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Building an Enterprise Software Startup

Abinash Tripathy, CEO, Helpshift
Abinash Tripathy
Chief Executive Officer
Helpshift
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK

It seems every venture-funded startup wants to be an enterprise software company. Yet, selling to the enterprise is challenging and requires special skills and experience. This episode explores the challenges and solutions with someone who has successfully built a software startup with large enterprise customers. 

Abinash Tripathy is co-founder and CEO of Helpshift, the world’s leading customer support platform for mobile. Abinash brings more than 17 years of experience within technology, Internet and mobile, having created and run a number of early and growth stage companies. Prior to founding Helpshift, Abinash created and ran a number of early and growth stage companies where he was responsible for conceptualizing and delivering the world’s first Unified communications platform, Mobile Photo Messaging and MMS products to the market.

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Building an Enterprise Software Startup

Michael Krigsman:

Welcome to Episode 191 of CXOTalk! I’m Michael Krisgman. Today, we are talking about enterprise software, and how do you build an enterprise software startup? We talked with founders, we talked with VCs and entrepreneurs, and everybody wants to build for the enterprise, sell to CIOs, sell to lines of business across a company, but it’s really, really hard to do. And our guest, Abinash Tripathy, who is the CEO and founder of Helpshift, which is a startup that has managed to cross that chasm, and is successfully working with very large organizations. And so, we’re going to talk about enterprise software. As always, there is a Tweet-chat going on simultaneous with this live conversation, and so join us using the hashtag #cxotalk; and you can ask your questions of Abinash, and you can join the conversation!

So, Abinash Tripathy, how are you?

Abinash Tripathy:

Great! Thank you Michael for having me on the show!

Michael Krigsman:

Well, it’s awesome you’re going to be here, and you’re the CEO and founder of Helpshift, so let’s being by giving us a brief background about Helpshift.

Abinash Tripathy:

Great! Helpshift is an in-app customer service product. We built this product because we saw something that was changing in the environment. Consumers are using apps, employers and companies are using apps, and apps are becoming sort of the mainstay in the mobile era. And what we observed is that user behavior is changing as well, that people don’t want to be on the phone or email someone for customer service, but they want to engage in messaging-like behavior, which is very attuned to the mobile-centric world we live in. And, so we brought that paradigm into the app environment, and started working with very, very large brands like Microsoft and Supercell, who are sort of the leaders in the mobile space, and delivered the first mobile, in-app customer service experience and we have lots of customers now who enjoy the product every day.

Michael Krigsman:

So, tell us about the company in terms of how long have you been established, how much money you’ve raised, give us some of the vital stats about that.

Abinash Tripathy:

Yeah, great. So, we’ve been around since mid-2012; the middle of 2012. We didn’t have a product, we had a very small team; and we built the product, launched the product in the market in the middle of 2013, and then we’ve been selling the product since then. And basically, we’re a post-Series B-stage company, we’ve got 20 employees worldwide, and we’ve got lost of customers, and it’s a great feeling to be part of a company that’s really making an impact.

Michael Krigsman:

Abinash, as I said in the introduction, it seems like almost every startup these days wants to be an enterprise software company, and it’s not an easy thing to do. Can you summarize for us the challenges: Why is it so hard to sell successfully to the enterprise, and then, as we have this discussion, we’ll talk about some of the ways of overcoming those challenges, and some of the things you’ve done and the lessons you’ve learned.

Abinash Tripathy:

Sure. You know, I’ve been part of the Valley startup ecosystem for a while now, and you see this sort of cycle where the companies that want to be, sort of, B2C companies, you know, B2C is cool, and then there’s a slump in the Valley, with B2C valuation, and then you see startups gravitating towards enterprise. And I think we’re going through that right now and a lot of companies believe that they want to be enterprise companies, and to sell to the enterprise, as the focus right now is on making money and being profitable.

But having said that, I think enterprise companies, or enterprise startups that cater to enterprises - very different type of startup. So, take our startup as an example. We really focused on the very large customers from Day One. It’s painful to be in that kind of space because it takes a while to build a company, it takes a while to close these deals with these large companies: they have a lot of process, they want to do diligence, they want to make sure that you as a company can meet their needs and be there for the long term because they’re making sort of a long-term bet. So, the sales cycles are very long and you have to be very prepared to deal with companies like that and with longer sales cycles. And then, once you start building up your pool of reference-able customers, then your company starts to excel from a growth standpoint, because bigger companies or the bigger enterprises, the way they do business, is they look at who in their peer group you have on your logo board. So that’s kind of important. And as you build a lot of social proof that you are working with a bunch of enterprise-class companies, then your sales cycles get shorter, and your growth starts to accelerate.

Michael Krigsman:

You say that you built the company from the ground up thinking about the enterprise market. What did that involve?

Abinash Tripathy:

I think if you really look at the enterprise market and ask yourself what’s so unique about the enterprise market, the first thing is, that we all agree on, is that enterprise is really the definition that we give to companies that have attained a certain scale. So, scale is a very important aspect of doing business with them. So, when we started selling to our first customer, it was in the gaming vertical, and in the mobile space, gaming had the most scale, so some of the customers we worked with had in excess of hundreds of millions of daily active users, and some of our largest customers in the gaming space generate about forty to fifty thousand customer conversations, or tickets, per chat, so whatever you want to call them, every day. And, they service that number of chats with about two thousand agents sitting in contact centers around the world. And, that sort of scale is something that smaller startups don’t have to deal with Day One, because a lot of the enterprise-focused, or what I say B2B, startups focus on the sort of the long tail, Day one, And don’t have to work on these scale challenges. They’re usually working with companies that have about five to ten employees, a hundred contacts a day, and they build a solution towards that market, and then they can’t really go and address the scale needs of larger enterprises. Scale is a very important aspect of enterprise software.

The second one is really being very flexible when it comes to working on some requirements that may be very a enterprise, integration or compliance-oriented requirement. So when you work with very large enterprises, they may have their own internal systems that you need to integrate with, that are not standard off the shelf, or Valley-standard stack of software. So, you need to have great APIs, you need to have, really, the flexibility to work with those companies in order to build, sort-of, integrations into their systems.

And I also feel like the compliance requirements - that those could be daunting to a startup trying to work with enterprises, right? So, for example, if you’re trying to work with financial services, then PCI compliance becomes important, if you’re working with the healthcare vertical then HIPAA becomes important; and we were working in the gaming sector originally and COPPA was very important. You know, COPPA is a law that establishes the rules for service providers about collecting information from children who play games, or whatever. And so we have to implement sort of, these compliances in our product very early in our life cycle to deal with verticals like gaming. So, that’s another aspect of being flexible and being able to understand the need of the enterprise and being able to respond to it.

Michael Krigsman:

So, as you were starting the company, how did you get to the point where these large companies would take you seriously? Because you’re providing in-app help, and so a large company like Microsoft or a large gaming company has an app, a mobile app, and you’re providing the help infrastructure, so to speak, that allows users to interact and chat with that company to get customer service, and that’s pretty mission-critical for those companies. So, how did you get to the point where they were willing to trust you with that set of jewels? Obviously, it doesn’t happen overnight, so when you were at the early stages, how did you reach that point?

Abinash Tripathy:

Yeah, I think the key here is differentiation. If you went and created a product that just was a just a better customer service platform, and was sort of the red ocean, what, you know Bill Black, one of our investors likes to call it, the red ocean. Let’s say we were marginally better than the other customer service products out there, then we would have had a much bigger challenge in seeing these large companies; that they have to try this. But, what we did was we were the first in market with this in-app, native, mobile customer service experience that was modeled around chat, and nobody else did it, and we were able to convince large companies that this was a hugely differentiated service that customers would really enjoy.

So, our first large gaming customer, which was Supercell: they had the traditional, sort of very modern helpdesk that’s available, that most of the companies in the Valley use, and then they basically saw the differentiation and they saw how much better their customers’ lives would be to do it all in-app, inside the app, inside the game. And prior to this, the old customer service product they were using, the user experience was very poor. Basically, the users had to leave the game, they had to go online, on mobile phone, to a website that wasn’t even optimized for mobile, search for FAQs there, fire off an email ticket, and then come back to the game. So there was a lot of friction, and we got through all of that friction and showed Supercell that a user could just press one button inside the game and have access to customer service, and natively just like a mobile app on their phone. And that really got them thinking. They gave us the opportunity to trial our service inside one of their newer games because they were not willing to risk changing their workflow. They had a team that was about one hundred to two hundred people at that point, and they were not willing to change the system unless they were convinced that the value was not marginal. It was a huge step forward.

And so, that first pilot that we did with them proved that the experience was so much better, the users loved it, and so they made the decision to switch their entire support offering. In fact, they were one of the boldest customers because they went out and turned off email as a channel, turned off every channel that they had and basically made in-app customer service the primary channel for all their users.

Michael Krigsman:

But, how did you get them to trust you? I think trust is the key factor here.

Abinash Tripathy:

Yeah, so Supercell is a very, very interesting company. They’re one of the largest gaming companies, you’ve read about them in the press, they make billions of dollars every year from their four mobile games, and at the point they started with us, they were already a multibillion revenue stream company; so they weren’t willing to take big risks. But, because the experience we showed them was so powerful - actually, the way it all started was one of my sales heads, one of my sales cofounders, or one of the cofounders that had sales, basically nagged them for a demo, finally got to meet them at some sort of event, presented them with the experience, and they were sort of intrigued. And then, a few months later, their COO who was flying down from Finland, basically emailed us saying, “Hey, I’m going to be in San Francisco. I’m going to stop by your office, let’s talk.” And so, we were very excited, he came down to our office; and we sort of explained our company, our culture, and how we build products, and he was very intrigued and he said, “Ok, I’m going to give you an opportunity in one of our newer games without disrupting what we already have. And if you are able to prove in that game that you are able to perform and meet our expectations, solve all the pain we’re having with our current solution provider, then we will adopt you in all our games.” And so, that pilot ran for about three months, and once that pilot was done, basically the results were on the table for the company to make a very educated decision, and they decided to unplug their traditional CRM and move over entirely to Helpshift.

And that customer has scaled all the way from a few hundred agents to a few thousand agents, handling in excess of forty to fifty thousand contacts per day. When I say “contacts”, I mean real tickets or chats per day, and a lot of our larger customers have that sort of scale.

And once you close a big customer like that in the gaming vertical like Supercell, it basically draws a lot of attention to you from their peers. Everybody wanted to be Supercell in the gaming vertical, and so they were curious as to who we were. And we have our branding prominently in the SDK that we provide, so when people open up a Supercell game and and go to “Help”, they can actually see “Powered by Helpshift.” A lot of people noticed that, and they called us, and wanted to learn as to why we were better and how we were able to help a company like Supercell, and that sort of drove adoption in the gaming vertical.

And so of the first set of customers, the early adopters of Helpshift were mostly gaming customers, and really that made a lot of sense to us because if you look at the app ecosystem, the market we were going after, eighty - ninety percent of the revenue in that ecosystem is generated by gaming companies. Just to be a dominant player there, we got to work with some of the major thought leaders of the mobile space. The gaming industry by far is one of the most advanced when it comes to mobile. And we took all of those learnings, put it into the product, and now we can go after non-gaming verticals. We have customers in the e-commerce vertical like Target, we have customers in the productivity space like Microsoft, we have publishing customers like Flipboard, and we have media companies like Virgin Media, we have IoT companies like Honeywell and Suunto as customers, Wordpress.

So, basically we have gone beyond gaming, but I would say that the initial part of our life was mostly gaming. Gaming had a lot of scale, it taught us a lot about how to work with companies that had a lot of scale, and which is very important to the enterprise. And then we started to work with companies like Zynga, who for example, were using another traditional CRM system and moved over entirely to Helpshift. And, they had a lot of customs for API kind of needs, they had integrations to a lot of their backend systems, and with Zynga we learned how to build integrations into their backend systems and developed APIs. So, we met a lot of their enterprise needs there, and then we already had started working on COPPA and things for compliance.

And so, I think that the focus we had from Day One to go after large enterprises, gives you the opportunity...Actually, it’s hard, but it gives you the opportunity to go specialize. And when you specialize, it really shows.

Michael Krigsman:

And so, from the beginning, you specialized in the gaming industry, somebody made an introduction or one of your investors made an introduction, and they sort of tentatively adopted you, it worked, you grew it from there. And so you basically had an anchor foothold in the gaming industry, and from there, you were able to expand out. And during that early period, as you were going through that expansion, as they were trying you out, what kind of pressures or tensions did it create, or challenges did it create, inside Helpshift? Because at that point, you know, you’ve signed them up for a trial or a proof-of-concept, and you have to deliver, and then it only gets bigger. So, what kind of tensions, challenges, pressures did it create inside Helpshift at that time?

Abinash Tripathy:

I’m glad you asked this question, because when we signed on Supercell, we had absolutely no idea who we were taking on. This was the largest gaming company in terms of active users, probably the toughest of the toughest to deal with. And having them as your first customer, literally, if you could not respond to a customer like that, could be a company-killing event. So, we didn’t shy away from it, we took on that scale. It was incredibly hard, I still remember when they first brought on...so they were very satisfied with how we worked in their sort of, small new game. And the new game didn’t have a lot of scale, because it was the new game. And they had this giant game called “Clash of Clans” which is basically this, hundreds of millions of daily active users, and while we knew of the scale, our systems were probably not ready for that level of scale yet. When they first brought on Clash of Clans, when we first launched Clash of Clans, our servers were going down because we couldn’t handle the load. And I remember spending twenty days and nights with my engineers in the trenches, sort of keeping the system up, rearchitecting on the fly, adding capacity. We had to re-do a bunch of our software to meet that sort of scale. It's called “refactor” in the geek speak. We had to refactor a lot of code to make it work at that scale. And, I remember having a couple of conversations with the COO of Supercell, and he was like, “Hey, are you guys sure you can meet our volume?” And I had to convince him that we had it, that we could have it in a couple of weeks, we would be past all of that, and we would just keep scaling, and lo and behold, two weeks later our software just kept scaling. And so we’re holding billions of events every day on our stack, basically today we are handling in excess of three to four billion transactions per day on our servers; and thanks to Supercell we were able to do that, and they gave us the opportunity, they were willing to be patient, they gave us a little bit of time, we were able to respond in that time; and then once we proved to them that we were able to solve these really hard problems, we really became very deep partners with them.

And that partnership - and this is another, sort-of lesson of working with large enterprises. So, we have weekly calls with Supercell’s team. They have thousands of agents, use our system, so obviously they’re the most demanding customer we have. We don’t put them through the normal support process of raising tickets and issues with our company, our support managers talk directly with Supercell on a weekly basis, we take inputs from them on what’s working, not working, input that directly into product and respond very quickly. And, we have quarterly business reviews with them, they come to our location once or twice a year, we go to Finland once or twice a year, and we work on joint roadmaps.

And so, it’s very different from working with small enterprises, where, in the SMB space, a lot of the service providers don’t even meet their customers, or have phone calls with them. They just email them, or Slack them and that’s about the contact they have. But when you work with these large enterprises, they really are true partners in a very, very partnership-oriented sort of mode.

Michael Krigsman:

What about the sales cycle? So, for example, so it sounds like the sales cycle originally for Supercell was pretty straightforward, because you had that introduction. But, a startup having to deal with RFPs and RFQs and having to travel to meet decision committees, that often large companies have in place, and the sales cycle can be three months, six months, nine months; can be a year. As a startup, how did you manage that aspect of it?

Abinash Tripathy:

Well, I mean if you’re selling to the enterprise, and you’re consciously building an enterprise to sell to the enterprise, all of those things are a given. You have to do those things to be able to sell to an enterprise, including the long sales cycles. So, fortunately for me, I started my career in 1995 Silicon Valley, and I was working for Oracle, where in my early days, I learned how to sell to very, very large enterprises. And from there, I went into extreme, sort of enterprise selling and I was part of a startup that invented WAP, and we put mobile browsers and mobile features back in the days when we had those feature phones - those flip phones. And, we used to work with telcos, which was an extreme level of enterprise sales. So, selling to large enterprises is one level of complexity and selling to a telco is sort of a next level of complexity.

And, so, having done that for many years, I think it’s important to have that experience. If you don’t have that experience in the Valley and you’re trying to build an enterprise company, you won’t see the value of working with these companies, being patient, and investing up-front to go work with companies of that size, and you’ll always go after what’s easy. So you see a lot of these B2B companies in the Valley, they do what’s easy. They’ll go after small companies - five, ten person companies - that don’t have a lot of complex requirements, and build for them. Then they find that it’s really hard to move upstream, and go sell to the enterprise.

And, you know, there’s a reason why Salesforce is Salesforce, and Zendesk is Zendesk. They’re two different-sized companies, from a revenue and size standpoint, and they probably have an equal number of customers, right? The revenue difference is 5 - 10x, right? Because one sells to very large enterprises, and the other one sells to sort of, you know the long tail.

Michael Krigsman:

What is the advice that you have towards startups who want to sell to the enterprise, but they look at these long sales cycles; in many cases, getting introductions is hard. But once they have an introduction and the sales cycle, the need to invest is very, very difficult. It’s just that delay, that time, is so expensive for a startup and it’s cash that they don’t necessarily have and time that they don’t necessarily have.

Abinash Tripathy:

Yeah, so for companies that sell to the enterprise, the scaling and the growth is slower than those selling to the SMB, initially. So, let’s say you take two companies: one selling to the SMBs and the other selling to the enterprise-sized companies, and they start their journey at the same time. Chances are the SMB-focused company will scale much faster than the enterprise-focused company in the initial years, right? And, so after the three-four year mark, it looks like the SMB company is ahead. But then, once that market starts to peak out, or, you know, bottom out, and it happens very rapidly in those sort of SMB segments where you run out of all the SMB that company can sell to, and then you make the decision to go up-market, and then your product is nowhere near close to being up-market at that point. Literally any company… I haven’t seen a single SMB-focused company become a successful enterprise company. I haven’t seen any examples of that. Nor have I seen examples in the reverse where you see enterprise-focused companies being really good at selling to SMB. I think they’re two separate markets, they’re two separate needs or requirements, and different types of companies will cater to those segments.

That’s really…So, the biggest thing, coming back to your question, which is “What do you really need to do to be an enterprise-class company?” The first thing you need to do is you need to know that you are building a long company, or a long-term company. Basically, you need to go find patient investors, investors who have the patience to build a longer-term, enterprise-class company, and are not looking for that SMB, fast-growth kind of model. So, it starts with picking the right investor. In the Valley there are those investors that really want the rocket ship, B2C-style, no-sales kind of companies. They basically tell a founder, “Oh, you should not have any salespeople at all, it should only be inbound marketing,” so there’s investors that prefer that. And then there are investors that believe that, “You should start working with large enterprises. It’s going to be slower. Build an outbound team.”

And the two types of companies are very different. If you’re looking at the SMB companies, they’re investing a lot of dollars in marketing, in digital marketing, and not as much in sales. And you look at enterprise-focused companies: less dollars in marketing, more dollars in BDR [Business Development Resources], outbound, inbound, having account reps and inside sales. Very different models, right?

Now, the other thing I’d like to add is if you think about how we grew as a company, before we built our sales, the BDR, SDR machinery, the first thing we invested in was customer support and customer success. Because, when you work with enterprise customers, they are big brands, and you don’t want to fail them, so you want to make sure you have the best customer support and customer success teams in place to handle these big accounts and make them successful, and they become case studies. They go around to the world telling them how good you are as a solution provider, and then companies in their class come in, inbound. And when that engine starts to work, it’s very powerful.

Michael Krigsman:

So the focus, then, requires patience, and you begin with having a customer success team. And I’m assuming at the very beginning of the company, everybody is focused there, but quickly; and it sounds like you kind of specialized in having a customer success team, in order to make sure that the enterprise customers you’re selling to, were just delighted with everything they were getting from Helpshift.

Abinash Tripathy:

Yeah, and initially when we started, the founders… and actually I just want to correct you: Supercell we didn’t win because our investors made an introduction, we won because our head of sales cofounder was extremely persistent, and he was a true hustler that went and literally stalked Supercell at events, and somehow got a meeting with some of their people. So, it was pure hustle that basically got us Supercell as a customer. And after that, it was a lot of keeping those customers really happy and engaged, and that happened. So, before we built out the success team, the product team, which was headed by me, and the engineers, we made sure that Supercell was a massive success. And then as we brought on bigger customers on that scale, we built out our customer support team first, before we started building out our SDR, BDR, AE teams.

Michael Krigsman:

That’s really interesting. So, you found your first big customer purely on the basis of intense hustle, and then you made sure they were really happy.

Abinash Tripathy:

That’s right.

Michael Krigsman:

So, what about building up inside the company, what kinds of people did you have to hire? What was the background of the folks that you brought into Helpshift as you were growing in this enterprise domain?

Abinash Tripathy:

Yeah, so, if you really think about what kind of people we need, we needed customer success people, we needed a lot of SDR, BDR AEs who had done this before at other SaaS companies. So, when we hire in San Francisco into our sales and marketing teams, and our customer success teams, we look for people who have relevant selling or customer success experience in peer-group companies. So, when I say “peer group” companies, we would typically hire somebody who’s left either Box or Salesforce than somebody who’s worked at Zendesk, right? Because you deal with a different class of customers when you come from sort of peer-group companies. So, a lot of our initial people are people who left Salesforce, or Box, or those types of companies.

Michael Krigsman:

As you were going through the sales process, and I’m so focused on the sales process because that’s really what everyone cares about, how much of your selling back then, and say today with your customers well-established, how much of it is based on referrals and relationships in terms of how you do your business development today?

Abinash Tripathy:

Well, I would say a lot of it. If you look at people who sort of work in big companies, they move around every two years or three years. And, if they have a positive experience with a vendor, they take that to their new workplace, to their friends in peer companies. So a lot of our customers today are referrals from existing customers. And also, the bigger companies go through an RFP process, and in the RFP process, you typically have to provide references to companies that are of similar scale or of similar size. And these references are critical to closing these deals. And, when you start building up a base of these types of customers, I would say a referral in selling is very important, reference selling is very important, and it works well for a company that’s in the enterprise category.

Michael Krigsman:

Now today, Microsoft is one of your customers, and you provide the in-app, the chat or customer service inside the very important Microsoft apps. So can you tell us, what are you doing with Microsoft? How did you get that relationship going, and frankly why did Microsoft decide to go with you rather than develop the capability in-house, which, I mean, they could do that if they wanted to.

Abinash Tripathy:

Oh yeah, excellent question Michael. So, Microsoft is on such a great trajectory right now, and they’re willing to look past what they’ve built internally, they’re just willing to do the right thing for the customer. But, our story of Microsoft goes as follows. So, we started working with a small company called Acompli which basically got acquired by Microsoft, and is now Microsoft Outlook. And, one of the cofounders of Acompli, Kevin Henrikson, was a colleague of mine at my previous startup, at Zimbra and at Openwave. And, so I started working with Kevin when he first put the Acompli product out, and he was very far-sighted and he said, “Look, even though we’re an email client, I see the value of doing this in-app, and I really want to be able to iterate and to build our product really fast in collaboration with our customers,” when they were really small. And, I see this whole app thing as a very powerful thing, and he adopted Helpshift and put it in the Acompli app. It truly helped Acompli succeed, which eventually led to their acquisition by Microsoft and then becoming sort of the Outlook client on mobile, because they were really able to take advantage of the in-app chat capabilities and iterate on their products very fast. So, they would put out a build every two weeks, and in that two weeks, they would basically take all the input from customers, optimize the app, and put it out in the app store; and they really built a science around this.

And, when they became acquired by Microsoft and they became Outlook, there was obviously pressure from Microsoft to abandon a third-party product like Helpshift and move to an internal product, right? And so, a lot of products inside of Microsoft were already using existing products that Microsoft had, which were products that Microsoft had built, it’s not even products that were third-party products.

So, Microsoft owns another customer experience company called Parature, which Microsoft bought for a lot of money, and Parature was being used by a lot of productivity groups inside of Microsoft, and but Kevin basically was able to convince the Microsoft peers that, “Look, in-app is where it’s at, Parature was not in-app, Parature was still trying to drive customers into email as a channel,” and then; more than in-app what they really saw for Acompli is that because we’re embedded in an app, we could take all the information about a user inside the app, and pass it seamlessly to the cloud that the company can then have a view into. And we called that “telemetry”, right? So, that telemetry was so vital to provide a great customer experience to the users that basically, Kevin was able to convince all of his peers that this was the way to go. In fact, Microsoft then became an investor, so they participated in our Series B round, which closed earlier this year, and they are an investor in the company as well as a customer.

And so, we’ve expanded our relationship beyond just the Outlook mobile client. We’ve built desktop SDKs now that work on Windows and Mac, and now Helpshift is going to be their in-app service provider for their desktop applications, for their Microsoft Outlook, for desktop Office, so we’re working on a path with Microsoft to sort of get Helpshift embedded in all of their mobile and desktop product lines. And so, I’m just so fortunate to have colleagues or friends like Kevin who had the foresight, who had the ability to go prove to the world that the better solution has to win, convinced Microsoft internally that indeed, Helpshift is a better solution.

Michael Krigsman:

So, with Microsoft, you’re talking about embedding Helpshift technology, customer service technology within Microsoft desktop apps, like Office.

Abinash Tripathy:

That’s right. So, we’re working on a path right now to hopefully embed Helpshift into the desktop apps.

Michael Krigsman:

Obviously, that’s incredible. That’s just (Yeah.)

Abinash Tripathy:

And then you have to think about the fact that Microsoft has two very large CRM products, one is Dynamics and one is Parature, in-house. And yet, they use Helpshift.

Michael Krigsman:

Yeah, that’s pretty amazing. So now you’ve got kind of this relationship going with Microsoft. What does that mean internally at Helpshift in terms of how you organize the company? So, you obviously have a product that was a great product, great technology, and you somehow got it into their hands through a combination of relationships and hustle, and they bought it, and you did all the things that were necessary to keep them happy, to keep that huge enterprise customer happy. And now, you’ve got to organize the company internally inside Helpshift to have the right kind of customer relationships, and support for those relationships, management of those relationships. And so, how do you do that? How do you organize for the deep enterprise relationship?

Abinash Tripathy:

Yeah, it’s very hard, right? So, especially when you’re in a startup environment and you’re working with a lot of young people on the engineering side who haven’t really had a lot of enterprise experience. When they get asked to do things that are unreasonable for some reason, right? So, you know Microsoft for example, to work with them, one of the first requirements that we had was that all of our infrastructure was hosted on Amazon. And you know, Microsoft basically said that if you want this massive contract from us, you’re going to have to host at least Microsoft Tenant on Azure. And so, we had to go push our team internally, and basically have two deployments. So, we had an AWS deployment for most of our customers, and then we had an Azure deployment that we manage. And, so all these things you have to do, there’s things around security, there’s things around privacy, there’s things around data storage, right? And there are so many compliance things you have to do with enterprises.

And it’s so frustrating with young engineers to be able to not work on cool features but to work on these boring, sort of compliance kind of things. So you really have to go and have a massive selling inside your organization — to your teams — to explain the value of working with these large customers and do things that may seem boring on the surface, but have huge payoffs in the long run.

And, just to give you an example, the work we did with Azure, it’s incredible! So, initially, as a company, as a startup, you’re like, “AWS is, like, incredible,” and we always looked at Azure as this thing that’s kind of new and maybe not as good. And what we learned in our experience of deploying on Azure was that Azure was just as good, even as good as deploying on Amazon. And maybe we'll get better cost efficiencies with Azure. And now we’re hoping to put a plan together to try and move most of our infrastructure to Azure, right? So, there’s a lot of learnings that come out of large enterprises, and you just have to be open, flexible. The biggest challenge is really getting your team completely aligned with the enterprise focus, right — you know getting your young engineers to see the value of working with these big companies on things that may not be very cool.

You know, that’s the thing. In the Valley, the engineers in younger companies want to work on the next cool thing, and for enterprises, you have to go solve really hard problems that may not be cool, and that earns you the right to do business with all of these companies.

Michael Krigsman:

So, we have just a couple of minutes left, we’re just about out of time. But we have an interesting question from Twitter from Arsala Khan, and maybe you can answer this very, very briefly. So, Arsalan Khan asks: When you were starting out, or when an enterprise company is starting out, how good or useful is social media to help create that initial buzz, or in helping you establish relationships that will lead you to customers? So very, very quickly.

Abinash Tripathy:

So, social media is kind of important, but not super important. So for B2C or sort of, long tail - focused companies, social media is more important than for enterprise-focused companies.

Michael Krigsman:

And, the last thing that I want to ask you and again, pretty quickly because we’re just about out of time: Out of all of this, what is your advice, your best advice for startup founders who are wanting to sell to the enterprise, and they’re at an early stage. What’s your advice on how to get to the point that you have reached with Helpshift?

Abinash Tripathy:

Yeah, I think my biggest advice is if you don’t have a cofounder that has worked in the enterprise category or space, selling or in BD, then go get one. You really need a person that understands what it takes to work with enterprise companies. That’s the first and foremost requirement. And, the second one is to find patient money. If you really want to build a long-term enterprise company, you going to want a VC that is patient and knows what you’re going to be doing, and it’s going to take some time, and is willing to work with you and help build the company. And so, patient money is really important. I think those two things, if you’ve got people who really have the experience that you need for enterprise, and you have patient capital, then I think you’re on your way. It’s not that those problems can’t be overcome, it’s that those are the two things, the foundational elements.

Michael Krigsman:

So, enterprise experience and patient investors who understand what the enterprise sales cycle and process is like.

Abinash Tripathy:

Correct.

