Thu, 18 April 2019
Matthew was a guest of StartCon, Australia’s largest startup and growth conference. It was held at Randwick Racecourse in Sydney on Nov. 30 and Dec. 1.
When he was young, Matthew Brimer spent his days taking apart old electronics and dreaming of space exploration. A child of the Midwest, he was raised on the belief that hard work and passion could turn even the grandest dreams into realities.
As he grew older, he continued to hold tightly to this conviction, and, with the blood of two entrepreneurial parents pumping through his veins, Brimer knew he wouldn’t be stuck in his high school job selling ice cream forever.
Always that tinkering kid at heart, Brimer wanted to be an inventor. And he ultimately achieved his dream, but in a way he never would have imagined while growing up. He became an inventor of businesses, of communities, of experiences.
Co-founder of several brands to date, including dance party/lifestyle brand Daybreaker, VC firm The Fund, and most notably online education platform General Assembly—Brimer has developed an incredible knack for building passionate, engaged communities. Today, General Assembly has 20 campuses and more than 35,000 alumni, and Brimer serves as a mentor to members of the next generation of entrepreneurs through his role at The Fund, a New York City community of founders that he co-founded.
And it all began with an old piece of furniture and a lucky break on eBay.
In 2005, during Brimer’s freshman year at Yale, he and a few buddies noticed that some of the buildings were under renovation and the university was selling the contents in the process. After perusing the items for sale, they decided to buy an antique piece of furniture to see what they could get for it on eBay.
They took a couple photos of the item, posted it and hoped they could make a few extra bucks from the sale.
They had purchased the piece for $50. It sold for $1,000.
Minds blown, they rushed back to the buildings, bought more items and the college freshmen launched a small online business in the antique furniture space.
Having caught the entrepreneurial bug, Brimer wanted to try his hand at something a little bigger—something that required more technical skill.
In 2007, he and four other college students launched the website GoCrossCampus.com, an online game that turned college rivalries into a wildly popular online battle.
“We made every first time founder mistake in the book. It ended up a few years later becoming a total failure,” Brimer says. “But for a while we were the largest college gaming network in the country.”
He acknowledged that with too many founders and no way to generate new revenue, the project was doomed to fail, and GoCrossCampus shut the doors to its battleground in 2010. But while his first project may have ended, Brimer’s desire to create new things had only begun to grow.
He graduated, moved to New York and freelanced as a web designer while he spent all his free time immersing himself in the tech space. Although the city was bursting with brilliant entrepreneurs and new, exciting ideas, Brimer soon realized that bringing them together to interact and exchange those ideas was a challenge.
What if, he wondered, there was a physical building dedicated specifically to serving those in the tech space? What if there was a place where they could work alongside each other and learn while building meaningful community?
With that dream in mind, Brimer, Jake Schwartz, Adam Pritzker, and Brad Hargreaves co-founded General Assembly in early 2011.
Education for the 21st Century
General Assembly launched as a place for coworking, education, and community, under a single membership model, and this system worked well at first. But Brimer quickly noticed that, to better serve members, a greater emphasis had to be placed on building out the educational branch of the brand.
“There’s this huge skills gap between where traditional higher education leaves off and where the 21st century begins,” he says. “College education isn’t changing that much relatively speaking. But the 21st century—in terms of what employers are looking for, in terms of the talent they’re hiring, in terms of the skills you need to be effective in any industry today—that’s moving quickly.”
Brimer says that a traditional university education can leave graduates in tech fields woefully unprepared for the challenges ahead, and this was the gap he hoped General Assembly could fill. So they eliminated the coworking aspect of the business and doubled down on providing quality education from stellar instructors.
According to Brimer, these practical training programs on digital skills taught by actual practitioners currently working in the space were the most powerful, the most transformative thing they could provide. He wanted to equip students with valuable skills that enabled them to land a new job, upgrade their current position or pursue their passions in the digital economy.
Brimer and his cofounders threw themselves into the new phase of their business, raising more capital, expanding their curriculum both online and off, and launching a new branch that offers corporate training and assessments to large companies. They also built out a credentials program and launched a philanthropic wing designed to lift up those with talent and tenacity from all socioeconomic backgrounds.
With this grand expansion came a need to cement the trust consumers had in the brand.
From day one, Brimer placed a significant focus on delivering measurable outcomes at General Assembly, as a way to build firm trust in the brand. He wanted to answer the question, “What can I do after experiencing this product that I couldn’t do before,” with an unequivocal answer: get a job in tech.
It’s no secret that a college degree doesn’t necessarily guarantee a job after graduation, and this, Brimer feels, is a major issue right now for traditional colleges and universities.
“So here you have spent all this money, all this time getting a college degree and it doesn’t guarantee you a job anymore,” he says. “The outcomes are a little nebulous.”
Brimer and General Assembly wanted to provide something with more certainty. By supplying classes in coding, data, design, marketing, business, and career development, as taught by instructors with the most up-to-date information, Brimer feels that General Assembly fills the gap left by traditional education, more directly preparing students for a career in the industry.
The co-founders of General Assembly also made a concerted effort to attract instructors who were not only excellent in their fields, but also who cared deeply about passing their knowledge and skills on to others.
Brimer says that the best instructors at General Assembly are those who love giving back and empowering others, even if they’ve never had any teaching experience. Today, according to its website, there are more than 250 expert instructors. With an ever-evolving curriculum, and continued expansion, General Assembly is bound to continue making a splash in the tech world.
Brimer began as a cofounder, later transitioned into a part-time position, and this summer he stepped into a new role as an external “evangelist for the company,” when the Adecco Group acquired the brand for $412 million.
While his day-to-day work at General Assembly may have come to a close, he is still extremely passionate about what he was able to accomplish during his time there, and is excited to see what new frontiers they are able to conquer in the years to come.
Brimer is no longer the kid tinkering with household electronics in Missouri, but with free time to concentrate on new ventures, he’s still dreaming big.
“It would be a hilarious thing,” he says, “to explain to my 6-year-old or 8-year-old self what it is that I am, have been, and will be.”
4 Ways To Establish Trust in Your Brand
When competing with major colleges and established universities, the way Matthew Brimer was when he co-founded General Assembly, it is absolutely essential to establish deep trust in the brand as quickly as possible. But all brands, not just those in the education space, have to find a way to build a bridge of trust between company and consumer to become successful. These are four of Brimer’s best tips on how to establish trust for your brand.
1. Deliver Measurable Outcomes
Brimer says that one of the best possible ways to build trust in your brand is to deliver outcomes that are clear and measurable. To decide what that outcome is, he recommends asking, “What is possible for a customer after engaging with the brand or product that would have been completely unattainable before?” By nailing down the measurable outcome and then delivering it, it turns word-of-mouth references into undeniable, tangible results.
2. Celebrate Success Stories
Once you’ve determined what “measurable success” for your brand looks like, it’s time to celebrate those who have achieved it! Brimer says that even prestigious colleges only gained the clout they have because of the success of their alumni. In the same way, the successes of others who have interacted with your product reflect back onto your brand.
3. Establish and Adhere to Core Values
By crafting a definitive and concrete set of core values you can stand by, customers learn what they should expect from your products and services. Brimer says that by delivering on those values, you can develop an invaluable level of trust with consumers that can only come from maintaining integrity.
4. Stay Humble
Brimer says that, all too often, as companies grow larger, so do the egos of the people at the top, preventing them from quickly acknowledging mistakes and accepting feedback with humility.
“The more human of a relationship you can have as a company with your users, the more trust you’re going to have,” he says. “Trust goes away when it’s a faceless brand—a faceless corporate entity—interacting with live humans on the other side. That’s when things go downhill.”
Wed, 10 April 2019
How Aidan Clarke grew global brands 2XU and Saint by prioritizing product.
In a market saturated with quick, cheap fashion, building a high-quality, global apparel empire was not an easy feat—but in 13 short years, Aidan Clarke paved a way.
It took a lot of dedication, but Clarke was determined to make a game-changing clothing company. Clarke decided early on that he doesn’t care about how his apparel looks, as much as he cares about its quality, and that commitment has paid off in a big way.
His first and primary brand, 2XU, is based on the idea of making high-performance athletic wear, with a focus on unique, custom-engineered materials first. This approach and the resulting success would lead him to his second brand, Saint, which takes that same emphasis on materials and applies it to safety gear for motorcyclists.
The funny thing is, by focusing on high-end users and materials, Clarke’s companies ended up creating products that have much broader appeal than the initial target audiences, branching out into athleisure, workwear, and potentially even streetwear for skateboarders.
Through these two brands, Clarke has found a way to sell products that look good and perform well—and outfit consumers in over 60 countries.
From Door-to-Door Sales to 2 Worldwide Brands
Clarke got his first taste of the clothing business at just 18. As he was preparing for a school dance, he took a second glance at the neckties he and his friends were buying. A young entrepreneur’s mind started crunching numbers and realized that the fabric only cost $30 per meter, and each meter could make up to seven ties. Yet here he was shelling out almost $100 to purchase just one. “I thought, ‘Hang on, there’s a business here,’” Clarke recalls.
He decided to start making his own ties and selling them door-to-door to businesses in his home of Auckland, New Zealand.
Clarke’s entrepreneurial path didn’t continue in a perfectly linear fashion, a common theme we see among emerging founders. After graduation, he went to college and started a corporate career. His pushed his entrepreneurial passions to the back of his mind, but not for long.
“I ironically landed back in clothing,” Clarke says. “I’d grown up around seamstresses and saw the value-add of clothing.”
Clarke started his first apparel brand 2XU in Melbourne in 2005 and moved his family there soon after. He spent the following five years on a plane building 2XU into a multinational business reaching more than 60 countries.
Why Melbourne? Clarke and his team had received a significant amount of startup funding, and their investor was based in Melbourne. The Australian market for 2XU was also better than in New Zealand. “We spotted an opportunity. New Zealand had lots of local sports brands, but Australia ironically didn't,” Clarke says. “We wanted to take on the big boys.”
2XU started with audacious goals. Clarke and his team wanted 2XU to be uniquely performance-focused, so they spent the entire first year developing fabrics for their apparel, before creating their product. “You can either buy fabric or focus on quality,” Clarke says. “We said, ‘Hey, we want to change the fabric.’”
With millions in seed capital, they were able to spend ample time and resources on fabric development. Eventually, their warehouse became so full that they had to start selling their product.
Clarke and his team did wholesale and direct sales at the same time. While most clothing brands avoid direct sales so as to not compete with wholesalers, 2XU opened its first retail store to prove they could sell premium, expensive sportswear in Australia. “Selling at our own store motivated retailers to accept products,” Clarke says. “Having our own hero shop drove demand for wholesale.”
The team also visited both retail and special sports stores. Selling next to well-established international brands was difficult, but they pressed on. Their first major sale was to a now-closed triathlon store that purchased the entire 2XU line for over $3,500.
Another significant sale Clarke remembers was to Rebel Sport, a major retail chain in Australia and New Zealand. “Needless to say, we had a few drinks that night,” he says, laughing.
Clarke’s next step for expanding 2XU was finding ambassadors and distributors. But that wasn’t always easy. “Trusting someone with your brand is like a glorified babysitter,” Clarke says. “You have to find someone with the same passion to sell your story.”
He found that the best thing about distribution is how it taps into local knowledge and expertise. The 2XU team worked hard to find passionate brand ambassadors and people to accurately represent 2XU brand in each country. In doing so, they found mostly nontraditional distributors: athletes.
In the following years, 2XU celebrated two major equity events. In 2011, a local company bought 30 percent of the company. Next, the capital arm of Louis Vuitton discovered the brand and bought in at 40 percent, a significant valuation for 2XU.
