Episode 2: Smart Bear Live!

It’s “Loveline for startups,” if you like those kinds of phrases. Introduced a month ago as an event in Austin, this time we moved this live audio advice column to the web, taking phone calls from startups around the country.

My co-hosts were Bob Walsh and Patrick Foley, hosts of the well-known Startup Success Podcast. It was awesome having podcasting experts on board, especially Patrick who was on-site with me at Cospace in Austin, interrupting a vacation with his family to drag over $1000 worth of audio equipment to make sure we got a high-quality recording.

You can listen by subscribing to my podcast on iTunes, or it’s enclosed in this blog’s RSS feed, or you can just download the mp3.

Why listen? Especially if you don’t normally listen to podcasts? Because then you’d miss out on:

  • Whether it makes sense to give away a product to consumers as a sales path to a paid professional/enterprise product.
  • Why even if someone gave you money for your platform, you still might not have a business model.
  • How changing your tagline completely transforms how someone perceives your company, and therefore whether they might be interested in your product.
  • What a hardware company needs to do in the next three months in order to raise a Series A.
  • Three specific things a small company should do to make a newsletter effective (or possibly not waste time with one at all).

Here are the companies who called in:

Plus, if you have feedback and advice for the companies on the call, or feedback for me about the show itself, please leave a note in the comments!


Transcription services provided by:
Speechpad – Transcription Services

Patrick: Welcome everyone to Smart Bear Live. We have Jason Cohen on the phone.

Jason: Yeah. In fact, in person, right next to Patrick. Welcome to the second edition of Smart Bear Live. The first one we did live in front of 70 people. This time we’re doing a call-in show, which is kind of how I want it to be anyway, reach more people. Thanks for dialing in.

The co-hosts today are Patrick Foley and Bob Walsh who run the start up success podcast and Bob blogs over at 47 Hats. A lot of you know him from there, what’s the name of your blog, Patrick?

Patrick: Patrickfoley.com.

Jason: See, that’s easy. Patrick’s got all of those crazy, ganglia, audio equipment here, which is awesome, I feel kind of pampered and spoiled, it’s pretty neat. He’s also going to be manning the chat client there on the dial-in and organizing who asks the questions, which I have not seen yet neither has Bob, for the most part. I think we should just dive in. You can visit at our various sites if you don’t know who anybody is and we should just get started. This is by the way, like love line for start ups if you haven’t seen us before.

Patrick: Nice. All right. We’re going to start today with Matt Bradley an East Texas, boy, how ya doing today Matt?

Matt: All right, how about y’all?

Patrick: Cool.

Jason: So, Matt, what’s the name of your company, just the name of the company?

Matt: Vignature.

Jason: Vignature. Yes, well if I had to guess what that was, Vignature, it sounds like a signature, so maybe it’s an identifying thing of some kind. Vig, vig, video, video signature?

Matt: Exactly.

Jason: You weren’t supposed to tell me, good we can stop. It’s video signature, what does that mean? Tell me what that means?

Matt: OK. What we provide is basically an image based electronic signature so you have irrefutable proof of the signer.

Jason: OK.

Matt: When you sign a document you can either sign it with your mobile phone using your webcam or using your webcam it takes an image of you as a signer as you click to sign.

Jason: That’s really nice, in fact it’s better than a signature sometimes if you have their face. That sounds great. So what’s your question today?

Matt: We have a consumer product and a business focus product. They both use the photographic, use the camera technology to take a photo of the signer in real time. The consumer product is a subset as far as the infrastructure it utilizes of the business product, but we view it as a, and we also don’t plan on making much revenue . . .

Jason: Let me interrupt you for a second, what’s the question first?

Matt: OK. The question is should we even consider marketing and selling the consumer product when we primarily want to get revenue from the business product?

Jason: Why would you? If you want to get revenue from the business side, why would you not just focus on getting revenue?