Michael Krigsman:

Fantastic! Well, this has gone by very quickly. We have been talking with Abinash Tripathy, who is the CEO and Founder of Helpshift. He has been explaining what it’s like, what are the challenges and solutions for building an enterprise software company; an enterprise software startup. Abinash Tripathy, thank you so much for joining us!

Abinash Tripathy:

Thank you, Michael.

Michael Krigsman:

And, everyone, thank you for watching CXOTalk Episode 191 and we will see you again next week. Bye bye.

Funding Technology Innovation with Nagesh Rao, Chief Technologist, Small Business Administration

Nagesh Rao, Chief Technologist, Small Business Administration
Nagesh Rao
Chief Technologist
Small Business Administration

The Small Business Innovation Research (SBIR) program offers a unique model for funding technology innovation. The SBIR serves as a portal to connect small businesses, academics, and startup with partners in agencies across the government. It also provides assistance to ensure that small companies are treated fairly during their engagement with the federal government. 

Nagesh Rao currently serves as Chief Technologist with the US Small Business Administration’s Office of Investment & Innovation. His portfolio of work includes the SBIR/STTR program and coordination of the Fueling Small Business Innovation Interagency Policy Committee for the White House’s Lab to Market Commercialization Agenda.

He is a practicing technologist and commercialization strategist working at the intersection of applied science, law, business, and public policy from both domestic and international perspectives with over 10+ years of successful experience. Nagesh has been afforded the privilege to work with top-tier cutting edge organizations such as Rensselaer Polytechnic Institute’s Office of Technology Commercialization, The National Academies (NAS, NAE, IOM & NRC), US Department of Commerce (USPTO, EDA, & OIE), LAUNCH, CleanTech Los Angeles, Global Access in Action, NCET2, Innovation Endeavors, Planet Labs, Ecovative Design, Publicbeat, Peek, Stiefel Family Foundation, and most recently Virginia Tech’s Applied Research Corporation.

Nagesh Rao played an instrumental role in the creation and execution of 5 major interagency policy committee reports regarding the SBIR/STTR program on behalf of the White House-OSTP and SBA for US Congress, as well currently co-leading the re-vamped build out of the www.sbir.gov platform that centralizes the programmatic efforts of the 11 participating federal agencies. Nagesh has been afforded the privilege to work with top-tier cutting edge organizations such as Rensselaer Polytechnic Institute’s Office of Technology Commercialization,

Within those various organizations Nagesh has worked in a myriad of roles including: patent examination, investment diligence, intellectual property portfolio curation, startup company formation and scale up, fundraising, expert advisory assessments, crafting of policy reports and much more. As well through his work he has played a significant role in developing the following programmatic endeavors: i6 Green, FLoW, Patents for Humanity, VT-ARC Additive Manufacturing Grand Challenge, and AAAS-Lemelson Invention Ambassador Program.

Furthermore he composes and presents intellectual musings which have been featured via WAMC-NPR, TechCrunch, The Scientist, Triple Pundit, MIT XPrize Lab, UC Berkeley, RPI, Stanford, Cleantech Open at Xerox-parc, NCET2, BPIA, The National SBIR Conference, Microsoft Worldwide Partner Conference, The National Academies, Next Gov Prime 2020, and PwC’s CleanTech Revolution at the LA Autoshow.

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Funding Technology Innovation with Nagesh Rao, Chief Technologist, Small Business Administration

Michael Krigsman:

(00:06) Welcome to episode number 169 of CXOTalk. CXOTalk brings you conversations about disruption in the enterprise, leadership, innovation, and we have which is probably the largest video library on this topic with executive interviews any place. And today I’m speaking with Nagesh Rao, who is the Chief Technologist and entrepreneur in residence at the US Small Business Administration. Nagesh how are you today?

Nagesh Rao:

(00:45) Good how are you Michael.

Michael Krigsman:

(00:47) I’m great and thank you so much for joining us. So Nagesh tell us about the USSBA and tell us what do you do.

Nagesh Rao:   

(00:55) Sure and thank you Michael and to the audience. It’s a pleasure to meet you and thank you for taking timeout on a Friday afternoon to hear this what I hope to be a lively conversation.

(01:07) My name is Nagesh Rao as Michael has mentioned, and as the Chief Technologist for the Us Small Business Administration I actually work on a very cool special program. It’s the Small Business Innovation Research Grant and Contact program, and it is housed within the SBA offices of investment and innovation and that’s where I serve as Chief Technologist, because it is a little bit of a unique inter-agency initiative program from a federal wide government. So the SBIR program has been around since 1982, and it is America seed fund. And when I say America seed fund I literally mean it is a seed fund for high-tech start-ups and high-tech small business companies to engage in the necessary federal government research and development programs.

(01:57) But with the commercialization affect to do that innovative research and technology development for the federal government need and the general public’s need. It’s a $2.5 billion annual seed funding program in the forms of grants and contracts for the small businesses to work with agencies on projects from the Department of Defense all the way down to the Environmental Protection Administration.

(02:23) You’ve probably heard of companies like Qulcomm, Biogen, Symantec , probably seen 3-D printing in the Roomba vacuum cleaner. Maybe you have heard of latex surgery. The origin point for a lot of those technologies, industries, and companies is the SBIR STTR programs. They seed funded in a non-delude of manner, the origins of technologies R&D development and commercialization. And what’s really interesting is the government when I said non-deluded I really mean it. We don’t take an equity stake. All we ask is that you use the funding to do the necessary R&D efficiently, effectively, appropriately, and honestly.

(03:05) And the return on investment for the American government and for the American taxpayer is high-tech innovation, growth and development spurred on through these funding opportunities. And as a result of that – sorry Michael. As a result of that I was recruited from the private sector a few years ago to help co-manage and run that initiative. I work for Mark Walsh our Associate Administrator, Michelle Schimpp who is the Deputy Associate Administrator, and John Williams the Director of Innovation and Technology. They are all senior executive service members who I work for and help me do all the invasion, brainstorm and develop the collaboration opportunities internally with the inter-agencies initiatives from the federal government side, but then I will externally with the public and private sectors and non-profit sectors to help evangelize and further build out the use of this funding opportunity to seek these catalytic transformations and technology development.

Michael Krigsman:

(03:56) So you say that you’re America Seed Fund and you have $2.5 billion to invest and yet you do not take an equity stake in the companies which you invest. So how does this work? Where exactly does the money come from? Is it within your part of the Small Business Administration, does it come from you, does it come from agencies? How does that part of it work?

Nagesh Rao:

(04:24) Sure so the funding actually comes from the federal government agencies. From the Department of Defense, NASA, National Science Foundation, Homeland Security, USDA, Education. Those are some of the many agencies that participate in this program.

(04:39) They hold the funding though what’s called their extramural research and development budgets. The federal government extramural research and development budget is usually around 130 to 140 billion per year, and it is set aside towards the federal government to do that necessary research and development through extramural partnering activities.

(04:58) So about for the fiscal year 2016, about 23% of that budget has to be set aside for small business companies to do that innovative research and development. The agencies are the ones who are administering the funding opportunities that the US for Small Business Administration is the umbrella organization that oversees the problematic and policies oversight over the program. And so we help oversee it and then work with the agencies to collaborate and engage with the public and to find new opportunities and scout for new innovation type lines to encourage small business companies and high tech startups to engage with those agencies and apply and develop these technologies forward.

(05:40) So a good example would be a company like Made in Space. They are engaging with NASAs SBIR STTR program, and they’re this small business company that is actually literally developing the 3-D printing technology on the International Space Station. So when we heard about it a year and a half ago the space station was able to print something in space, and what folks didn’t realize was that it was done through an SBIR funding company called Made in Space.

Michael Krigsman:

(06:08) So does a company apply to get this money? It sounds like a pretty good deal. You hand out money, and you don’t take equity but you must get something in return. Is it that you want these people to be nice to you so you give the startups and the entrepreneurs a lot of money is that it?

Nagesh Rao:   

(06:29) What we’re looking for is you know the angle is economic development job creation, wealth creation and maintaining America’s innovative technological leadership. A lot of countries have actually tried to replicate our program. I’ve discussed this with folks up north in Canada to folks in Sri Lanka, Vietnam. In Europe they have something similar called the Horizon 20/20 Program. In Brazil they’re looking to develop their own versions as well, but the interesting thing is that what makes ours unique is we don’t take an equity stake and there’s a reason why.

(07:03) It just doesn’t make sense in our free market society to allow for that state owned enterprise to occur. All we want to do is spur and incentivize our growth and by doing it with less, you know as is and the paperwork and whatnot to apply is a bit cumbersome. So to add on top of the the governments going to own a bit of your technology or part of your company. it just doesn’t make it a savory topical area of interest.

(07:30) So we step out. We let the market dictate for it, but what we need to do and what we like to do is we seed fund more high risk, high reward tech driven technology platforms and technology companies that are willing to do the stuff that the free market might not, deemed savory right off the bat.

(07:49) So for example with 3-D printing and I’ll get to that how does one apply in a second. The SBA program is actually catalytic and funding the development of that technology industry back in the 90s. Some of the earliest companies that were doing it were small companies like ZCore, Geomagic and DTM. And what was interesting was it was federal funded opportunities that incentivized those companies and those entrepreneurs to actually do that technology development that the VC and the angels just wouldn’t touch because it was too risky of an investment that to make at that time.

(08:27) So what we’re doing is we’re helping, it’s an augmentation helping in de-risking with the technology. And the angle for us is that it will commercialize and it will maintain our leadership, but it will also help seed fund that promising next generation technology that we need in order to maintain and grow as we technologically evolve over time.

(08:52) And for someone who is interested in applying for the program we actually incremented a gateway business intelligence platform that is at www dot sbir dot gov, we created it as a one stop shop platform that provide the necessary input and intel to a promising entrepreneur, innovator, small business company that is looking for funding opportunities, and may not realize that there are different pools of funding and different types of funding that are available on that site.

(09:20) Currently we have funding from helping human services, Department of Defense, and National Science Automation, and what’s really interesting is that they definitely go into their own directions from a science and technology mission perspective, but there’s definitely a bit of an overlap. And so what’s really interesting is if you’re supposedly, suppose you’re working on something that relates the Internet of Things and it might have an ‘I’ll help’ aspect to it. Well to be honest with you the National Science Foundation’s funding some of that development of that technology. So is Health and Human Services and the Department of Defense. They just won’t call it Internet of Things.

(09:58) We all call it a little bit different you know what we may think as robotics at one agency and autonomous systems at another agency and there’s a reason why. It’s because each of the agencies will operate either under a branch or contract in perspective, and more importantly they’re going to have different needs. And we try to be agnostic but broad and specific at the same time, so you have these different enter plays occurring.

(10:25) As for applying, like I said you can go through SBIR dot gov is a one-stop shop to help assist and where you want to apply and who to apply with. Then we look through the different solicitation funding opportunities, the actual instructions and the link to the agencies that’s funding and be able to then click on and go through the application process at the Health and Human Program or the Department of Defense or National Science foundation or the department of Energy or whatever it may be.

(10:51) With the granting agencies with the exception of the National Science Foundation, they will operate through grants dot gov for the formal application process. As a contracting agency they have their own specific contract portal that you would work through. But the whole point of SBIR dot gov is to take all those different zig-zags and funnel through it at a central point so that you can at least get to where it is that you want to get to in a quicker format.

Michael Krigsman:

(11:16) Nagesh, what is the criteria for getting one of these grants, because that’s what everybody wants to know. That’s what entrepreneurs want to know is, I have this great technology, how can I be part of this funding process.

Nagesh Rao:

(11:37) Absolutely, so one of the first important things to do is to remember that you have to be US majority owned for-profit small business company. Now does that mean you have to incorporate? Not necessarily at the upright, but if you do win, if your proposal does win funding then you do have to make sure you incorporate.

(11:58) But that’s going to include the steps of getting your EIN setup, your DUNs number setup. You have to make sure that when applying it for a particular funding opportunity that you’re addressing the needs in that application.

(12:13) The program managers from the different agencies that will fund are looking for technical skill development set, they’re looking for business skillset and they’re most importantly looking for that you’ve got something potentially feasible. And we operate this program on a three phase process.

(12:28) So what’s interesting at SBIR and as I said it’s an augmented funded source is that phase one, you can win up to $150,000 in the grant or contract, and I refer to that as being akin to an angel investment. So when we think about an entrepreneur who is going through the funding lifecycle, from idea and you know napkin to lab to marketplace. We’ve always talked about bootstrapping, followed by friends and family, followed by angel investors followed by venture capital, and venture capital breaks out into corporate venture capital, private sector and private venture capital.

(13:07) In between the angel and the friends and family is where I think especially if you’re working on a high risk, high reward, high growth technology driven application development is where SBIR fits in nicely. And phase one is up to $150,000 grant and contract and that is very much akin to an angel investment. And phase two is up to $1 million and that is akin to a series A.

(13:36) Now I’m just giving you the formal caps. There’s actually a hard cap of $225,000 for phase one and $1.5 million for phase two. And actually above that you can go above it but it gets into the technical details of wavering. But the whole point is that you know if you have a promising idea you can get some significant money to help seed fund the R&D.

(13:58) Now what’s really interesting to is that with that phase one and phase two funding, phase one is all about feasibility study and developing the proof of concept. Phase two is if you do a really good job in your phase one, the agency will then give you phase two and say, that looks promising and we think that can be a really viable prototype, so here’s a million dollars. Scale it up and grow.

(14:20) And what’s really interesting to is that the programs pretty popular. We’ve got about 16 to 20% acceptance rate at phase one. And then of those phase ones around 25-30% mature into phase two. But they tend to be a bit more disrupted technologies and they tend to be a bit ahead of its time. But it’s really for those folks, those agencies who are looking to develop you know far reaching technologies ahead of its time.

(14:48) And what the best part is that because it has been de-risked by the federal government and no equity has been lost after phase two anyways, if the company has done a really good job there’s a couple of options here, and that’s what we refer to as phase three. And for contracting agencies like NASA and defense, we call this notion, (‘spinning’? 15:09) and that is where the government is seeking from that technology to be developed for government use down the road, for the space mission programs or whatever it may be. And that is where you know the federal government will encourage you to partner with the primes, the ITKs the Lockheed Martins, we will help make those introductions and inroads so that you can be part of that upside chain process.

(15:31) And at the phase three that’s when it’s actually like a 20, 30, 40 million dollar contract to help develop. You know you’ve done a great job and the government say, I need 10,000 of those units now so let’s start producing.

(15:45) With the granting agencies like the National Science Foundation and National Institutes of Health they will usually like an emphasis on more commercialization for the publics good, and they will do all sorts of meetings. Meet and greet business conferences whatnot to encourage you to grow with the private sector and connect it to the right folks in the private sector. But then step out of it. We’ll make an introduction and then we’ll step out of it and say, we’re out of it from there, but here are folks who you may want to engage with and talk to. What we like to do is bring all the different folks together and then we get out of it, out of the room and say, it’s on you.

(16:24) But we will make those introductions and facilitate, and what’s really nice to the VC and the private sector community and the technologies funded they go that’s the seal on the golden eagle. It’s been de-risked and there’s some promise to it, otherwise they wouldn’t have funded in it.

Michael Krigsman:

(16:35) We have a couple of questions from Arsalan Khan from Twitter his interesting questions, he’s wondering, he’s assuming first off you’re only funding emerging technology, but them he’s wondering about the success rates of these companies, and in addition do you need to have a patent before you can apply for an SBI funding grant?

Nagesh Rao:   

(17:01) So let me address the patent. No, you don’t need a patent. In fact if you patent any of the technology as a result of SBIR funded development, you keep the patent. We actually encourage you to own and keep that eligible property, and I won’t get into the legal concept of the development because it will go for days. But there is a provision called the BiDil Act. And the BiDil Act says that if you are a non-for-profit institution or a small business company and you’ve engaged in federal research, it then allows your property that is derived you get to keep, you get to own it; done and simple.

(17:30) And so what’s really interesting is that you don’t necessarily need a patent, I mean it helps but what we’re really hoping you do is you actually develop that promising technology that’s not fully baked out. That’s the whole point of a phase one is that it’s not fully baked out, and so it’s in its nascent stage. And if it’s promising and we think there’s some feasibility and it merits then we will fund you to develop it further so that it becomes the practice.

(18:05) Now with respect to Arsalan’s other couple of questions it was the…

Michael Krigsman:

(18:14) Success rates and you only fund emerging technologies, what stage of funding technology development.

Nagesh Rao:

(18:19) It is yes it is emerging, it’s generally nascent, but it’s nascent in the sense of like the free market, we’re filling a dearth in that connect in what they have always called the valley of death in commercialization. We’re filling a little bit of a dearth at that early phase. You know phase zero that nascent brought down.

(18:37) When I said 3-D printing back in the 90s, yes, we seed funded the origins of that principle technology in the beginning and then we got out for a bit. You know it was growing on its own. And what’s really interesting is that we put some funding back in again in 3-D printing space because it kind of needed it. And that was in areas that were related to food, space, and environmental security and whatnot. So some of the promising technologies that are coming in the 3-D printing space, Made in Space, Upperbone, and Modern Meadow are actually addressing what’s necessary needs.

(19:13) Modern Meadow has actually figured out a way to 3-D print meat essentially and leather products and whatnot. Upperbone has been able to figure out how to 3-D print and they are pioneering the 3-D printing of muscle tissue, bone, you know that sort of stuff so that you don’t have to go through the laborious process when getting a skin graph or replace a lung or kidney or whatnot. You can actually print out the organ for you instead of having to wait for a donor. And like I said with Made in Space it’s actually very interesting.

(19:45) You know when you think about the explorers back in the day when they came to the new world, they didn’t bring the old world with them. They just brought the necessary equipment to do the job and then work with the recourses here.

(19:59) With 3-D printing that’s kind of the same notion, we’re not going to bring all our resources with us and then go to colonize on a planet. You know if you think about why we’re surveying Mars and all that stuff, it’s a lot of geochemistry readouts with the different rovers. It’s because we’re trying to find out what are the building blocks and the building materials there that we can then use and adapt into a 3-D printer to print out you know the infrastructure is necessary for the housing and whatnot.

(20:25) Now success rate, so I said the success rate of getting around phase one to 16 to 20% and getting a phase two is around 25 to 30% usually. But it was interesting. I was looking this up the other day. I found a paper looking at the success and the commercialized technologies it’s close to almost 50% now. You know when you think about it and what’s funny is so the mobile wireless device, everyone knows about your iPhone and all that. Folks don’t realize that about 70% of the components of that technology actually it’s origin point of funding through developing it was from the SBIR program.

(21:10) Whether it was the processor or even the biometric scanning that was a company called Ultra-Scan Corporation that pioneered the development of that technology. There’s a lot.

Michael Krigsman:

(21:23) It’s pretty amazing. We’re talking with Nagesh Rao, who is the Chief Technology of the Small Business Administration. Now how do you compare to VC investment. What are the pros and cons?

Nagesh Rao:   

(21:44) So a Venture Capitalist is great because they bring in their network and they’ve got a lot of money, and they can cut out a big check, and they are less burdensome, and cumbersome to do it absolutely. But it’s different; it’s comparing apples and oranges to be honest with you because you know they take equity stake, they want some ownership, they’re going to manage and dictate your board, and I remembered seeing that back when I worked on startups at the Bay area. I hear the horror stories from my friends, and also some good stories to, but there’s definitely bit of a takeover and the founder is also kind of pushed around and pushed over.

(22:24) You know for us in the programme we are not interested. We want to empower the founder, we want to empower the team and encourage them to do the development properly. And we just want to get out of the way, but we are incentivizing them. We are using this as a catalytic investment and a catalytic incentivisation to get them to do that necessarily R&D in areas of interest like environmental security, food, water, health, national security, to tackle those tough problems and those issues and figure out solutions for a billion people in mind and not just one or two people.

Michael Krigsman:

(23:02) Are there – well we have an echo turn your volume down. This is live video folks, so if you have questions for Nagesh Rao, who is the Chief Technologist of the SBA. And we are talking about small business innovation research funding, and this is a way of applying to the government and basically getting a no strings grant. So if you have questions we are on the hashtag cxotalk on Twitter, and ask away. So how do you make the selection process, who actually decides and I’m assuming since you are here you have some sort of coupon code so that people watching can get an automatic grant from you, something like that.

Nagesh Rao:   

(23:54) So the federal funding opportunities for the selection criteria are done by the agencies themselves primarily and they all have different peer review processes. So you know whether it’s National Science Foundation, National Institute of Heal or defense, they’ll all have their own review process. But they can be industry experts, business leaders, and science and technologist in the same room generally. And they will review the proposals. They will go through it one by one and see who they think it’s promising, who is going to do a good job, and who they think will actually be able to carry forward on the potential feasibility and the development of the technology.

(24:34) The thing to keep in mind is know your audience. So for folks like National Science Federation, the Department of Energy, and National Institute of Health they’re granting agencies, they use a little bit of a hybrid between academic and the business review process. Whereas the Department of Defense, they are really looking for hard core science technologist. There is a bit of a business acumen, but at the end of the day defense is going to be looking at those small business companies and saying the long term is that you’re going to develop this promising technology and then partner with our primes because our primes have the manufacturing capability to be able to do that mass manufacturing and will want to be able to work with them.

(25:13) So it’s a mixed bag. It really does vary from agency to agency, but the whole point is that we are looking to small business companies to do that innovative research and development from an applied and commercialized perspective. I think that’s the unique thing that makes our program very successful.

(25:32) Now having Universities and having worked at a University tech transfer office years ago and whatnot, universities are very ethereal, it’s very basic R&D there. There are applied perspectives there, but you know most university folks are still thinking from the notion of, ‘oh I’m going to solve this problem’, and from the applied perspective it’s ‘I’m going to solve this problem with a purpose in mind of actually taking that discovery and putting it into action’. Now I know a lot of universities are starting to head towards that mindset and making sure that there is a bit more applied perspective, and it’s wonderful. But at the end of the day a small business company, I think one of the things that makes it a little bit incentivized and why you will get more sort of a catalyst with a small business company than a university is really the risk factor.

(26:26) For a small business company it’s do or die. For university it’s like, ‘nah it didn’t work, okay. I go back to my drawing board and I have my job to keep me happy’. And so when you think about it, those different incentivisation parameters around it’s easy when you’re a tenured to a faculty just to chill out for a moment. And if failure happens, ‘well I have something to work with’, whereas a small business company a failure happens that it, they’re done. So they have to be very smart and strategic and driven to get that success going forwards more.

Michael Krigsman:

(27:02) When you receive these applications, what are the initial filters that you look at? So what are the characteristics of companies that make it through the first gateway, and what advice do you have for companies who obviously are applying and want to make it through just the initial filtering process that you must go through.

Nagesh Rao:

(27:24) Team, team, team, like having a good idea; well one, following the instructions and following the directions. I know there’s a lot of boxes to check off, i’s to dot and t’s to cross. But it’s always important to – it’s free money. But with that free money we just expect you to do the paperwork correctly because it’s just important for us to make sure that you’re doing it right, and there’s no fraud, waste, abuse activity occurring.

(27:54) I think the other thing is that you have to have a good solid team. It’s always important to have a good strong science and technical acumen with the business acumen and with the you know a little bit of the market acumen and figuring out what it is you’re developing altogether. I think a little bit of legal to. It’s always important to have some legal advisers with you, especially when you’re thinking about patents, trademarks, copyrights, and more importantly just figuring out that patent landscape, because if you do develop some innovative stuff you will want to patent it.

(28:26) I think another important key attribute and a filter for us is that you know what you’re talking about, that it conveys in a very clear, elegant, and simplified manner what it is that you’re looking to do and how you are solving that need and addressing the issues of the federal funding opportunities; the problem statement per se.

(28:47) You know, contracting agencies like defense and NASA are going to have a bit more of a problem statement; we need this specific coding in mind, or we need this specific AI system or you know ori-finder or whatever it may be. But whereas granting agencies like even the US Department of Agriculture or whatnot, they are looking for a little bit more broader and bigger picture is like okay, you come up with an idea for food security, but how are you going to commercialize it and make it more effective and deployable. And it does vary also to phase 1 versus phase 2. Phase 1 is really more on feasibility study of like I’ve got this idea, I’ve got this solution or promising technology to help increase food yield with this next-generation crop rotation and using this autonomous system to help do that. But then actually carrying out what it is that you can do to then scale it up, and when the favor of those agencies and they say yeah, that’s actually really promising in development and we’ll fund further because we think it can scale further.

(29:56) A good example is Altura Energy actually. So it’s really interesting, Altura was funded by the US Department of Agriculture, and what they did was they repurposed aerostats. I don’t know if anyone is familiar with aerostat technology. It came from the Air Force and essentially it is a wind turbine, helium device which floats up in the sky and it was really designed more for like a satellite kind of communication technology.

(30:24) What these guys did was kind of take some of the same kind of applications of that technology and pivot it towards energy creation. So there’s terawatts of energy. When you get up to about the Empire State building height, 2000 feet up or higher, you’re dealing with constant streams of wind flow. If you’ve ever been to the top of a skyscraper or the Empire State building, you always notice it’s windy. Because the winds are going around all over and over, and that’s terawatts of energy essentially floating up there.

(30:58) And what these guys did was they figured out a way to take this aerostat technology, and with the helium float the turbine up into the sky and then it’s tethered by cables down to generators, and it’s just basically generating energy non-stop and sending it down the cable. What’s really interesting about what Altura did was they got me funding from USDA because the USDA said we need to solve these energy systems, you know deploying energy in the world environments, getting energy to the world communities and performing in that community, because you know whether it’s coal or petrol or whatnot you know it’s got to be compact and is got to be easily transportable. But you know it makes coal and petrol very savory versus you know some of the aspects of solar, wind turbine and hydro, and the economic differentiations is that it’s got to be at a price point of economics for anyone in the switching costs. So Altura has figured a way to do that. And they figured it out and in the rural parts of the country where it’s great for coal store regions to. But what is really cool because they did such a good job and it’s becoming the USDA/SBIR success story.

(32:18) What’s really funny they got the attention of Ratan Tata, so anyone who is familiar with the Tata family out in India, TATA is a major company and Tata is basically the Bill Gates of India. And he now is putting money into the company because he wants that technology developed and deployed in India.

(32:37) So it is this great opportunity also where they took this technology solution where it was developed here in the states for a specific need for the USDA we are seeing in the rural community for energy access to then finding international markets who are willing to jump on it quickly, and especially in regions of economies where it’s a blank canvas. It’s perfect.

Michael Krigsman:

(33:02) So you apply for the loan – sorry not long, you apply for the grant and if you successfully go through the programme, at the end of it it’s your technology, you own it completely, and there are no strings attached from the government right?

Nagesh Rao:

(33:23) Pretty much. So there is this one provision from the BiDil said if the federal government needs to use it we have margin rights. So the notion is the federal government needs to really desperately use the technology, we reserve the right to use it licensed free and whatnot, but it’s never really happened. We’ve never margin in, we don’t because we are not in the business for that. We are in the business of making sure that you develop the technology, you go chase the markets, and you commercialize it and get out into the hands of the masses. So we’ve never really done that and we never will.

Michael Krigsman:

(34:00) Are you partners with the Venture Capital community or are you competitors of the VC community?

Nagesh Rao:

(34:08) Collaborators, not really competitors. I guess in a way if they’re VCs got this mindset of like, I want to own all these companies and promising ideas and own it for myself, perhaps but that’s really not the case. It’s more of we’re collaborators and we’re a pathway to success. We are a very different avenue. For our ROI it’s very different from what a VCs ROI is. And our RIO is we’re looking seven, 10, 15 years down the road; a VCs looking one, two year horizon. You know we have different internal rates of insurance because for us it’s a lot job creation, economic wealth and development and technological leadership. And we really are trying to forecast and tackle issues or problems ahead of its time. Story time again.

(35:03) Remember in 2014 when we had the whole situation with Ebola, and everyone’s getting a little frantic and we’re trying to figure out what solutions are out there. Well there was one solution that was put out there to test, and it was tested out; it was a drug derivative of a tobacco leaf and it was called ZMapp. And that technology, the ZMapp drug was being tested out was developed by a small business out of San Diego called Mapp Biopharmaceutical.

(35:35) What folks didn’t realize was that Mapp Biopharmaceuticals got its origin point of starting the company and doing some of those innovative R&D in the biopharmaceutical drugs from the NIHSBIR program. It specifically that drug that was used the ZMapp drug, that was SBIR funded technology, phase one and phase two from the NIH. What folks to realize is that NIH was actually funding the development of that cure in 2008. 2008, some of the program managers at NIH were like, this might be something we need to think about. We don’t know, let’s put a solicitation out because it might come up. And that’s what happened.

(36:19) And 2014 rolled by, and you know this experimental drug is going through the works. It’s got to get clear through FDA and whatnot, but the whole idea is that NIH had the foresight to say this might be an issue to think about so let’s start thinking about it now.

Michael Krigsman:

(36:37) So is pretty extraordinary collection of technologies. We have 10 minutes or less left, so what advice do you have for I keep coming back to this because I think this is what everybody wants to know. What advice do you have for companies who want to apply for an SBI or grant? And once you go through the paperwork, from the point of view of the recipient company, what’s the process? So they submit their grant application and then what happens? What’s the pathway to actually getting a check?

Nagesh Rao:

(37:16) Yes, so one of the most important things I can tell folks is that in order to compete effectively to win the funding and have a promising chance at it, it’s always important to go to connect with the program managers from the SBIR programs. Get to know them better. And SBI dot gov is the gateway to do that. We have lists of actually all the contacts and telephone numbers for those program managers, whom you can reach out to and do an introduction.