Since then, 2XU has scaled up and hired corporate CEOs to run the company. “The challenge we face, though, is how to still act like a small business…an underdog,” Clarke says. “We used to say, ‘By athletes, for athletes,’ but we can’t say that anymore.”
But at the end of the day, the 2XU product is “still sensational.” It’s been well-received at the professional and Olympics level and is very much considered a premium brand. In the United States, it’s worn by the NBA, NFL, and even Navy Seals.
In other places, 2XU apparel has become an athleisure staple. “You don’t have to be a world champion to still want quality,” Clarke says.
After getting 2XU settled, Clarke pulled back and spent a “non-executive year” focused on himself and his health. One day, while riding bikes with his co-founder, he came up with what would become his next big idea—a new form of safety apparel for motorcyclists.
The idea sounded simple, but as the duo dove into R&D, they realized creating this type of product would require a significant commitment. “It cost us a couple million dollars after a couple years,” Clarke says. This effort would go on to become Saint, Clarke’s second global clothing brand.
Their goal was to create a single-layer safety product—ensuring a flexible, comfortable riding experience—that wouldn’t rip or tear if someone fell off their motorcycle. The global “slide time” standard for the fabric on these products (which defines the amount of time that a fabric should withstand sliding across an abrasive surface, such as pavement, before it tears) is four seconds, and they’re routinely tested in facilities equipped with spinning disks of sandpaper that replicate sliding on the street.
Their first fabric lasted 3.67 seconds before ripping—just short of the standard but still much longer than any other single-layer fabric. After continual development, Clarke’s fabric now lasts almost six seconds.
This single idea helped Clarke and his brand break into work clothes and other tough lifestyle applications.
They’ve since patented their super-durable fabric, which involves a unique material spun into the yarn. “As for workwear, no one can do what we’ve done,” Clarke says. “It’s nice to have the IP protection.”
Premium Product > Price
Both of Clarke’s businesses, 2XU and Saint, lead with a premium product line. And there’s a reason for that. “People often lead with price,” Clarke says. “That’s a lazy way to sell. Product is king.”
Some clothing retailers also find themselves tempted to sell their products relying on aesthetics alone, but not Clarke. “Rather than being a fashion brand, I’d rather be an authentic motorcycle brand with tough products…that also look good,” he says about Saint.
How can you create this demand? Clarke relates it to a “chicken and egg” situation. If you create demand before you’re ready to supply and distribute your product, you risk wasting resources because you’re essentially creating demand for competitors. On the other hand, if you develop and supply your product before the demand is there, you risk wasting resources on product that never brings in revenue.
To build demand for your product, Clarke recommends doing so authentically. He and his team often attended sports events and spread the word about 2XU to one person at a time. Those early adopters and advocates would then tell friends. “It’s like a grassroots movement,” Clarke says.
Clarke claims that social media, in fact, is a lot more directed. “The ability to target and generate demand is more focused than ever,” he says. “That’s what’s exciting about today.”
Every business’s website is now the flagship store, at least to begin with, Clarke says. People form their judgments about your products very quickly, and you’ve got to have your website synchronized with the products you’re offering in the real world.
The Future of Saint and 2XU
Looking ahead, Clarke is excited for the futures of both 2XU and Saint. The brands are at different stages, but they both sell high-quality product and are both in growth mode, as Clarke calls it. His primary growth measure isn’t from a focus on sales numbers—it’s from a focus on communities.
“Saint is a rocketship about to take off,” Clarke says. “It’s five times tougher than standard workwear.” The brand has even had inquiries about street fashion and safety gear for skateboarders and other action sports.
As for 2XU, Clarke says that seeing more and more people discover the brand is exciting.
“The tough thing about clothing is that scalability is hard,” Clarke says. Small businesses often buy too much stock, but Clarke encourages the opposite—pay more to make fewer units and sell them up.
In his opinion, it’s better to scale yourself up. Too much stock can put clothing brands in a hard place. Unlike the whiskey business, apparel product is worth less and less every year.
At the end of the day, Clarke reminds brands and entrepreneurs to prepare themselves for the road ahead. “It’s a tough game,” he says. “Just believe in yourself, be resilient, and keep pushing.”
Thu, 4 April 2019
At 16, he began building websites.
At 18, he became a regular at the gym.
At 20, he started sewing and screen-printing workout apparel in his garage.
By 26, when most adults are only on the cusps of their careers, Ben Francis had already launched a viral gym clothing line, served as its CEO, and stepped down in favor of a more creative role in the wildly successful company.
Today, the Gymshark founder works alongside 190 staff, including the high school buddies who partnered with him to launch the brand, bringing this unmistakable apparel line to customers in more than 130 countries.
And while it seems like this former pizza delivery boy magically rocketed to entrepreneurial stardom overnight (OK, he sort of did), his success can be traced back to a dedication to community building and an innate understanding of social media influencer marketing, long before it was a thing.
But it all started with amateur website building, a love for fitness, and a whole lot of YouTube.
Years before he was a CEO, Francis longed to make a name for himself in the fitness space. But the closest thing he had to investors were people calling to order a pizza, so establishing a clothing brand couldn’t have seemed less attainable.
Not to be discouraged by limited funds, Francis and his high school friends began a workout supplement drop-shipping business and quickly realized that there was an opening in the workout apparel market.
Dressing a bodybuilder and a skinny, weight-lifting newbie are two totally different jobs, especially when you’re going for form-hugging designs fit for a workout. Francis and friends, however, believed they could create a line that would be sleek, modern, and appealing to gymgoers of any body type.
“And so,” Francis says, “I bought a screen printer and a sewing machine and started to make the clothes by hand.”
The designs were an overnight sensation.
“People were seeing the clothes, and they were so iconic and unique, that it sort of started to spread like wildfire,” Francis says.
But the real secret sauce was the passion he and his friends had for YouTube.
In the early 2010s, YouTube was rising fast. People passionate about everything from movies to knitting, gaming to, yes, fitness, were creating video content and building communities around shared interests.
Francis and his friends were among the millions who joined online followings based on their hobbies, but stuck around for the personalities in the videos. One such fitness YouTuber who held their attention was Lex Griffin of Lex Fitness, whose channel now has over 440,000 followers. Another was Chris Lavado, whose channel has 65,000 subscribers today.
Realizing they could leverage the followings of others, Francis and his friends pursued a business strategy that put them on the map, and that they still use today.
They sent samples to Griffin, Lavado and other fitness YouTubers they admired, and hoped for a stamp of approval—and a video to prove it.
While the term “influencer marketing” has only recently entered into the pop consciousness, the principle has been around as long as marketing. Attracting the favor of a wealthy or influential person by showering them in gifts that define a brand is as a classic move, a point Francis illustrated by sharing some history of his hometown of Birmingham, UK.
For hundreds of years, the Jewellery Quarter in central Birmingham has been a hub for opulent accessories. Many jewelers open businesses in the Quarter, and the competition is fierce. But historically, there was one way to ensure that a brand’s name would be on everyone’s lips: become the first choice of royalty.
Frances explained that this principle of vying for favor worked then and still works now.
“They would provide a bunch of free jewelry to royalty so that people would associate that jewelry with the royalty and then hopefully back to the brand and go buy it,” he says. “It’s no different to what influencer marketing is nowadays.”
“I think it’s worked forever, and as far as I’m aware, I think it’ll always work.”
And so, like an ambitious jeweler in the 1700s, Francis sent off his product to curry favor with those who had the power to make his brand catch fire. And it worked.
“They absolutely loved it, and they’re still with us today,” he says. “That started, I guess, what you’d now call an influencer market for us.”
Today, Francis continues to leverage the audiences of athletes through an ambassador program that now includes such personalities as bodybuilder Matt Ogus, lifestyle and fitness vlogger Nikki Blackketter, and weightlifter Whitney Simmons.
Because of Francis’s early success in harnessing an influencer-generated market, Gymshark has never relied on investors for capital.
“We never needed investment,” he says. “So why complicate things?”
Francis recognizes, though, that there was also a component of luck at work. He entered the world of social media influencer marketing when it was still a young idea, and those with followings weren’t inundated daily with products in search of a boost.
“I do think it’s a hell of a lot more difficult than when we first started,” he admits. “It’s a completely different place now.”
But if he were to launch a new business today, a venture he says would be a fun challenge with the vastly changed online landscape, he knows exactly where he would focus his attention.
“Product is king at the end of the day,” he says. “I would focus on creating an absolutely brilliant and a gorgeous product because I think from that, it’s like a snowball effect.”
He believes that by designing a remarkable, unique, and stunning product, anyone can rise above the cacophony online.
“If you get someone’s attention with a genuinely brilliant product, people will wear it, people will use it, and people will talk about it.”
But for now, Francis is focused on the current community he has built.
Growing up, Francis loved attending events and expos in his hometown and dreamed of the day he would not only participate, but host his own. His belief in the power of person-to-person advertising was instilled in him as a young expo attendee and has continued to stick with him into his mid-20s.
“Even though the world is becoming ever more online, and 99.9 percent of what we do is online, there is always space for that human connection, and I think that’s really, really important, and it’s a real important thing to Gymshark.”
So in Gymshark’s very early days, when an opportunity to participate in an expo presented itself, Francis says that nothing could have stopped him from finding a way to join.
When he reached out to one of the coordinators to find out how much it would cost to get Gymshark a spot, he was quoted a price far more than they were able to afford at the time. But as Francis likes to emphasize, he plans hyper long-term and hyper short-term and lets the rest in between work itself out.
“This was 12 months in advance of the show, and I was like, ‘Right, yeah. We’ll have it. We’ll get that, and we’ll just sort of make it work,’” he says. “It was our dream to go to an event like that.”
And go they did, beginning a successful string of expo appearances that were initially in the UK, but rapidly branched out internationally until, eventually, they stopped going to expos and started hosting them.
“I literally think, ‘Let’s make the product that I love,’ and by default, I think other people would love, and let’s create the event that I would love to go to, and by default, I think that other people would really enjoy to go,” he says.
He also says that when it comes to events, making a profit is not the immediate goal. Just like the early days spent working a screen printer in a garage, Francis’s motivation is simply a desire to create something awesome. Something he loves.
“We just sort of think, ‘Right, what would we really, really love to go to? Let’s go make it happen. Let’s forget about the profit and loss at that point for that event. Let’s just go make something really, really cool.’”
But rapidly gaining a dedicated following, especially when selling a physical product, has its challenges. Francis says that Gymshark’s biggest challenge at the moment is keeping up with demand, especially when YouTube influencers or expo attendees are hyping them.
“We definitely made massive improvements in the last six to 12 months, but there’s still a long, long way to go,” he says.
Part of the Gymshark’s effort to keep up with growth meant Francis himself coming to terms with his right role within the company. As CEO, he quickly came to realize that he was in a position that he was not suited to fill.
“We were growing so fast, and the role of the CEO is very people oriented,” he says. “I’m very much an introverted person. I’m much more suited, and work better, in either a very small team or on my own where I can really dive into a project, focus on that thing and make it really special.
“As we were growing bigger, it became more and more evident to me that the CEO really needs to be a lot more of a strategist and a lot more of a people person than what I am.”
So Francis made the difficult decision that it would be best for him to step into the role of Chief Brand Officer instead. But the transfer of CEO power didn’t just happen overnight, which he feels helped build trust among himself and the staff. It happened over a period of about a year as Steve Hewitt, the current CEO, slowly took on more and more until he finally stepped fully into the role.
Of course, passing leadership on to someone else is always a humbling and challenging process, but it’s one that Francis has come to embrace as an opportunity to become more fully himself.
“I think it’s very important to be self-aware and to understand what you are good at what you’re not good at,” he says. “I’m a massive, massive believer of that.”