Matt: Because the consumer product is a subset technically of our business product so it doesn’t require anymore effort on the technology side, but it obviously requires a different marketing approach than the business side.

Jason: Wait a minute. Usually you spend marketing dollars so you can make money. On the business side, obviously you can do that. Let’s assume that technical challenges for the consumer side is zero, like you said it’s a subset. But building the company manning the technical side is usually not even the problem anyway even if you haven’t built this yet, right?

Matt: Yeah.

Jason: So, you’re going to spend marketing dollars to get to people who are not going to give you money. Tell me why that’s a good idea?

Matt: Because we actually also view it as a marketing expense because the consumer traffic will drive interest in our business product.

Jason: You have a consumer product today or you don’t?

Matt: Yes, we do and people actually love it. You can download it on the iPhone or Android app and we’ve already seen interest in a specific business verticals for consumers who have used the app to sign documents and send them back to businesses.

Jason: So how many of those people who are using the consumer version today, how many to date, have actually moved up and bought the product, because they moved then to the professional edition?

Matt: Zero because we haven’t currently started selling the business product yet.

Jason: So how do you know that you can make money on the business product?

Matt: Because we’ve talked to businesses they’re willing to use it. We already have businesses using it we can’t, from our MVP strategy, we don’t even have a way to charge for the product yet.

Jason: OK. My feeling is that if it’s that valuable, then someone should pay for this. This is a really obvious app to pay for. So how does it work. They’re going to pay $5.00 in the app store? They have to have an account with you? What’s your concept of how they’re going to give you money?

Matt: On the consumer side it’s free and the application on the phone is always free but on the business side through our back-end as far as the features we’re adding the portal to support storing the documents and accessing the documents in the future, that’s what we’re charging for, it’s a monthly subscription fee.

Jason: OK. So the consumer’s don’t need to keep track of their signed documents, so they don’t want to use it or what?

Matt: They’re not right now, exactly. If they did, they would have to upgrade to the premium model.

Jason: This doesn’t really sound like consumer and business to me, actually. It just sort of sounds like, there’s a lot of people who need to sign documents, probably everybody.

Matt: Yes.

Jason: Most people who would even think that they need to take a picture and get some kind of proof of it, that’s not a normal consumer. Normally you just sign it and there’s already apps, by the way, where you can just digitally sign it or drag your finger around the screen, that all exists. And actually a lot of those are free or it’s a one time app purchase. I’m not saying you can’t compete against them, I’ve seen that already, so what. So you have this more interesting back end way to make money, but the average person definitely does not need this, right? I mean most people do not think about this.

Matt: That’s one of the reasons why I’m calling. Originally we basically developed the technology because of the fact that it’s an irrefutable signature and there’s potential and there’s a lot of interest in government sectors, financial sectors, insurance sector, but it turns out that the mobile application was so easy to use, it’s actually easier than the scripted signature methods on the capacitive touch screen, because all you do is tap and it takes your picture.

Jason: Right.

Matt: Because of that and because it was so easy, and the uptake was so easy, we just said ‘Why not?’, because once again it’s a subset and then when a business gets a document signed by one of these individuals, they’re curious and they go visit our website.

Jason: Yeah, are their lawyers OK with that, when a document comes back with a face and no signature?

Matt: We haven’t had a single signature questioned yet.

Jason: And how many signatures have gone through?

Matt: Several thousand.

Jason: Oh, that’s great

Patrick: So you’re saying there’s a viral nature, too.

Matt: Yeah, that’s kind of the whole idea, well from the consumer perspective we can see people assuring and then it drives interest on the business side and once again, the way we found out there was interest, one particular market that we’ve seen interest is reverse mortgages, because people are concerned with fraud and those signatures. We would have never found that out without the consumer product.