(37:44) Now, if you want to get the attention of a program manager because they get hit up a lot. Best way to do it is come to an SBIR road tour event or the SBIR National Conference, which is the National conference is here in DC from May 23 to the 25. All the program managers will be there. We have a road tour program if you go to sbirroadtour dot com, we are going across the country bringing the pharma manager's across the US to different cities where there is an SBIR event and the program managers there within a 250 mile distance. We are sitting down. All the agency program managers are sitting down and doing one-on-one counselling sessions, where you can sit down, talk about your technology, talk about what it is what you’re looking to do, and get a better sense of what it is the program managers are looking to fund and develop, to help you develop.

(39:34) Now what’s important is do your homework, so if you go to sbir dot gov and if you go to the award section you can see what we funded in the past. We have all the data up there to show you what the projects and the type of technologies that we funded in the past. And that’s good business intelligence. That tells you, you know what our interests are. So get to know the program managers. Get to sit down with them. We are actually unveiling in July on sbir dot gov a 10 course module system where you can get trained very quickly in 10 courses on the basics of how to compete and apply and put together an effective proposal.

(39:14) So get to know the program managers, go through the course content on sbir dot gov. I think once if you do a great job and you get funded, once you go through all the different bits of the paperwork you get the money, that’s it.

(39:30) Like for a contracting agency and granting agency is a little different, so contract agency it’s a bit more milestone driven, so you’re going to have deliverables, and you’re going to have to you know every month do a billing receipts for the goods and services that you provide back to the government.

(39:46) For granting agency is typically more so that you get the money a bit more lump sum. You get the money, you have to produce a report, and you have to show what you have been able to do. They will check-in on you you know throughout the period to make sure everything is going well and you’re doing the necessary R&D so there will be check-ins and whatnot. But with granting agencies you get a bit more of the money upfront, whereas the contract agencies it gets spread out over a period of time.

(40:14) But you know, the biggest thing I can say is come to the SBIR events that we do, and the best bet is to get to know the program manager. And when they meet with you they will take the time to tell you what they are looking for and what they are thinking to do. And the best part two is that if you have got an interesting idea that hasn’t been funded before, that gives them the idea of like you know we should fund that area of interest. We should you know fund and that next gen AI or cyber security or whatnot. It gives them a chance to say all right, we’ll produce a funding opportunity. Everyone still has to compete for it and the best idea wins meritocracy, but you could actually encourage if it needs to be dealt.

Michael Krigsman:

(40:56) And so you go through every one of those applications looking at…

Nagesh Rao:

(41:03) All the managers do, yeah. Yeah, they will sit down, each agency will sit down with a slot team and they will review all of the applications, that’s their job.

Michael Krigsman:

(41:13) Right okay.

Nagesh Rao:

(41:14) And I’ve been involved in a few. Like they’ll pull me in for some of them and asked me to sit in on a review process. So I’ve done it before. I don’t do all of them. I mean it’s a lot, but I will carve out time and participate.

Michael Krigsman:

(41:28) And I’m assuming in those applications you need to – aside from the teams, somehow need to demonstrate that you have the wherewithal to reasonably finish and accomplish the goal.

Nagesh Rao:

(41:40) Absolutely, absolutely. And you have just got to make a compelling you know, the most important thing for a submission of a prospective proposal really it’s got to be compelling. It’s just got to be addressing all the pain points, the issues that they are looking, and you know, it’s always important to spend extra time to put something really good together. You know, what’s really interesting on sbir dot gov is we have these resource centers all across the US and they are what we call phase zero centers through our fast network and through the accelerator’s and even partner with SBIRs work.

(42:23) Most of the states now will have someone who is available to help at that phase zero proposal of prep work, well there is an economic development specialist and an SBIR deemed expert is there to assist you in making sure to help you, council you on putting in an effective proposal together. So we do partner a lot. If you go to sbir dot gov there is a state services section. We list out every state all the different services that are available to help you figure out how to compete effectively

Michael Krigsman:

(42:50) And this is all basic technology, so I’m assuming issues such as better design, better user experience, better websites, better at mobile apps, that’s not the purview right, this is about the money.

Nagesh Rao:

(43:09) Yeah, we are more advanced and apply driven. We’re hitting areas that you know the markets are not really touching properly.

Michael Krigsman:

(43:16) And that’s the reason for your existence is because you want to jumpstart innovation wherever inside the country it might be, especially on technologies that may hold promise, that may hold substantial promise in the future, But may not have a practical path to funding today, is that it.

Nagesh Rao:

(43:30) Correct yeah, and the thing is that we’re agnostic. We’re not just going to go in and find all the cool innovators in Silicon Valley, and Boston and that’s it. We believe there are diamonds in the rough all over across the US. And so we want to encourage the entrepreneurs who are developing simple stuff whether it’s in Oklahoma, Nebraska, New Mexico, Rhode Island, Florida. The beauty of our program is that we really seek to find promising ideas and innovators, and promising technological solutions but there are potential for solutions all across the US and that’s part of the reason why we are doing the road tours. We are going across the areas that we think there’s promising talent and high-tech small business companies that can grow in Germany, but they just need a little bit of seed funding to help them get forward.

Michael Krigsman:

(44:32) Okay, I think we’re just about out of time but just your last, your distilled wisdom, advice on companies that want to apply, how do you do it and make sure you win. I know you spoken about that, but just your distilled experience to summarize.

Nagesh Rao:

(44:55) Be smart, be pragmatic, be risk taking and know your stuff really well, and convey a story. Convey a narrative that is compelling. And believe in yourself. I mean that’s the biggest thing for any entrepreneur. Anyone who does entrepreneurship or engages entrepreneur activities you know is always going to have high highs and low lows. And so it’s always important to remember that, and believe in yourself and believe in your idea, and believe in the promise that it could be transformational.

Michael Krigsman:

(45:29) Okay, well what great advice. Thank you so much. We have been talking on episode number 169 of CXOTalk with Nagesh Rao, who is the Chief Technologist and entrepreneur in residence at the Small Business Administration. And we’ve been talking about the Small Business Innovation Research grant program, which is a pretty amazing program where, if you apply and you win, the government will just give you cash to develop your idea. So Nagesh Rao, thank you so much for taking the time today.

Nagesh Rao:

(46:09) You’re welcome Michael it’s been a pleasure.

Michael Krigsman:

(46:12) And everybody thanks for watching CXOTalk and we will see you again next week, thanks a lot, bye bye.

Companies mentioned in today’s show

Small Business Administration           www.sba.com

Mapp Biopharmaceutical                   www.mappbio.com  

SBRI road tour                                     www.sbirroadtour.com

SBIR                                                     www.sbir.gov

Made in Space                                                www.madeinspace.us

Modern Meadow                                www.modernmeadow.com


 

Nagesh Rao

Twitter                                 https://twitter.com/GNageshRao  @GNageshRao                          

LinkedIn                               www.linkedin.com/in/gnageshrao

Growing a SaaS business, with Zach Nelson, CEO, NetSuite

Zach Nelson, CEO, NetSuite Inc.
Zach  Nelson
Chief Executive Officer
NetSuite Inc.
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK

This special episode of CXOTalk is being broadcast live from the SaaStr Annual 2016 conference stage.

Zach Nelson, CEO of NetSuite, has led the company from small size to becoming a public company with almost $1 billion in revenue. In this episode, he describes SaaS company growth and the challenges along the way. 

Mr. Nelson has led NetSuite to be one of the leading software-as-a-service companies in the world, where, under his leadership revenues have grown ten-fold, the workforce has quintupled to more than 500 employees and its customer base has expanded to thousands of companies. He has been a Director of NetSuite Inc since July 2002. From 1992 to 1996, he held various positions, including Vice President of Worldwide Marketing at Oracle Corporation. He was employed by McAfee Inc. (a/k/a Network Associates, Inc.) (now a part of Intel Corporation) from March 1996 to October 2001. Mr. Nelson joined Networks Associates Inc in March 1997 as the Vice President and General Manager of Network Management. From December 1999 to April 2001, Mr. Nelson served as the Chief Executive Officer and President of myCIO.com. Since April 2001, he served as the Chief Strategy Officer of myCIO.com.

Growing a SaaS business, with Zach Nelson, CEO, NetSuite

Michael Krigsman:

(00:10) CXOTalk live. I’m Michael Krigsman and I am the founder of CXOTalk dot com. CXOTalk brings together the most innovative people on the planet for in depth conversations, and today we are honored to speak with Zach Nelson who is the CEO of NetSuite. Zach how are you?

Zach Nelson:

(00:34) Great to be here, this sort of reminds me of the founding of NetSuite. We were founded above a liquor store so we haven’t gone very far.

Michael Krigsman:

(00:42) So you’re returning to your roots. You know and I should say this, this is episode number 155 of CXOTalk. So Zach, tell us about NetSuite, what is NetSuite, what do you sell, who’s your market?

Zach Nelson:

(00:55) Well I’m sure many of you know NetSuite maybe use NetSuite. The founding story is interesting and I think arguably we were the first cloud business application companyfounded back in 1998, so it was a long time ago now. But our founder Evan Goldberg, still our Chairman, still our CTO that had founded a company that competed with the technology that became Flash. Macromedia bought Flash, his company went out of business and so he and Larry Ellison sat down to talk about what Evan wanted to do next.

(01:25) Evan was an incredible developer from Oracle and Larry had funded the first company. Even said, you know it’s really hard to run a small business. I have all these systems and in particular I have a problem with managing my salesforce, so I think I want to go and build a version of Seibel but make it more for small and mid-sized businesses. And Larry said, well that’s a great idea, but the problem with Seibel is there’s no customer data in Siebel. All the customer data is in the back office, what they bought, how they paid, was it shipped to them etcetera. So he said build the back office first and then build the suite and applications around it.

(01:57) The second thing he said was, and by the way deliver it over the internet because that’s how all software’s going to be delivered. And the last thing he said, which was a five minute conversation was, and make sure it has a web store on it because people are going to want to buy things on this internet. And really that’s the architecture of NetSuite today, and as an aside there was one other guy involved in that conversation named Marc Benioff and He went off. And two weeks later called back and said I’m going to do that Seibel online thing and that became Salesforce dot com, so both of the leaders today were founded literally in the same conversation with Larry Ellison.

Michael Krigsman:

(02:28) So this was 1997/8

Zach Nelson:

(02:33) Yeah and it was amazing in 1998 nobody believed complex applications would be delivered over the internet.

Michael Krigsman:

(02:40) And that internet thing you know and SaaS were toys.

Zach Nelson:

(02:43) That’s right. If you think about it, and if you think about the EBay’s and the Amazon’s of the world were the first generation software to service applications if you will, they weren’t toys. They’re the world’s largest businesses today, so it was pretty obvious that – at least in my mind, that everything was going to move to the internet.

Michael Krigsman:

(03:00) Okay, so today NetSuite is heading up on $1 billion in revenue, but you joined the company in 2002 when the company had less than $1 million in revenue and you went public in 2007. So take us through the stages of the development of NetSuite.

Zach Nelson:

(03:24) You know I joined NetSuite and my last job was at MacAfee and actually my last job at MacAfee 1999/2000 were taking our security products and putting them onto the internet. So we actually had a start up called MacAfee dot com, which ultimately went public which was a B2C version of the anti-virus delivered over the internet. And I ran a division called mycio dot com which was a B2B version of MacAfee dot com, and from that experience I realized really quickly that all software was going to be delivered this way, so I left MacAfee and began looking for companies doing business software on the internet.

(03:55) There were two at the time, one was called Salesforce, then at the time Net Ledger. One had a CEO; one didn’t have a CEO, so hence here I am today. But as you look at the sort of stages that we’ve gone through are sort of big categories. You know from 2002 to the IPO timeframe it was really about defining the metrics that defined our business, and within those metrics figuring out where the levers were that we could pull to accelerate the business.

(04:21) So on the sales side, how many deals could a rep do in a month or a quarter and at what average sales price. So that was pretty simple math the top on . For us it turned out they could do one or two deals a month, so how did you grow your business? You added sales reps in our case, so that was a huge driver of our business.

(04:38) The second element on the go to market side on the services front, unlike simple SaaS applications these were critical applications. Even though we were selling to small businesses at the time, so services became very important and the big challenge there was how do you do a big SAP like implementation and with many many zeroes missing off the purchase order, and so there were product things you did as well as repeatability things that you did.

(05:01) On the product side you know that’s evolved over time but those of you who are in SaaS startup companies, you know Evan and the team used to push software live. One Christmas Eve, Evan likes to talk about someone’s webstore had a problem and he went on, five minutes fixed it and pushed it during the middle of transactions. Well of course you don’t do that anymore, but you know, lots of releases to sort of very structured release processes as customers get more and more effective.

(05:28) So defining your metrics, driving them, and as you change the business measuring the old metrics compared to the new metrics is very important. So having a good view on – not losing your historical metrics is super important. The second sort of stage is really post-IPO, and when you go public you want to make sure actually that you have enough control over the business, that you’re not going to miss your numbers coming out of the gate, in fact grow the numbers. So I think it’s really mostly about executing in a big way at that time. And probably one of the most important parts of execution is retaining your people. You know you build these great organization you go public then you don’t want those people to walk out the door and be picked off by somebody else.

Michael Krigsman:

(06:06) So you’re initial set of metrics were all about deal size and how many deals we’re closing and how many salespeople do we have, and eventually you started looking at internal metrics in addition to the external facing metrics.

Zach Nelson:

(06:20) Yeah absolutely as a company, and one of the core – and I think we did this very well and I’m really proud of what we done here is we looked at our top 50 employees because those are who your competitors are going to come and poach, and we’d already been there for 10 years already, everyone had already invested over quite a bit of stock, it was how do we retain these people? And of course there’s non-financial things you do to retain people and then there are financial things that you do to retain people. So I think we put in a great system of really using an application call SpiraLinks, and the CEO SpiraLinks is here, Julie Southern and my view of the world was there’s cash comp and there’s stock comp and Silicon Valley is driven by stock comp. And one of the beautiful things this application did for us it gave us the availability to view the vesting of every employee over time. So we knew when people were falling off cliffs. We knew that developer was going to go from a million dollars investing to zero. And you knew they were looking for a new job when it was zero, so this has been an incredible tool that we continue to use now as a 5000 person group.

(07:19) The other thing that we did was when you go public the first thing Wall Street ask you is what’s your next engine of growth, so we had teed up several next engines of growth. We knew they were going to work before we went public. We hadn’t told the world about them, but it was very important as we went public to have next generation ideas. In our case it was multi-company, consolidation, and e-commerce. But we knew that they were going to work and we could really accelerate them in the face of public markets so we could deliver on the expectations of our investors.

(07:51) And then third and this is sort of the stage we’re in now is I call it scaling at scale right. We’re a 5000 person company you know on track to something like a billion this year in revenue. Last year we had at 1400 employees, it’s an incredibly different challenge obviously to grow basically a NetSuite a year in many metrics at this scale. And I would say one of the best things we’ve done and one of the things I’m proudest about that this audience might look at is we build a distributive company very early on. When we were small we knew we had to get out of the Bay area for a whole host of reasons. And so probably in Silicon Valley we had maybe 400 employees but we have 5000 employees in the company. So we built a distributive organization and not just in the US but globally and very early on and that makes the challenge of hiring people much easier when  you’re hiring a thousand people in one office and hiring a thousand people in 20 offices.

Michael Krigsman:

(08:42) So you’re thinking about a multilayered set of challenges today and objectives today, whereas in the beginning again it was all about the sales.

Zach Nelson:

(08:56) The good news is all those things we did in the past are still the basis of what we’re doing today. So we still look at our metrics and say how do we change these metrics or do we need new metrics to drive the business. So that’s really the foundation of the company is what we did in those early years to grow.

Michael Krigsman:

(09:11) Okay so tell us about the metrics back then especially focusing on sales, how has that changed and how has your customer base changed over this time.

Zach Nelson:

(09:23) You know the biggest thing that’s changed over time was that NetSuite was originally designed for small mid-sized businesses. That DNA, cracking the code on how you sell complex applications to mid-sized companies is something almost no other company on the planet has done. Most companies start by running out to the enterprise because it’s an easier sales model. You know, there’s 500 companies in the Fortune 500 the last time I looked and how do you sell to them, you hire 500 reps and you go after it. When you’re selling to the fortune 5 million it’s a very different proposition; you can’t hire 5 million reps to get at them.

(09:56) So that model is firm and I think is by far the best model for sales and services model for mid-market complex business applications. What happened was we grew and we felt we were bringing the power of our enterprise systems to mid-sized businesses. And for those of you who run mid-sized businesses you know it’s harder to run a mid-sized business than to run a large company. In fact I worked at Oracle, I made million dollar mistakes and I got promoted. At a mid-sized company you make a $10,000 mistake you might be out of business it’s a very different world.

(10:29) So bringing the power of those large enterprise systems down was important, and what’s happened is those large enterprises now want the agility of a small business in their business. Just as an example, AMEX Global Travel is probably one of our largest customers. They rolled out in nine months, 30 countries, 120 currencies all live in nine months. You can’t do this on old ERP systems that’s the sort of agility that the larger companies are looking for.

Michael Krigsman:

(10:53) So as you went upmarket from smaller companies to now you sell to very large companies, what did you have to do inside NetSuite to accommodate that change.

Zach Nelson:

(11:09) We had to extend the models I talked about in the very founding’s of the company, the sales model, the service model, and the product model. My best example of the problem with the mid-market sales model applied to the enterprises the following one. We’ve gotten our first deal, it was a SAP replacement with a large multi-billion dollar company and they wanted to buy NetSuite. And so the SEO at the company said SAP has just come back in with another $80 million bid. Stuff doesn’t work and they want to charge us another 80 million to make it work, and great, I told him what did you tell him what we cost? Did you tell him we were 40 million over five years or what was it? He goes no, $400,000, that’s what I told him. And that’s when you knew that a mid-market rep would take an enterprise deal and turn it into a mid-market deal.

(11:56) I’m not talking about gouging people, what’s the value that we’re delivering that company, we’re delivering more than $80 million of value right. Arguably SAP didn’t work in that world. We should have been paid 80 million.

(12:08) And so we had to add a new story to the house; an enterprise sales organization, an enterprise service organization it was very important, and the hard thing about doing that is again, this mid-market DNA we have it so hard to figure out how to sell and service to the fortune 5 million. I did not want to lose that. So you really have to create a new company that’s targeted to the enterprise needs, the enterprise goes to market. And you know some of the things we change on the go to market front on that side was for the enterprise salespeople, we don’t pay them on services at all. We want them to go to market with the GSIs and the Perreaux’s of the world, Deloitte so a lot of things that you change as you begin to look at that segment of the market. But the important thing for us was to make sure they were distinct companies because it’s a completely different sales and delivery model.

Michael Krigsman:

(12:53) So you talk about services but for many SaaS founders the goal is and the ideal is put the product out on the website, people sign up with their credit cards, you never hear from them again, and the money is flowing and flowing in, but with NetSuite your product is complex. Your suite it’s ERP and it doesn’t work in that simple pure way.

Zach Nelson:

(13:18) Yeah, I mean it would be great if every application were a Google search box, and you just typed in, but that’s just not the way it works. I think as you talk about our company and your company, there’s going to be differences, and there’s going to be similarities. At the end of the day running a business is still a complex thing. You know people want to sell over the internet, you use the internet to reach customers, but that doesn’t mean going from order to cash gets any simpler.

(13:41) That was sort of one of the first phalluses. That was the first phalluses of client server applications if you recall. There were back office guys lay SAP and Oracle, there were millions or CRM vendors and the customer would say, well does your application work with that? oh yeah, it’s an API. You can tie Seibel to SAP no problem.

Michael Krigsman:

(13:59) Yeah it just works.

Zach Nelson:

(13:39) Yeah it works and of course it doesn’t work because the data’s complex the data’s linked. That was sort of the first big lie of the SaaS world to; oh you can just tie this application to that application – tie 20 applications together. And certainly the web services make it easier to connect applications. The challenge is it doesn’t make it any easier to synchronize the data and that’s what business is all about is synchronized accurate data. And the problem is once you have data in two places and it’s wrong in one of them, you just don’t know which one.

Michael Krigsman:

(14:28) You’re a business process company it’s not a consumer app.

Zach Nelson:

(14:32) Ultimately.

Michael Krigsman:

(14:35) So this whole services thing, what did that do to the company, the recognition that you need to build up this large services business inside the software company, what did that do to NetSuite?

Zach Nelson:

(14:48) Well I would say if you looked at our model while our customers are doing complex things with the software, we would have rather not built a services organization. However we had to because you know we had to get the customers live, the whole idea I’m speaking to the choir here was to make sure the revenue recurs. And so if the customer doesn’t get live the revenue doesn’t recur.

(15:06) And at the time that we started the company, not only did the world not believe this was going to be the future, but especially the mid-market, this thing called the bar channel, definitely didn’t think this was the future. There whole revenue screen was tied to the stone-age applications they were shocking into life every week for customers.

(15:24) So we had to build our own services because there was no other alternative, and so we did it differently than our services business would. We felt services was an investment in the recurring, and so we told our customers, our investors today we don’t tend to make any money on services; it’s an investment in the recurring, and we make a little money on our services today but it’s really a necessary evil, not saying the services are evil. We’re a software company, we had to have services and I’m really happy to say that 40% of our business now comes through channel partner. So that channel that was reticent 10 years ago is now driving our business today. That transition has happened but that was not there when we started the company.

Michael Krigsman:

(16:04) So services then is the lever that drives the recurring software sale.

Zach Nelson:

(16:10) In our case yeah, and that was another interesting thing about our model, just to talk about history here. You have a lot of startups here and they want to reduce cash burn and the problem with running a cloud company is you have differed gratification, instead of being paid upfront you have it over 10 years so you actually burn through more cash. So in the olds days we used to do three year deals, so you can imagine how hard the sales model was. We were $99 per month, but you need 36 months upfront and that was really to reduce the cash burn. That’s not really the way you want to build a sustainable business.

(16:44) And today, we changed our sales model many years ago to say you know, the way to align our interest with our customers interest is to do only one year deals, because now we’re incented to make sure that customer gets live and they’re incented obviously to get live as well. So that’s a much better alignment. But in the early days when you’re trying to conserve equity and cash burn you do funny things.

Michael Krigsman:

(17:06) What are some of the metrics that you use to correlate things like service and renewal rates and customer satisfaction and your ultimate recurring revenue.

Zach Nelson:

(17:15) Yes so on the renewal rate it’s interesting. When you have companies that span very small businesses to very large businesses, obviously this end of the market churns much more quickly than this end of the market. So we’ve always focusses on revenue churn, right. Infact now our revenue churn is every year we say that it can’t get lower and then it gets lower again. You know the bad side of revenue churn is churn and down sell and those are the negative inputs, and the positive inputs are upsell and year over year our upsell is more that our churn and down sell. So again as you all build company models upsell is a very good thing and you need things to upsell to replace the inevitable, even in a sticky application like ours, churn and down sell so that’s a very important piece of the model.

Michael Krigsman:

(18:02) Tell us about the essence of success in upsell, how do you do it successfully.

Zach Nelson:

(18:08) Well the customer has to be happy first of all to want to add more things. You also have to target the right group of customers, right. Some upsell just comes naturally. I think we’re probably the platform for 70 to 80% of next generation businesses such as here in the audience, so when they go from 50 employees to 500 employees it’s a beautiful thing. So choosing your markets wisely is another important piece.

(18:30) And I would say the third piece, and it goes back to my story of taking an $80 million deal and turning it into a $400,000 deal is really to determine what are the components of your application that bring value to customers, the things that they’re willing to pay for it.

Michael Krigsman:

(18:44) I was going to ask about the link back to the product in this.

Zach Nelson:

(18:45) Yeah, and it’s really key and the way we used to look at it was we’re unusual from a SaaS model standpoint, because if you talk to most SaaS companies they talk about per user per month revenue. And we certainly get per user per month revenue. But we get far more revenue from the functionality from our application. So for example we introduced revenue recognition, we’re not going to add any more users in the finance department. Infact they will probably fire the four guys and redeploy the four people running the spreadsheet but we are bringing them enormous value.

(19:15) So when you look at does the functionality add users or in some ways subtract users and add automation value, we price that separately.

Michael Krigsman:

(19:24) Let’s talk about the competition

Zach Nelson:

(19:28) Is there any?

Michael Krigsman:

(19:29) I’ve heard that there are other companies selling ERP.

Zach Nelson:

(19:35) There are definitely people selling ERP, there are very few cloud – I mean the amazing thing about our position in the world it takes a long time to build this stuff.

Michael Krigsman:

(19:43) Well I was going to say it seems like every ERP company in the past that’s now presently alive is saying we’re cloud, right and that’s the common reframe.

Zach Nelson:

(19:55) I love it.

Michael Krigsman:

(19:58) Why do you love it? These are your competitors?

Zach Nelson:

(20:00) Well this was another Larry Ellison story way back when, when he said the thing that made Oracle take off was when IBM declared they had a relational database. Of course they didn’t have a relational database it was nothing close to Oracle. So people began to look for a relational database and it was basically only one.

(20:15) So the same things happening here. If you look at NetSuite today, we’re top 10 in financial market share. We’re number 10, but by far the fastest growing. If you look to the left of us, all these people claiming cloud, it’s the graveyard of software. You know Microsoft grade planes, Epicor, Infor I mean these are just ugly ugly products. They are I mean you use this stuff; I mean you can’t use it, it’s completely unusable.

Michael Krigsman:

(20:38) He doesn’t mince his words does he?

Zach Nelson:

(20:41) So you can call it – I mean there in the first generation of cloud-washing, look you can host our application – none of it works. You have to re-write these applications from the ground up and by the way you have to do it correctly. You know, you look what SAP did with Business by Design. They spent $3 billion on this thing and instead of copying NetSuite they thought they knew better and the thing was a massive $3 billion flop. It doesn’t really exist anymore, so it’s not just desire but you actually have to have that to execute, and it’s very difficult for the guys on the old applications to execute.

Michael Krigsman:

(21:00) But in fairness some of these competitors like SAP do have a lot of revenue.

Zach Nelson:

(21:14) Well they have a lot of revenue, but even today when SAP talks about their cloud applications it’s all products they’ve required. They have not build a single cloud base, its success factors and can concur you know where is there cloud base ERP offering; it does not exist.

Michael Krigsman:

(21:28) when you think about the differentiation, when I look at EPR websites it seems that most of the ERP vendors are giving very similar marketing messages. So how do you differentiate – obviously you’re growing very rapidly so you’re doing it really well, how do you differentiate NetSuite against both these established companies as well as there are quite a number of smaller cloud based ERP companies that have sprung up in the last number of years as well.

Zach Nelson:

(21:56) Well in truth we never built any ERP systems. We built a system to run a business and the system they run their business on first and foremost is the back office. We have enormous differentiation in terms of how people use that application. If you look today we have a thriving business in Omni-channel retail. You don’t buy SAP to do Omni-channel retail. Our system does it sort of as an accident of the architecture.

(22:22) We discovered very early on you know our customers have their inventory data, their warehouse date, their order of management data, their customer data. It’s all sitting in that suite that was built on the internet so instead of making it look like a business application we said, well couldn’t our customers just put their website on top of that same data and low and behold they could.

(22:37) So it all comes back to the founding vision of our company and the founding visions of your company that the thing that you start to build 20 years ago really defines where you can go in the future. And this idea that Larry and Evan had of building a system to run a business which nobody had ever done and which today still no one has done. You look at how you run your businesses, how many applications do you have tied together, that’s still there big idea. That’s what gives us leverage over other ERP vendors.

(23:03) It’s not about taking people soft and putting it on the cloud, that’s a failed you know 1980s architecture. It’s about enabling a company to do something very different with their business and I think that’s the platform we’ve built.

Michael Krigsman:

(23:16) So the ultimate success point then is the reference backed to the original vision of the company and you’ve executed it and you’ve expanded it in many ways.

Zach Nelson:

(23:27) Yes, you know I’ve gotten philosophical as I’ve been in this job for almost 20 years now, but done some research and there was a researcher from Shell that said, what really makes for the longest lived companies, a guy name (Erie De Groot?) did the study and he found three things to the longest lived companies, and the number one thing was the vision of the company. And the example he used was the Dutch-West Indies Trading Company which is arguably the oldest company on the planet. And he said if they had called themselves that they were the Dutch-West Indies Spice Company, they would have died when the spice trade died. But they were a trading company so they built there core DNA around trading and they grew and grew and grew. So your initial choices and how you build your business really is super important.

(24:09) The second important piece that he found was financial management, and people always look at a cloud company and say well doesn’t that mean you should be profitable? Well no. it means you should invest wisely. And I think that’s something we’ve done as a company particularly well. I mean we raised $100 million before we went public and that’s almost bootstrapping it today you know. A lot of companies are raising $500 million or a billion dollars to run these companies, so as we invested heavily in sales and service and marketing because we felt that that was the important place to invest and it’s paid off a wise investment.

(24:37) And then finally I talked about this in my sort of my middle section, the third important piece was the people, and who you hire, the jobs you put them in, and how they grow with the company. So that’s what we really try to focus on and that’s where those three things, vision, financial management, and the people that we bring on-board.

Michael Krigsman:

(24:54) Fantastic, it’s been quite a journey.

Zach Nelson:

(24:56) It has been.

Michael Krigsman:

(24:58) Thank you so much, everybody Zach Nelson.