Today, Francis has the freedom to focus on product and vision, gathering small teams together to pursue new designs and strategies for the future.
So what’s next for Gymshark?
Francis says that they are always pursuing innovation and are currently in the process of designing new fabrics, as well as looking to branch out of the strictly apparel space.
And in an effort to keep avid followers and fans of the brand up to date, Francis has recently launched a vlog series of his own, giving a behind-the-scenes glimpse into Gymshark and into his world.
In the 10 years since Francis started creating amateur websites from home, his world has utterly transformed. But many things remain the same: a love of fitness, a passion for social media, and an unbreakable bond with his high school friends turned business partners.
The Gymshark brand invites each customer and avid follower to “Be a visionary.” And Francis is asking nothing of his followers that he hasn’t done himself. After all, where would Gymshark be without an enthusiastic pizza delivery boy who had the vision to buy a screen printer, and the boldness to show the world what he could create?
Ben Francis’s Tips for Success
Launching a brand new product on your own or starting your own business is never easy. No matter how large or small the venture, it requires vision, courage, and determination. But Ben Francis believes that there are three things any beginning entrepreneur can do to improve their chances of success.
Francis says he was once asked to share a story about a time when he was told that he couldn’t do something. He paused to think, but his mind came up blank. “That never happened, because I never surrounded myself with those people,” he says. Starting a business is a challenge, but with the support of people who inspire and motivate you, Francis believes that mountains are reduced back into molehills.
Being honest with yourself and clear about who you truly are is one of Francis’s crucial steps to success. “Self-awareness is key,” he says. “I think it’s massive. You can only kid yourself for so long.” Without the ability to identify which skills you have in abundance and which you lack, you’ll be unable to build a team around you that complements your abilities and improves upon them.
Once you’ve identified your strengths and weaknesses, Francis insists on the importance of allowing them to guide your decisions. “Could I do an operational…role for a little bit? Absolutely. I’m reasonably intelligent. I could manage,” he says. “But would I be able to do it for a sustained period really, really well? Absolutely not.”
Rather than forcing yourself to be something you’re not, Francis encourages all entrepreneurs to be honest about their strengths and find ways to play to them, even if that means relinquishing, as he did, the title of CEO.
Wed, 27 March 2019
When Kim Perell landed a job at a hot new internet startup in 1998, she thought she had hit the jackpot.
She loved her job and learned a lot, but when the dot-com bubble burst, the startup went bankrupt. What was once a dream company that she recruited many friends to join had become a nightmare when she had to lay off those friends, and then lose her own job too.
“In an instant, someone pushed delete on my life, and my future, my identity,” she says. “My multimillion-dollar stock went up in flames and was worth nothing.”
Perell turned to the one person she thought might give her a loan to start over: her grandmother. And sure enough, even though Nanny didn’t know what the internet was, she loaned her granddaughter $10,000, which Perell spent on a computer, a GoDaddy account for a website, and a one-way ticket to Hawaii to live with her boyfriend rent-free.
Perell launched Frontline Direct, a digital marketing company pairing brands with online advertising. Scarred from the bankruptcy, she was eager to work for herself and get back to basics, which meant focusing on profitability and growth. In 2008, Frontline Direct was acquired for $30 million, and again by Amobee, where Perell now serves as CEO.
Through all the ups and downs, Perell has learned many lessons, which she passes on to fellow entrepreneurs in her latest book, The Execution Factor: The One Skill That Drives Success. After investing in over 70 startups, she noticed one thing stood out in particular for those who succeeded: they focused on execution more than anyone else did.
For her, writing The Execution Factor was a way to pay it forward.
“If I could shortcut the system and share, based on my own experiences, what is important as an entrepreneur, that was really meaningful to me,” Perell says. “And I just felt like my grandma made a bet on me, and I was going to pay that back.”
In addition to the book, she established The Execution Factor Fund to provide seed stage funding to execution-driven startups. One hundred percent of the proceeds from her book are contributed to this fund.
(And in case you were wondering: Perell paid back the loan to her grandma.)
Thu, 21 March 2019
Tony Fernandes has worn many hats over the course of his decades-long career. And if the Group CEO of AirAsia (and former host of The Apprentice Asia) ever finds himself dissatisfied with a signature look, he’ll just invent a new one.
“You have to keep renewing yourself,” Fernandes says. “You’re only as good as tomorrow.”
That philosophy undergirds Fernandes’s entire career trajectory. Before starting what is now one of the world’s most successful budget airlines, Fernandes was an accountant, working briefly for the likes of Virgin Atlantic and Virgin Communications. He then reinvented himself within the music business, where he served as a Warner Music executive in Malaysia.
Fernandes’s latest reinvention is his biggest, and most complex. He’s the co-founder and Chairman of Tune Group, a conglomerate of hotel, automotive, financial services, education, media, and telecommunications industries subsidiaries. And he sits at the helm of AirAsia, a budget, no-frills airline that has revolutionized travel in Southeast Asia. After purchasing the then-bankrupt airline for a shocking 24 U.S. cents, Fernandes has grown the brand to a net worth of more than $1.5 billion. AirAsia is now the fourth-largest airline in Asia, behind only the big Chinese carriers (in 2017, AirAsia flew over 90 million passengers), and it recently embarked on an ambitious program that will see the airline transform itself into a travel technology company.
To hear Fernandes tell it, two primary factors differentiate AirAsia from other companies. For starters, the company has always embraced digitization. And secondly, the organization is built on inclusivity and creating a fantastic work culture. Here’s how Fernandes has leveraged those strengths to build a company that no one thought possible.
Pursuing a Childhood Dream
In 2001, during Fernandes’s more than decade-long stint in the music business, digital advancements began to threaten deeply entrenched industry norms. Fernandes spotted an opportunity, but his colleagues weren’t so keen on the digital revolution.
“Napster had come along and Spotify was just starting, and I thought, ‘Wow, this is super exciting for the music industry,’” Fernandes says. “But I was a lone voice.”
No one at Warner Music or Time Warner Inc. (where Fernandes was working at the time) thought it was a good idea. “They thought the internet would destroy music,” Fernandes says. “My premise was that we can’t hold technology back and that this was a fantastic distribution model to create more revenue.”
But his vision didn’t gain traction, and when Time Warner merged with AOL, he decided to bid adieu to his music industry career.
He was sitting in a bar in London, trying to figure out what to do next with his life, when he saw mention of the budget airline easyJet on the pub’s TV. Fernandes instantly recalled his childhood love of planes.
“Always from a very young age, I’d told my dad, ‘I’m gonna own an airline one day,’” he says. “That’s one of those things you say, but you’re not entirely sure you’re gonna do. But I always said it. And so I thought, ‘Well, this could be the time.’”
It might seem like a bold move for a music industry exec to presume he could run an airline, but Fernandes was motivated by one simple premise: YOLO.
“I thought… ‘You only live once,’” he says. “If I fail, I fail. It’s okay. I’ll go get a job doing something else. But I don’t want to sit there at 55 and say, ‘I wish I did it.’”
Fernandes’s idea gained further traction after he started studying the models of low-cost airlines such as RyanAir. (RyanAir’s then-Director of Group Operations would later become a shareholder of Fernandes’s airline.) Inspired by what he refers to as an “amazing concept,” Fernandes gathered up some partners and returned to Malaysia for a meeting with the Prime Minister.
The Prime Minister agreed to let Fernandes and his partners into the airline industry, but only if they purchased an existing airline. As a result of some devastating circumstances, there were a lot of opportunities. Fernandes was looking to purchase an airline around the time of the September 11, 2001 terrorist attacks, which had sent the industry reeling. He ended up purchasing AirAsia, a Malaysian government-owned airline that was $11 million in debt, for a grand total of 24 U.S. cents.
After purchasing AirAsia, Fernandes knew he had to move fast. “It was very clear to me once we started moving that…I was going to put the foot to the accelerator because there were some big around me,” Fernandes says. “When you have something, scaling up is important.”
Luckily, Fernandes spotted multiple avenues for growth.
For starters, he knew that at the time he acquired AirAsia, only 6 percent of Malaysians flew. If he could capture even a portion of the other 94 percent, he’d be in business. What’s more, he was willing to fly to places that most airlines didn’t go. “A lot of our growth has come from destinations that no one did before,” he says.
But perhaps AirAsia’s biggest differentiator was its use of the internet at a time when, globally, many still weren’t online. “Back in 2001, most people didn’t even have internet yet,” Fernandes says. “But I said, ‘Trust me, when I put a fare at 2 dollars, people are going to find their way to the internet.’” Since then, AirAsia has been religious about tracking and keeping data. So when huge brands started to embrace digitization many years later, they were already ahead of the game.
Still, Fernandes knew he was at a disadvantage, due to his lack of industry knowledge, so he accelerated his learning to ensure he could continue AirAsia’s rapid growth. He sat down with engineers, pilots, simulators, and cabin crews; learned how to change a wheel; and generally threw himself into understanding the intricate workings of planes and airlines. “I was a sponge,” Fernandes says. “I took everything in.”
A strong focus on innovation, learning, and growth helped Fernandes and his team make up for what they lacked in capital.
“Let’s be real, three guys from the music business coming in to start an airline is not the most convincing business ,” Fernandes says. “No bank gave me a cup of coffee. Did we want capital? Of course. But we didn’t have it. But again…we built a massive airline with very little capital.”
In fact, AirAsia only raised one round—$30 million around year three—before launching its initial public offering (IPO). “I’m old-fashioned in that aspect,” Fernandes says. “I believe in cash. I believe in making some profit. If you have a model where you can make money, make money. And of course reinvest some of that money, which we did.”
Much of that money went into flying to new places. “The product was going places that no one else wanted to go,” Fernandes says. “We couldn’t stand still… kept adding routes and new destinations.”
While the airline continues to add new destinations, today it’s equally focused on developing a multi-pronged digital strategy. The organization is digitizing all of its processes to enhance efficiency and the customer experience. It’s also attempting to create a comprehensive travel ecosystem that will enable users to book train tickets, purchase concert or other event tickets, use financial services, and so on, all from one central hub.
“We’re using and building platforms that will provide more value to my customers…and it’s an exciting vision,” Fernandes says. “There’s a huge potential if we can execute well.”
That execution hinges on a top-notch team working cohesively and effectively. Luckily, Fernandes has been building that since day one.
Building a Dynamite Culture
“Culture is, I think, the most important thing in the success of AirAsia,” Fernandes says.
Fundamental to that culture is a bedrock of transparency and trust—even among 24,000 staff. “It is by complete choice that we’re open plan,” Fernandes says. “When you have an office, you have all these invisible walls. … So one day I just came in and smashed all the offices. I brought a contractor in and just tore them all down. And we’ve been open-plan ever since.”
In keeping with the open office concept, AirAsia also employs a fairly flat organizational structure. “I like to think we utilize everyone’s brain,” Fernandes says. “We put everyone…in the same building. Everyone eats in the same place, everyone goes to the same gym. I want people who believe they can do a lot more and grow in this company.”
This spirit of inclusivity extends to diversity. “We embrace diversity,” Fernandes says. “We don’t care what race, creed, color, sexual orientation you are. And I think that’s a strength. Because that gives us a huge diversity in our workplace, and a huge ability to attract great talent and great ideas. … I wanna have a fantastic, multi-ethnic, diverse company, and I think we’re not far from that.”
Of course, when you’re dealing with a team of 24,000 people, it’s easy for bureaucracy to rear its ugly head. “We got big, and politics and bureaucracy creep in,” Fernandes says. “But it’s not something I’m gonna run away from. I confront it because bureaucracy and politics is the cancer of any organization”
One strategy the team uses to confront bureaucracy is simply having fun. “I think too many business leaders take life too seriously,” Fernandes says. “Too many entrepreneurs get too stressed. Have a balance. You don’t have to work 18 hours a day. Make sure you give time to your family and your kids and your friends.”