Jason: Well here’s what it sounds like to me. I think using the words ‘consumer’ and ‘business’ may be artificially segmenting this stuff out. It certainly threw me for a loop because it seems to me like the average Joe just doesn’t care. So maybe it’s not a good idea to draw the line between consumer and business and say that that’s some kind of important thing, maybe instead the way to think about this is, there’s this free app you can use it by itself and it’s viral because obviously there’s always two people involved in a transaction, maybe more than two. That’s great, you have this thing that doesn’t cost you much to support. Even people who sign stuff all the time are not gonna be throwing gigabytes of stuff through your system everyday, so it’s gonna scale very easily with a lot of free users.

Then you have this back end, as you said, you don’t have to say business, right, and why should you. What if it’s an angel investor who just wants to keep all this stuff online. Is he a business? Why even bother trying to say that he is or isn’t part of some segment. So just say there’s this great free app that just does it, and then if you want a system of record and it’s secure and you want to be able to look through it, then there’s other things, like some of these things might expire after a year, maybe it could give you an email telling you, ‘Here are the things that are expiring in the next quarter.’ That would be kind of usual to have. Not an MVP, right, but you can see how that more sophisticated back-end could start adding value over time to people who care about all those documents.

I wouldn’t make that separation, instead I would just say ‘It’s this amazing free app for signing anything that happens to be faster and more secure than a signature, how cool is that? It’s free, so there’s no reason not to use it, and by the way if your getting these there’s this back end.’ And by the way, you should also be pushing this back end. If I use this app, I should have to put in my e-mail address, and then you can do things like e- mail me a PDF that’s like a receipt almost that this happened.

Matt: We are currently doing that.

Jason: Right, so now you have this big email list that’s oped in, obviously. Which means you can use it to say, ‘Hey, you have all these documents’, you know how many documents they signed so you can say, ‘Look, we know you have 13 PDFs kinda floating around you email, for only, I don’t know what it’s gonna cost, but at your size for only $20 a month, we’ll manage that for you and we can tell you when anniversaries of those signatures are coming up, that sort of thing.’ So, I can tell you, a really obvious use for this would be NDAs. The thing about NDAs is they all expire.

Matt: Actually, we have a lot of NDAs that go through. We have the documents, not only do we encrypt the documents but we have the names of the documents that go through our system.

Jason: Yeah, an NDA expires and usually it’s on a year style boundary, so best if you knew when that was, but what would be perfectly fine is if you told me, ‘Hey, an anniversary of a signature of this document is coming up.’ Because things that expire generally do so in units of years, and so that’s actually really nice to know when I can kind of shred this thing and it’s no longer there. That would be a service, and this is an excuse now, to e-mail everybody and tell them about this, ‘And by the way, if you paid money we would be doing this all the time.’ and so forth and so rather than saying, ‘consumer with fewer features in business’, I would say it completely differently and just say there’s a free component which is usable by itself and there’s a for money component that adds value, and not use those words.

Matt: OK. Because you know that’s really how we differentiate it. We actually call it the recipient product on our end, but we are searching for a better language as far as how to describe our product. If you don’t mind me extending a little bit into the question, like I told you we’ve had a lot of interest in the enterprise market. But those are long drawn out processes. A lot of potential in particular with a large consumer product company. Should we continue to focus on this consumer side or the free component when we have these big enterprise deals we are trying to negotiate?

Jason: Well, any of these deals are going to take forever to close.

Matt: Yes, exactly.

Jason: And then there is going to be some development. And that is going to drag out for some reason. And then they are going to want to pilot it. And all that stuff is fine, because probably just one of those could make the whole company I am guessing. So that’s fine. It also cannot be your primary strategy. It’s just going to take too long and it’s not in your control and so forth. And so I would pursue those and think of them as second priority.

The first priority is you have to get control over your own business. I mean that’s already difficult because you can’t control what other people do. But to the extent that you can control the growth and usage of your product. Of course that’s what you have to do is get your arms around that. So one of the things I would challenge you with is, what is like the most important driver for this business. Is it the number of transactions? Is it the number of people who are using this app? Is it just the number of people who have it installed? Is it the number of e-mails that you have because of the app? I think you could make a pretty good case for any of those actually, like all those are rational. I would sit down and ask like, what of that is really going to drive to revenue.