Companies Mentioned in today’s show

Amazon                                   www.amazon.com

AMEX Global Travel                www.americanexpress.com/Travel

Deloitte                                   www.deloitte.com

EBay                                        www.ebay.com 

IBM                                         www.ibm.com

McAfee                                   www.mcafee.com

NetSuite                                  www.netsuite.com

Oracle                                                 www.oracle.com

Salesforce                               www.salesforce.com

SAP                                          www.sap.com

Siebel                                      www.seibal.com

SpiraLinks                                www.spiralinks.com

 

Zach Nelson:

LinkedIn           www.linkedin.com/in/zachnelson

Twitter                        https://twitter.com/ZachNelson

Office Hours with Shaan Puri, Co-Founder, Blab.IM

Shaan Puri, Co-Founder, Blab.IM
Shaan Puri
Co-Founder
Blab.IM

This episode kicks off a new series where we bring practitioners to CXOTalk so they can answer your questions. For this episode we are talking with Shaan Puri, CEO of Blab.IM. Blab is a fast-growing video chat platform that makes public, interactive conversations easy.

To interact with us on Blab, check out this URL: https://blab.im/michael-krigsman-cxotalk-office-hours-with-blab-ceo-shaan-puri

Office Hours with Shaan Puri, Co-Founder, Blab.IM

Michael Krigsman:

(00:06) Well don’t you love technology.

Shaan Puri:     

(00:09) How did you get it to work, what did you end up doing?

Michael Krigsman:

(00:10) You know, I don’t know. I just kept restarting and eventually the gods chose to smile. Actually at one point I unplugged my camera.

Shaan Puri:     

(00:22) Okay there you go. Okay, so quick ground rules for this, people may jump in and they see office hours with me and say, I want to ask feature questions and I want to ask about Blab, I mean I’m leaving it up to you however you want to do this. I’m just kind of warning you so what are the ground rules here?

Michael Krigsman:

(00:39) You know, I think the ground rules are we should do whatever people want, we should have a good time and learn from you. you’ve got a lot of experience, you’re co-founder of this amazing new platform. You have your insight, wisdom, and experience and we should extract that out of you so we can all learn.

Shaan Puri:     

(01:02) Okay, sounds a good idea. I would say experience is the one thing that I’m lightest on actually so I would say I have ideas, I have ambition. I have many things, but I would say experience is not one of them. I have experience’s but not necessarily experience.

Michael Krigsman:

(01:17) Well you have experience building  this platform.

Shaan Puri:     

(01:19) That’s true, I am one of the worlds renowned Blab experts..

Michael Krigsman:

(01:25) so tell us, so just by way of background, so CXOTalk has now being going on this is now episode, I forget, it’s about 153 I believe. And CXOTalk is any opportunity to talk at length with senior executives, often large companies but some small companies as well, investors, authors, industry analysts and really to have conversation with people who are shaping the future.

(02:00) So in this Office Hours segment, and the term Office Hours was your idea, the notion was to make you available to this audience and learn from your practical advice.

Shaan Puri:     

(02:17) Cool, the reason I thought Office Hours was an interesting idea was because I don’t like generic advice because everybody’s situation is so contextual, right. like advice that worked for me when I was doing what I was doing is very hard to explain all the variables including timing, team, market conditions all those things. So what works for one person will not necessarily work for another person, so generic advice to me is not that interesting.

(02:41) But hearing, like workshopping an idea together or ripping off ideas together or asking critical questions and hearing what peoples answers are, and saying here’s what I think and here’s what my perspective is. That can be extremely helpful for people. So my goal for any of these things that whenever I try to make myself available and get my head out of the Blab you know day-to-day tasks, well cool. How can I chat with some people and be inspired by what they’re doing, but also help them and not in a way where I just say, ‘hey, I have all the answers. Ask me any question and I’ll tell you the answer and that’s it. That’s the definitive way to do something’, because we all know that’s not how it works.

Michael Krigsman:

(03:23) Well let’s start so tell us briefly what was the concept behind Blab, why Blab?

Shaan Puri:     

(03:31) Why Blab? The honest answer of why Blab is that we wanted to do something very different that was out there. Very different to what we were doing at that time, because my company had existed and Blab was actually a pivot. It was a change in direction of what we were building, and when we knew we were going to make that change we knew hey, this experiment may succeed or it may fail but it’s definitely going to be different than what exists today.

(03:36) So we wanted to build something where it’s the most novel idea, that’s not really the case right. There are some other platforms where these features exist is that we wanted to approach it in a different way. So for example we looked at it pretty simply we said, innovation is the measure of change in people’s behaviors. So if you think you have done something innovative but is not changed people’s behaviour I don’t consider it innovation at all.

(04:43) I believe that innovation is something that makes people start to do things differently right. In my space, in the social space, say an easy example of this is like Slack, which is a tool right now that teams are using to communicate, and is definitely not the first team communication tool. It’s definitely not the first chat tool, it’s not definitely the first chat tool with many of these features, but teams are using it and when they use it they send less emails.

(04:48) So like my startup for example we send zero email within Blab, so they’ve actually changed people’s behavior. They’ve changed what people are doing, and they’ve put the features together in such a way that it got a different result. And so with Blab what we wanted to do is the same thing you know, there was facetime, there was Skype, there was many ways to do a video chat but it was always private. And we said what would happen if we made conversations public right. What if I had access to the most interesting conversations between the most interesting people in the world?

(05:16) So, if I’m interested in tech and startups I want to listen to something like this right. I want to hear a conversation between two people who are doing big things in tech. I want to hear conversation between you know; one of my favorite Blab shells is called Work in Progress. It’s a conversation between two CEO companies, Jason Freed, who is an author and CEO of Basecamp, and Nathan who’s the CEO of Highrise and they just chat about what is going on in their business, and that is a conversation I would have never otherwise had access to, but I get it now because there is a platform where they feel comfortable having that conversation in public. And that’s just one example.

(05:51) But for me, for each person there should be many examples or whatever they are interested in. I’m interested in tech and business, but others may be interested in totally different things.

Michael Krigsman:

(05:58) Okay, so Blab is all about the distinguishing feature of Blab is that it has engagement with the audience baked in from the ground up.

Shaan Puri:     

(06:09) Yes, so right now for example if I was typing a message into the chat because this is not just a pre-recorded conversation, where you know me and you talked in private, we edit it, and we upload it and then others can view it in their own time.

(06:23) The fun of Blab is being able to let the conversation unfold spontaneously right, somebody just called in and I have no idea what he’s going to talk about, but I know the conversation just changed direction you know as we were going. So, if you’re not interacting with your audience you’re not really blabbing in my opinion.

(06:42) Most people who blab and just want to get a perfect recording, they’re not very interesting when it comes to Blab.

Michael Krigsman:

(07:18) So Shaan and I think what everybody wants to know is how do you get engagement, how do you get an audience, how do you build it?

Shaan Puri:     

(07:29) Honestly, it’s not a sexy answer. So there is no quick, fast, simple way to get a big audience, but that is to be expected is it not? So when you do go live on Blab you do share it on to your Twitter, you do share it on your Facebook, so where people who are already interested in you will networks they have the chance to interact with you in a totally different way. So that’s the fastest way to get some audience, right. That’s how we’ve got 77 people so far into this room.

(07:56) But it’s going to get bigger and better the more you do it. The more regularly you do it, the more you add value, the more people will tell your friends about you and that’s how people end up joining. So like I just saw my buddy just joined just now because he probably saw this on Twitter or Facebook and he can let us know in the chat where he saw it.

(08:14) But we want to grow on the back of these social networks where people have already said, hey I want to follow you, hey I want to be friends with you, I want to know what’s going on in your life and Blab gives him a new level of access.

Michael Krigsman:

908:23) So in general if somebody wants to build an audience what are the steps that they should go through in order to become a social media star so to speak. Everybody wants followers.

Shaan Puri:     

(08:35) I think you have first got to ask why are you doing it right, so if you don’t know your end goal then you’re not going to be very successful. So you have got to know why you’re doing it, right, I enjoy doing this because I enjoy putting my opinions out there. I do a show for example called Techbits every Thursday, where I just talk about me and somebody else we talk about you know the news in the startup world because that’s what I’m interested in.

(08:57) That’s what I like to do, that’s what I’m reading about and thinking about on my own anyway, so for me it’s an outlet for my thoughts. It’s a way to get it out there in the public without sitting down and writing a blog for an hour. And (b) I want to be more known for it, right, so I want to within the startup world put my opinions and my personality, and my ideas out there. So when I do I enjoy meeting new people. I enjoy who I am and what I think based off of that.

(09:23) So I have two simple goals. I would say if you’re trying to do this, you’ve got to know why you’re going into it from the start. The guy who called in a second ago, he said he’s been on Blab twice and gotten 11 new clients. For him it’s about getting new clients and that’s what his goals are with the platform.

(09:40) But after that there are some pretty simple tips; Get a co-host so that you have someone regularly to talk with. Number two, figure out where your audience already is. So where are people who like this content, where do they already live and get it in front of them. Go and tell them about it, get embedded there. You know, partner with people and say, ‘hey will you promote this with your audience’. That’s the way to get started and then you just do it consistently. You keep doing that consistently then your audience will grow. If you are entertaining people, if you’re educating people your audience will grow over time.

Michael Krigsman:

(10:11) So you have to have a clear understand of your audience and what they actually want.

Shaan Puri:

(10:16) Yeah, and look this advice is not going to seem groundbreaking right. Like Charlene said in the chat, this is basic 101. But just like everything else in life it’s not about finding this new strategy or this new idea that nobody else has, it’s about executing on it right. I could tell you if you say hey I want to get fit, I would tell you, you should eat right and you should exercise regularly, and you don’t need a crazy secret solution to how to do that, you just have to actually follow through on what we know and following through is not always easy.           

Michael Krigsman:

(10:46) Is there a difference between developing engagement and building a community?

Shaan Puri:

(10:54) totally, I mean what’s a community? A community is a group of people who share a common trait and common mindset, and so if you want to build a community you’ve got to really understand who you’re recruiting in and once you’ve recruited them you have to align yourself around some kind of value, some kind of principle right.

(11:14) So if you were doing CXOTalk for example let me ask you this who id the community for CXOTalk?           

Michael Krigsman:

(11:19) Well our case it’s a relatively small group because it’s people who are very interested in digital transformation and innovation, leadership.

Shaan Puri:     

(11:33) So what do those people have in common?

Michael Krigsman:

(11:35) They tend to be decision makers in an organization and tends to be from larger organizations and tends to be quite thoughtful about those topics as well.

Shaan Puri:     

(11:48) Okay, so they’re decision makers in large organizations and like what do they want, why do they crave this content? Why do they take the time out of their day to listen to this?

Michael Krigsman:

(11:56) These are great questions. So I think the common thread is they are innovative, they’re open to innovation and as a result they recognize disruption around them and they’re looking for better skills and to share experiences with people who have faced disruption successfully.

Shaan Puri:     

(12:20) Okay, so what I heard and putting that into simpler terms I heard, I’m a decision maker in a large company. I’m someone who’s on the way up and I want to know what the best you’re thinking, I want to know all the ideas out there. I crave any edge I can get, any content, any insight, any anecdote I may not have had access to because that just makes me better right. Because those learnings that’s how I learn, I learn through other people out there playing the same game I am, who are out there in this field as well. so that’s what I think, so that’s the shared thing of your community is you guys crave learning and you’ll never stop learning and you learn from each other.

(13:00) So that’s the simple value that your whole community can be based around, and for everybody they have to figure it out what it is for them. Like the Blab community is based around a really simple principle which is speak your mind right. People are here because they want to speak their mind; they want to say what’s on their mind and sometimes they’re just shooting the shit and they want to say what’s going on in their life. And other times it’s professional and they want to say what’s on their minds there, but they’re not afraid to put their ideas out there in the public, right.

(13:26) They know that, hey something good can come of this if I just put it out there in the public. If I say it to these people who are like-minded you know, agree or disagree the ideas are welcome.

Michael Krigsman:

(13:35) Yeah you know there are some great comments taking place in the chat as well. Mark Myer says the better question is who does CXOTalk serve, and I think that’s a really important point is which audience are you actually serving? What do those people want and what are you doing for them? What’s the value or the benefit that you’re giving these folks?

Shaan Puri:     

(13:59) Are you asking me?

Michael Krigsman:

(14:00) Well I’m just making comment. He made this comment and I think it’s a fundamental point which is be clear about your audience but at the same time understanding what is it that you are giving to them, what is the specific value and I guess I’m just saying the same thing which you just said in a different way.

Shaan Puri:     

(14:20) Yeah totally, I mean hey look, and we’ve got 25 more minutes of this conversation and what I want to do is I want this to be valuable to the people that are out there right. I want them to be excited that they chose to click on this Blab, and I think that one of the ways to do that for us it’s like let’s get to it, let’s make it happen. Let’s improvise, we’re live right now and if somebody actually is trying to go somewhere, if somebody is trying to move up right, like the CXO community if they are trying to learn, let’s learn, whether it’s a specific question somebody has, or they just want to share what they’re doing and let’s rip off of each other right. Let me ask you some questions and let that clarify your thinking because that’s how I learn for example.

(15:00) I learn by going to people who are smarter than me, or are doing things differently to me and I say, ‘hey here’s what I’m thinking, here’s what I’m doing. Ask me the questions, ask me the stupid questions. Ask me the things so I can say it more simply, more powerfully, more interestingly, that’s how I get better. So if anyone’s up for it, the seat is open.

Michael Krigsman:

(16:44) So Shaan, what about audience size, people always want to have a very large audience, but are the different qualities of an audience, you know a large audience where people are drive-bys versus a smaller audience that actually actively engaged on an ongoing basis.

Shaan Puri:     

(17:05) Of course, right like for Blab we don’t register the total number of registered users, right, we care about how many people are active, how many people go in and actually watch a stream on a given day; that’s the only metric we measure. You can ask anyone on my team, they wouldn’t even know how many total signups we have because we literally don’t care.

(17:24) And so it’s the same thing with a blab right, what you want are people becoming loyalists, right, if you want to reach the most amount of people you would send out a tweet. Right, go and look at your Twitter impressions for a single tweet. You’ll realize that got in front of a bunch of people.

(17:37) Do they care, do they read it, do they know you better or are they more of an evangelist for you, are they interested in you, do they reply, do they join the conversation, now those are separate questions, so for each platform there’s a different way to use it. There for us this platform is an interactive platform so you should be thinking about, hey, how many people are interacting with me right. Are they watching for a while, are they chatting, are they asking questions, are they calling in. those are signals that you might be doing something right.

(18:05) We had a community organized party here, you know there are a couple of hundred people in our office – fantastic party by the way, but the main thing I was struck by was these people know each other; they’ve never met in real life, and when they came to the party it was like they knew everything about each other because the depth of interaction that you’ll get in just a couple of minutes will make you feel that you know that person.

(18:27) You will feel that you want to give them hug because you hung out already, you talked already, you’ve seen this person in action and it’s not a cold introduction. So if you’re doing well on Blab it’s probably because you’re interacting with your audience and probably because that they feel that they know you and formed some connection with you.

Michael Krigsman:

(18:41) So forming a connection is the key.

Shaan Puri:     

(18:44) It’s always the key in everything in life and that’s not just a Blab lesson.

(20:47) We’ve seen conferences, we’ve seen all kinds of different things on on Blab because you only want to use technology if it removes a barrier. And when I go to a conference and I’ve got to fly there, book a hotel, by a conference ticket, and then try to sit in the room and absorb as much information as I can those are barriers. And if I can instead watch from my couch and not fly anywhere and watch on my own time, the replay for example, may be call in and ask a question where you know normally I can’t rely upon the stage and ask that person a question, those are barriers that you have removed. And it’s not necessarily better or worse is different, and it will work differently for different people.

Michael Krigsman:

(22:24) So Shaan how did you get Tony Robbins to participate?

Shaan Puri:

(22:30) We didn’t, he found it somehow. Blabs supposed to grow organically right, it’s a public system so it’s out there and people tell people they say, hey this might be a good way for you to do X, and in this case one of the users is doing an interview with Tony Robbins, so she invited him on, and he cleared it with his people, his people talked to my people and here we are he’s going to be on today.

(23:14) Truth be told we haven’t looked and for us we aren’t selling a service to a particular type of people. We look at this like blogging. We look at this like podcasting right. it’s just a medium and it’s going to be used, like blogging, there are teams who blog, there are CEOs who blog. There’s business who blog. There is really not a specific niche we want to target. That’s why we don’t measure which niche is it today, because that will give us the false illusion of that hey, these early adopters that’s who it’s for.

(23:43) We want to make it as open as possible where whoever want to have a conversation in the public this is a way for you to do it. So men, women, children, professional, non-professionals it doesn’t matter.

(24:27) One thing you might have seen today is Producthunt uses it, and they have a giant startup community on Producthunt and we power all their Producthunt live channel. So they embedded it on Producthunt dot com and they invite guests, everyone from Chris Socco, early investor on Instagram, Uber, Twitter he was on. They bring on the who’s who of makers investors, you know different people in the startup world, so that’s an example of people using it in the startup world but also an example of what you can benefit from.

(24:58) So like when Producthunt uses it they bring a ton of people to the startup platform. And now that’s a demographic that exists on Blab who might be interested in your show as well. So hopefully these audiences start to cross-pollinate and you know people who are interested in startup stuff will discover all the best people in startups.

Michael Krigsman:

(25:31) So Shaan can you give us a sense of the growth that you’ve seen

Shaan Puri:     

(25:38) Rapid!

Michael Krigsman:

(25:39) Yeah very rapid it seems like it’s just gaining in popularity very quickly.

Shaan Puri:     

(25:45) Yeah, I mean it’s one of those things where its spreading very organically honestly like, all growth is not created equal, also for example you can do a lot of paid marketing and your numbers will go up, but you have to know that is the source of it. So far are we were always curious does one blab creates another blab right, when you do this just like now and Bethany sees it and says this might work for in my community, and then she is going to go and create one and that’s how we grow. So we measure really specifically, does one blab create another blab and does the viewers of one create the next and so that is what we are most interested in, and we’re really just getting started with this and we haven’t even started optimizing that, but that is the next phase for us.

Michael Krigsman:

(26:27) and that’s essentially the definition of sharing and ultimately going viral as one begets the next.

Shaan Puri:     

(26:33) Exactly, that’s the viral loop; one user creates the next user.

Michael Krigsman:

(26:37) What are your tips for running a successful blab?

Shaan Puri:     

(26:42) Like I said get a co-host, make sure you have good Wi-Fi, have something you want to say, and I guess for me it’s read the audience, right. You’ve got a lot in concert going on in here and you want a pulse for when they’re bored or whether there excited, and do they have questions and do they want to call then or whatever it may be and use that as your guiding light, so use that to decide to wear next.

Michael Krigsman:

(27:22) So a lot of it really does come down to getting a feel for as you said what the audience is, and what are some of the tell-tale signs that tell you that you have the pulse of the audience or you need to refine it.

Shaan Puri:     

(27:39) Well all the features should support that right, so right now you are getting props, that’s a signal that people like that question. Right, you want to get that immediate feedback. If I get it it’s a hey,, they like that answer, they’re laughing or whatever it may be. So the tell-tale signs are obvious and they should be in your face. If people are giving you props, people chatting, people asking questions, people calling in. People saying afterwards, hey that was great and can’t wait for the next one. People following you. Those are the signals that you are doing well.

(27:04) The opposite is also true, if you’re boring and you see people leaving walking out the door, that’s a good sign that it sucks.

Michael Krigsman:

(28:12) And if people are leaving what do you recommend? How do you adjust, what do you do?

Shaan Puri:     

(28:18) You learn from it right, you figure out why and what was I saying before they left right. Did I not deliver very well, was my title not indicative of what actually was happening inside. You know, figure out who is your market, may be that just wasn’t the group of people who were interested in that type of thing that you were doing. So maybe you will say okay, let me recruit more people who are interested in the type of content that I’m providing.

Michael Krigsman:

(29:06) What are some of the interesting communities that you’ve seen on Blab?

Shaan Puri:     

(29:12) So we’ve seen the start-up community, we’ve seen the marketing community, we’ve seen the sports community, so ESPN uses us for example. We’ve seen a lot of stuff like just up-and-coming which is like there’s religious stuff that goes on right. So there are people who want to talk about religion or the absence of religion. There is you know a few that are related to like almost like mommy bloggers, so people are talking about parenting or whatever it may be.

(30:34) We look at it like a funnel, so there’s people at the top of the funnel who have come to Blab and not signed up, and the next step is they’ve signed up, and after that they have actually done something and entered a blab. And that’s when we start to pay attention, but we want to make the whole funnel just frictionless. So if you’ve signed up and haven’t done anything I would like to learn from you. We don’t count that as a win, we don’t count that as a user who is active, but it is interesting for us to learn from, and we care about that whole chain.

(31:01) Why are some people so addicted where they are on it 12 hours a day, and why are some people you know visiting blab but not actually doing anything. We try to learn from each of those cases.

(31:11) What we measure ourselves on is actually something called watch time. So what we measure internally, the big graph on our screen that we take a particular shot of that number when it is going up is watch time. So how many minutes a day do people spend watching a blab? That’s the metric we care about. That’s the biggest sign that they are getting some value out of this.

Michael Krigsman:

(31:32) So you are looking at watch time for the user, but then you must also be looking obviously at the aggregate number of users as well?

Shaan Puri:     

(31:39) Yeah, the total and the daily for each user so the average per user, and the total for a day or a week or a month.

Michael Krigsman:

(31:50) And the total number of users?

Shaan Puri:     

(31:52) Not so much the total of users. We look at that as a secondary thing. For us it is watch time first, and then when we notice that watch time goes up it’s often because there is a bunch of new users joining. But not always, sometimes it’s been a content and sometimes different things affecting it. So the number that we care about in the end is watch time, and everything else is just a way to get the watch time to go up.

Michael Krigsman:

(30:12) It’s interesting with CXOTalk I often use the similar metric of minutes watched

Shaan Puri:     

(32:21) Yeah exactly.

Michael Krigsman:

(32:22) It reflects both having a broad audience, but even more importantly the depth of people. But the minutes watched per video. So I’m actually interested in both; how many people are watching. And out of that group which ones are spending a lot of time watching the videos, and who is just kind of a drive-by one-off and maybe they are there for a couple of minutes as opposed to watching for 20 minutes or half an hour or something like that.

Shaan Puri:     

(32:57) Yeah, exactly like I think this is something that companies struggle with right, so for Twitter for example, they really have struggled with teaching the market of how to value them. So what they say is people are asking Twitter, how are you going to get your monthly active users to go up, and why? Because that’s the metric Facebook uses, and Twitter is not the same business as Facebook.

(33:20) And for us and active user is not the same as an active user on Buzzfeed, who skims an article and leaves right. For example, our user, our average daily user watches 65 minutes a day of content. So a user is not a user right, one does not equal one for different services so you’ve got to know, I mean the takeaway for you guys it’s not just you know this is very blab specific stuff, but you’ve got to define your metric, the key metric to make it the one metric, to make at the whole company knows about and the whole times. So for us it’s watch time, and everybody on a team knows about watch time. They know when it’s going up and they know when it’s going down, and that’s the thing we focus on. But then eventually you’ve got to educate the investors in the market that that’s the number we care about and here’s why, and that’s how you should judge us.

Michael Krigsman:

(34:04) Yeah explaining the reasons why. The fact that your average is 65 minutes it’s amazing. It’s very very high.

Shaan Puri:     

(34:13) It is very high right. that’s why the investors love us!

Michael Krigsman:

(34:18) I mean it goes to the very heart of that you are really doing something that is really satisfying a need for these folks that they’re investing that much time.

Shaan Puri:     

(34:28) You said it right, perfect.

Michael Krigsman:

(36:24) Somebody asked the question about notification. What do you think about notifications, it was a pretty vague question but how do you think about notifications and how does that work in Blab and what is your reason and logic behind how you do notifications.

Shaan Puri:

(36:51) So I think just because something is live doesn’t mean it has to be a surprise, so far are we would think about that as scheduling for example. You can schedule and say, hey we are going to have this conversation, hey we are going to have this life announcement in three hours. That’s totally fine, that’s great, that’s how life streaming should work in life in my opinion.

(37:10) Notifications are similar where I don’t think we do a good job today. In fact I think we do a very bad job today, so the question is how do you do notifications right for life stream platform. Some think we are thinking about a lot, and something that we have in the pipeline for where I can’t reveal exactly what it is yet, mostly because we haven’t finalized it but, we think notifications are supercritical right. You have to be able to tell you audience, hey, I’m talking about this right now, come on in and join the conversation.

(37:40) For me notifications is not an notifications, it’s an invitation to participate. It’s an invitation to say hey, do you want to talk about this to, or would you want to be a part of this, and so we need to think about it that way, and there is definitely notification overload in many cases for people who are following a bunch of people. So we need to be able to intelligently notify you about the stuff that you are going to like, and not bombard you with notifications that you’re not responding to from people may be who you follow, but you actually don’t want to go to all of their blabs.         

Michael Krigsman:

(38:08) It’s interesting that you say it notifications are actually invitations to participate.

Shaan Puri:     

(38:13) Yeah, because in every other product that’s not the case. A notification means something happened and check that out at you all leisure. The reason the blabs notifications should be exciting is because you can actually join in. You can actually not only hear it but chat, ask questions, have access you know call in. Notifications are an invitation for us.

Michael Krigsman:

(38:34) Great, you know I think we are just about out of time. Any final thoughts Shaan you would like to share about what you are doing and the logic behind it, the reasons, the underlying reasons behind what you’re doing and what makes it successful.

Shaan Puri:     

(38:50) Look I think the people who are here are already sold. The people who are in this room listening right now those are the ones who are already sold. So I don’t want to sell to what is already sold. I think I will share a thought with you and it’s a thought I had this morning. It has nothing to do with Blab.

(39:05) This thought was just about lying, and I noticed the other day in a blab that people were using language that was softening what they really meant. So they would say something like, ‘you know, I’m sure he’s a great guy but’, and then they would say something extremely negative. And the reality is you actually not true he’s a great guy, he’s more than like being not a great person if that’s what you actually mean.

(39:30) And so I was just thinking about this the other day, how can I be more clear, more honest in what I say and not using language that just softens it for softening sake. And that’s what I’m going to do from now on. I encourage you guys to keep track of the words you’re using and see if anything interesting comes of it. If you find that you either communicate more effectively or less effectively and there is a reason to soften all of these statements.

(39:50) So, that’s what I will leave you with Michael, it is a random thought I had this morning about how we often try to soft and something and actually turn it into a life. And it we just should say it how it is, and say what we really mean.

Michael Krigsman:

(40:12) Yeah, it’s an interesting point, when you soften something then perhaps the listener may not be turned away, or to put it the other way, if you present a hard truth to somebody you may turn off the listener, and so the communication ends. And yet on the other hand on the other extreme, as you say if you present a thought that is overly filtered and the point of that communication may be lost entirely.

Shaan Puri:     

(40:42) Exactly.

Michael Krigsman:

(40:44) And that thank you so much Shaan Puri, who is the co-founder and CEO of Blab for taking the time and sharing with us today.

Shaan Puri:     

(40:55) Thank you all for being here, and hopefully that was entertaining. It was a lot of fun, and let me know what you think as always, put it in the chat, Tweet at me, let me know what you think. I use all of these just as a learning experience, so good conversation Michael. Good hanging out with you.

Michael Krigsman:

(41:10) Thank you so much, okay everybody have a great day thanks so much, bye bye Shaan.

Companies Mentioned on Today’s show:

Basecamp       https://basecamp.com

Blab.im            https://blab.im

ESPN                www.espn.com

Facebook         www.facebook.com

Facetime         www.apple.com/us/ios/facetime

Highrise HQ    https://highrisehq.com

Producthunt    www.producthunt.com

Skype               www.skype.com

Slack                www.slack.com

Twitter            www.twitter.com

 

Shaan Puri:

Twitter:           https://twitter.com/ShaanVP

LinkedIn:          www.linkedin.com/in/shaanpuri

Investing, Startups, and Media with Jason Calacanis, Investor and Entrepreneur

Jason Calacanis, Serial Entrepreneur and Angel Investor
Jason Calacanis
Serial Entrepreneur and Angel Investor
Launch Festival

Video, podcasts, blogs, sites, digital marketing: the media landscape is changing and new business models are emerging. This episode explores the shifting world of media with entrepreneur and investor Jason Calacanis.

Jason Calacanis is the founder and CEO of Inside.com, a real-time mobile news app with the mission of being the world’s best news product.

Calacanis is a serial entrepreneur and angel investor in over 70 startups, including the first round of Uber. He is currently investing $15 million a year in 30 promising startups through the LAUNCH Fund and his AngelList Syndicate, which has 400 members.

After three years of hosting TechCrunch50, he founded LAUNCH Media, which publishes the LAUNCH Ticker and produces a number of events, including the annual LAUNCH Festival, the largest startup conference in the world with over 9,000 attendees last year. The Festival features 50+ startups that launch in front of 5,000+ industry leaders. Previous graduates include Mint, Dropbox, Yammer, Fitbit and Room 77.

Since 2009, Calacanis has been the host of popular podcast "This Week in Startups,” the largest talk show about technology and startups in the world. Past guests on the show includes Mark Cuban, Twitter founder Evan Williams, Paul Graham of Y Combinator and angel investor Chris Sacca.

Prior to that he was the CEO of Weblogs, Inc., a network of widely read blogs including Engadget, Joystiq and Autoblog. Founded in January 2004, Weblogs, Inc. became a wholly owned subsidiary of AOL in November of 2005. Calacanis maintained editorial supervision over Weblogs, Inc. as a senior vice president of AOL.

Before forming Weblogs, Inc., Calacanis was CEO and founder Silicon Alley Reporter, a must-read monthly that chronicled New York’s Internet and new media industries, that was eventually sold to Dow Jones.

Calacanis is known for his insights into the media and tech industries, and he is often quoted in trade and consumer media outlets. He also keynotes industry conferences worldwide.