In Fernandes’s view, this juggling act is worth it in pursuit of building a great team. “You’ve gotta surround yourself with good people, and you’ve gotta be prepared to listen,” he says. “Too many founder CEOs think they know it all. … You can have all the ideas you want in the world, but the execution is what it’s about, and you need a good team.”
Luckily, developing a great team has always been fundamental to Fernandes’s vision for AirAsia.
“My vision was to create a great place to work—a fair place to work, where it didn’t matter whether you…had money or a great education, but if you had a great brain and you had the will and belief, you could achieve anything in this airline,” he says. “To turn a raw diamond into a diamond—and we have so many of those. … If you really push me, it’s allowing a lot of my staff to live their dreams—that would be something I’d be most proud about.”
That spirit of affirmation and inclusivity extends from AirAsia’s team members to its customers. In spite of the many ways that Fernandes and his airline have reinvented themselves over the years, the company’s slogan has remained the same since Fernandes first developed his vision all those years ago: Now everyone can fly.
5 Mini-Lessons in Entrepreneurship from Tony Fernandes
“Great ideas are great ideas…only people know about them,” Fernandes says. “Too many businesses don’t spend enough on branding and marketing. Keep a budget for that.”
“The world is littered with products that didn’t reinvent themselves,” Fernandes says. For example, he references Nokia. “Who believe a world without Nokia phones? They were it.” Today, of course, the phone landscape is very different.
“You have to live within your means and live within your resources,” Fernandes concedes. “But you also can’t stand still. It’s a balance. But life is a balance. Everything you do is a balance.”
“Failure doesn’t worry me, because I’d rather fail than not try at all,” Fernandes says. “Many people are too worried about failing, so they don’t do anything. I’ve had many failures… I don’t have any regrets, because if I didn’t try I didn’t know.”
“You can do all the marketing research you want,” Fernandes says. “You just gotta go with your heart sometimes and do it.”
Thu, 14 March 2019
Life in the Fast Lane
From washing cars, to selling them, to building businesses, Sendlane CEO Jimmy Kim credits focus as the key to his rise to the top.
Like many children of Asian-American immigrants, Jimmy Kim knew his parents had high expectations for him. When he was a child, his mom told him that he needed to become a doctor because that would make him the most money.
“I don’t wanna be a doctor,” the young Kim replied. “I’m gonna make more money than a doctor.”
Fast forward to 2018, and Kim is making good on that promise to his parents, as an entrepreneur working in online marketing.
He’s built and sold multiple companies, and now sits at the helm of the fast-growing email marketing software Sendlane. The bootstrapped company employs 25 full-time employees in its newly remodeled, 6,000-square-foot office in San Diego. As of May, Sendlane had already more than doubled its revenue over 2017 and was on track to triple or even quadruple that number by the end of the year.
How did he get here? Kim attributes his success to one thing: focus.
From Washing Cars to Building Businesses
At 15, Kim was entirely focused on one goal: saving up enough money to buy a car. He started working 10 hours a week making pizzas at a local shop. But earning $4 an hour made saving enough money difficult.
“When I turned 16 and I got my driver’s license,” Kim recalls, “I still couldn't afford a car because, well, I came from a middle-class, first-generation Asian family, and my dad's not going to buy me a car. I mean, it didn't matter what my grades were at that point.”
He figured the next best thing to owning a car was working with cars, so he got a job washing cars at a dealership.
“That was my solution,” he says. “That was my first mindset: ‘Okay, let me go at least get to drive cars.’”
Kim worked at the dealership until he went off to college. During summer break, he returned and asked for his old job back, but they said the positions had been filled. He felt defeated. But as he walked out of the office, one of the salespeople spotted him and asked him a question that would change the trajectory of his career: Why don’t you try selling cars?
Thanks to his excellent work ethic in the past, the manager hired him on the spot. During Kim’s first month, he sold 31 cars, made $14,000, and became salesman of the month, at the age of 19. Some brushed it off as beginner’s luck.
“That just fuels the fire in me,” Kim says. “That's how I am. I'm a competitive person.”
His second month, Kim made even more money and, again, was named salesman of the month. That’s when he decided to make the difficult decision to drop out of college.
“Now, as an Asian growing up in an Asian family, it was probably the hardest conversation that I ever had with my family,” Kim says. “My parents did not approve. They thought I was crazy. They thought I was wasting my life, ruining my life.”
As a compromise, he agreed that after a couple of years of making money, he’d go back to school and fund his own education.
After that conversation, Kim went full time at the dealership and was doing well, but being the ambitious kid that he was, he felt he could do even better. He noticed a finance position opened up at the dealership, and he was drawn to the challenge of selling intangible goods—life insurance, car insurance, paint protection, etc.
“I wanted to be that guy to sell that intangible because I thought it was really fun to take it to the next level.”
Excited by the possibility, he asked if he could take the finance position. The manager said he would need to speak with the general manager, and a couple days later, came back to Kim and said the position had already been filled.
“The anger inside of me actually grew at that point,” he says, “which, I'm not an angry guy at all, but for some reason, I just felt like he was lying.”
Infuriated, Kim marched up to the general manager’s office (“It's totally disrespectful. I should have never have done that.”), and told him he couldn’t stand the place and he was quitting.
A month later, he got a call from the owner of the company, inviting him to come back and talk it out. Kim shared his aspirations with the owner, and eventually, was sent to a finance class where he obtained his certifications and earned his coveted spot in the dealership’s finance department, where he eventually worked his way up to finance director.
At 25 years old, Kim became general manager of a Saturn dealership, and under his oversight, it became one of the top 10 Saturn dealerships in the nation.
The End of an Era, the Start of an Empire
In 2009, General Motors, which owned Saturn, filed for bankruptcy, forcing Kim to make his next move.
“It was kinda sad,” he recalls. “I remember that bittersweet moment that it was the end of that realm.”
With GM going under, some people wanted to reopen the Saturn dealerships as Kia stores instead. They asked Kim if he’d be interested in helping, and he agreed to help them get started, but set a hard date for when he would leave the auto industry.
“I realized that this isn't what I wanted to do for the rest of my life.”
Kim wasn’t entirely sure what he did want to do, but he had a friend, Anik Singal, who had an internet marketing company, and he’d always been curious about what he was doing. So he approached him and said, “Look, I don't know what's going on as far as what you actually do in business, but there's one thing I'm really good at—I can sell stuff and I'm really good at operations.”
The timing was perfect. At that point, Singal’s company had more than $1 million in debt and needed help. The two friends worked out an agreement. Kim would help the company get out of debt, but in exchange, Singal would teach Kim everything he knew. As soon as the company was out of debt, Kim would move on.
And just like that, Kim went from making around $250,000 to $300,000 a year at the dealership to about $80,000 a year at the internet marketing company. But remember, for Kim, it’s all about focus, and he had a plan.
By 2013, after delivering on his promise to get Singal’s company out of debt, Kim transitioned to the next phase of his career by starting his own internet marketing company, JK Marketing. In 2016, he estimates that business brought in $4.5 million in revenue.
From Side Hustle to Full-Fledged Business
While Kim was running his internet marketing company, he and his team developed an in-house solution to their email marketing woes: Sendlane.
“We never intended it to be anything else but for us,” he says. “That was the number one thing: We built it for us. It was a platform. It was ugly. It was purposeful. That was all we built it for.”
But by 2014, friends and clients alike began asking Kim where they could find out more about Sendlane. The problem was, they couldn't. All that existed was a login page for Kim’s company to use to access the app. So in 2015, he and his team decided to open the doors to the public and see what happened. They put up a simple webpage with a payment portal—and people started signing up. From 2015 to 2017, they ran it passively. In its first year, Sendlane reached $40,000 to $50,000 in monthly recurring revenue. By 2016, it climbed to $80,000 to $90,000 a month.
So there Kim was, juggling his internet marketing company, a growing side business, and on top of that, a clothing store in Las Vegas. But in August 2017, a life event changed everything for him. His daughter was born.
“The moment I saw her I realized that I needed to find more time in my life,” he says. “Yet I knew that I couldn't slow down business because I love business too much. So I had to find a good balance.”
To do that, Kim decided to sell most of his companies and revive his favorite tactic—focus. He would pour his energy into one company only, and it would be Sendlane.
“I took that hard look,” he says. “I looked at the companies and I was like, ‘You know, this is the company that I can see incredible legs, and I know we haven't focused on it, but look what we did without even focusing on it. What can we do by simply focusing on it?”
That was in August 2017. From September 2017 to May 2018, Sendlane grew an average of 10 percent, month over month.
Bootstrapping Versus Raising Capital
That age-old question. So far, Sendlane has been 100 percent bootstrapped, but Kim says he will be raising capital to the tune of $5 million later this fall.
“Bootstrapping is great and it's a way of life, of course, and I totally respect it, and I think that it's been a great journey for me.”
But as someone once explained it to Kim, you can own 33 percent of a $30 million bootstrapped company, or you can own 20 percent of a $100 million VC-funded company.
“Being bootstrapped, you're always going to slow yourself down because of revenue and money,” Kim explains. “But when you have a large infusion of money, it becomes a different mindset because now all you're focused on is growth and not the money.”
And what would Kim do with an infusion of $5 million? He says he plans to spend the majority of the funding on growth, such as media buying and salespeople, keeping a close eye on getting an ROI as fast as possible.
The One Thing Your Email Marketing Needs
While we had his attention, of course we had to ask Kim to share some of his email marketing knowledge. The first thing Kim wants people to know, though, is that you can’t use outdated tactics and expect awesome results.
“People are still trying to do what worked in email marketing in 2008, in 2018,” he says. “People don't recognize things have changed so dramatically. … People are just getting a heck of a lot more emails every day.”
In fact, a whopping 269 billion emails are sent each day, according to a 2017 report by research firm The Radicati Group. So how can you stand out in a crowded inbox? Kim recommends behavior-based automation.
Using your email marketing platform, create emails based on actions a user took (or didn’t take). Did they open your emails? Did they buy anything? What kinds of actions have they taken in the past?
For example, if a subscriber isn’t opening any of your emails, it may be time to get more aggressive. On the other hand, if a subscriber is opening all of your emails but hasn’t made a purchase, that tells you they’re highly engaged, but for whatever reason, they’re not buying. It may be time to move that subscriber into a separate email funnel that pushes them to make a purchase.
“Creating that personalized experience is, bar none, the best way to make people want to actually listen to you and want to open your emails,” Kim says. “That's email automation and that's the best way you can do it now, in 2018, and forward.”
This level of personalization can be achieved with email marketing software that allows tagging, revenue tracking, and “if this, then that” statements.
“Things like that you can do with email, you can do with Sendlane of course, but you can do it with most email platforms that are more advanced thinking.”
What’s Next for Sendlane and Jimmy Kim?
Aside from raising a round of funding later this year, Kim has an entire roadmap for Sendlane that he wants to continue to implement.
“I'm not going to tell you that I'm not going to ever sell the company,” he says, “because if someone offers me enough money, I'm going to sell the company, and I'm going to move on to the next project. But the coolest thing about that is, being the owner or founder, you don't have to worry about that if you just put your heart and soul into it.”
Kim also wants to put more time into sharing nearly a decade’s worth of his digital marketing knowledge. He plans to get more into vlogging; he’s already started a YouTube channel where he shares tips on anything from Facebook ads to affiliate marketing. And a recent project he’s particularly proud of is the Advanced Email Marketing course he put together in collaboration with Foundr.
“It's always been kind of a small passion of mine to share this information,” he says. “Whenever comes out, that's something you should be looking for.”