Investing, Startups, and Media with Jason Calacanis, Investor and Entrepreneur

Michael Krigsman:

(00:07) Welcome to episode number 162 of CXOTalk. I’m Michael Krigsman and before we start I just have to give a shout out to Livestream, who is our video streaming partner because they are great and they are enterprise ready and stable, which is what we need at CXOTalk and Livestream you guys are great partners and I just want to thank you.

(00:39) We’re here today talking with somebody who is one of the top angel investors in the world. And at the same time is truly a pioneer in new media, Jason Calacanis. Jason, how are you today.

Jason Calacanis:

(00:57) I’m very good. I am super super excited to be here and I am 12 days away from my wife’s due date for twins. So if I get a phone call during this I might be leaving because she’s going into labor. Who knows, anything can happen.

Michael Krigsman:

(01:15) Well thanks, hey thank you for taking the time to do this, especially under those circumstances. Jason, very briefly tell us about you background, just very quickly set some context.

Jason Calacanis:         

(01:28) Well I’m a kid from Brooklynn who grew up in the right time in history I guess in terms of opportunity because you know 1977/78 somewhere in that timeframe I started using a computer, TSRS80 I think when I was out in New Jersey at my cousins house we would go to computer camp. Boy, was that a revelation to me when we were programming basic. And then I got my own PCM Junior and having a 2600, so I was kind of born at the beginning of this personal computer era and was fascinated by was able to get high paying jobs, my whole career as a database programmer, developer doing PC maintenance.

(02:08) Somebody just found, my brother actually found my first business card from my first real full-time job which was working for Amnesty International, and it said on the card, ‘Microcomputer Specialist’, and I was so proud of that card because I was a specialist of something in my life.

(02:26) But I quickly realised that I didn’t want to work for anybody and I started doing more and more entrepreneurial projects let’s call them, and once I had that entrepreneurial bug I had started a magazine called Cyber Surfer with a publisher that ended badly. I did five issues of that. Then I started Silicon Valley Reporter which became my  first big claim to fame. I grew that to a $12 million a year business off my credit cards and it was quite a run. You know I think maybe 75 – 100 employees at the peak and I was a  26, 27, 28 year old with you know, whatever, almost 100 people working for me and sitting around a table with 25 journalists.

(03:09) So it was pretty heavy stuff and then of course the market crashed and I sold that company to Dow Jones and got a couple of years salary. Started Weblogs Inc, which was a blogging company when there were really only two or three other blogs out there. Dave Weiner had a blog and Gawker was out Gizmodo had just launched and then I started Engadget and Autoblog and Joystiq and a few other blogs, 18 months after Mark Cuban and me started that company. I sold it for $30 million to AOL and then I worked at Sequoia as an entrepreneur in residence. Did another company called Mahollow which is now Inside and still chugging along.

(03:47) And along the way about five or six years ago my friends at Sequoia said, Jason do you ever think about doing angel investing, you know a lot of people and you forward this to a bunch of your friends to look at their companies, what do you think? And I said okay, I’ll try it, so you know my first five investments were things like, Thumbtack, Uber, Chartbeat, and Signpost. So I had quite a good company and a really good network and since that time I’ve done 150 companies in just under six years. I’m on pace to do about 40 investments a year. And I’m definitely the most prolific arguably you know depending on who you ask the number one, two, three, four, five most desired angel investors in the world which is kind of how I define success as an angel investor, which is how much do the founders want you in their company. And you know when Ycombinator bans you, you know you’re doing something right.

Michael Krigsman:

(04:48) Right so on these angel investments that you’re doing is there a particular common theme?

Jason Calacanis:

(04:56) Yes I pick entrepreneurs who are extremely driven, resilient and who want to win. Then I picked entrepreneurs who are executing at a very high level, and then I pick entrepreneurs who fit those two categories who are operating, hopefully in a space that I see becoming a billion-dollar market capped company. If I can’t figure out how to get to a billion-dollar market capped company, then those other two factors are very strong the resiliency and drive of the founder, and the founders ability to execute I might still invest. But if those first two are off I will not invest.

Michael Krigsman:

(05:37) So there’s no particular subject domain or topic domain so to speak that you’re investing in?

Jason Calacanis:

(05:46) No that’s stupid to do I think, these are my things and I think that’s kind of stupid although the respect to people who do this and people who build entire funds or it might be because they love working on those projects or they intellectually curious about it. I don’t think it’s a very good thesis for returns, because it presupposes that you are some genius with Nostradamus like effects, and I haven’t met the person who has that. That’s coming from the person who is in the top 10 Angels investors of all time right now.

(06:19) So you know, I’ve watched the other angel investors who have done an amazing job, a better job than me. Ron Conway, Chris Sacca, they’ve had much more success than I have, and Mark Andreessen even when he was an angel investor he did pretty well to. Kevin Rose did fabulous, and I think all those people have much better track records than I do although none of them are angel investing any more. But those four I don’t think they were sector specific either. So you know, people look at the statistics, this idea like the Google glass fund, which you know Mark Andreessen funded into the Google glass fund, now there’s a Slack fund. Their previously has been you know…

Michael Krigsman:

(07:00) Well there serving a particular interest in those cases, a particular master.

Jason Calacanis:

(07:06) Yes, it’s a huge mistake I mean it’s not mistake for the companies Slack or Google it’s probably a great idea to put $100 million into funds to build up their core business. It’s a mistake for everybody else – it’s a mistake for fund managers I think to be sector specific.

(07:24) You can have preferences because I’ve a Ph.D. in biology and you know what ever sure, put this on biology I understand that, but I think on the angel investing front, if you’re looking for the big binary outcomes I would have never been a marketplace investor or taxicab investor. My two top investments are a transportation company and a marketplace company. I didn’t ever think I was going to be in those businesses right, but now I think my biggest company after Uber or Thumbtack probably would have been Café ex, which is about coffee machines, so I never thought I would be in the coffee business either but here we are, right.

(08:02) I try to reserve judgement, and what I learned long ago is that I’m not the smartest kid in the class, they told me that explicitly that actually, ‘You are not the smartest kid in the class’. So then I said hey, if I’m not the smartest kid in the class I can be the hardest working, and I can be the most connected. I can be the most risk taking, and so the smart kids are sitting on the bench and I’m more aggressive and risk-taking than they are.

Michael Krigsman:

(08:24) What about media, you have this week in start-up and you’ve hit over 600 episodes, so tell is about…

Jason Calacanis:

(08:34) It’s a hobby.

Michael Krigsman:

(08:35) So it’s a hobby, so you’re doing this thing as a hobby and you’ve got 600 episodes under your belt, tell us about that and tell us about what’s going on in media, because you’ve got a unique position, a unique seat as a media observe.

Jason Calacanis:

(08:49) Yeah, it’s the number one start-up podcast I think in the world – well actually no, there is another group that makes podcasts called start-up and it’s about their start-up, MPR guys, and I think they have much more traffic than I do.

(08:59) But I think in terms of like a serious start-up, and you know it not like an entertainment show, we are the beginning and the end we have close to $1 million in revenue or so on the podcast and then we’ve got an Emmy Award winning producer you know, a bunch of people who work on it. So I love doing it, but I actually do it to feed my own intellectual curiosity, because I like having conversations with intelligent people. And after I get out of it those conversations I feel more inspired and I have more energy.

(09:33) So, I’m a high extrovert and one of the definitions of an introvert versus an extrovert is where they get their energy from. I learned a long time ago that if I have a great conversation you know at noon you know, for the next 24 hours my energy is really high, and my creativity is very high and I really enthused.

(09:51) So my podcast is almost in a way like my energy. I just ask my producers to get me highly intelligent people that I can talk to. I could do it all day long. I could interview three people a day, every day, for 365 days a year and that would not feel like work to me.

Michael Krigsman:

(10:10) Yet I mean I interview people like you, people shaping the world, and it’s so much fun. But you have $1 million in revenue, what is the business model then.

Jason Calacanis:

(10:23)  We read two ads a day, about two ads per episode and we limit the advertisers to people who have products that I actually use or one of my companies uses. So we don’t get any shitty advertisers or advertisers we don’t believe in. I use GoToMeeting, I use Squarespace. We use PagerDuty, we use Chartbeat or actually not Chartbeat now.

(10:49) When we had MailChimp as an advertiser we used MailChimp. I still use MailChimp. Audible I love. Audible knows I love them because I tweet about what books I like and make them as an advertiser. Then they went away for two years, then they came back. You know like there’s different companies I love and their products will just float in and out and support the podcast. We typically sell out the ads three, four, five months in advance, and you know it’s a nice little business that I enjoy doing.

(11:17)  I don’t know I think I’ll maybe get to 1000 episodes and maybe I’ll pack it in; I don’t know. I said that when we were getting close to 500 and when I was at 400 I said hmm, so maybe I’ll stop doing this at some point.

(11:28) But we’ll see. I’ve got a lot of offers to do stuff on real television now and you know real radio ad so I consider some of those opportunities. I’d like to expand you know, a little bit beyond technology and maybe talk about somethings just a little bit outside of that, because I talk about entrepreneurship and technology and you know that bleeds into a lot of other areas. But you know part of me in another life would like to just host a drive time radio show for three hours a day. I kind of love doing that.

Michael Krigsman:

(12:02) Yeah you like to chitchat, that’s not quite the right term. How do you build the audience, because I think that’s the real question that everybody has, so how do you build the audience?

Jason Calacanis:

(12:14) That might be the question you have to be honest.

Michael Krigsman:

(12:17) It’s definitely the question that I have but I think we’re…

Jason Calacanis:

(12:21) The quality of the guests. Yes, that’s it, it begins and ends with the quality of the guests. You get a great guest, you get a great conversation, and the things going to grow. You know, the thing is they just show up you know like people do like five episodes and it’s there, them and their friends talking and it’s incredible boring and none of them have any type of demonstrable success or charisma or they’re entertaining. But they just do a bad impersonation of some other podcast or other personalities. But what they don’t realise is you know, it’s not about you particularly, it’s you know the best podcasts are about the guests. You know like Kevin Pollak or Marc Maron or Adam Corolla you know some of those people are actors and comedians outside of it, but in those three cases they all happen to be exceptionally good at interviewing and having conversations.

(13:12) So I think if you look at Bill Simmons, you know he’s just a really good ring leader or Leo Laporte. So I think there’s different categories. There’s people like the ring leaders, like Leo Laporte and Bill Simmons, they can sort of organize a group of talented people around a topic. And then you have people who are solo artists, but who are great interviews. You know there’s all different types of people out there who have different skillsets. And you have to figure out which one is yours, and for me, I’m always trying to increase the quality of the guest. I know I’m a great interviewer but you know I don’t know if I would be a great solo podcaster like just me talking and not being able to give a shit.

Michael Krigsman:

(13:48) Yeah I know, it definitely helps. You need to have something to bounce off on. So a lot of it is being relentless.

Jason Calacanis:

(14:00) Yeah, showing up is probably 90% of it and you could probably say relentless is a way of saying showing up. But I do have to say you know, showing up and it being bad forever is not good either. But if you show up you should listen to what you’ve done, or take notes, or listen to the audience and just try to make a little better each time. I mean after 600 episodes, if I just made it 1% better each time that means it’s going to be well more than 6X because you’ve a compounding affect- 10X or whatever. So I should be theoretically about 1% every episode, you know 10 times better or whatever it is so you can do the math.

(14:44) But you know I don’t think a lot of people are super considered, nor do I think people are relentless. So you know, I think it takes a certain type of person because you know, it’s going to suffer for the first two or three years in terms of revenue or audience. So I think the people who succeed are the people who make it to year three or four. I think years one or two you’re just getting your legs under. Unless of course sure, Adam Corolla did a radio show or your Joe Logan and but even Joe Logan is at 700 episodes. I think he does it every day, so he’s just ploughing through episodes and he’s pretty dynamic in terms of an individual. So you know there are exceptions to it but generally speaking there’s no exceptions; that hard work pays off.

Michael Krigsman:

(15:29) You and I met at Jason Lemkin’s Saastr conference a few weeks ago.

Jason Calacanis:

(15:37) At the opening night party.

Michael Krigsman:

(15:39) That’s right, at the opening night party and I told you how many episodes we had done and you nailed it, so for us it’s about three years now. But as far as measurement…

Jason Calacanis:

(15:51) And you’ve got a good cameras.

Michael Krigsman:

(15:52) Oh we’ve got a great camera.

Jason Calacanis:

(15:55) I googled it. it’s gorgeous.

Michael Krigsman:

(15:59) There aren’t many people who are using this type of camera as a web cam, and it took a lot of work to figure it out, but you know figure it out. So, as far as metrics go, everybody is hung up on page views, and there’s problems with page views in general, but with video it doesn’t consider engagement at all, nor does it consider the quality of the audience. So how would do you think about metrics, page views and evaluating success.

Jason Calacanis:

(16:33) I don’t frankly. I mean everything for me begins and ends with just having a great conversation. You know, there are all kinds of little tips and tricks and things you can do. I suppose having good cover art is good. Apple featuring you is good. Having an email list is great, so even just basic stuff like that, which I guess just like blocking and tackling. But again, if you get a great guest and you know everything sort of flows from there and if you get the best out of that great guest.

(17:08) So if you look at somebody like Chris Sacca, a lot of people had them as guests, but nobody got out of them of what I got out of those individuals in conversation because they feel comfortable with me, and that’s my greatest advantage is that as an interviewer the people that I’m interviewing, if a journalist was interviewing them they would look at it as a journalist, which means it’s going to be pretty antagonistic by definition.

(17:30) If they look at it from me they go, oh this is a guy who I can do deals with, or this is the person I play poker with, or this is the person who I went on vacation with. Or this is the person who I had dinner with, or this is the person where we had a play date with our kids. So I’m got this incredible you know massive unfair advantage versus journalists who when they come in, they don’t even know who the person is.

(17:52) And so I’m not trying to catch anybody or do a ‘gotcha’ type of journalism, we just having a real conversation. I sometimes have a real conversation with somebody, and somebody will go there, and I’ll be like ‘whoa did they mean to go there or not, like the last Chammat episode he just went diversity, diversity and I asked him about diversity because he had put it out there by writing his blog post and his study about the information about it. So I sort of just put it out on a plate and said hey, tell me about your diversity effort. I didn’t ask him some you know, really you know challenging, Mike Wallace you know, hard-hitting 60 minutes confrontational question. But I don’t need to because you know if the person trust me, and if the person feels comfortable with me I can start on second or third base in terms of guessing that home run answer

Michael Krigsman:

(18:41) So the key to your interviewing then is creating an intimacy that’s based on trust, shared background, they trust you basically.

Jason Calacanis:

(18:56) Well yeah, I’m friends with a lot of the people on the show and a lot of people who have listened to the show for years or they’ve known me for 20 years as a journalist, as an angle investor, or entrepreneur. So I do think you accrue a certain amount of you know respect or people in some cases have reference for you. people like Ryan come onto the show and he’s like ‘I listened to this during college, like I called into this show’, or you know one of the founders of digital ocean is like ‘I’m at DigitalOcean because you told me to quit my job and go and join DigitalOcean. I was on an Ask Jason segment’. I was like ‘You were I don’t remember- oh yeah I do remember that’.

(19:31) So this you know when you’ve stuck around for long enough and I think if you listen to Howard Stern in this last five or six years, he’s become this incredible interviewer and I would argue that he’s always been a really good interviewer.

(19:45) Over the last five or six years, people coming into it, you know this guy’s retiring, this guy’s made me laugh for 20 years, 30 years. This guy’s had great conversations with other people; I think people are now going in who have just had Sally Field on. And you know I don’t know if Sally Field would have ever been on the show 10, 20, 30 years ago but the day after she hears Gwen Stefani – I’m sorry, Gwyneth Paltrow which was another incredible interview or Madonna or other people come on and have a great interview, I think it kind of somebody send that tapes and says listen to these three interviews. And they get inspired, they trust the person, have reverence for them, respect for them or whatever it is.

(20:19) I think I’m sort of just starting to tip into that in my career which is ‘oh yeah this guys- I’ve laughed at his show before. I’ve got information out of his show before. I can’t wait to be on the show’. I have many people that after they walk out of the show they’re like, ‘ This show inspired me to be an entrepreneur’, or you know, ‘this interview with this entrepreneur inspired me’. So the person you had on as a guest inspired me to be an entrepreneur. So the power of podcasting is not to be underestimated.

Michael Krigsman:

(20:47) So you’ve got this week in start-ups and then convert to a podcast. Are their business models for podcasters these days?

Jason Calacanis:

(21:03) …is the obvious one and donations work pretty well to, so if you look at Tech News Today, the guy who previously worked with Leo who did his tech show, Tom Merritt, he left and did his own show and he might do 10, or 20K a month in reoccurring donations. He’s up to 20K a month, up to $240,000 a year, he does it out of his house. They’re doing it on Google hangouts and you know, close to zero cost or very minimal cost for a producer and some bandwidth or whatever 100k  a year or 200 K a year.

(21:37) So, I think there are models out there between asking your audience to pay and asking sponsors to pay. But I don’t think it’s a place to go to if you’re rich at all. And there is also speaking gigs. I was talking to somebody you know who has a podcast – I won’t say the name but who told me – yeah I just got my first 10/20K speaking gigs, and I’m getting those every month. So it’s like okay, your podcast made zero but you got two speaking gigs a month and it’s 30k a month from speaking gigs, holy shit, what a life you have now.

(22:06) So I mean if I wasn’t doing everything else I was doing right now I could literally just do speaking gigs for 20 grand or something like 10 grand, I don’t know what people are paying me now, I could just do the speaking circuit probably like Seth Godin does or other people and paying the mortgage that way. So there’s plenty of opportunities but I don’t think it’s a great business to get into as a business.

Michael Krigsman:

(22:27) I was talking with the editor and chief recently of a major news site, and his observations is media these days is kind of a cottage business, so it’s sort of mirroring…

Jason Calacanis:

(22:40) There is a lot of cottages.

Michael Krigsman:

(22:41) There is a lot of cottages but there aren’t many to many big houses, I mean it’s almost impossible to build a huge major media company.

Jason Calacanis:

(22:48) Yeah, I have to think about that, so yeah, I mean who cares about building a major media company. If you’re Howard Stern and you can go from 30 million listeners at his peak and go down to two or three million now or five million whenever he gets you know well, he’s making more money of 10% out the audience because the audience is paying you know 10-15 bucks a month.

(23:12) If you look at someone like Leo Laporte, yeah sure he can get a million dollar contract with somebody or he can make I don’t know, a million dollars or two million dollars in profit a year doing his own network.

(23:24) So Adam Corolla was on regular radio now, he makes $5 million a year doing whatever he does, so you know it’s all tradeoffs. But I think it’s really about the big media companies because you know they can’t control the best talent anymore; the talent can go direct to the audience. And so everybody who wants to create a podcasting network, like I tried to do it and I had the same experience with every talented person which was they would go in and out in wanting to do a podcast or not because they don’t need to, and they don’t need anybody, so they can rent my ads but I don’t need to be part of an network. I don’t need to get a pay check from you so I’m not doing it for the pay check.

(24:01) So I think there are some complications to making it a big scalable you know there’s a Podcast One Network, there’s you know people are making their own little networks like Leo Laporte did and like I did and other people did. And it’s you know I think it’s very hard to get that second, third, fourth, fifth hit podcast that you want because you don’t have the talent. I mean anybody can just leave and there’s been Tom Merritt having a year or two with Leo and now he’s on his own. That’s no fault to Leo it’s just the nature of the business that somebody can just walk out the door, start their podcast the next day, and set up a patron page and technology allows them to go and do it themselves.

Michael Krigsman:

(24:40) What about education, so you’re talking about podcasts where the personality of the interview is so strong that really carries it. But what about distributed education and approaching it that way, and looking at it as an educational vehicle rather than…

Jason Calacanis:

(25:01) Yeah, listen people get an education from it for sure. I think in that way you know Audible has been doing better and better. Podcasting does better, audible does better, Audible does better podcasting gets better where I think people are looking at the spoken word you know just the device changes everything because I have a computer in my pocket with broadband essentially. So unlimited storage essentially, so I don’t know how many podcasts you can put on one of these things, but more than you can listen to in a year.

(25:27) So yeah, the software’s sophisticated, the amount of content out there is unbelievable. The quality of it is variable, but at the top end it’s exceptional. So yeah, education is a great category.

(25:42) Again, there’s probably other tools that are better for education for directly teaching people other than podcasts, so of course what Sarah is doing with Nano courses Or Dailydrip is doing with daily education, or Lynda and Treehouse with continuing education, those things are better or Duolingo for do not learning a language. So they are going to be very specific vertical. They going to be vertical specific apps and platforms that will do better in education. But for generalized, keeping up with the news, keeping up with industry information, and learning just how the industry works there’s nothing better yeah.

(26:18) I mean if you can have a choice to go and get an MBA or take the ( Unclear 26:23) without the MBA and literally listen to three or four podcasts a day, and write a blog post about them, and pay your living expenses and do that for three years, I think you would learn more actually doing two years of listening to podcasts and writing up a blog post on them and writing your notes about them, and then doing your own each weekly podcast.  Yes, for sure you can roll your own education, but you have to have discipline or it’s either you give another person a bunch of money and let them have the discipline.

Michael Krigsman:

(26:47) Jason, we have a question from Arsalan Khan, who’s asking what’s the best way to promote your material, but there is another way of asking it as well which is, with so much content that’s out there how do you break through the noise? And you’ve done an incredible job with that, so teach us, how do you break through the noise?

Jason Calacanis:

(27:10) That’s a good question, I think the quality and having the vertical that you’re good in is a good starting point. So if you start CXO podcast right, it’s a very general thing. But at least it’s about the senior executives at a company. Like doing a CFO podcast or the CTO podcast, or the Chief Strategy podcast would be a much better way to start than just doing that CXO – not that CXO’s a bad way to start. It’s obviously work for you to a certain extent so that’s awesome. But I would say go even more niche you know. I didn’t do this week in tech; Leo did I did this week in startups – a subsection of technology and the subsection I happen to be an expert on or most people consider me an expert on.

Michael Krigsman:

(27:52) So the key is to focus.

Jason Calacanis:

(27:56) Well I think if you created a sports podcast right now I don’t know if anybody gives a shit, but if you created what about rock climbing you might not have as much competition. I tell everyone we’re the number one startup podcast because there were no other podcasts about startups. It’s pretty true; when you don’t have competition is easy to be number one.

Michael Krigsman:

(28:16) Switching back to investing, you are seeing so many different companies, what’s interesting that is coming down the pike that you observe.

Jason Calacanis:

(28:27) Robotics, marketplaces, AI, machine learning, you know enterprise software there is always a place for people having the tools that makes them even more bionic. So I’m seeing a lot of tools that make individuals more effective and what they do because, let’s face it you know, the machines are going to start doing really interesting things that white collar people do right now. So you know first we had you know machines that just drove stuff instead of people carrying it. You know now we have machines that lift things, and people used to lift things. Now people are putting painting cars and putting the doors on, and putting the hoods on the cars. You know it’s only a matter of time before the cars you know start driving themselves. So you know just the idea of manual labor is going away, and the next piece that’s going away is the white collar work, and even some of the sophisticated white collar work is going away.

(29:25) So this idea you know that somebody will connect your phone call obviously receptionists went away. And now you have oh, you had an executive assistant who booked meetings, well now there is this like you know of virtual assistant that you can CC on your email, and he was she depending on how you…

Michael Krigsman:

(29:43) I just started using that.

Jason Calacanis:

(29:45) Yeah, it’s just you know basically it books the meeting for you and there is a little bit of human attraction on the backend right, but it just works. So you’re going to start seeing a lot more than that and that’s going to go faster than people think. So this making people bionic is something I’m getting as little bit interested in. so I think what will happen is just that my company LAUNCH, were doing the Launch Festival again and it April 19 were doing it. it’s bigger than ever that’s people working on it.

(30:12) So we reduced the number of the people who work on it. the people who work on it are getting better and better. So we use something called Zappier, Typeform, Stripe, Squarespace and Hipchat in combination with google docs to just solve so many problems.

(30:29) We had Typeform for registration and we were doing that reach out to upsell people different types of ticket and do sales automation. With ticket automation when tickets got bought it’s putting it into the Hipchat room that a ticket had been bought. Stripe was process, so we were creating like all these little scripts and if/then/else statements, it’s not quite programming but sort of scripting or you know, it’s going to turn out that we’re going to be able to say we’re having an event on this date and we just put it all on one list like all the things that have to be done and the Launch Angel Summit, which is our next event when we do the summer, it’s like we popped up the event in almost no time and the only piece that’s taken time is going to be – not even inviting people. The thing that will take time is getting a location. And after we have a location getting everything else inline is going to be easy. So I’m pretty excited about that.

Michael Krigsman:

(31:24) So you’re using all of these different apps as essentially your weaving them together in one chain in effect to replace having to buy some sort of large enterprise app.

Jason Calacanis:

(31:37) Yeah, I think it’s having a real people app really. It really was more like a manual process. So the sort of business process outsourcing is what’s to occur now; it’s business process scripting, where you script, this is what I want to occur in the business process and somebody applies for a ticket, it knows they’re an angel investor, you know alert somebody on our team and we check back to see they’re a member of our syndicate. You know we can do all this kind of interesting if/then/else kind of things. you know put them into the spreadsheet and have the third party printing company print them a badge, like all the stuff we used to take a lot of time to do is just getting easier and easier.

Michael Krigsman:

(32:19) And so the data is and if you are using Zapier to basically manage the flow.

Jason Calacanis:

(32:23) Yeah Zapier and If This Then That you know, both those programs worked really well and Typeform is just great sort of like Survey monkey but a little sexier, and Survey Monkey does good stuff too. You know you can just like weave all these products together as glue is built between them through APIs. So I think it’s going to be some big opportunities there but I do think that employment is going to be really interesting to see how we create new jobs and you know, if we can train people up fast enough because we have people out there who don’t even know how to use email properly, or don’t even know how to use you know, document management or spreadsheets. And they can’t spell and they don’t do gramma and they don’t know how to do formulas.

(33:05) And there’s the other group of people who know all that stuff and know they’re learning how to glue it all together. Like I frequently hear the people say, ‘Well I can hire somebody for that’, ‘I’ll just write a script to do it’. It’s like ‘Oh really!’

(33:18) So the $20 an hour jobs, the $30 an hour jobs are going away and now you have this $100,000 person or $75,000 person in an organization who does the work of five or six people. And that’s the efficiency they’re striving, the economy.

(33:33) Will it, you know, and we’re seeing more and more people join the permanent unemployed. So I think what you’ll have within society is there’ll be less and less people full-time employed, supporting more and more people who are not employed. I don’t know if that’s through government or through families or communities, but it’s definitely going to be a trend; somethings in the air.

           

Michael Krigsman:

(33:53) So the weaving together requires an understanding of a range of products that at out there in order to…

Jason Calacanis:

(34:05) And the ability to learn new products, so you have to know how to be able to use new products.

Michael Krigsman:

(34:10) So on your team, who do you have that is helping, in a way this is like the new enterprise architecture.

Jason Calacanis:

(34:19) Yeah, you just have to have bright people who are fearless, I mean I think they have to have high IQs, you know, they have to literally be smart. If they were going to play any chess they would be in the top 20% of chess players. You know, it could be that they apply themselves or it could be that they’ve applied themselves previously you know I don’t want to get into too much judgements lead into nature verses nurture. But essentially if you’re able to learn new software quickly, and you’re smart and hardworking, you can just start using these tools, and you also know to look for tools.

(34:48) So I have people who are just so – I see people in the world, I don’t have them work for me I hire them real quick for my teams and fit them out pretty quick. But you know, there are people like ‘I don’t know how to do that’, and it’s just like let me Google that for you you know. Ticket sales, you know we were using event bright competitors, so like we just found people that wrote a blog posts, like if you don’t want to pay the Eventbrite price where they charge 5% for ticket sales, you can literally set up a Typeform and put it in Stripe and build your own Eventbrite. Like it used to be just five, six, seven years ago Eventbrite was just incredibly revolutionary product, and we used it and I was like, what am I paying them for and it’s like, well because they do all the processing, but yeah Striped does that and we have a Stripe account. You go and plug your stripe account into the Typeform and ask for the first name and last name and these other five questions, and you’ve got something better that Eventbrite. So you know it’s pretty interesting times. You can basically roll your own stuff, and it’s more effective, more cheaper and better.

Michael Krigsman:

(35:51) Yes it is pretty amazing, so again the challenge in a sense is understanding the range of products, understanding the capabilities of the products because that’s the first stepped for being able to do what you were just describing.

Jason Calacanis:

(36:11) You know, I’m not sure exactly where this is going. One of the things I’ve learned as an angle investor I don’t actually have to know where the train is going or the rocket ships going. I just have to be able to identify this is a rocket ship, this is a train, get on it. right, so I know there’s a train and it’s going somewhere, and there’s a rocket ship and it’s going somewhere you can be on it. And to be on it you have to be on the captain’s table somehow.

Michael Krigsman:

(36:34) What’s the best way for people who want to be funded to approach you? How do you like to be approached?

Jason Calacanis:

(36:42) It’s not so much about how I like to be approached. I can tell you the most effective way to get to any investor, because I’m not like one of these guy’s whose like you know the queen of England, I literally have some VC friends who is like (Queen of England voice) ‘This is how you have to approach me. You have to ask…’ so like get over yourself!

(37:05)You know basically I could tell you the best hack is to have coffee with an entrepreneur, who’s in that person’s portfolio, have that entrepreneur fall in love with your business and have them introduce you.

(37:10) So  if you want to get built early as an investor and somebody from one of the portfolio companies od DogVacay or Uber or anywhere in between like that’s the way he’s going to pay attention. If you want me and you talk to Tom at Thumbtack or talk to Tony at Chartbeat, or talk to Stuart at Signpost, any of those people you know and they refer you to me and say, ‘Hey Jason this looks really interesting for me’, that’s the best way.

(37:50) Cold emails we look at and if it’s an incredible product that has revenue traction and is really well put together sure. Then the worst things you can do is to say, ‘can I have coffee’ and write a long email, because like this is too long, so it’s kind of like, ‘Oh my god, what’s important in a 2000 word email; it’s very hard to determine, so I like short emails. ‘we are building a Slack competitor that is better because it’s open source, and we’re going to make money off hosting and we charge a flat rate of $500 a month and you can have as many people as you want. It’s very disruptive.’ That email to me would be like ‘okay’ and there’s a link and ‘you could see the product here. You can try the product here. We have 20 people who are using it’. Whatever.

(38:35) The way I just presented that like yeah, we’re a flat rate variation of Slack, it’s ‘Oh is that charge just $500 a month and you have unlimited? Okay, it sounds like a disruptive business model, great. Let’s talk.’  Right so you know people are just a little bit clueless. They want to hang out, they’ve got that backwards. They think that you’re associated with a great investor you’re going to be successful. What it is it’s the great investors are finding the great entrepreneurs and it makes them look successful.

(39:03) you know, I’m not – the fact that I’m an investor in Uber makes me seem I’m the most brilliant person on the planet. I can assure you I am not. I got lucky. Had a 15 year relationship with the founder of the company and we’re friends, and I got lucky. And if anybody want to ascribe anything that Uber has done to me, they’re idiots. Uber would have been as successful. I have absolutely no credit t take and you know, it pisses me off a little bit sometimes because I’ll see other investors in Uber or like Thumbtack and they all want to like take credit for it.

(39:38) The most you can take credit for I think as an investor is you know, being a good picker right, and then you can take a little bit of you know, you can give yourself a high-five or pat on the back, if you like. If the founders say you’ve been helpful when they need somebody to talk to or a connection. But the truth is because I’m an entrepreneur like they know. The truth is the entrepreneur has built these businesses.

(39:58) The investors? They may have guided them, they may have set up meetings, they may have helped with the hire, but they’re not in their everyday working 12 hours in the day like everybody else in the team. So you know, never get too high on your own supply. It’s ironic or actually I should say it’s paradoxical that the best investors in the world are always the most humble and are aware of this fact,. Like you would never see Bill Gurley you know and the benchmark team taking credit for you know there investment success. You would never see sequoia doing that. you would never see Social Capital doing that. we all know we pick great entrepreneurs, we support the hell out of them but they’re doing the heavy lifting.

Michael Krigsman:

(40:35) I had Lew Cirne, who is the CEO of New Relic on CXOTalk, and he made the comment that the best entrepreneurs are the ones who are most self-aware.

Jason Calacanis:

(40:50) Yeah, you do need to be a little bit self-aware, I mean I’ve seen people who are not self-aware to be successful to, they just being delusional and whatever. But yeah, I would say being self-aware is a gift, because you know your own psychology. You know what’s going on inside your head. You know why you’re doing stuff. You know your motivation. It takes a little while to get there typically for most entrepreneurs who start doing stuff when you’re young. But you know, when you’re older it’s pretty nice to be self-aware.

(41:20) It can also be a curse to be self-aware because you realise it’s all meaningless, and you’re going to die and what is the point of having the number-one enterprise software company. But be pretty careful because if you become super enlightened you just might realise that oh my God, I can just take whatever money I have right now and live on a beach and spend time with my kids, which is much more important and fun for me. You know, or I could just go and play cards for a living and laugh, sleep, and eat and not really have to have any of this stress.

Michael Krigsman:

(41:49) So we’re just about out of time, so why don’t you pitch are anything you want that you are working on.

Jason Calacanis:

(41:59) Well I would say check out the inside Daily Briefing. I’m particularly proud of that and LAUNCH Ticker. They are both the exact media product in two different verticals. Essentially I have writers who are really smart, who do the news all day and summarize it, and curate it and send it to. Inside Daily Briefing is 20,000 people, 50% of them open every email, and there’s three emails a day so we’re getting you know, probably I would say 75% of the list, 80% of the list opens either of the two emails I’ll send a day. And every week probably 80% of them open it.

(42:33) So it is incredibly timesaving. It’s time-consuming on our part to have a full-time and going through all this content and saying these are the best and debating or not whether putting them to work, and to determine what is the best based on people’s clicks and what you read in the newspapers. So Inside dot com, just go there and sign up, try it for 10 days, and then hit reply and it will go to the entire team and rate the email on a scale of 1 to 10. And people will do it. I ask people every 50 episodes or so, every three or four weeks like, ‘Hey rate the email 1 to 10, and tell us what you love and don’t’. People write back like, ‘This thing saves me so much time, incredible’.

(43:14) So I think it’s going to be a very big business; I have 20,000 doing the email now and I might be able to get it to a million. So if I get it to a million people a day who are getting it twice a day, that could be a huge business. Launch Ticker is $100 a year, $10 a month and it’s the same product, and about 11,000 emails people get it every day, and we’ve converted 1000 of them to paid. There is 9000 on a one year free trial or two month trial or whatever it is depending where we put them on the list. So, those are the two things that I think are super fascinating in my world.

Michael Krigsman:

(43:47) And your open rates are phenomenal. Unbelievable.

Jason Calacanis:

(43:51) Yeah, it’s like five, 10 times the industry average because we have a secret; if you send it twice a day and people don’t want to be unsubscribed, and then we put an unsubscribe link at the top sometimes and we’re like, ‘Hey if you don’t-‘ because people don’t page down to the bottom, so I’ll just say, ‘Hey if you are not enjoying this anymore, do me a favor and please unsubscribe’. And then people ask why are you asking, and it’s like well if you don’t want to be on with it I don’t want you to get it’, because I want them to be able to have a high open rate and have the high click rates because that you know really helps. Some people are like you know, I don’t click because you summarize the news so elegantly, and now I have got to figure out what the business model is here. So, that’s the next piece of the puzzle but just go Inside dot com, hit reply, try it. I get every reply and I replied to probably 9 out of 10, almost always I reply. Just give me critical feedback which we love and grated on a scale of 1 to 10.

Michael Krigsman:

(44:43) Great, well thank you so much, and also before we go I have to give a shout out to Marshall Kirkpatrick, who is the founder of Little Bird who is just a great social media platform, or influencer discoverer I should say, and Marshall’s the person who introduced us and we released the 20 influential CXOTalk guide to 20 influential Chief Digital Officers, and Chief Information Officers, and we use Little Bird so thank you to Marshall Kirkpatrick. And thank you to Jason Calacanis, who has been our guest today on episode number 162 of CXOTalk.com, Jason thank you so much for taking the time

Jason Calacanis:

(45:35)  My pleasure, thanks for having me.

Michael Krigsman:

(45:38) And congratulations on your upcoming twins.

Jason Calacanis:

(45:44) Absolutely, it’s going to be amazing.

Michael Krigsman:

(45:46) Everybody thank you so much and we’ll see you next week, bye bye.

Companies mentioned in today’s show:

 

Amnesty International            https://www.amnesty.org/en/

Chartbeat                                https://chartbeat.com

DailyDrip                                 www.dailydrip.com

DigitalOcean                           www.digitalocean.com

DogVacay                                https://dogvacay.com

Engadget                                 www.engaget.com

Gawker                                    www.gawker.com

Google                                     www.google.com

GoToMeeting                          www.gotomeeting.com

Hipchat                                    www.hipchat.com

IFTTT                                       https://ifttt.com

LAUNCH Ticker                       www.launchticker.com

LAUNCH                                  www.launch.co

MailChimp                                    www.mailchimp.com

PagerDuty                               www.pagerduty.com

Sequoia                                   www.sequoiacap.com

Sequoya                                   www.sequoya.com

ServerMonkey                         www.surveymonkey.com

Signpost                                   www.signpost.com

Squarespace                            www.squarespace.com

Thumbtack                              www.thumbtack.com

Typeform                                www.typeform.com

Uber                                        www.uber.com

Y Combinator                          https://news.ycombinator.com

Zapier                                      https://zapier.com

 

Jason Calacanis:

Angel list                                 https://angel.co/jason

Jason Calacanis website         www.calacanis.com 

LinkedIn                                   www.linkedin.com/in/jasoncalacanis

Twitter                                    https://twitter.com/Jason

This Week in Startup               www.thisweekinstartups.com

Using Technology to Improve Education, with investor Anne Dwane, former Chief Business Officer, Chegg

Anne Dwane, Co-Founder and Partner, GSV Acceleration Fund
Anne Dwane
Co-Founder and Partner
GSV Acceleration Fund

The education market remains inefficient and expensive. In this episode, founder, venture-backed CEO, public company executive and now venture capitalist, Anne Dwane, discusses building a company to empower people to realize their potential.

Over the years, she led teams in creating services that were loved by consumers and valued by institutions - schools, colleges, universities, employers and government agencies.

She co-founded GSV Acceleration Fund to be a catalyst in the world’s largest, most inefficient capital market: the human capital market. GSV Acceleration Fund backs entrepreneurs leveraging technology to fundamentally improve learning and talent development from K-12 through higher education and career advancement.

Technology is doing for our minds what machines did for our muscles; globalization, automation and artificial intelligence renders much of the $5T spent worldwide on education and training ripe for disruption. While learning has never been more essential, technology is making learning more accessible, affordable and effective than ever before.

Previously, Anne was Chief Business Officer at Chegg (NYSE: CHGG), with leadership responsibility for revenue, company P&L and M&A. During her tenure, Chegg transformed from a private, asset-intensive textbook rental company to a profitable public company with digital revenues of $140M.

Anne joined Chegg through the acquisition of Zinch, where she was CEO. Zinch enabled students globally to showcase themselves as "more than test scores" to be matched with colleges, scholarships and graduate programs. Previously, Anne co-founded Military Advantage ( www.Military.com) to connect service members and veterans to benefits, including GI Bill and career services. Military Advantage was acquired by Monster Worldwide (NYSE: MWW), where she became General Manager, Affinity Networks, leading a portfolio of businesses focused on lifelong learning and career advancement. Prior, Anne was in business development at Paul Allen's Interval Research Corporation and in brand management at Nabisco.

She holds a bachelor's degree in Marketing & International Management from Georgetown University and an MBA from Harvard Business School. Anne is co-author of Getting In: The Zinch Guide to College Admissions & Financial Aid in the Digital Age (Wiley 2011). She was named a Henry Crown Fellow of the Aspen Institute

Using Technology to Improve Education, with investor Anne Dwane, former Chief Business Officer, Chegg

Michael Krigsman:

(00:00) CXOTalk and wow every now and then technology fails us. I’m Michael Krigsman and we’re talking with Anne Dwane, who is a serial entrepreneur an amazing woman and Anne, briefly tell us about your background.

Anne Dwane:

(00:17) Sure so I started my career in market research, which was in retrospect a really great place to start, because you really understand the customer you really have something to say. And then I moved into brand management at Nabisco, for Planter’s Peanuts which was an amazing experience. And I have been to nut school and learnered all about that. And then after that actually did some fun stuff at Nabisco in the very early days of the internet. And that was really my first experience with applying technology to make things better, faster, and cheaper.

(00:49) Then went to business school, came out and my friend from business school had an epiphany about community that could be connected with technology. And that was Christopher Michael who has been on this program and his idea was military dot com. And that was a way to really connect people who had served or serving now to all the benefits of service.

(01:11) And that was a fun opportunity to put technology to work, not just to make things better, faster, and cheaper but to really connect people to opportunities to learn and to succeed which is really a great purpose driven organization and that kind of inspired me for the rest of my career.

(01:30) Military dot com almost went out of business and that was kind of an interesting experience, but we with a great team brought it back from the brink and ended up having the company acquired by Monster, the jobs company and grew some businesses there. And then decided to go back early stage and join young founders who had a great idea to kind of revolutionize the college admissions process and make it a lot more friendly, and that was a company called Zinch and we grew that company and had the chance to work with a bigger company called Chegg.

(02:11) And Chegg is a funny name but it comes to a solution from the chicken and egg problem. And the chicken and egg problem that Chegg was out to solve was how do you afford college without a great job and how do you get a great job without college. And so how do you put those things together. And we were acquired by Chegg, grew that business with a great team. Went public with that process and transformed to a much more digital business from a heavily textbook rental organization. And just in the past couple of months I’ve decided to do the next chapter, which is moving from being an entrepreneur to being an investor. So I’m now a venture investor.

Michael Krigsman:

(02:55) Okay, so the common thread throughout all of this is the notion of community. When you were at Monster you said you we’re head of an affinity group, another way of say community. So what is the connection between learning technology and community, what has that thread been for you and what are you now investing in relation to this as well.

Anne Dwane:

(03:26) Well so there’s a lot of things happening. So in one sense with technology like fast networks, and globalization, and automation, and artificial intelligence really knowing is obsolete. It’s all about learning. Constant change is here to stay. And technology is doing for our minds what machines did for our muscle. So it’s never been more essential to be learning, and a the same time technology is really making new things possible and it’s more possible than ever for learning to be accessible, you know affordable, personal, measurable right, and affective right, because if you want to improve something measure it.

(04:11) So technology I think can just make things fundamentally better. You know more convenient, more effective at a fraction of the cost. And I think that community elements and sometimes community I’d say affinity is important because affinity is about a couple of things.

(04:29) One is it’s not about being labelled by other people. Affinity is how you self-identify, and sometimes when we talk about affinity we say, well people show their affinity by what bumper stickers they put on their car. So it’s a cause, it’s their children’s school, it’s a college, it’s the US Marine corps or whatever it is. And I think that’s increasingly important that people choose to self-identify. And then also affinity is about shared purpose and interest which is a big motivator.

(05:03) And I think finally I think affinity is about relationships not transactions. And all of those things I think are important. And the other thing is there’s nothing in the world like a great teacher, right. A teacher can inspire, can ignite a kind of passion for learning. He tricky part is great teachers are not always available to us. And community can fill a bit of a gap in some ways of discovering what’s possible for you and also giving you a pathway to go and do it and the ability to ask questions. So I think that’s the intersection and it’s a pretty exciting time.

(05:45) There’s about $5 trillion that’s spent around the world on education and training today from K-12 education, through higher education and life-long learning and you know workforce training. And the context of all that new technology there are really a lot of opportunities for disruption and to make the skills that we’re building for or helping people build is just more relevant and at a fraction of the price.

Michael Krigsman:

(06:14) So when you talk about knowledge versus learning what exactly do you mean?

Anne Dwane:

(06:22) So I think that you can know something and that can help you be affective and that is absolutely important. But what’s happening today is that knowledge often gets dated very quickly. And then the other thing is just because you know something doesn’t mean that you necessarily know how to apply it in a new situation. So then I think a couple of examples would be say technology coding examples, right, you constantly need to do that. but even ting sin communication right, social media didn’t exist 10 or 15 years ago, and if you’re not using social media you might not be making the most of the opportunities available to you and you may not be as relevant in the labor market.

Michael Krigsman:

(07:12) What about MOOCs and Coursera and EdX, where do they fit into this new universe and this notion of community and affinity group.

Anne Dwane:

(07:26) Yeah so I think that the exiting thing is there are so many more choices for people around the world about how they learn and it can be based on how they like to learn, what they’re trying to learn etcetera. The beauty of MOOCs really is the Massively Open Online Courses is that fabulous teachers can be accessible to all. And Coursera has a really fascinating model among many other things, but some of the learning is generally free. And the credential if you choose to get it that validates that you took the course and have the competence is what you pay for. And that is a game changer for humanity in the sense that it levels the playing field and gives people everywhere that access to learning.

Michael Krigsman:

(08:19) We have a question from Twitter, Arsalan Khan asks can you provide examples of skills that have become obsolete and what are we being taught that is relevant.

Anne Dwane:

(08:34) Okay great, good question, so I would say that some manufacturing skills are being changed by automation right and I think that idea that you would go into one company and stay there for your entire career and really not have to do a lot of training and workforce development over time is just not right anymore. The model has to be one that’s perpetually changing and learning.

(09:12) Things like creative or critical thinking are very applicable today. Communication skills, the ability to articulate a point of view and communicate that is really important. Another one is collaboration and increasingly especially in the workforce it’s a team sport, right. It’s synchronized swimming. Even when people are independent contractors right, they’re fitting into a larger human system and some of those skills are really important and they call them sometimes 21st Century skills.

(09:58) So I think at the core there’s lots of skills that are enduring right, and infact sometimes the liberal arts gets a bad reputation because they say it’s all about coding. But I don’t agree because if you actually think about the liberal arts as they were constructed, critical thinking, rhetoric right, which is communication those core fundamentals are good but all of us are challenged now to keep up with relevant ways in applying them to new situations. Good question.

Michael Krigsman:

(10:28) Yeah, so I’m particularly interested in Military dot com for two reasons. Number one, once you sold it to Monster dot com and now you’re in charge of affinity group what exactly does that mean and what did you learn. And then separately from the startup perspective Military dot com went through a very dark period, and you’ve written about this so I’m not airing some secret dirty laundry here and I’d like to know what you did to fix it.

Anne Dwane:

(11:10) Okay good, well maybe we’ll take that one first because it’s a kind of fun adventure story. And you know it’s actually very relevant now because it was in 2001 when the economy really changed, and the dot com boom of the ’99 – 2000 eras abruptly stopped. And there wasn’t funding, follow on funding for startups, and just overall the economy constricted. And we had clients who weren’t paying us. We had clients who didn’t want to continue doing business with us. We had primarily an ad supported model and it was ugly. And I think that we were optimizing for some metrics like unique visitors and certain things that didn’t actually correlate to profitability or being cash flow break even. And you know in retrospect if you want to build a great business you have to be focused on the fundamentals, and at least have in your control the ability to turn the dials at any time so that you’re not reliant on external capital.

(12:24) So we had to learn a very tough lesson. We had to you know reduce our workforce which was very painful to do and we had a great team and it wasn’t reflection on them it was on reflection that we needed to trench, and then we needed to go and sell our socks off and make sure that there was revenue coming in. and that’s always a tricky thing because literally we would go out to sales calls and the advertisers were folks like AT&T or USAA or you know car companies and things like that, and you really couldn’t let on and if they did fine that we couldn’t make payroll.

(13:06) And I think you kind of have to dig deep inside yourself and the confidence to do those meetings comes from not suppress or anything like that. it comes from kind of the conviction that this was a good idea and it should exist in the world and it was providing a valuable service, both to the service members of the veterans that we served and for the advertisers.

(13:31) So I think that’s the secret and you know we had to be really disciplined in our approach and that really is an important lesson for an entrepreneur is that a lot of things is nice to do but you’ve got to figure out what’s essential and what’s the right sequence.

Michael Krigsman:

(13:51) So you made a very interesting point. You said you were focused on metric such as visitors. So you were in this situation, what was the metric that you shifted to and how were you then when you went off on the selling effort, how were you then able to convince sponsors or advertisers and what was your model. How did you convince them to sign up because before then you obviously hadn’t?

Anne Dwane:

(14:22) So I think that the big deal is in today’s world it’s not about awareness. It’s much more about engagement and I think we were able to focus on who is coming and using our resources, online resources to actually inform not just decisions right about which car to buy or which insurance might be a good fit for their family or something like that.

(14:47) So I think it was really returning to the fundamentals and then really thinking less about just a media company where you aggregate a bunch of eyeballs and then you have some random ads and more like a marketplace where you have people really trying to actively research things and then service providers trying to compete for their business.

Michael Krigsman:

(15:11) So that was a thing that enabled you to get people to sign up.

Anne Dwane:

(15:16) Yeah that’s right, it was a good place. It was a place that provided, you know really we used to say the inside scoop or in the Navy they call it the gouge, and in order to discover opportunities and products and services that might be a good fit.

Michael Krigsman:

(15:35) And so you mentioned that awareness is not sufficient but you need engagement, what do you mean by that?

Anne Dwane:

(15:41) Well we wanted a depth of a relationship with people coming to use our services. So are they coming, are they staying for a long time, are they coming back, are they actually transacting through us.

Michael Krigsman:

(15:54) So these days in customer service and customer relationship management, engagement is the hot topic. Although engagement is almost being superseded by the notion of experience, does that come into play?

Anne Dwane:

(16:09) Yeah, no I think it does and then one lesson we learned at Military dot com for sure was there’s a difference between what I’ll call client service and client success. And client service is like we’ll answer your phone in a timely manner, your phone call and your timely manner will be responsive to you, we’ll kind of live up to the letter of the law of what we’re going to provide to you.

(16:30) But client success is different. Client success is where the team really takes ownership for the success metrics for the client, right. And really becomes an extension of that team and delivers for that team. And if you can – as an organization, do that that’s a huge C change right, and that creates interdependence or real dependence on you which is you know, something that we were able to do over time.

Michael Krigsman:

(17:00) And what are the levers that drive engagement? So at Military dot com for example just to be specific, what were some of the levers that you figured out that would drive engagement and not just eyeballs.

Anne Dwane:

(17:14) Yeah, so we were operating in, you know started in 2000 and the term social network didn’t really exist at the time. But we did know that when people were connected with other people on site their engagement went up. So again, I think that rather than being a media company we were a place to connect with other people. And so we kind of got out of the way and became a place where you connected with individuals, with services, with jobs, with all of that kind of stuff. So I think it’s the trust that came from providing a really good service.

Michael Krigsman:

(17:55) Okay, so you brought Military dot com back from the brink and then you sold it to monster dot com, at at monster dot com you were responsible for ‘affinity groups’ is that the name.

Anne Dwane:

(18:14) Yeah networks.

Michael Krigsman:

(18:15) Affinity networks, okay, so how did that build on what you had done in this as you were just describing in this period of time, where suddenly you were very successful.

Anne Dwane:

(18:30) Well so I think we learned a lot of ways to engage a community. And what Monster had realized and they had created this online, job matching category, but it was very transactional. People would come to Monster when they were looking for a job. And the reality is that many employers are looking for people who aren’t actively looking for a job. So as you walk around the planet there aren’t many unemployed nurses that are sitting around you know looking for a job. There aren’t many unemployed engineers or other sought after professions.

(19:06) So how would Monster engage a community over time, have a relationship that’s maybe  professional development or other ways that helped them stay engaged, and really, Monster would have the opportunity to present new career opportunities to those of that we call passive seekers right, people who are gainfully employed, but might want to consider their next move.

(19:30) And that affinity network was really about taking those learnings from the military community and trying to apply them to other communities. And Christopher Michael was really you know a thought leader in this. And actually went out after selling Military dot com to Monster and started a company, really focused on engaging those communities and sure enough, very quickly I think it was a year or two after starting at Monster acquired it because it was such a unique capability.

Michael Krigsman:

(20:30) That’s right Affinity Labs, which I never made the connection. So in today’s world you know we hear about things like content, marketing, and influencer marketing and all of this. And at its heart it is very very closely tied to what you’re talking about. So that raises the question then how can a startup founder or somebody working inside a large company who’s in marketing for example, how do you build that community? How do you establish that affinity? What do you do?

Anne Dwane:

(20:45) So I think it’s about a couple of things. So one thing is just really hitting the nail on the head right in terms of the questions that people have in their mind, and one way to do it is to make sure is that if people ask a question that you have quality answers. And that might be really supporting and answering community right, or maybe it’s technology that gets you the right answer to a question in the case of search engines or something like that.

(21:17) But then I think it’s using increasingly what you know about people, what they had volunteered to you in order to serve up the right stuff at the right time. And that’s why I think that technology has just continued to evolve. Because I think we used to be in an era where technology was a tool. Okay, you can go and you can look this stuff up.

(24:41) But where we want technology to evolve is technology to serve us right, and to be again with our permission about our willingness to share our preferences and interests and behaviors and whatever, so that the technology can be prompting us, ’oh, looks like you need this, looks like you need you know, don’t forget to do this’, or help you discover a product or service or a person that could be helpful to you at that time. And I mean I think that’s really exciting and that’s where were heading.

(21:15) And you know we talked about artificial intelligence a little bit earlier, and you know there’s a lot of people in the world that are very negative on the labor displacement that could happen with some of these things. And that is non-trivial. We have to think that through and there certainly will be people that whose careers are impacted by technology.

(22:33) But I also think on the flipside there are tremendous new possibilities created by technology. And technology that becomes easier to use, and effectively it lets people on ramp to a network economy where they can actually have more access to opportunity and prosperity which is pretty exciting.

Michael Krigsman:

(22:56) You know, on some level what you were describing the technology, the system giving people the answers that they want at a time that they want it and so forth. It sounds like you’re an ad technology dream come true. And I know that’s not your intention, but you’ve just described personalization and ads.

Anne Dwane:

(23:19) Yeah, well I guess ads is – it’s funny because I wrote a study a long time ago that’s people don’t mind advertising that’s really relevant to them. If advertising is really discovery of products, and services, and information that’s good that is true. I think it has broader than commercial application right. If you find information that lets you be healthier and actually contribute to your happiness or longevity, that doesn’t have a clear economic benefit but it creates value for you.

(23:52) And I think so many companies today have the opportunity to create a lot more value than they capture. And again that’s the beauty of technology. It kind of lets you cheat the laws of the universe which used to be better, faster, cheaper pick any two. But now you know there really are cases where technology lets us be better, faster, and cheaper.

(24:19) That’s especially true in the case of discovering opportunities. You know there’s a great quote out there that says, ‘talent is widely distributed but opportunity is not’. And the network lets people really engage with what’s out there and see what’s possible for them.

(24:38) Get the learning for example that they need to close the skills gap and then to participate in that economy and again it’s not perfect by any means, but it is I think frankly better than it’s ever been.

Michael Krigsman:

(24:51) Now, apply it to education.

Anne Dwane:

(24:55) Well I think there just is an opportunity now to think about personalizing opportunities and making learning fun, and those two dimensions are really new. So much of education and training around the world is highly standardized. There’s standardized tests and all that kind of stuff.

(25:30) But now with technology I think we have opportunities for personalized and adaptive learning. That’s huge. And I think the whole notion of fun is also big and it’s also less to do with technology than just of a kind of change in mindset. And somewhere along the way – and maybe it was the Prussian influence on education or something like that. It’s kind of like we decided that learning was too important to be fun. And schools became a fun vacuum and the training we have to do as part of corporate America isn’t generally very fun.

(26:05) But the reality is learning happens best when people are having fun. And infact in gaming, computer gaming learning is the fun. I mean think about the time people spend on games and again whether they’re offline games or online games, you know athletics or whatever, think about the time and effort people put into practicing and mastering.

(26:28) And could we create those same kind of healthy addictions in other areas. And I think that we’re going to be seeing more of that kind of engagement. And so it’s going to be learning that’s a lot more effective and a lot more fun, literally fun.

Michael Krigsman:

(26:50) So learning and personalization, what about applying this to the corporate market because you’ve been talking so far about higher ed or secondary school.

Anne Dwane:

(27:08) Yeah the whole thing and I think that you know the thought that we would go to school from the time we’re about five years old to 18 or 22 or something, and then we fill the knowledge tank and then we’d be done for the rest of our lives is just a fallacy right. We need to continue this learning. So I think we’re seeing a lot of innovation, and certainly as venture capitalist’s we’re looking at some of those companies. Whether its companies like Degreed or Pluralsight or some of these others that are really emerging to help people build their skills. It’s really important and especially as more of the world moves to be freelancers or flexible workers right. it’s incumbent upon each of us to build our own skill and think of ourselves as athletes right that are trying to increasingly be able to have the you know kind of life style we desire to have by investing in ourselves.

Michael Krigsman:

(28:12) And is that your focus right now, is this what you’re seeking out as you transition from being a public company executive and entrepreneur to investor.

Anne Dwane:

(28:23) Yep, so we’re really thinking about backing entrepreneurs who have an epiphany about learning in talent development, and the company’s that we think about are technology enabled but are human centered, right. They’re not just machine learning. They might involve machine learning but they would involve leveraging a person and helping that person be more effective. And so that’s one aspect and we look of course for big market, but it really comes back to the entrepreneur and we say that you know, entrepreneurs have these epiphanies.

(29:01) And I would think sometimes entrepreneurs are like comedians. Comedians don’t live in a different world than we do. They just have a different lens on the world that lets them see the humor in it, and entrepreneurs are the same way. I mean so many times we are struck by that the entrepreneur has looked at a situation that so many of us has seen as intractable or we just take it as granted and they identify a simple idea that changes our mind.

(29:36) That epiphany is important because if that entrepreneur is able to explain that in a way that inspires others, they have the kernel of you know the ability to really be a catalyst and then hopefully they’re really convicted about that. they’re really, we might say really hell bent on this because that resilience is needed as an entrepreneur. So yeah, so we’re looking for entrepreneurs that think about learning in technology and that really feel there’s a better way leveraging technology.

Michael Krigsman:

(30:11) So we have a comment from Steve Dippolitto, who is a higher education CIO who says he loves the statement, technology enabled but human centered. So may be elaborate on that, what does that mean?

Anne Dwane:

(30:27) So I think and I think it’s the folks at MIT, like Andrew Maxie that says that technology today is doing for our minds what machines did for our muscles. You know there were people displaced by you know the automation of machines right, but by and large machines enabled us to do things much faster.

(30:53) Infact I was on a little trip in Viet Nam and I was biking through the back roads of Viet Nam and one of the local guides said we have oxen that help us plough the fields, and we also have Japanese oxen. And I said, oh what’s that and he said yeah it’s a tractor. It was a Toyota thing and he said I can’t tell you the difference it makes in people’s lives, right.