Kim’s 4 Tips for Founders
NEW COURSE ALERT: Want to learn advanced email marketing secrets from the cofounder of Sendlane? In our latest course, Jimmy Kim is sharing all the knowledge he’s learned to help you transform your email list into a money-making MACHINE.
In Advanced Email Marketing, you’ll learn:
To be the first to know when Advanced Email Marketing is open,
Wed, 6 March 2019
240: How to Use Excellent Customer Support to Stand Out in a Crowded Market, With Ross Paquette of Maropost
When Ross Andrew Paquette founded email service provider Maropost in 2011, he never expected it to take off.
“The plan was to have 10 customers and maybe sit by the pool a little more often than not,” he says with a laugh.
But since then, he’s scaled the company to nine figures, with an impressive customer list that includes DigitalMarketer, Livestrong, and The New York Post. And beyond email marketing, Maropost has expanded into customer acquisition and ecommerce solutions.
These are extremely crowded markets, but at the core of the company’s success is its strong commitment to excellent customer service, with heavy emphasis on a 24-hour in-app live chat and five-minute support response times.
We chatted with Paquette to learn the strategies he used to so impressively grow his SaaS company in a short amount of time.
Tue, 26 February 2019
You don’t become the richest self-made woman in American real estate by playing it safe. Dottie Herman has proved time and time again that bold moves pay off.
In the 1980s, in a maneuver that solidified her path to the top in real estate, Herman flew to California and convinced Merrill Lynch to hire her to help the company expand into the real estate market.
In 1990, when Prudential decided to sell its regional holdings, Herman then persuaded the company to lend her $9 million to purchase its own Long Island real estate offices.
And in 2003, Herman expanded her empire into New York City with the nearly $72 million purchase of the most prominent Manhattan real estate company, Douglas Elliman (again convincing Prudential to finance the deal).
“If you don't ask, you don't know,” Herman says. “And the worst that can ever happen is someone says no.”
Thu, 21 February 2019
238: Juggling Multiple Projects and Knowing When to Step Away, With Grasshopper Founder David Hauser
David Hauser’s life changed forever the moment he taught himself how to code.
Like so many other nascent entrepreneurs, the power of computer programming set him on a lifelong path as a tinkerer, always fine-tuning and building in an effort to shape his and others’ futures.
In much the same way Hauser learned how to code, his entire entrepreneurial journey has been one of unrelenting trial and error, involving a mix of success, failure, and personal and professional evolution. With the creation of tech companies like Grasshopper and Chargify, Hauser used his talents and curiosity to shape his own destiny, and make a splash in the startup world.
Now, in his latest endeavor, he’s directed that very sense of experimentation to the field of health and fitness, with an upcoming book documenting his extensive adventures in improving his own physical well-being.
But it all started with a few lines of code that enabled him to pursue a nontraditional professional life.
“I always worked for myself since before high school,” Hauser says. “I never had a traditional job.”
In the late 1990s, the internet was gaining unstoppable momentum, and as websites started to become viable means of doing business, the demand for web designers and ad creators increased dramatically. This shift granted new opportunities to clever teens on the cutting edge of new technology who wanted to make a few bucks (and sometimes much, much more) from the comfort of their childhood bedrooms.
Hauser, who has no formal tech training, was one of these teens, swiftly making his way into the world of banner ad management and creating his own company WebAds360.
“From there, I started grabbing onto different things, learning different technologies, working with other people,” he says. “But it all started with web design.”
Before graduating college, he founded a second company, called ReturnPath, to help businesses that used permission-based email lists to keep their addresses up to date as subscribers graduated college or changed jobs.
Being a teenage entrepreneur in the late 1990s and early 2000s presented some major limitations, however. For one, what phone number were prospective clients supposed to call?
Cell phones of the time were still extremely basic and lacking features like putting a caller on hold or setting up a conference call. Meanwhile, home landlines might be answered by baffled family members. Neither option exactly screamed professionalism. It wasn’t just a problem for young people working at home, either, as lots of scrappy new entrepreneurs were lacking dedicated business phones.
So when the born and raised New Yorker headed off to Babson College in Massachusetts, and met Siamak Taghaddos, another entrepreneur with a similar problem, they put their heads together to pursue a solution.
Leaping Toward Success
“It started with a really simple idea,” Hauser says.
All they wanted was a way for tiny companies, startups, and solopreneurs to have the phone presence of a large, established company. And when neither he nor Taghaddos could find an existing solution to their problem, they did what so many successful entrepreneurs end up doing. They built their own solution.
Because they were only out to solve a problem for their existing businesses, Hauser admits they didn’t spend a lot of time on research or planning.
“It wasn’t well-researched necessarily, beyond the fact that we knew we had a problem, and we thought that we could solve it,” Hauser says.
During the process of creating the solution to their own problem, they realized that they were really onto something. That maybe this was going to be much bigger than a new tool for their own tool belts.
And because he and Taghaddos had their fingers in a lot of pies, and the money flowing in from their existing projects was enough to fund their new endeavor, they never needed to request outside funding.
In 2003, the pair officially launched Grasshopper, a service that enabled small businesses to present themselves like big businesses using just a cell phone, complete with extensions, customizable greetings, and simultaneous call handling.
Before long, Hauser shut down all of his other businesses, including WebAds360, and decided to focus entirely on the management and growth of Grasshopper.
And business boomed.
Small businesses and startups flocked to the service, delighted that it enabled them to operate with the professionalism of a well-established corporation. The company continued to grow for the next six years, when Hauser decided it was time to relinquish his role of CTO.
“I was always relatively technical,” he says. “But I am definitely not a top programmer, and as we really started to build out the company, it was clear that we needed to have better leadership from a technical perspective, and I could apply my talents better elsewhere.”
So, Hauser moved through another phase in his evolution as an entrepreneur and broadened his scope.
“Rather than being just focused on the technology side, I spent a lot more time in company culture, HR, hiring, process, goals and how we implemented those,” he says. “I shifted my focus.”
And as he stepped back, looking at Grasshopper from all angles, he saw possibility everywhere.
Trial and Error
Even though Grasshopper was a big success, Hauser’s head was bursting with new ideas and new problems to be solved.
In 2009, he developed Chargify for streamlined recurring billing. Then in 2010, he created PackageFox, a way to secure guaranteed refunds from late or lost packages shipped through FedEx or UPS. And in 2011, he launched PopSurvey, a graphical survey creator.
These are just a few of the self-funded side businesses born out of Grasshopper, and Hauser says there are many more that aren’t resume-worthy or that never saw the light of day.
“Those are probably just the ones that became something,” he says. “There are tons of others that failed and never really got very far, or failed horribly bad and we lost a lot of money.”
PopSurvey eventually fizzled out, overcome by competitors. PackageFox was an opportunity for Hauser to learn more about automation, but he eventually sold it off to someone in the space who could make better use of it. Hauser kept Chargify longer than either of the other two, but recently sold it, as well.
And while Hauser learned much during this time of exploration and creation, he admits that it created a lot of tension within his team at Grasshopper.
“We thought maybe we couldn’t keep growing Grasshopper, and we started all these things, and wasted a tremendous amount of time and money, but more importantly distracted ourselves—and even worse, probably, distracted the team—from the thing that was growing well. We could have just doubled down,” he says. “The success would have been much better than if we had wasted all that time, but that was the blind spot we had, and luckily we realized it.”
Hauser says that internal blind spots are some of the most difficult challenges that founders face. While an entrepreneur is wrapped up in the excitement of a new creation, he says it can be nearly impossible to determine impartially whether or not that is the best possible use of time.
“We’re overly invested in something, and we have that blind spot to maybe this isn’t the right thing to be working on right now,” he says.
But whether by choice or by force, the decision to take the left fork instead of the right is eventually made.
“I think sometimes it happens naturally. That progression just happens and you kind of see it,” he says. The problem is that sometimes it takes too long, and we over-invest in something that’s not productive, taking time away from something that has a much brighter future.
And while he is thankful that the ultimate effect this period of distraction had on Grasshopper was minimal, he would have done things differently given the opportunity.
“Looking back on it, it was not the best choice,” he says. “We should have focused on Grasshopper and grown Grasshopper.”
But despite any amount of distraction, Grasshopper grew and grew until the company was raking in $30 million in annual revenue. Before long, the success of Grasshopper drew the attention of hungry eyes, and the acquisition calls started pouring in.
Sales and Farewells
“When we started the company, we had no exit plan,” Hauser says. “Our goal was to build a company we loved being at and loved doing what we were doing. That was it.”
So when the first of the interested buyers knocked, Hauser turned them away empty-handed.
But as Grasshopper was a privately funded company, without the limitations placed on it by investors and capital, interested buyers were not to be discouraged. Eventually, Citrix, a multinational software company, made them an offer that they couldn’t ignore.
Citrix said that Grasshopper could retain their brand name, keep the team together and continue growing the company.
Over the course of a year, Citrix worked with Hauser and Taghaddos until they recognized that this proposal was a great fit for everyone involved. So they decided to sign on the dotted line.
As soon as the sale was finalized in 2015, both Hauser and Taghaddos bid their greatest success farewell, something Hauser describes as being “very emotionally difficult” but “best for both the company and Citrix.”
He trusted the management team to keep steering the ship in the right direction, and with Citrix’s new ideas for growth and strategy, he knew the business was in good hands. Neither he nor his partner were interested in sticking around for “two more positions for highly paid executives with titles that are kind of meaningless in a big public company.”
While he knew he had made the right decision, Hauser was rocked by the impact of his choice.
“All of a sudden, your email address changes, your phone number, your identity,” he says. “For 12 years, I was the guy involved in Grasshopper, and I ran Grasshopper. That’s who I identified with and people identified me with, and that just changed overnight.”
For a year after stepping away from Grasshopper, he continued with Chargify, but in July 2016, he sold that business, too.
With a clean slate, Hauser stepped into his next phase of evolution.
He explains that the core purpose of Grasshopper was to empower entrepreneurs to succeed. Now, he’s just hopped into a larger field.
“After a year, I came back to and found my core purpose,” he says, “and that’s empowering others.”
The Pursuit of Health
It’s been two years since Hauser’s life changed with the sale of his two most successful brands, and he spent the latter half of that time on an exciting new project: himself.
“I really wanted to change my life, and that included changing my exercise and diet, and I went from doing extreme endurance sports to practicing yoga six days a week,” he says. “Like massive change.”
In pursuit of this change, he also took just about every test imaginable—blood tests, stool tests, sleep tests, DNA tests and more. All in the pursuit of a healthier life.
And now he is ready to share what he has learned.
Thirty pounds lighter, Hauser is releasing a book in 2019 called Evolve: Optimize Your Life, Body and Mind. In it, he busts myths around fad dieting, trendy workouts, and quick fixes, sharing instead the methodology he used to transform his own life.
He also tackles many of the health sacrifices entrepreneurs make while chasing lofty goals. And despite all the changes he tried in his own life, he isn’t necessarily an advocate of massive life shifts or hours spent in the gym. He believes that often the little choices can make the most impact.
“It’s always easier to work an extra hour past midnight because no one is bothering you, right?” he says. “It’s easy to pick up the phone and call for pizza, because you know you get that instant boost and gratification and can continue working for an extra hour. But I think, at the end of the day, what I care about is output and productivity, and I don’t think there is very much value in that extra hour of work when it is low productivity and low value, and it is just work for work’s sake.”
Through his book, Hauser hopes to open the eyes of founders and non-founders alike to the power they have over their own lives and the small adjustments they can make that will bring huge impact.
“The idea with the book is allowing people to understand that their life is a self-experiment and doing little things like maybe just buying a new pillow for your bed…could have massive gains,” he says. “Each thing in your life is an experiment, because you’re different from everyone else.”
Once again, just as he did as a teenager learning to code, Hauser is relying on the power of trial and error—how the slightest adjustment, addition, or subtraction can make a big difference. He is, yet again, learning to crack the code, and yet again, hopes it can change lives.
David Hauser’s Tips For Living A Healthier Life
Since founding, building and selling Grasshopper, David Hauser has invested much of his time in pursuit of a healthier life. In 2019, he is releasing a book on the subject, “Evolve: Optimize Your Life, Body and Mind,” and these are just a few of the tips held inside for entrepreneurs pursuing a healthier lifestyle. For more information on the upcoming book, and a free chapter on the impacts of coffee, visit www.evolvebook.com.
“I am a huge believer in routine,” Hauser says. “If you talk to the most successful people in the world, most of them will tell you routine is very important.”
He is such a strong believer in routine that, even when he doesn’t plan to work out, he still goes to the gym because it’s on his schedule. By developing a routine that allows for more movement, more stability, and more sleep, he thinks entrepreneurs can improve their lives—as well as their businesses—in enormous ways.
“As founders, understanding our sleep patterns—improving our sleep patterns—I think has tremendous effects and gains on our productivity the next day, the next week, the next year that we don’t realize,” Hauser says.
By making more time for sleep, and being unwilling to compromise that time for a little extra work at the end of the day, he believes that entrepreneurs will actually be far more productive. Entering into each new day refreshed improves mood, interaction, and problem solving—all areas that are vital for success.
“Life is a self-experiment and doing little things like maybe just buying a new pillow for your bed…could have massive gains,” Hauser says. “Each thing in your life is an experiment, because you’re different from everyone else.”
Even the smallest changes can make a massive impact, and what works for others may not necessarily be the best choice for you. By trying new ways to solving old, persistent problems, he believes people can make great impacts on their health, and what is more entrepreneurial than that?
Wed, 13 February 2019
Jay Baer was born to be in business. As a seventh-generation entrepreneur, he always knew he’d start his own company one day.
Over the years, his ventures have run the gamut—from an early internet company to a design firm to his popular marketing consulting firm, Convince & Convert. His clients have included Hilton, Cisco, Nike, and Oracle, just to name a few.
And if that weren’t enough, Baer is a New York Times-bestselling author, with six books under his belt. His latest, Talk Triggers—co-authored by marketing expert Daniel Lemin—dives into the power of word-of-mouth marketing and how to use it in your own business.
What is a talk trigger? According to Baer, it’s a “strategic, operational choice that creates conversations.”
Take DoubleTree, for example. Their talk trigger is the warm chocolate chip cookie given to every guest who checks in. Baer and Lemin interviewed 1,000 DoubleTree customers for this book, and that’s just for one of the 30+ case studies you’ll find inside.
If you want to acquire customers faster and cheaper, listen in as Jay Baer shares his marketing know-how to help you identify your business’s talk trigger.
Wed, 6 February 2019
“I don’t think CEOs should be able to be CEOs if they can’t code,” says Grant Petty, founder and CEO of Blackmagic Design.
That’s a bold statement, but Petty is a bold guy. Working as an engineer in the television industry, he realized the technology was overpriced. So he started a company that cut costs and put power into the hands of creators.
“Really what I was doing was a protest against the way the TV industry was,” he says.
And soon, Petty began to challenge the status quo of business in general. He runs his company a little differently: There are no spreadsheets, very little planning, and to him, metrics hardly matter.
“In the Western world, business culture becomes so rigid and so inflexible,” he says. “If you’re a creative person, you can get destroyed by that because they don’t allow you to exist.”
Today, Blackmagic Design boasts nearly $300 million in annual revenue and is still 100% bootstrapped. Its technology is used by 80% of modern day feature films. We sat down with Petty to discuss what he’s learned about how to run a meaningful business in the face of opposition.
Thu, 31 January 2019
These days, Sabri Suby reigns supreme as the founder of King Kong, Australia’s fastest-growing digital marketing agency. But he’s come a long way since his first job, selling ink cartridges over the phone, which he describes as a “cold, hard slap to the face.”
“I sucked incredibly badly at doing that in the beginning,” he says.
Soon enough, thanks to mastering the art of sales and persuasion, he became the top producer in that role, went on to travel the world, and eventually, forged his path as an entrepreneur. For all of his companies, he realized he was asking the same fundamental question: “How do we get more customers?”
His obsession with answering that question has helped him perfect his selling skills and scale King Kong from zero to $10 million in annual revenue in just four years.
In his latest book, Sell Like Crazy, Suby reveals the selling system he’s created and honed over the years, including things like the Magic Lantern Technique and the Halo Strategy. He says he’s deployed this system in more than 167 different niches and markets—and it’s worked every time. With Sell Like Crazy, he shares the steps you need to take, regardless of what stage you’re in, to level up your business.
Tue, 22 January 2019
From humble beginnings to fitness empire, Sweat CEO Tobi Pearce tells us what it takes to run a multimillion-dollar business and grow a powerful brand with a significant other.
At just 26, Tobi Pearce has accomplished a lot. He’s the CEO of Sweat, a fitness app that’s been downloaded 30 million times. He’s engaged to his business partner and Instagram fitness star Kayla Itsines. And together, they’re worth an estimated $63 million, according to Australian Financial Review.
But just a decade ago, Pearce was homeless and struggling to get by on $45 a week, something he revealed in an Instagram post in July 2017. “I am not posting this for sympathy and this is not a sob story,” he wrote. “I just thought it was time some of you got to know ‘me.’”
To get to know Pearce is to discover many unexpected facets. While he’s popular for his fitness empire, prior to all of that, he was a “nerd” who grew up in a small town in Australia and loved playing classical music. From what we’ve seen on social media, he can just as easily shred it on piano as he can in the gym. On his Facebook page, he posted a video of himself playing a complicated Chopin number, writing, “I used to be embarrassed to tell people I played piano as a kid because it wasn’t ‘cool’ or classical music made me a ‘nerd.’”
Today, Pearce has plenty to be proud of. In addition to his upcoming wedding to Itsines, TechCrunch reports that the couple’s fitness company is on track to bring in $77 million in revenue this year.
From Classical Music to Fitness Classes
Pearce began his foray into fitness when he started working as a personal trainer to pay his way through college. He and Itsines met at a gym and began dating around 2012. Eventually, the pair became business partners, too, with Pearce taking over the marketing side, helping to promote Itsines’ popular Bikini Body Guides ebooks and grow her Instagram account (today she has more than 10 million followers).
Not one to be easily satisfied, Pearce then set his sights on expanding the business “to kind of shake up the industry.” That’s when the Sweat platform was born.
“My whole career and this particular field has always been about trying to push boundaries and kind of see how far we can move the dial and how big we can build things,” he says.
Originally dubbed “Sweat With Kayla,” the Sweat app provides workout videos, meal plans, and progress-tracking tools to its subscribers, for $19.99 a month or $119.94 a year. It targets millennial women with programs from bikini body to post-pregnancy workouts and boasts well over a million monthly active users.
The Appeal of an App-Based Business
Moving from ebooks to a mobile app, what made Pearce choose a new platform for Sweat? As he tells Foundr, there were three main reasons:
First, he wanted a better user experience. Originally, Itsines’ workouts were being shared through ebooks—not a very interactive platform. Pearce wanted a way to have more control over the user experience, including being able to gather user data to improve the product.
Second, he wanted to meet the needs of millennials. Most of Sweat’s customers are in that age group, so Pearce knew that meant the content needed to be mobile-friendly.
Finally, he wanted to be able to scale. To be able to make a real impact on the health and fitness industry, internationally, Pearce knew Sweat needed to switch business models.
“The big move was, yeah sure, from ebooks and a website to an app,” he explains. “But it was also a huge migration from a single-purchase service into a subscription business. And subscription business economics are completely and fundamentally different to that of a traditional ecommerce business.”
Combating Churn With an Engaged Community
As with any subscription business, churn is always a concern. One way to combat the tendency for members to cancel their subscriptions is to cultivate an engaged community. For Pearce, this is a no-brainer: He’s seen how it works from his personal training days.
When he was a personal trainer, he often picked up on the social habits of the people he was training. At 8:30 a.m., for example, a few women attended a 30-minute class with Pearce, while another group of women had coffee together downstairs awaiting their 9 a.m. slot. Once 9 rolled around, the groups would exchange spots, and by 9:30, when everyone was finished with training, they’d all go to the beach together.
“Fitness actually brings people together,” Pearce says.
But how can you recreate the social aspect of in-person fitness classes in a mobile app? The Sweat team knows people feel their best right after they’ve exercised, so within the app, users are prompted to invite their friends once they’ve finished a workout. They can even share their trophies and achievements, as part of what Sweat calls “social currency.”
Beyond the friend-invite feature, Sweat has a community forum where members can share stories, find advice, and get motivated.
“Not seeing much progress :( starting to panic,” wrote one bride-to-be on the Motivation & Encouragement forum.
“There is such a difference between the two photos,” replied another member. “You’re definitely making progress so keep up the good work!”
“There's all these different stories,” Pearce says of the forums. “But there's hundreds of thousands of women that can connect and relate with one another, and that really brings them together.”
On Chasing Growth Without Sacrificing Quality
While Pearce is aiming for growth, he’s not willing to do it at the cost of top quality and a strong brand. Sweat’s trainers, for instance, are carefully curated.
“We're not really looking to have like a hundred or a thousand different trainers and programs,” Pearce says. “We're kind of looking to have best in house and best in class.”
A prime example of this is Kelsey Wells, who joined the Sweat team over a year ago and leads the weight training and post-pregnancy programs. Beyond her finesse in the gym, she’s excelling on Instagram with 1.4 million followers. Her brand growth and depth have impressed Pearce, who says, “We'd much rather work with 10 people like her in their own specific categories than a thousand people that are just generalists.”
With a team of talented trainers who are also Instagram rockstars, does Sweat have aspirations of acquiring influencers abroad to boost international growth? “There's definitely a potential for that,” Pearce says.
How a Fitness Power Couple Finds Work-Life Balance
Google “Tobi Pearce” and you’ll find plenty of headlines referring to him as “fiancé of Kayla Itsines.” From the start, he’s been comfortable doing the behind-the-scenes work while Itsines steps into the spotlight for the Sweat brand. As soon-to-be spouses and current business partners, how do they strike a healthy balance between work and personal life?
“It has its testing moments, that's for sure,” says Pearce, adding that he’s obsessed with the business aspects while Itsines loves handling content creation and community interaction.
“She’s able to switch off,” he says of his fiancée.
Pearce, on the other hand, not so much. “I've always been probably a little bit too interested in ,” he says. “If I'm not talking about it, I'll be reading about it. If I'm not reading about it, I'll be listening to something about it or learning one way or another.”
Pumping Up Your Personal Brand
In recent years, a movement to build your “personal brand” apart from your company or product brand has taken hold of the entrepreneurial world. Big names like Gary Vaynerchuk and Neil Patel come to mind; both social media powerhouses use their personal brands to funnel clients into their consulting agencies.
Sweat has a similar story. It began as Itsines’ personal brand, which Pearce helped grow into the formidable Instagram presence it is today. Recently, Forbes named Itsines as the top social media influencer in fitness. Many of her faithful fans have followed her to the Sweat app, too, where she leads high-intensity workouts based on her Bikini Body Guides.
So what’s the secret to building a powerful personal brand? “Content and messaging are really king,” Pearce says. That means content that is high quality and messaging that creates interest.
“There's so much crap on social media,” he adds.