(31:23) And in the space of 20 years right, Viet Nam has gone from not being able to feed itself to being the number three exporter of rice in the world. And it’s just hard to argue that technology did not augment humanity.

(31:39) Now there might be some spill-over effects from technology and nothing is perfect, but I think there is this ability and people who are worried about technology I think need to be thoughtful about, let’s have the conversation about how we can make sure that we get the kind of future we want for technology. The future isn’t written right, and we have that opportunity.

Michael Krigsman:

(32:11) Now as you are out talking with companies can you give any examples of companies who are doing interesting things such as what you’re describing.

Anne Dwane:

(32:24) Sure let’s see there’s so many I’m trying to think. So one I’ll point to is one is Andela, and Andela is by Jeremy Johnson and he’s a very successful entrepreneur. And he has education boot camps or training in Africa. And the people there are able to get certification and then he offers their services to American companies, right. So there’s a kind of a globalization going on there which is interesting.

(33:05) I think that there are great companies like Clever, so Clever has a marketplace for decision makers in K-12 schools districts to purchase things efficiently and to purchase them in an environment where they get to understand what other school districts are seeing. And so that just allows a level of transparency and efficiency which is really exciting.

(33:34) So I think there’s tons of this and actually there’s a company called Creative Devworks in Baltimore that actually has a similar model. They’re actually training people who sometimes even haven’t graduated from high school, with a bunch of skills that let them get employed. And there’s so many I think potential game changers out there and it’s not that there’s  one size fits all; there’s more choices and now  I think more transparency which is actually working.

Michael Krigsman:

(34:12) What about the business models because all of this ultimately can’t just be effective from an educational standpoint in order to be funded and get out there in the market, there has to be a sound business model. So do you have any thoughts on the business model around all of this stuff?

Anne Dwane:

(34:29) I think there’s multiple business models and this is one example. This entire category has a lot of money in it. So again globally the market has $5 trillion dollars. It’s spent on education and training and that’s you know, there’s different breakouts from K-12, higher Ed and beyond.

(34:47) The easiest models are ones that say the alternative is to purchase this is x dollars and we offer the same benefit or more right, with more convenience at a fraction of the price. So I’ll use Chegg as a quick example. So Chegg offers textbook textbook rental and now digital textbooks and a bunch of other stuff. But buying textbooks new is really expensive for college students. The ability to rent textbooks that you don’t want to keep right saves up to 90%. That’s a huge saving.

(35:25) Another thing Chegg has is called Chegg Tutors, and Chegg Tutors lets you as a student whether in high school or college or wherever or included the workforce right. If you needed help, you could go online video voice or video text connect with an expert and you get to pick you know the expert that you like right, that you have an affinity for. Maybe it’s another woman who went to your college or went to your high school or something like that and you pay as little as 50c a minute.

(35:58) And so think about that change. There’s a lot of studies out there that say that one-on-one tutoring provide outsized result to students in terms of learning outcomes. Well one-on-one tutoring was extremely expensive and inconvenient right. You were kind of signing up for as a minimum like going somewhere, whether it’s an instituting center around campus or the tutor comes to your house or whatever for an hour.

(36:31) The paradigm now is literally it could be on your mobile phone or your computer. You could be stuck on a calculus problem and you could get five minutes of help to get yourself unstuck. So you can schedule recurring sessions with someone to take you through your stuff, or you can get the help you need just in time. So these are game changers, and it wasn’t until a couple of years ago where the technology would have been available to make that effective.

Michael Krigsman:

(37:00) So these are examples of what you were just describing using the technology to power human centered education.

Anne Dwane:

(37:13) Yeah.

Michael Krigsman:

(37:17) So what’s next for you?

Anne Dwane:

(37:20) Well I you know feel privileged to be having the opportunity to talk to new entrepreneurs that want to start their business’s, and you know I think that I’ve made a lot of mistakes and learned a lot of lessons of the many years in doing this. And just excited to work with them more, and I do think that we have a great opportunity again to put technology to work for us to make sure we create more opportunity and more prosperity for people everywhere.

Michael Krigsman:

(37:56) Fantastic, well we have been talking with Anne Dwane, who is a serial entrepreneur, and this has been episode number 157 of CXOTalk. Anne thanks so much for taking the time.

Anne Dwane:

(38:11) Thanks Michael.

Michael Krigsman:

(38:13) And everybody, I am so grateful that you are taking the time to watch us today, and come back next week and we will have another awesome show, thanks. Bye bye.

Companies mentioned in today’s show

Andela                         www.andela.com

AT&T                           www.at&t.com

Chegg                          www.chegg.com

Clever                          https://clever.com

Coursera                     www.coursera.com

Creative Devworks      http://catalystdevworks.com/

Degreed                      https://degreed.com

EdX                              www.edx.com

Military.com               www.military.com

MIT                              http://web.mit.edu/

Monster                      www.monster.com

Nabisco                       www.snackworks.com

Pluralsight                   www.pluralsight.com

Toyota                         www.toyota.com

Twitter:                       www.twitter.com

USAA                           www.usaa.com

Zinch                           see Chegg.com

 

Anne Dwane:

LinkedIn                       www.linkedin.com/in/dwane

Twitter                        https://twitter.com/adwane

Customer Engagement and Community, with Christopher Michel, Investor and Entrepreneur

Christopher Michel, Investor, Entrepreneur & Photographer
Christopher Michel
Investor, Entrepreneur & Photographer

Engagement is a foundation for developing durable customer relationships. On this episode, Chris Michel explains how to build successful communities to engage customers.

Chris manages Nautilus Ventures, an early-stage venture capital firm he founded in 2008. Nautilus has made over 40 investments including Palantir, Doctor on Demand, Sparks, Goodreads, Castlight Health, 3D Robotics, RelateIQ, Blue Bottle, Ruby Ribbon, etc.

Chris is also an active board member and serves as a Director of Dale Carnegie, Kixeye, Tugboat Yards, and 3D Robotics. Previously he was a Director of Castlight Health (NYSE: CSLT), IDG, the USO, Alliance Health, etc.

In 1999, he founded Military.com, an online portal for service members, veterans and their families. Military.com was one of the first online social networks to reach scale in the United States. In 2006, Chris founded Affinity Labs, which runs a portfolio of online professional communities. Both companies were purchased by Monster Worldwide.

Chris serves on the oversight committee for the Division on Earth and Life Studies, one of six study divisions of the National Academies. He is also on the President's Circle of the National Academies. In addition, he's an advisor to the Center for Investigative Reporting (CIR).

He was also an Entrepreneur-in-Residence at Harvard Business School during the 2010-2011 school year. Prior to his business career, Chris served as a Naval Flight Officer in the United States Navy. While on active duty, he flew as a Navigator, Tactical Coordinator and Mission Commander aboard the P-3C Orion aircraft. Following his operational tour, he worked in the Pentagon as Aide to the Chief of the Naval Reserve.

He earned his commission from the NROTC program at the University of Illinois, where he graduated Phi Beta Kappa and was selected as the distinguished naval graduate. He also holds an MBA from the Harvard Business School and an honorary Doctorate from Tiffin University. Michel was named a Henry Crown Fellow of the Aspen Institute and serves as a life member of the Council on Foreign Relations.

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Customer Engagement and Community, with Christopher Michel, Investor and Entrepreneur

Michael Krigsman:

(00:00) Episode 159 with Christopher Michael, and we are looking at a selfie that Chris took literally at the edges of space, and Chris I can hear you but nobody else can hear you,  tell us how in the world did this come about, this wild selfie.

Christopher Michel:

(00:31)..I’ll take you up in a U2, and well, it was an opportunity I could pass up. A lot of people might know it from A Bridge of Spies, the movie that just came out. Francis Gary Powers, one of our most important surveillance assets still flying missions every day. So I went up to Davis–Monthan Air Force Base and you know, it was one of the greatest experiences of my life.

Michael Krigsman:

(00:54) And so you were in the military and that is how you founded military dot com. So briefly tell us what was military dot com and what was the connection to community in military dot com?

Christopher Michel:   

(01:06) Okay, well so just a little bit of background, so I used to fly as a navigator in P3s out of college hunted soviet submarines; Russian submarines. Kind of on a lark I ended up at business school and I was always interested in technology and my first computer was 1979, a Sinclair ZX80, and after I finished business school I knew I wanted to be an entrepreneur but I didn’t have the idea and I was drilling with VP65 in Point Mugu.

(01:33) In 1999 it hit me like a ton of bricks the internet would be a great way to connect and empower military people and the 24 million people it serves. So I quit my job and racked up credit card debt and started military dot com, which was one of the earliest social networks. It wasn’t the first but it was you know five years before Facebook. We didn’t even use the term social network back then, it was just a community. So that was the idea to enable and empower the military community, and it’s still around today, and I’m very proud, 17 years later.

Michael Krigsman:

(02:08) And then you started something called Affinity Labs and the common thread here was this notion of connection among people with still for marketers is very powerful today.

Christopher Michel:

(02:22) Yeah, so we can talk a lot more about the military dot com story which we did a little bit on the last show, but basically we raised a lot of money for the company and we learned a lot. I burned through all the cash. Got fired. Came back as the CEO and we made a lot of mistakes in the online community but we figured out some things and then it really started working. And I sold the company to Monster and I said to Monster you know, we really should do this for other communities other than just military people because it was really working for the military.

(02:52) It didn’t work out there so I left Monster and started a company called Affinity Labs, which was to take the lessons of Military dot com and roll it out to – well I only got to 10 before I sold the company again. But the idea was thousands of online communities, different verticals and different affinities. And lessons learned and those lessons proved to be true. Affinity was successful although we sold the company quickly it was working, but I still believe although that was 2008, I think the idea for Affinity Labs would be very powerful today and somebody else can go and do it.

Michael Krigsman:

(03:27) So what was the idea and what was some of the core lessons about building a community that you learned.

Christopher Michel:   

(03:34) Well I think there’s a number of things in play here, so one of them is what worked at Military dot com and we can talk about that, but the other was technology had evolved quite a bit since I started the company initially. We figured out a way to build communities very inexpensively on the internet. Well in a way, Facebook has done this a little bit, they’ve built community infrastructure, so anyone can build a page for their group or company of whatever. It takes two or three minutes to do that or five minutes or whatever it might be.

(04:03) Think of Affinity Labs as some hybrid model, so something that looka a lot like Military dot com, which is a very robust piece of software with community and content and services. Or imagine we figured out how to do that with its own brand and its own URL and its own website and its own management team. We figured out how to do one of those in three or four days. So instead of years and millions and millions or tens of millions of dollars like for military dot com we can now do it in days and thousands of dollars around real communities. And eventually the idea was that people could build their own communities. So it’s more than just group management. Its real community where people belong and you know lots of things.

Michael Krigsman:

(04:46) So how do you get people to coalesce because these days you hear so much marketers are talking about personalization and one-to-one personalization and customer engagement and at the end of the day it’s all around constructing some sense of community and that’s the challenge that marketers have. So what was the secrete you learned back in those early days.

Christopher Michel:   

(05:13) You know you sent me a question like how do we look at communities, so I take seven factors we used to look at and which communities to watch because we could launch them very quickly, but I’ll throw out an important distinction and that is I’m not a marketer right. I ran a community that I cared about, the military community and I did it for a purpose and mission and the company had a purpose and mission and that is to support people who served to get them access to the manifest. So right at the very front of this thing is authenticity, right. this is where companies have had real challenges because the marketing team says we need to build a community, you know or have a blog for our company and people don’t always love that because it feels a little bias and it feels a little less real.

(05:54) And so the real challenge and this was the challenge at Affinity, we were going to build a bunch of communities where I wasn’t necessarily a member of that community. So we had to build authenticity right at the beginning.

Michael Krigsman:

(06:08) Okay, so therefore the question is how do you build authenticity if that’s the key.

Christopher Michel:

(06:13) So I can talk about that but maybe I’ll just step back a little bit and say, how do you think about launching communities. So maybe there’s like two groups of people, maybe there’s many groups, but two groups of ideas in the community. One might be, I’m part of a community or company, and I want to launch a community and, hey, Affinity Labs sounds like a good business, maybe I want to go and try and replicate that business. So I’ll tell you how we launching the community. So dot com which was working right, and we said which are the next ones we want to watch, and we actually created a little formula where we would look at the size of the Affinity group you know, and then we would look at like the Affinity score and that was kind of a variety of factors, like how strong is the valance bonds right. So is America a community? Well, America is kind of a community and we feel some sense of loyalty and connections to people. But it is so large and so many diverse segments and the need are so different it’s very difficult, so the affinity score would be quite low.

(07:12) Maybe your family would be a high affinity score a lot of things in common, you might have unique needs, but the size is quite small so we have to find that balance. Then we would look for is there a sense of unique needs, so we started with career affinities or job affinities because people need to get jobs in their vertical right. So if you’re a nurse, nursing education for example and nursing jobs are a big thing right, so imagine LinkedIn for nurses. Right, so if there are unique needs in the community like the military has very unique needs, there’s special benefit programs that are complicated. So they are unique needs that matter.

(07:49) See what is already there, so you know, the beauty of Twitter today is – actually, the beauty of Twitter today is you can see where people seem to have similar interests, where verticals are there. I met a guy at one of the career colleges and he said he would start a career college based on what he saw in magazine racks; this is like 10 years ago. So he saw lots of magazines around, I think he saw a lot of them around like cooking, so he created Cordon Bleu, interesting idea. See what’s there. Is there activity there already, that maybe an opportunity.

(08:!8) I just have a couple more. The other successful modality was find a community manager to lead that community. A subject matter expert, someone who cares like for example our first community at Affinity Labs was police Link. We found a guy who basically ran one of the largest police communities,so that was very helpful. So then we’d come up with brand and pre-populate the site and then roll out monetization and then we would start marketing then so.

(08:47) I think all of those things matter but if you’re the person that says I have  to do it for my company, you might you know, it’s a little easier finding the group because you know what it is but it’s probably a lot harder to find sufficient entertainment or utility to get people engaged.

Michael Krigsman:

(09:02) Yeah and I think that’s the big question. You can identify a community of people but there may be other online communities that serve that group.

Christopher Michel:   

(09:12) Yes that’s true.

Michael Krigsman:

(09:12) And so how do you create sufficient value to encourage those people to actually participate in a meaningful way.

Christopher Michel:

(09:21) That’s a good question. Well I think you’re onto something really important, so one of the things that we talked about earlier was what mistakes people make, and this isn’t just true for Affinity Labs or Military dot com or any online community, it’s true for a lot of businesses but probably especially digital businesses, and that is you either have to be in the consumer space you have to have high utility or bigger entertaining. If you are not either of those things or some combination of them people have no time. It’s like if the offer is just sort of good, people don’t care.

(09:52) I would say LinkedIn is not entertaining but LinkedIn has high utility, or they hope it has high utility. They’re trying to do things where they’re engaging more. You see the feed and people are trying to do stuff where they can endorse people, but I think it’s actually not going that well for them. I think people are finding that they are being bothered by some content that’s not relevant to them.

(10:13) So in our case we try to do some of both. So entertainment for example at military dot com, we have a shock and awe video section, where people can upload videos or photos from the field. So we broke the news of Saddam Hussain being captured. I didn’t break it, it wasn’t ABC News, it wasn’t CNN. It was one of our members who was part of the capture team, who uploaded a photo.

(10:36) People tuned in for that kind of content, it was super interesting, the discussion was interesting to people. Humor is interesting to people. But the thing that got military dot come and Affinity Labs in sights was we were high utility. If you wanted to use your G.I bill or VA loan or whatever, you would come to us right.

(10:55) There was a third piece in that and that was community. We built the first sort of alumni infrastructure for all the military units like 101st Airborne or you could go there and find people you served with. So connecting with old buddies was important. Today that’s less relevant because Facebook does that pretty well. But you know, if you’re at Chlorox and you think you’re going to build a community of people who use you know Chlorox products good luck. I think that’s going to be difficult.

(11:23) Interestingly is CXO community, CXOTalk a community I don’t know, it’s certainly utility. It’s certainly some entertainment, but do those people feel affinity for each other? I don’t know.

Michael Krigsman:

(11:35) It’s an interesting question and I’m interested in what people on Twitter think about that, CXOTalk as a community. It certainly serves – is there a distinction between community and affinity, because CXOTalk for example serves a group that has a certain common interests. is there affinity or community among those people, I guess that’s a separate question.

Christopher Michel:   

(12:07) You know there are natural affinities and then there were built affinities. So a natural affinity could be you know women and tech, or University of Illinois alumni or paternity alumni group. So that is basically taking an analog group and creating a digital manifestation for it. Then there are communities that can be built up over time. Those things are usually higher utility in things right, like CPA to biz was an online community for accountants, and they have tools for people to give content.

(12:41) So could you build a community? I think you could build a community but it would be not as straightforward, right, because what are the unique needs for that group. Could it be a discussion board where people could discuss things? Yes potentially.

(12:54) I mean here’s another element, do they want to talk to each other or do they just want to receive content, right. Is CNN a community, well it’s not really a community. They are people who consume the content. Is Twitter a community, I don’t know you know, not really.

Michael Krigsman:

(13:08) Although there are certainly pockets of Twitter that people interact on a regular basis.

Christopher Michel:

(13:15) You’re right. There are valance bonds between people. That’s a very interesting idea which is what’s actually going on on Twitter. If you could graph it you’d probably see that there are individuals that are parts of little communities that communicate with each other.

Michael Krigsman:

(13:34) Yeah Twitter as one person I know describes it, Twitter is you can either use it a mile wide and a millimeter deep, or very narrow or very very deep and I guess it’s when you go dee you actually start to have a sense of community or camaraderie or affinity develop among the participants.

Christopher Michel:   

(13:56) Yeah well you know Twitter is trying to figure it out for themselves.

Michael Krigsman:

(14:00) This is interesting, so you started military dot, what was the year you started it?

Christopher Michel:   

(14:06) 1999

Michael Krigsman:

(14:08) And this problem, this question of affinity groups and communities remains absolutely as relevant today even though the technology has changed. We have a question related to this from Arsalan Khan on Twitter, and he’s coming back to this issue of how would you go about creating and engaging communities for enterprise business solutions, what kind of ideas would you use blogs, how would you go about that? It’s a practical question.

Christopher Michel:   

(14:38) Yeah it’s a practical question. Well first of all I would say that is a hard problem and you know, maybe this is a question for you guys who has done it successfully and why have they done it. You know you didn’t ask me about my communities that I launched and failed, and there are a number that didn’t work. With enterprise solutions, it’s tricky. What do those people have in common, what is it that they need? What is it that they want to talk about? Is sharing Gilbert cartoons. Is it that they want software, is it that they want revues, is it they want white papers, is it they want jobs? You know, does it make your job easier? Do they want to talk to each other? I mean these are the questions that I would ask. But I can’t think off the top of my head about you know, does Slack software help a community of people that are into Slack. Maybe, maybe the people who implement it. Maybe people want to get the most features out of it.

(15:34) You know cameras or Nikon have it easier because you have people there about the passion of the community, and there’s like gear that people like to talk about. So from an enterprise point of view it’s a tough problem. I mean what I would say at a board for an enterprise company is that companies should be careful about investing too much, or they should at least be skeptical that they can actually build these communities effectively. Right, so they should test for a while to see that it’s working before they pour too much money into it.

Michael Krigsman:

(16:03) So essentially the community building test, what some people have said is, and you eluded to this earlier is that it doesn’t make sense to start or very hard let me say to build a community from scratch and I guess that would fall into the category of creating artificial affinity that you mentioned earlier as opposed to looking to where natural affinities that exist. But it seems that any place where there are natural affinities that exist if it’s in the commercial market chances are somebody is already trying. Somebody is trying to do it.

Christopher Michel:   

(16:38) Let’s go back to what I said earlier. So let’s apply the Chis Michael Product Manager test. Is there high utility around the community or is the content highly entertaining. If it is not either of those things you have an up hill battle. So you can apply that to anything right.

Michael Krigsman:

(16:56) Absolutely, I mean one of the things we have been focused on recently at CXOTalk is creating videos that have real practical value. Think you go onto YouTube and you want to learn about lenses, how does a particular lens function or take it apart. I say that because you’re of course a photographer and there may not be any entertainment value but very high utility value.

Christopher Michel:   

(17:22) You’ve nailed YouTube. So the CM task applies to almost all internet products. YouTube to me seems to be either (a) highly entertaining content of people signing songs, doing dances, you know, squirrel suit jumping, or (b) things that teach you things like how to fix your sink or how to do math or you know, whatever it might be, how to play a certain song on the piano or a camera review right. So it’s either utility or entertainment; everything else is kind of wasting people’s time.

Michael Krigsman:

(17:56) So the implications if you are a brand, if you’re a company, you’re a marketer, you don’t see yourself as a marketer. You see yourself as somebody – well, how do you see yourself. You’re not a marketer so how do you see yourself in that way.

Christopher Michel:   

(18:15)  As a photographer I don’t know.

Michael Krigsman:

Well certainly when you were with Military dot com you were part of that affinity froup, that military…

Christopher Michel:

(18:25) Yeah so I guess I saw the internet as a kind of tool, but the mission was well beyond the internet. The mission was to make the lives of military people, veterans, and their families better. And we used a variety of tools and the internet enabled a lot of those.           

(18:41) So this is back to the authenticity, you know if we wanted to as a case study you could pick any product or any brand and we could noodle through is there anything here. What we might find are the ones where there isn’t high entertainment or high utility, and we have to carve something out that is interesting for people that doesn’t sound like it’s wasting their time, it isn’t just PR.

(19:02) You know, part of it might be that we’re listening to people about what can make our products better. That’s a way to engage people right. If you’re really listening – I heard Apple is now going to start to do twitter customer support. They weren’t doing that for a long time. They had no engagement.

(19:17) I think it’s a good idea, I think brands that listen, you know I tweeted something at United Airlines a message right back from those guys, you know, it was the only time I had a positive United Airline experience and it was about my photos. I took a photo from outside the window and they said you know, our birds love when you take photos and I thought that was really clever and nice.

Michael Krigsman:

(19:38) Just speaking of United I have sometimes tried to take photos and they had a flight attendant very clearly told me that that’s not allowed. I guess you have to hit it a good one.

Christopher Michel:

(19:52)  I shot out the window.          

Michael Krigsman:

(19:56) Okay, in a moment let’s look at some of your photos which are just extraordinary. You have these two different parts of your life, one as an entrepreneur and the other as a photographer. But any last final pieces of advice, maybe talk about this notion of authenticity because it seems like it’s central to the whole thing about building a community and getting a community engaged.

Christopher Michel:

(20:24)  Well you know when we think about authenticity I’m going to bring it all the way down to who’s touching the customers. So let’s say the CEO is authentic and they said well we really want a blog or we want a community for whatever it might be for Cannon cameras.

(20:42) You know, who you have running the community is the person that has to be authentic. You know, it probably has to start at the top          , but it’s the person that’s there and if you’ve hired someone for $70,000 a year and they’re just going through the motions, it isn’t going to work even if you’ve got high affinity.

(20:58) We saw at Affinity Labs, we saw that there was huge variability in the quality of the community based on who was leading the community. This was nothing new, but you know I guess the point is you just can’t like you know write a check and hope it happens. So who you find and making sure they really are passionate and engage.

(21:19) I mean think about your show. Who the host of the show is matters a lot right. If you just go and I’m just going to hire somebody to do it, it probably doesn’t work. They might show up every day but. So I would get to that and then ask yourselves the tough questions, am I being for real, am I helping people, and do they like it. If it’s not true then you’re optimizing. I mean we could take the twitter streams of a lot of brands and think they’re not doing themselves any favors.

Michael Krigsman:

(21:45) Am I helping, am I serving this to the utility, both the utility and the entertainment quality that you mentioned a second ago.

Christopher Michel:   

(21:54) You know are you real. Like part of being real is acknowledging you’re not perfect. You know I think that’s one of the big ideas in brands where people go, you know what, we can do one better and we will be better. It’s like when Apple tells me everyone loves their Apple watch, I think Apple is not telling the truth right. That’s inauthentic PR that is damaging them. I want to hear from them, you know what? The watch is really for early adopters. We’re going to do a lot better, and we’re learning a lot.

Michael Krigsman:

(22:24) So authenticity has a lot to do with being honest and acknowledging your flaws.

Christopher Michel:   

(22:33) Yeah.

Michael Krigsman:

(22:34) That’s pretty simple concept and yet it seems to be very…

Christopher Michel:   

(22:41) Well it’s also true with people. You know you see a lot of people that are working very hard to put on a kind of front and not be vulnerable. But vulnerability is one of the most powerful things that humans can show. When you’re vulnerable you talk about your mistakes. People like it and they appreciate and they connect with you. And where you don’t do that people don’t feel connected and they don’t feel that you’re honest and they don’t want to support you.

(23:07) And people who know how to do that effectively really have better lives when they’re being much more effective. I didn’t always do that in my early days at Military dot com. I was a very young CEO and I felt like I had to put a show on and it didn’t work. People didn’t trust me as much and I learned over the years that being real and authentic, and connecting with people and really caring about them really lead to a community of culture and trust.

Michael Krigsman:

(23:31) So when a brand actually cares, a brand is comprised of we think about a brand as being this abstraction. But a brand, especially when it’s interacting with its customers is a group of individuals and so if that group of individuals demonstrates that they care, acknowledges when there’s a screw up of a problem with the brand. But then at the same time the brand has to have policies that give the people working there the flexibility to do that. 

Christopher Michel:   

(24:02) You’re totally right. That’s actually probably one of the biggest issues and this is where it gets hard and you don’t delegate your PR to a lot of people you’re basically going to get the corporate line all the time. Like you’re never going to see a politician say anything, you know or politicians on a Twitter team say anything that doesn’t sound incredibly positive, right. You have to have competence and authority to be able to communicate the truth.

(24:28) I mean I guess some organizations you know, they delegate that a little bit because they have the right people but it’s hard. This is where I would argue for the value or the principle being involved in communications right, unlike Steve Jobs, saying here’s the truth. He didn’t always do that but one thing we knew about Steve was you know whatever quality bar we had, he had an even higher bar and that was part of his genius.

Michael Krigsman:

(24:52) Well he was obviously a rare person because he was able to get the deep sense of the culture and then create product that address those needs, even if we in the masses didn’t know we had those problems.

Christopher Michel:   

(25:08) Yeah it reminds me of a funny video I once saw at a conference and Bill Gates was there and this was near the end of his term as the CEO of Microsoft, but he made a kind of funny video, and you can probably find that on YouTube. It was an Napoleon Dynamite video, where he’s in a dream and wakes up and he and Napoleon Dynamite and they have to go to Napoleons job, and he’s typing in the Microsoft activation card, Bill is typing the Microsoft activation card for a piece of software and couldn’t every get it right. Remember how long, it was like a 40 digit you know and he was like, I can’t enter this. You know I loved that and I think people started to see Bill as a real person. And the company acknowledged that they do some silly things. I don’t know; worked for me.

Michael Krigsman:

(25:50) These are the lesson you learned and I suppose you kind of learnt the hard way because you were figuring it out at the time and there weren’t many examples when you started Military dot com.

Christopher Michel:   

(26:01) Yes, well that was the beauty of Affinity Labs. It was like we figured out the business model and then we scaled it with affinity.

Michael Krigsman:

(26:09) So, speaking about business models tell us about your photography, your photographs are so great. So tell us about why you take photos, what’s on your mind, what’s the common theme

Christopher Michel:   

(26:27) I started Nautilus Ventures after Affinity Labs but instead of doing another company as the CEO I really thought about what it is I really wanted to do in the world, and that’s creating art and having incredible experiences and photography is my e-ticket to the world. So I have gotten to go to a lot of places; to the edge of space, to deep in the sea, to both poles, to the jungles of Papua New Guinea and I’m just back from Congo. I’ve gotten to go to a lot of places and see a lot of things, and meet a lot of people and learned every single day because of my camera and my interest in telling stories.

(27:03) So it is not about the photo’s really it’s mostly about the experience. And really I hope for everyone else out there to think about photography in that way because I think it can be a big part of a lot of people’s lives in a way that’s very additive. And you know the net result is you’re creating art. You’re creating art that may matter and especially when you do portraiture, when I take your photograph and I give you that picture, it’s valuable to day, to you and your family, but it’s only going to get more and more valuable over time. So it’s a kind of alchemy and you know to me maybe it’s a kind of legacy.

Michael Krigsman:

(27:40) Okay, let’s look at some photos, how that. okay, so I hope everybody can see obviously that is the top of the Golden Gate Bridge in San Francisco. How does one get to the top of the  Golden Gate Bridge in San Francisco to take a photo. Was it scary?

Christopher Michel:   

(29:08) …great engineers, builders and designers.

Michael Krigsman:

(29:13) And you had to hold onto the camera so it didn’t fall? Okay, so pretty tightly. So let’s look at the next one, so where was this and what’s the story of this. It looks kind of the archetypical dessert island in the middle of the Pacific.

Christopher Michel:   

(30:08)…On his G500 Gulfstream and we flew from Teterboro New Jersey to our first stop which was the outer Marshall Islands at a place called Majuro and this is one of the little island groups as we went by to go deep sea fishing so it was a really cool experience. Although I will say this is the kind of place that I remember from Gilligan’s Island that I always wanted to live on. But in practical terms you might not actually want to live on the islands.

Michael Krigsman:

(30:38) Well it certainly is beautiful and we have coming up, what is this?

(30:54) Well this is another one of clouds and it’s clearly the water with layers of clouds.