In the fitness sphere, he says it’s more than just looking good and posing for the camera. You need to create content in an intimate and authentic way. Just take a look at @kayla_itsines on Instagram. Instead of polished, picture-perfect content, it’s a mixture of motivational quotes, funny memes, before-and-after praise for her clients, and of course, workout videos—all with conversational captions where Itsines’ personality shines through.
While Pearce is hesitant to give a one-size-fits-all strategy for growing your Instagram—”Every industry is different,” he warns—there is one Instagram tip he recommends for fitness brands: lay off the endorsements.
“It's all well and good to sell a product or do endorsements, sure,” Pearce says. “But if that becomes everything that you do, it really becomes a bane of your existence and it's actually quite saturating for your personal brand. It's impossible for you to maintain credibility and authenticity as a brand if every second post that you do is talking about a new deal that you've done.”
Instead, says Pearce, focus on what you’re good at. Let’s bring Gary Vee back into the discussion. Take a look at his social media accounts. How many times does he mention his agency?
“I don't think I've ever actually seen him do that,” Pearce says. “The point that I'm making there is that if you do have a product, it's very often what you're trying to do is sell yourself and sell the opportunity, sell the dream. You're not really actually trying to sell the product itself because telling people to buy stuff is irritating.”
The Sweat brand steers clear of hard sells. That’s no small feat in an industry that’s always pushing guarantees of six-pack abs, a celebrity body, or a nice rear-end. “We would never, ever do that,” Pearce says of his company, “because reality is that it instills the wrong cycle of mindset in consumers. It predicates the wrong perceived mindset before consuming a product and that only actually sets up consumers for failure.”
How to Sell Without Selling
If people hate being sold to, how do you get them to buy? Sweat focuses on the benefits, not the features. For instance, instead of promising you amazing abs, Sweat’s messaging would tell you how you’re going to feel more confident and develop better relationships by getting healthy with its app.
“The best car salespeople are the ones who actually don't try to sell you anything, but they make you feel like you really want to buy the product,” Pearce explains. “They're telling you why this car's going to be perfect for your family. … They're not telling you that it's got 19-inch rims and blah, blah, blah.”
For Sweat’s Instagram account, Pearce focuses on posting educational, credible content that adds value: healthy eating tips, user-generated content, and motivational quotes, with a few posts highlighting the Sweat app sprinkled in.
“It pitches us as industry experts—which we rightfully are—but then it makes people turn to us when they do want to spend their money on a product that's actually going to help to solve these problems in their life, rather than going for the one that just says six-pack abs, because no one actually believes that crap.”
And Pearce doesn’t get fixated on the one-off purchases; he’s looking to create long-term users and repeat buyers, which is something the Sweat platform is built to nurture. “They develop friendships with other members of our product and that builds our community.”
Working Out What’s Next
For the next year or two, Sweat will be focusing on reducing churn and improving the product, namely, getting more quality content and keeping users engaged.
Long-term, though, Pearce hints at something more. He says there are three big pillars in the fitness industry: facilities (think studios and gyms), trainers and therapists, and content. “We obviously kind of only play in the content spectrum of that at the moment,” he says. “I think in the longer term, we'll probably, hopefully, get a chance to play in some of the other areas as well.”
Wed, 16 January 2019
Steve was a guest of StartCon, Australia’s largest startup and growth conference. It was held over two days at Randwick Racecourse in Sydney on Nov. 30 and Dec. 1.
One For The Books
The story of Booktopia, ‘Australia’s favorite bookstore,’ and how they’re conquering the competition—even Amazon.
Once upon a time, a programmer who got his start with IBM was given an enchanted opportunity to create a magical bookstore that would one day battle powerful giants. The magical power? With just a click of a button, Australians could have brand new books delivered within days to their doorsteps.
And just like in most fairy tales, our hero and his friends stumbled upon the opportunity entirely by accident. “We literally fell into it,” says Steve Traurig.
Traurig and his two brothers-in-law, Tony and Simon Nash, were running an online marketing consulting business when Angus & Robertson, the 130-year-old Australian bookseller, approached them and asked if they would be interested in getting into the book business. The pitch was a white label book retail website, meaning that everything from the website creation to the distribution would be handled by Angus & Robertson. All Traurig and company had to do was add their personal flair.
But Booktopia, the company that arose from that project, would end up becoming something much bigger. Nearly 15 years after Traurig’s brother-in-law said he “wouldn’t mind giving that book thing a bit of a go,” Booktopia has served over 4.2 million Australians and is on track to bring in $115 million this year, making it the market leader in online book sales. Oh, and they now own Angus & Robertson.
The journey from their very first book sale to squaring off against Amazon for online book supremacy in Australia was a chess game of strategic move after strategic move. Thanks to some shrewd decisions, including focusing on customer interaction and building their own ecommerce and fulfillment systems, Booktopia’s well on its way to happily ever after.
A White Label Bookshop, Transformed
In 2004, with only $10 a day to put toward advertising their new business, Traurig and the Nash brothers dove headfirst into the book world.
“When we first started, we owned nothing,” Traurig says.
When Booktopia first launched, Angus & Robertson created their website, managed their distribution and owned the brand. Traurig and his brothers-in-law were responsible only for marketing, so they created a few Google AdWords campaigns (one of which is still running today) and waited for their first books to sell. By the end of the first year, they were doing $100,000 in business a month.
This worked beautifully for the trio and for Booktopia for three years, but in 2007, they had to confront the reality that what they were building, with revenue ever increasing, could all go away in an instant. They also realized that the fulfillment company was neither able to keep up with the growth they were experiencing, nor were they able to meet the expectations Traurig held.
“We decided we had to go out on our own, because we were actually building a company of value,” he says, “and we realized that if you want to have something of value, you have to do it yourself.”
Things were going well, and they realized that in the current setup, they didn’t really own anything of substance, should they ever want to sell.
So they broke away from the fulfillment company and set out to turn Booktopia into something of their own. They set up their first warehouse, hired a warehouse manager, bought some shelves off eBay, and got to work building their own core systems.
“Dealing with those sorts of numbers in databases, in the website, in the front end, in the backend, etc., the scale is beyond almost any other retail environment, and we had to make it all work,” he says. “We built the systems ourselves and that takes particular commitment and skill.”
With all of the changes taking place, it would have been reasonable to see a marked customer drop off. Before the transfer, they did about 130 orders a day, but that number only dropped to about 110 a day, even after everything from their systems to their website changed.
Through it all, the Booktopia customers remained loyal. In fact, the focus Booktopia places on the customer experience would come to define their brand.
“It’s about the customer obsession,” Traurig says. “About putting yourself in the place of the customer.”
When Traurig and his brothers took on the fulfillment side of the business, they began with only a single book on their physical shelves, but knew that building up their stock was the only way to give their customers the best experience.
Instead of the long wait from the moment an order was placed until a supplier could deliver the order and then ship it off, all they had to do once they built up stock was grab an item from the shelf the moment the order came in and send it along.
“That was essentially a business-changing experience, because the feedback we got from the customer was instantaneous,” he says.
Customers responded with glee that their books arrived so quickly, inspiring them to remain loyal and recommend the bookseller to friends. Because of this organic growth, Booktopia has never needed to take on investors.
Even without investors, they have consistently outmatched the competition and met their sales goals. In fact, they made the BRW Fast 100, Financial Review’s list of the fastest growing Australian brands, seven times between 2009 and 2016, the only company to do so.
Traurig says that they have also built strong relationships with their banks, something he describes as a critical part of doing business. This gives them additional wiggle room if necessary, staving off a need for traditional investors.
“A lot of startups, a lot of founders, think they immediately need to go out and grab someone else’s money and give away bits of the company,” he says. “There’s definitely merit in doing that for certain types of models. We chose to actually build a solid business organically and build it off the back of our customers and customer service.”
And this approach has carried them through what could have been a business-ending battle.
Squaring Off Against a Giant
When Amazon announced that it would be launching in full in Australia at the end of 2017, Traurig wasn’t nervous. The institutions they worked with, however, had concerns.
The gargantuan online retailer had generated $136 billion in revenue the year before, with all signs pointing to continued growth. So how was “Australia’s local bookstore” going to keep up?
Well, according to Traurig, they had been keeping an eye on the behemoth from the very beginning and hadn’t let its success deter them.
“From our point of view, when we started Booktopia, Amazon was shipping $100 million worth of books into Australia already, and we didn’t worry about that,” he says. “We were fearless.”
They focused instead on their own business, and the most important asset: the customers.
Due to its global nature and size, Amazon has an impersonal quality to it that Traurig says Booktopia always vowed to counter. For example, Booktopia’s website has the office’s physical address, email, and phone number on every single page, not only allowing but encouraging customers to reach out and share praise, complaints, and questions instantaneously. They wanted to be accessible and feel like a part of the community.
To keep up with the emails and phone calls, they quickly hired their first customer service staff, a cheerful individual who still answers the questions of Booktopia customers today.
Traurig says they take customer feedback extremely seriously and use it to inform their continued development. With a 20-person development team on the case, he says that Booktopia is always in pursuit of the best possible user experience, a quest that can only be completed through regular, honest feedback.
Traurig says that this approach to customer service has been the key to keeping up with the competition.
“All throughout our history, Amazon has been this massive company…but we were just focused on getting product to our customers.”
And if winning 2016’s National Book Retailer of the Year and 2017’s National Bookstore of the Year at the Australian Book Industry Awards is any indication, Booktopia’s approach is working.
The Next Page
Today, Booktopia has over 6 million products available on their website with over 150,000 of those titles in stock in a 140,000 square-foot distribution center. They also acquired Angus & Robertson, along with its online store Bookworld, in 2015.
“It’s a 130-year-old company that had a very, very good chance of disappearing completely,” Traurig says. “So for us, it was also an honor.” The company currently runs as its own business unit with independent marketing, branding and customer base.
The founders also have high hopes for the company’s automated systems and distribution center. To demonstrate their capabilities, Booktopia acquired an online camera and optics company. In doing so, Traurig and his partners are hoping to show that their systems can handle more than a single type of product.
So what’s next for Australia’s favorite bookstore?
Although they ventured down the path of going public in 2016, they pulled the IPO just before launch, choosing to remain a private company. With Amazon looming, and after watching several other online companies attempt to go public and fail spectacularly, they decided to keep things as they were.
While Traurig has a “never say never” mindset toward another try at going public, there are no plans to move in that direction for now.
“Our customers have been our investors,” Traurig says. “What we’ve always chosen to do is delight the customer.”
And in true fairytale fashion, delight them they will.
Steve Traurig’s Tips on Building a Sellable Company
While founders are still scaling the challenging mountains that come with launching a business, it might seem silly to think 500 steps ahead to the day they will be shaking hands on the sale of the company. But Steve Traurig believes building a company that will someday attract a buyer starts on day one, so he offered three tips to creating a company that will sell.
“One of the things we’ve always done is make sure that our financials, our financial reporting and our accounting are top notch,” he says. As you might expect, well-kept books have always been a priority at Booktopia. From the very beginning, they sought financial advice when necessary and kept all of their books in perfect order. And because neither he nor his other co-founders had strength in bookkeeping, they always made it a number one priority to hire someone skilled.
“It may just all look like a whole bunch of receipts and a pain the neck…but aim to set up solid financial management right at the beginning.”
In the beginning, Booktopia was a white label website, but when it started to flourish, Traurig and his partners realized they needed to make some changes. “If we wanted to sell it,” he says, “we had nothing to sell,” Traurig says. So they decided to build all of their own core systems to create something that would be attractive to eventual buyers. Traurig encourages founders to use as many original systems as possible and innovate wherever feasible. In doing so, the value of the company you may someday look to sell increases significantly.