Christopher Michel:

(30:59) Yeah, so this is the opposite side of the world, so this is I just recently came back from an outside magazine shoot at the North Pole and I left Murmansk in the only surface vessel that’s capable of reaching the North Pole which is the 50 years of victory nuclear Russian icebreaker and we were passing through Franz Josef Land on the way to the Pole and you know, this is like 8i degrees North and you see lenticular clouds there and a very beautiful place.

Michael Krigsman:

(31:33) Pretty wild, you have a lot of cameras, does the camera matter?

Christopher Michel:

(31:48) Well I’ve an unusual answer. I would say no and yes. So no it doesn’t matter in the sense that I’ve seen incredible iPhone pictures. Some people say the best camera is the one you have with you. I’ve seen point and shoots do amazing amazing work, but what people often notice is unusual pictures and these are either wide-angled pictures or animal photographs, or night photography and a lot of those require specialized equipment. I’m looking right now at a church photograph from Iceland that was taken with a wide-angled camera. Or probably a wide-angled lens, it’s probably a 16mm lens on a Nikon.

(32:31) So I guess it matters in that way. I oftentimes shoot vary narrow depth of field portrait photos and those require very special lens; a 50mm F.95 lens. So what you often find is that people with good cameras carry them around a lot more. And people that carry their camera with them take a lot of photographs produce good work. People who do not do that do not get the picture. Sometimes they’re lucky.

(32:59) And I’ll say there’s one other cost to all of you out there that think your iPhone pictures are great. They maybe great but oftentimes because they’re so cheap, meaning you can take them anytime and you just keep them on your phone, I think they have a real risk of being lost over time. And they don’t get synced and they don’t get saved, and they don’t get printed and they don’t get post-processed. So I’m a big fan of being very intentional about your photos.

(33:20) This was taken with the Leica, I think it was the 50mm F .95 at Ocean Beach. So you can see the very narrow depth of field in the picture. So this one is Sarah is in focus and everything behind her at sunset is blurred.

Michael Krigsman:

(33:37) So at the end of the day it’s not about the equipment, but you may need special equipment, special camera lens in order to take certain types of photos.

Christopher Michel:

(33:46) Yes, so I guess I would say it’s primarily about the intentionality of taking photos. So if you have that intentionality and you’re committed to doing it you will get good photos and it doesn’t matter what equipment you use. Some equipment’s better than others and some equipment if you’re going to go to Africa and you’re using a point and shoot it isn’t going to work. You might say well you get a couple of good pictures, but if the animals are far away it will be difficult.

(34:11) This photo that I’m looking at is one of my favorite places on earth, it’s Torres del Paine National Park in Chili Patagonia.

Michael Krigsman:

(34:21) Pretty amazing. Now are penguins as friendly and as cute as they look.

Christopher Michel:

(34:34)  In a word yes. I love penguins. I’ve taken a lot of photos and this is probably one of my most famous photos. It was on the front page of National Geographic’s website a year ago. This was taken on my trip to the South Pole in a place called Gould Bay and I had to work hard for this photo. I was lying down at this kind of opening on the ice and the penguins are quite happy, they march; we’ve all seen marching penguins. They march 70 miles back and forth. Well if there’s a lead opening up in the ice they can get food. So I was very very close to this penguin, shot with a wide-angled lens, so I was like two feet away or a foot away and he was quite surprised to see me or she was quite surprised.

(35:20) And you know when I approached this colony for the first time five penguins came right up to me and just circled me about two feet away and were just fascinated. On my last day with these penguins, two of the penguins walked two miles with me back to camp. Just followed me all the way, and when I stopped they’d stop and where I went they would go. They’re curious interested people and don’t have a lot of land predators so maybe only the leopard seal, so they are interested and they are so cute.

Michael Krigsman:

(35:48) And you said they’re curious interested people, did they feel like people to you?

Christopher Michel:   

(35:54) The fact that I said that is a kind of morphication of these of these creatures but that’s why we love them because they’re kind of ridiculous, sweet, cute looking humans. I mean the waddle around; they’re birds but they don’t act like normal birds. They act like curious little creatures.

Michael Krigsman:

(36:14) Extraordinary, so this one.

Christopher Michel:   

(36:16) So this is actually related to the previous photograph, so to go to the South Pole is tricky unless you’re going with the government. So there’s a company called A&I that takes people down there, so this is an IL76 Russian military aircraft, designed for landing on the tundra and I used it to fly from Punta Arenas to Union Glazier icecap; a tent cap. And it’s just landed on the ice; there’s no runway there just a blue ice runway, and we’re going to disembark here and go to our tents and I’m going to get in some Kenn Borek twin otters to fly to the penguins on the South Pole.

Michael Krigsman:

(36:56) So you mentioned earlier that when you were at the North Pole that you were on I think you said a Russian icebreaker, and this is a Russian plane that’s designed for landing on ice. Is there something about the Russians that they’re really into this type of exploration or is it just coincidence?

Christopher Michel:   

(37:13) Well I don’t know this but it appears to me is the Russians will sell access to things. So the Russian nuclear icebreaker is a working icebreaker. You know its run by Atomflot which is sort of associated with the Russian government. As we know Soyuz will sell you a seat on a mission to space. The US government does not do that. You cannot buy your way aboard a US Navy warship. So I think there is a little something about their equipment being available and oftentimes it takes military like equipment to go to these extreme places.

Michael Krigsman:

(37:50) Okay, for our next photo which is coming up, obviously a very different kind of place from the cold to what I imagine is pretty darn warm. Zebras.

Christopher Michel:   

(38:04) Yeah zebras. This is in Kenya, the Maasai Mara, the lands of the Maasai and it was just a beautiful late afternoon and these three zebra were just walking. You can see the lone tree in the distance. And I really like it, the sort of color and contrast here and the camaraderie; the three musketeers.

Michael Krigsman:

(38:29) I also like the way that you kind of over exposed it a little bit it just gives it a beautiful feeling

Christopher Michel:   

(38:39) Its kind of ethereal. It almost seems not quite real.

Michael Krigsman:

(38:44) Now I imagine that you were pretty up close with this gorilla or maybe you were using a telephoto lens, but I imagine the gorilla experience is a little bit different from the penguin experience.

Christopher Michel:   

(38:56) So I just took this photo. This was taken about four weeks ago, and I was on assignment with the American refugee committee, the IOD dot org, shooting hospitals and water facilities in the Democratic Republic of Congo, which as you probably know is a very dicey place, and it was quite remarkable and interesting, and scary and wonderful experience.

(39:21) One of those days I left kind of that work and went hiking in the jungle with a guide and we went to see the Lowland Eastern gorillas which are the largest in the world. So it was about a two hour hike and it was me and a friend and these three guides with machetes cutting their way through the jungle and we got right up to this guy. So I would say we’re six-seven feet from him and we got closer because he came right up close to us.

Michael Krigsman:

(39:54) And we have another photo of a gorilla which is so interesting because it looks like he’s looking directly at you.

Christopher Michel:   

(40:13) So this is the baby. So the baby is a little further. The baby’s maybe 15 feet and I can’t tell you if it’s a he or a she but she’s prey cute.

Michael Krigsman:

(40:24) And speaking of pretty cute, some of these portraits are just so breathtakingly lovely, like I just love this one. I’m not sure if it’s a boy or a girl with a pot over his or her head.

Christopher Michel:

(40:45) Nobody listening would know this, but you just pick these photos from like a big set of photos so you know I’m pleased that you picked this one. So you know there’s like 20 years of photographs. Interestingly enough you’ve been picking photographs of recent trips which makes me feel like I’ve been doing better work so thank you. This was just taken and taken interestingly enough coming back from the gorillas, so you picked it randomly as we were coming back through this little village it started raining. Actually start raining when we were with the gorillas and so we were caught in a downpour with all my camera equipment. And as we were coming back I saw this little kid using a it looks like a pan or something as a kind of umbrella.

Michael Krigsman:

(41:34) Just cute beyond cut and when you take photos of kid or take photos of adult portraits how do you go about doing it., because a lot of people will be shy to go and ask and obviously you’re not doing it behind these people’s backs. They’re looking right at you very close.

Christopher Michel:   

(41:51) Yeah so you know you can put photos into a couple of categories. So one photo category would be people know that I’m taking a photo of them right, so in these two shots people know that I’m taking their photo they don’t know. So this is like general street photography or landscape or whatever it might be where if there is humans in the photo that they don’t know the the photo is being taken.

(42:14) And there’s a place for both but I shoot a lot of very narrow sort of depth of field photography, which means the focus has to be really perfect and up close to the subject. So in those cases I go up to people, they see the camera I smile at them and if they don’t want their photo taken they’re often communicating that they don’t want their photo taken. But sometimes you don’t know what they’re thinking and I take the photo and I show them the photo. So in this case this boy knows because he’s seen some of the photos that I’ve taken of them and he wants to get his photo taken more. So that experience is very common where there’s some in trepidation, they see their photo they get into it and they’re really into it and want more photos.

Michael Krigsman:

(42:52) And so there’s a communication that even that’s it’s not verbal there’s a communication that’s taking place between you and the person that you’re photographing.

Christopher Michel:   

(43:01) Absolutely, so do these people know that they are getting their photo taken? I don’t know that they do. They probably will know shortly because I think they turned around, but I just thought it was a really cute moment.

Michael Krigsman:

(43:13) It’s a totally cute photo.

Christopher Michel:   

(43:15) Again this is a Congo photo. This was taken in one of the villages in DRC.

Michael Krigsman:

(43:25) And now we have somebody that is older in maybe India or you tell us, where was this one taken.

Christopher Michel:   

(43::31) This is in Rajasthan and one of my favorite things to do is just go with my camera into little villages, and I’m just wandering the streets and I see this woman sitting inside of her home and I go up to the doorway and wave, and smile and she smiles and she’s okay with having her photo taken so I just take the picture. I step into her home and take the photograph and then show her the photo, and she’d probably be surprised that we’re taking about her right now on the internet.

Michael Krigsman:

(44:01) And this one is another woman and yet obviously a completely different environment and I thought the contrast between the two is pretty extraordinary.

Christopher Michel:   

(44:10) This is pretty unusual so I don’t do this very often. This is a photoshoot. So this was styles, we had a set person work on it and we had a creative person come up with the idea and it was taken in my living room.

Michael Krigsman:

(44:29) Another one that is completely different environment, maybe Viet Nam or Cambodia or Thailand, so tell us about this one.

Christopher Michel:   

(44:42) Yeah I love this photograph. So this was taken in Yangon on Myanmar, and I just arrived so this is the old Rangoon. And I’m walking through the old city and it’s raining and it’s like midnight and I was there with a friend of mine, and she’s like let’s go back it’s so late. And I’m like no this in incredible. And what I love about this photograph, not just the lighting but it’s the juxtapositions. There’s old Myanmar, old Burma, you know these people cooking and selling food on the street and then in the background you can see a BMW. And this is what I’m seeing all over the world is this old and new are meeting right in the cities, and we know who’s going to win sadly there.

Michael Krigsman:

(45:25) Yes and here we come back to the most outrageous selfie in the world, you up at the edge of space and you spoke about that briefly earlier, but we also have some kind of behind the scenes looks, behind the scene photos. For example these look like two fighter pilots I suppose.

       

Christopher Michel:   

(45:58) I was there for a week doing training, maybe five days doing training and one of the things during training was take photographs of U2 pilots and these were two guys flying in the U2, just come back from a flight and I call it the hero shot. Captain Toll is the guy on the left and it’s a General on the right and they’re standing in front of a U2 at base operations.

(46:30) So one of my favorite things about my U2 experience is it’s really a kind of an Apollo space experience; it’s the same kind of people, it’s the same spacesuits. They have me on barker lounger; you have to like eat low residue food, you eat and drink stuff through a tube and you can kind of see me drinking kind of a Gatorade as they’re preparing me for launch.

Michael Krigsman:

(46:51) And something tells me that this next one that it looks like you’re in a lazy boy recliner, something tells me that there’s something else going on here than relaxing watching TV.

Christopher Michel:

(47:02) Yeah, so there are only a few places in the world like this. You know it’s probably like Cape Canaveral at here. I’ve been to Russia and seen where the Soyuz launch and it’s not quite like this but may be similar. So it’s a multi-hour process to get ready. It’s very exhausting. It’s hot in the spacesuit.

(47:22) So basically what you see is this is a kind of dressing chair and they dress me. I’m now sealed up. I’ve out gassed all of my nitrogen. You have to do a thing when you’re breathing oxygen on a treadmill. They have me hooked up to a coolant air system. So I would suffocate if I was not hooked into an air coolant system, and so that’s kind of like what’s going on there.

I see another photo there taken and this is me walking down the street seeing a VW bus.

Michael Krigsman:

(47:51) And the thing is with your portraits, the common thread that I see is there is this warmth. I mean you look at and they’re very very very good natured photos. I think oftentimes you see photos that people take and they’re in expression and the photo is the expression of who that person is if it’s art, and these are so good natured, all of your photos.

Christopher Michel:

(48:14) Yeah I mean part of it is people re reflecting. So I’m smiling and I just think this is a delightful moment. And you know when your smiling it’s a delightful moment and this guy is like he knows he’s cool and he’s driving around in an awesome VW bus with a canoe, and we have a kind of moment where we both acknowledge each other. And I never spoke to him. He doesn’t know anything about this photo other than he knows that some guy took his picture. Do you know who this is?

Michael Krigsman:

(48:43) Well of course Om Malik.

Christopher Michel:   

(48:45) Yes it’s Om a good friend of mine. I’ve taken many many many photos of this famous writer and capitalists and friends.

Michael Krigsman:

(48:54) There’s a question from Constance Woods on Twitter. Do you have opinions or thoughts on Periscope, livestreaming video apps and that kind of thing.

Christopher Michel:   

(49:05) Well it’s interesting, Meerkat and Periscope I don’t use it and every time I try to watch one of those things I’ve always missed it. I’m not you know following real-time on Twitter. so I don’t know if that much people are into it I guess.

(49:23) I like asynchronous content consumption a little bit more unless there’s breaking news. You know there’s lots of other services if you mean like Instagram, those things are pretty cool. Photos on Twitter are pretty cool especially when there’s something going on in the world and you want the content. You know I was sadly around during an explosion of a balloon that blew up right near me in Luxor Egypt, killing 20 people. I tweeted it with a photo and it got global quickly. And you know that’s the exciting thing about that technology is you know we no longer turn to the news to see what’s happening in the world because some citizen or journalist is covering it.

Michael Krigsman:

(50:08) So this next one.

Christopher Michel:   

(50:10) So this was me walking in the Mission in san Francisco and I see these people walking and they’re dressed a bit unusual but maybe not for San Francisco, a bit steampunk and they were going to a wedding. And there’s a picture and I don’t know if you have it but is kind of a robust woman and her fiancé that’s part of the wedding party that’s the other shot in this set.

Michael Krigsman:

(50:37) I did see it, it was pretty interesting, and so another one, a gentleman with handlebar moustache.

Christopher Michel:

(50:46) I’m glad you picked this. I didn’t know you were going to pick this. So this photo has an interesting story. So I was at Bluebottle where I spend a lot of time and so I see this guy, so you know I’m a portrait photographer and when I see interesting people I feel compelled to take their photograph, even although it’s difficult. And I said to him do you mind if I take your picture and he said no. and you can see he’s delighted and we have this great shoot. This photo was taken I don’t know, seven years ago.

(51:16) Two years ago, somebody was looking at this photo and they say, do you know who that is? And I’ll ask you Michael, do you know who that is?

Michael Krigsman:

(51:25) You know I saw you put it on Facebook or something, but I forget his name but a major bicycle builder.

Christopher Michel:

(51:32) Yeah, so it turns out its Garry Fisher, who is one of the founders of mountain biking, but that’s the interesting thing about taking photographs is that you don’t always know who you’re taking photos of. Sometimes it’s a celebrity and you wouldn’t even know. Infact I’ve had that experience when taking photographs of people and they’ve turned out to be as you can see here well-known people. But I’m the last person that would recognize celebrities. 

(51:56) This guy, I don’t know anything about him, he’s just a compatriot as one of my many compatriot portraits.

Michael Krigsman:

(52:03) So when you come across people that are interesting looking, you stop and ask can I take your photo or how.

Christopher Michel:

(52:10) Well I think it’s quite likely that he doesn’t know that I’ve taken his photo

Michael Krigsman:

(52:13) In that case.

Christopher Michel:

(52:14) I don’t know that he doesn’t. This was taken a long time ago. Do you know who this is?

Michael Krigsman:

(52:20) Stan Charnofsky.

Christopher Michel:   

(52:21) Well done. So this is my good friend Stan, who is one of the driving forces behind Facebook messenger and probably the best engineer, growth hacker in technology and one of my closest and dearest friends.

Michael Krigsman:

(52:37) And of course we all know who this is, but tell us the story of how you got in position to take a photo of the Dalai Lama.

Christopher Michel:

(52:51) So remember I said that photography is the e-ticket ride. You know, you take a lot of pictures and people know you as a photographer and maybe trust you, and a guy who runs the Dalai Lama center for ethics at MIT is a monk, Tenzin. Tenzin asked me, he said Chris, you know his holiness is coming to MIT for three days would you be his holiness’s photographer. And I got to do that, so I spent three days intimately connected to the Dalai Lama and it was a very very interesting experience.

Michael Krigsman:

(53:31) What are your strongest memories or sensations about that experience in being so close to the Dalia Lama for several days.

Christopher Michel:

(53:41) Well I’d say that there’s two categories and one is I’ve always been a fan of his holiness, but sometimes you’re a little worried about meeting super celebrities because maybe they’ll disappoint you, you know if you have such a high set of expectations, like a movie or anything else and maybe he would turn out to be not as authentic and not as nice. Some super celebrities are like that right, they don’t have time for people.

(54:03) And it turned out that that was unfounded worry. I observed him off the record all the time. I saw him in places where no other one is near him, and he is as gentle and as kind, and is interesting, and is thoughtful and treats everyone from the housecleaner to Sting in the same way and I saw all all of that and he is really a wonderful person. the other category is you know I’m kind of Buddhist and I’m kind of Buddhist because my experience with the Dalia Lama and it isn’t because I’m particularly religious but it’s that he espouses Buddhism as a secular ethics as an approach or technology for living your life and being happier. And you know there’s a reason he spends a lot of time with his disciples because he really couples science, and theology and philosophy in a way that I find very compelling.

           

Michael Krigsman:

(54:57) And this final photo I just thought was kind of a cute photo of the Dalai Lama wearing an MIT hat.

Christopher Michel:   

(55:06) Well you know he’s a funny guy and you know humor is a big part of everything that he does. He meets leaders, he touches them, he tickles them, he laughs, and he’s having a good time. You know, to me there is something really to be learned here, which is you could be famous and be well-known and be involved in serious things. And he’s involved in incredibly serious things. Look at all the things happening in Tibet. Many people look up to him, but he’s still having fun, he’s still smiling, he has joy in his life and it’s a lesson for me and for many of us.

Michael Krigsman:

(55:39) Well speaking of interesting experiences, this has certainly been an very interesting experience from me, and we’ve had a lot of people watching and so I just want to say thank you Chris for taking the time today.

Christopher Michel:   

(55:54)  It’s my pleasure. It’s an honor to be here.

Michael Krigsman:

(55:57) We have been speaking with Christopher Michel, who is an entrepreneur, investor, and he’s a photographer. And you know, those are attributes, and mostly he’s just a really good guy. A really nice guy, and you have been watching episode number 159 of CXOTalk. Chris, thanks again for taking the time today for speaking with us.

Christopher Michel:   

(56:25) Thank you.

Michael Krigsman:

(56:27) Next week we are going to be talking with Aneel Bhusri, who is the CEO of Workday a hot company these days so please come back next Friday and again thank you to Chris Michel and especially thank you to everybody who joined us today. Take care everybody, bye bye.

Companies mentioned in today’s show

Affinity Labs                            www.affinitylabs.com

Apple:                                      www.apple.com

Clorox                                      www.clorox.com

Dalai Lama Center for Ethics http://thecenter.mit.edu/

Facebook                                 www.facebook.com  

Instagram                                www.instagram.com

LinkedIn                                   www.linkedin.com

Militery.com                           www.military.com

Monster                                  www.monster.com

National Geographic               www.nationalgeographic.com

Nautilus Ventures                   www.nautilusventures.com

Slack                                        https://slack.com

Twitter                                    www.twitter.com

 

Christopher Michel:

                                    www.christophermichel.com

                                    https://about.me/cmichel

                                    https://angel.co/cmichel

Twitter                        https://twitter.com/chrismichel

LinkedIn                       www.linkedin.com/in/michelchristopher

YouTube                      www.youtube.com/user/cmichel1

In Search of the Mythical VP Sales & Marketing

Bruce Cleveland, General Partner, InterWest
Bruce Cleveland
General Partner
InterWest

I have to admit to harboring an extreme prejudice.

It rears its ugly head when a startup CEO comes into our office to take us through their business, introduces the management team and describes one of the executives as the “VP Sales & Marketing”.

At that point, I stop listening and start thinking about how I can end the meeting on a professional note. Like the mythical Unicorn, I don’t believe in the mythical VP Sales & Marketing. Actually, I am more likely to believe in Unicorns than a VP Sales & Marketing.

Why? Simple. Sales and Marketing are vastly different functions that require substantially different personalities, skills, and decades of experience to master. In my 30 years of operating experience, I have found very few people – I mean less than a handful – who are experts at both functions. And, for that rare individual, in my experience I do not believe it is possible to head up both functions simultaneously.

A CEO who doesn’t understand this basic fact, or doesn’t believe it, is not a CEO I want to invest in. Here is why.

Someone who is head of Sales must have an in-depth understanding of current key deals in the sales pipeline, a deep sense of the probability of whether those deals will close, and what it will take for them to close. This is a 1:1, short-term focus game and success is predicated upon a career of working closely with buyers. In many cases, it also requires someone to travel and meet with prospects to gauge for themselves whether or not a deal is really a deal. It is the realm of oral communicators.

The head of Marketing, on the other hand, must develop and maintain an in-depth understanding of the overall market and the company’s brand in that market. To do this, he/she must constantly work with industry analysts, the media, execute trade shows, keynotes, and the web. Perhaps even more importantly, today’s head of Marketing must be an excellent demand creator (the “owner” of future revenue) through sales-ready leads.

Marketers must know how to generate those sale-ready leads for the lowest acquisition cost and ultimately nurture any sales-ready leads that fall out of the sales pipeline. This is a 1:many game and requires constant refinement through analyzing campaign, market and customer data. It requires continuous meetings with internal staff including the CEO, Product Marketing, Sales, etc. It is the realm of verbal/written communicators.

A CEO who has combined the Sales and Marketing functions, indirectly but undeniably, telegraphs me that he/she does not truly understand the diverse nature of these positions and the fact that it is impossible to execute both functions simultaneously with excellence. In most instances, I have found that the CEO who makes this serious mistake hasn’t worked with someone who is an excellent Marketer and therefore discounts the role it plays.

So, if you ever come and present to me and think you are going to show me a “real” VP Sales & Marketing,  don’t be surprised when I look at you as though you’re trying to convince me there are Unicorns and excuse myself early from the meeting.

This originally appeared on Bruce Cleveland's Rolling Thunder

Do Venture Capitalists Suck?

Bruce Cleveland, General Partner, InterWest
Bruce Cleveland
General Partner
InterWest

Dave McClure, formerly with PayPal now at 500StartUps, posted a great article this past week he titled, “Scaling Venture Capital. We suck. We can do better.” I encourage you to read it.

Dave makes two points. The first point is that most venture capitalists are hypocrites. They expect entrepreneurs to build large, global companies while they as venture capitalists have never personally held an operational role nor built and scaled a large, global successful company.

I think it is this issue that tends to cause a lot of friction between entrepreneurs and venture capitalists and it is this point I am going to focus on here.

Whether they admit it publicly, most entrepreneurs look at VCs as a necessary evil — the VCs have the money entrepreneurs need to launch their business and in order to get it, entrepreneurs are obliged to put up with someone who is going to meddle with their business – or even take it away from them.

A classic example of how this “meddling” manifests itself is when the company is hiring its executive team. As part of this process, most venture capitalists want to meet with and interview the candidates – many of these same venture capitalists have never held an operational role or maybe they have held an operational role but they were only an individual contributor.

We VCs expect the VPs of our portfolio companies to have years of experience and to demonstrate significant expertise in their field. Yet, we don’t apply the same criteria for ourselves. Do we really think we have learned enough about an executive operational position sitting in board meetings to actually “interview” candidates — as if we have the domain expertise to hold and perform their job?

Should we meet the candidates and sell them on why we invested in the company and why they should join? Yes, absolutely! Interview them for their operational expertise? Sorry, but for most of us, I would say we aren’t qualified and if we had any sense we would willingly turn that job over to other people who are experts in that role; people who we trust to do the interview on our behalf.

When I first decided to flip from the operating side to the investing side, I thought that my operating background would give me an advantage as an investor.

After all, I had run engineering, products, marketing, sales, alliances and finance functions in companies that ranged from pre revenue to $2B+. And, over the course of my operational career I had been an individual contributor, manager, director and senior executive working for some of the most successful entrepreneurs and companies in Silicon Valley – Apple, Oracle and Siebel.

However, I have found that while my prior operational  experience has been useful at various times and some entrepreneurs have even “valued” my input, I have also made the mistake of making some of our best portfolio CEOs angry with me by “offering” unwanted, unwelcome and/or irrelevant advice – what I have come to call practicing “drive by” management.

If a venture capitalist is to be of much operational value to an entrepreneur, I think we should have personally held or managed a variety of different operating roles — engineering, products, marketing, sales – in a variety of different stage companies. We need to have been an individual contributor, a manager and a senior executive to really understand what it took to make those companies successful.

Each phase/stage of a company requires a different set of skills.

If the only operational roles we have held were in large established companies, we have no personal experience with what those companies faced when there were only a few people in them. If we were an individual contributor inside a start up that became a big success, we may not have been privy to many of the issues the senior executive team faced in the early days.

If we have years of experience on the operating side in a variety of roles, we need to be willing to adapt and throw everything we know out the window because the things we experienced “way back then” are different than the things that are going on now (e.g. social media, mobile, etc.). Different time and different place. We have to be open to and want to continuously learn.

Finally, even if you have all of these “requisite” operational skills and background, the one thing I have found consistent across start ups is that the best teams really don’t want your operational advice – or at least they only want it when they ask for it — not when you may think they need it. They have their own point of view on what needs to get done and, quite frankly, they are in a much better position than their investors to understand the issues in front of them.

I personally know many venture capitalists who have made fantastic investments in superb entrepreneurs yet have never held an operational role. And, the fact they haven’t held operational positions doesn’t mean they aren’t highly sought after by enterpreneurs.

These investors have built great “personal brands” due to their uncanny ability to spot companies and teams that become winners- if an entrepreneur can can get them to invest in their company it carries social status among their peers. Everyone wants to be associated with great brands, personal or otherwise. Not all the great investors may have operational expertise but they seem to find a way to identify those who do – or can learn – and they then apply a light touch when it comes to the actual management of the company.

I agree with Dave McClure, as an industry, the venture capital community should strive to do better. I think we should have more investors who started out on the operational side and built large, global and successful companies — at least we will then have the credibility and experience to provide guidance – when asked.

However, once we’ve made an investment, I have come to learn that it is important we are prepared to get out of the way and let the team we bet on call the shots – this has been one of the more difficult elements of my transformation. After all, great operational executives lead…they don’t follow…at least not for long.

I think I meet Dave’s test for operational expertise but even with all that background, I know I am definitely still learning how to be a good venture capitalist.

This originally appeared on Bruce Cleveland's Rolling Thunder

The Missing SaaS Metric – Customer Retention Cost

Bruce Cleveland, General Partner, InterWest
Bruce Cleveland
General Partner
InterWest

A few months ago, on a quiet Sunday, I was reading through some of my board decks getting prepared for the upcoming board meetings.

A common theme among all of those decks was a section on churn and the impact it was having – both positively and negatively – on my portfolio companies. Some of those companies, fortunately, are experiencing negative churn as their customers increase the footprint of the portfolio company’s technology.

I got to thinking about this issue.

We have a significant number of metrics we use to measure top of the funnel health for our companies that use a SaaS business model – Customer Acquisition Cost Ratio (CAC Ratio), Customer Lifetime Value, Churn, etc. These are tried, tested and proven metrics management teams and investors use to evaluate how well a company with a recurring revenue model is performing.

However, with churn  a critical component of the SaaS model, I asked myself, “Why don’t we have a common metric to measure the health of the bottom of the funnel?”

Key questions are:

  • Shouldn’t we know how much we are spending to retain a customer?
  • At what point should we “fire” a customer?
  • Should that point vary by industry or type of customer?
  • When should we parachute in our “customer success” teams?

It seemed to me that if we have a Customer Acquisition Cost metric, shouldn’t we have a Customer Retention Cost (CRC) metric and what would be the elements we would use to measure the CRC and CRC ratio?

So, I put together a bunch of thoughts on what should go into the calculation of such a metric and sent that over to one of our portfolio companies – Totango.

Totango provides a customer success platform. Software companies and others use their platform to determine whether or not a customer is deriving value from a software product. This enables customer success teams to “parachute in” and help a customer derive value from the vendor’s software product and mitigate a key issue associated with churn.

Given they are “in the business of reducing churn”, it seemed to me only natural that they take my initial concepts, flesh them out,  and launch the CRC  and CRC Ratio metrics into the industry as a whole.

I am happy to report they have done that with a fantastic white paper on the subject. I would encourage anyone dealing with churn/retention, to read this paper and add to the conversation.

The CRC and CRC Ratio are not metrics to be owned by any one individual or company. They need to be owned by the industry and your contributions are welcome.

This originally appeared on Bruce Cleveland's Rolling Thunder