Now that you’ve created something original, it’s time to show what it can do! Perfect its intended capabilities and then push its limits. This is what Traurig says they are currently doing at Booktopia with their distribution systems. Because they created the automation used in the center, they decided to demonstrate to potential buyers that it could handle more than one product at a time, leading them to purchase a camera company. The only thing better than an innovative creation is one that can be used in more than one way. Traurig says that demonstrating this is a great way to build a sellable company.
Fri, 11 January 2019
232: Create a Company Culture That’s Healthy and Profitable, With David Heinemeier Hansson of Basecamp
Eighteen years ago, David Heinemeier Hansson was a college student sitting in his little apartment in Copenhagen when he stumbled across a blog post by 37signals (which would later become Basecamp), a Chicago-based design company he had long admired.
In the post, co-founder Jason Fried posted a question on some aspect of programming. Hansson knew the answer, so he contacted Fried. Several emails later, Fried was asking Hansson to work with him.
“Jason decided it was easier just to hire me than to learn how to program,” Hansson says, “and that's how we started working together.”
That was the beginning of a now-legendary tech startup team, and an illustrious career for Hansson. In Hansson’s early days at Basecamp, he famously created Ruby on Rails, an open-source web development framework once used by Twitter, and still in use by GitHub, Shopify, and many more.
We were excited to talk shop with Hansson (often known as DHH) because, in an industry dominated by breakneck Silicon Valley culture, Basecamp stands out in many ways: It’s been profitable every year since its inception in 1999, it doesn’t chase growth, and it doesn’t even set numerical goals.
With their latest book, It Doesn’t Have to Be Crazy at Work, Hansson and Fried are hoping to challenge the prevailing narrative about chaotic work culture by sharing the unique way they run their company.
This is Part 2 of our Basecamp co-founder interviews. To hear Part 1, check out our podcast interview with Basecamp co-founder Jason Fried.
Wed, 2 January 2019
Ditching Growth and Setting Up Camp
How Jason Fried and David Heinemeier Hansson turned their backs on lofty goals and created a profitable tech company quite unlike any other.
Growth is exciting. Sales boosts, climbing revenue, and eager investors are all signs of a happy, healthy company. Right?
Basecamp founders Jason Fried and David Heinemeier Hansson beg to differ. While they rejoice in revenue and profit as much as the next set of tech company founders, they define success a little differently.
Instead of chasing arbitrary growth goals and deadlines, they simply aspire to do their very best work day in and day out.
Instead of always expanding their line of software products, they double down to perfect the one they already have.
Instead of scrambling to hire more people when revenue is climbing, they enact a hiring freeze so as to not lose sight of their mission.
Critics might call their approach too timid. Others call them brilliant. Fried and Hansson don’t care much either way. They’ve followed the startup road less traveled and have pitched sturdy camp at the end of it—all while remaining profitable and highly respected.
Today, Basecamp is one of the leading project management and team communications tools on the market, while boasting remarkable employee satisfaction. The duo also have a new book out explaining their unique take on startups and how they’ve found success.
Setting Up Camp
The origins of Basecamp date back to 1999, when Fried started 37Signals as a web design company. It’s since transitioned to a web development company, specializing in project management and team communication software, and became Basecamp in 2014.
The transition to web development happened in the early 2000s, when young Danish developer Hansson responded to Fried’s blog query about PHP. Hansson had been a fan of 37Signals for years and jumped at the chance to help out. After a handful of emails, Fried decided it was easier to hire Hansson as a programmer than learn to code himself.
The firm created Basecamp’s flagship software product in 2004 and drummed up 45 customers in its first year. The idea was simple, but met an important need in the modern workplace: It allowed for real-time, remote communication to help teams identify what needs to be done (and when) and work together smoothly and efficiently. In the following years, the pair saw their product achieve steady growth, which also caught the eye of venture capital and private equity firms.
Even so, working with investors never made sense to Fried and Hansson. They didn't want to sell any control of Basecamp or be forced to exit their business on someone else’s timeline. But they did need money to continue developing Basecamp and its products.
In 2006, the pair was approached by Jeff Bezos himself. In exchange for a yearly dividend payout (but without making any other demands or staking any other claims to the company), Bezos purchased a piece of ownership and became a member of Basecamp, LLC. This arrangement worked well for Fried and Hansson as they didn’t have to sell control of their business to raise money, and the purchase was a lucrative investment for Bezos.
“[After Bezos’s investment], the appeal of selling the company subsided and allowed us to pursue our mission to build a wonderful company to work in for the long term,” Hansson said.
Fried and Hansson maintain a fiscal relationship with Bezos, but that’s about it in terms of what they’ve taken from the richest man in the world. As for perspectives on growth, productivity, and culture, Basecamp has blazed a trail of its own.
It Doesn’t Have to Be Crazy at Work
Or does it? Fried and Hansson’s latest book introduces a new perspective on the modern-day entrepreneurial hustle. They published this book to “[send] out an alternative beacon,” Hansson says.
The cover of It Doesn’t Have to Be Crazy at Work features a big red “X” crossing out words like "packed schedules,” "80-hour weeks," and "overflowing inboxes."
Sadly, a lot of today’s business literature and role models celebrate crazy schedules, packed days, and little sleep. “[This has] been a predominant narrative for quite a long time,” Hansson says.
Pushing back on the norm, It Doesn’t Have to Be Crazy at Work argues that this kind of lifestyle isn’t healthy, sustainable, or necessary. “You can do great work in a normal eight-hour day and 40-hour week,” Fried says.
Basecamp’s culture and success is a testament to this ideal. The 20-year-old business has been profitable every single year since it started, and the company’s 50-plus employees work a totally normal schedule. “At Basecamp, it isn't crazy at work,” Hansson says. “Crazy at work should be an exception; it shouldn't be the norm, and certainly not be an aspiration.”
The (Mis)Guiding Principles of Goals and Growth
As of 2018, Basecamp has more than 100,000 companies utilizing its software. But unlike most tech companies, that number goal doesn’t dictate their work.
“We have no interest in building [our] company to a certain amount of dollars or size,” Fried says.
In Silicon Valley, businesses often feel the need to dominate industries and destroy the competition. Basecamp isn’t driven by those criteria, and they’re definitely not driven by constant growth or lofty goals. “We've always felt that we don't need to chase anything but profit and quality...and quality of life, for both our employees and customers,” Fried says.
To Fried and Hansson, it’s much more about running a sound, sustainable, profitable business. Instead of prioritizing OKRs or various other acronyms, they simply focus on doing the very best work they can every day.
“The idea that a goal should be driving you harder. ... I don't understand why that'd be,” Hansson says. “People forget that goals are figments of their imagination.”
He explained that as a primary indicator of what success should look like, goals are not helpful. They’re arbitrary measures of success or failure…and falling short of one can make you feel bad when you shouldn’t.
Moreover, goals are often determined by looking at others. “They become this death of enjoyment by comparison,” Hansson says.
Basecamp does set a few loose, top-level goals, such as “build a good product,” “create a great place to work,” and “treat customers with dignity, honesty and kindness.”
But what about specific metrics, like sales, retention rate, or customer success? “We can look at [those] numbers, like retention rate, renewal rate, etc., to see how well [Basecamp is] working,” Fried says. “But we don't have goals around those numbers.”
To measure the success of their product, the team simply uses it themselves. They actually use it more than any other company. By employing their own product and improving it every day, they’re able to better understand their customer experience. And when it works better for them, it works better for their customers.
“We judge our success by how we feel about our work, and the customer reaction and reviews,” Fried says. They ask themselves, “Are we proud of what we did today? Are we proud of the way we did it? And ultimately, do customers like the product?”
How Basecamp Approaches Success
Such a nebulous approach to growth and goals is sure to make employees feel adrift, right? One might think so, but the opposite is actually true for Basecamp employees, they say.
There are very few meetings at Basecamp, and that’s not just because they are a mostly remote workforce. The company does have an office in Chicago, but even those who live nearby only come in a few days a week.
“We’re a writing-heavy company,” Fried says. Instead of insisting on weekly stand-ups or organizing project check-ins, the pair encourages their employees to chronicle all updates, ideas, and thoughts. This gives employees a chance to ponder what they’ve read and formulate thoughtful responses—instead of presenting an immediate reply the way you’d expect in meetings and boardrooms.
This notion of slow, delayed communication inherently pushes back on live chat, an up-and-coming trend in today’s tech companies.
“The idea of chat as a primary means of communication inside of a company, I believe it to be a very toxic idea,” Fried says. He argues that outside of social communication and quick check-ins, keeping in touch with chat can cause a massive distraction for employees.
“I think that, right now, chat is why work is more hectic for more people,” Fried says.
Like they contend in It Doesn’t Have to Be Crazy at Work, Fried and Hansson don't expect, require, or support a culture that's “always on." They routinely monitor for “overwork,” and occasionally have to gently remind employees that late-night emails or mid-weekend product updates aren’t necessary. In fact, they’re frowned upon.
We don't reward late, hard overwork,” Fried says. “We’d rather reward someone who works normal hours and gets a lot done…someone who protects and manages their time. There’s no celebration of long hours here”
Basecamp hasn’t always been like this, though. Some of the values have been around since the beginning, but the company has spent the last 20 years constantly tweaking the way they work.
One major change Fried and Hansson have made is the way Basecamp gets projects done. The company used to work with absolutely no deadlines, then started implementing three-month work periods. Today, they work within six-week cycles.
The team doesn’t do anything they can’t complete in six weeks. When asked if that sort of deadline adds pressure, Hansson is quick to respond: “It could if you don't approach the idea of the budget as a tool. It’s there to shape your decisions and guide you. Budgets make it easier to say ‘no’ or ‘not right now.’”
Fried and Hansson are less interested and impressed by the results of work done with unlimited resources or timeframes. In the past, working with no deadlines left each project open-ended. It was harder for developers to say “no” or know when to stop working.
Each six-week time budget forces employees to make decisions and weigh tradeoffs. “That's what's enjoyable about product development,” Hansson says.
By implementing changes such as these, Fried and Hansson have noticed that Basecamp has become a calmer company. While the pair conducts employee audits twice a year, they mostly take the pulse of employee success and satisfaction by staying close to each team, which isn’t hard given the company only has 53 employees.
“We're constantly seeing [our employees’] work and talking to people,” Fried says. “We have a really good sense of how things are going. It’s pretty obvious when someone’s not doing well.”
How does their remote culture affect this? It doesn’t. The team has a few in-person outings each year—when they gather everyone in their Chicago office—but even those are spent “reconnecting and recharging social batteries,” as Hansson explains.
Basecamp’s culture is simply based on trust and harmony between words and actions.
When asked about the challenge of building a culture with a remote workforce, Hansson says, “[That is] based on a misconception of what culture actually is. Our definition is that culture is repeatable actions, what you actually do.”
Fried and Hansson do instill specific values and principles throughout the company, but Basecamp’s culture arises when they live up to those words. “Nothing transmits culture more than seeing actions, especially during hard times.”
He also believes that a remote workforce is better situated to building a strong culture because such culture is derived even more explicitly from the actions you actually take and the shared writings you commit, given there’s no office or in-person meetings to do the work for you.
The numbers behind Basecamp’s culture and employee satisfaction are off the charts. The industry average for employee turnover is about 18 months. Of the 53 employees currently at Basecamp, the average length of employment at Basecamp is 5.8 years. Eight employees have been there over 10 years, and almost half have been there over seven.
“Basecamp employees stick around a long time, even in traditionally high-churn positions,” Hansson says.
In the spirit of constraints, they’ve capped their headcount and are doubling down on good, effective work.
“We have no love for size,” Hansson says. “Big companies can’t solve small problems. The bigger they are, the more divorced and less able they are to relate [to customers]. More layers of management and indirection only harm empathy and kindness.”