So in other words, having fewer people who use it more than once a month probably drives to revenue more than just having tons of people that barely use it. Because if you barely use it it’s cool, and there is some value and I agree with you with that, and that’s neat. But that’s not the best driver. But you may argue and say, ‘no, no, no, the more e-mails we have, we can just continue telling about cool stuff, we’ll learn more and we’ll come out with the new product and we can e-mail it. No, the e-mails are key’, you might argue, and that’s a fine argument, too. But I would have that debate internally, decide, and then let that drive what you do as far as this product is concerned. What you call it, how you promote it and so forth. And even which features you decide to put in the free side or not. Because obviously you want to select the features that will grow that one number that’s important to you.

Matt: That makes a lot of sense. I actually feel pretty good about it. We’re pretty on track with the stuff you said, but then you definitely helped.

Patrick: Good, well thanks for calling in Matt. I appreciate your time.

Matt: Well, thank you guys.

Patrick: And, certainly know that I am cheering for you. Take care.

Matt: Alright.

Patrick: Alright, next up. Actually, before I introduce you, there is a little format that Jason does. I’m going to warn people. Jason does not know anything about the companies. I offered to brief him on some of these companies, he said, ‘No, no, no, it’s more fun if I don’t know.’ So, Jason is going to ask for your company name and he’s going to try to figure out what you do from the company name. So play along with that if you don’t mind. So next up we have Sean Tierney from Scratch Audio. Sean, are you there?

Sean: Yeah, what’s up guys?

Patrick: Awesome, how are you doing, Sean?

Patrick: Good.

Jason: That is a cool name, Scratch Audio.

Sean: Thanks. What do you think we do?

Jason: Yeah. I don’t know. When I think of Scratchy Audio I think of LPs. They can have scratchy, on the other hand you kind of what them to. And it’s like some ineffable thing that’s missing now, I guess maybe it’s effable, it’s the scratchy part. So I think Scratch Audio is trying to make the sort of cold, digital sounding audio sound more warm and feel more like an LP?

Sean: Interesting guess, not anywhere near it. I guess the etymology of the name is more, think of it like a post it note and basically the ability to take an audio segment and share it and collaborate on it and post it. Kinda like the way Google docs lets you do with documents, only an audio track.

Jason: Cool. OK. And what’s your question today?

Sean: I don’t actually have a specific question as much as, Patrick invited me on and he’s seen what we do, he’s played with the demo, and he just thought you know sharing what we do and maybe getting a sanity check on the approach that we’ve taken would be interesting.

Jason: The approach to the business model or the product or what?

Sean: Yeah, so, it’s . . .

Jason: Which one?

Sean: The business model. We’ve basically made the technology, we did the mistake that they tell you never to do which is to make a cool technology without thinking about the business problem you are solving. So we are kind of retrofitting the business model on top of it now that we have this killer technology.

Jason: So what is the current theory of the business model?

Sean: So it’s two front. We have the technology, we’re actually post- revenue now. We got our first revenue last week via a licensing deal on a company out of LA that already has an existing business and they saw our technology is being able to increase sign-ups, reduce overhead, all that.

Jason: Is licensing what you expect your business model to be?

Sean: I see that being part of it, yes. I see there being, basically like a platform play with the technology, but then also we have an idea around, basically becoming a customer of our own platform, and we’ve built this thing called Mix Fork which is like the first application built on the platform.

Jason: Who said they were going to buy a Mix Fork?

Sean: Well, Mix Fork is like a, it’s a service targeted towards bands, basically lets people…

Jason: OK. So which bands said that they were going to buy Mix Fork?

Sean: Which bands said they were going to buy it. I mean we’re working with one band right now, nobody said they are going to buy it. We’re about a month…

Jason: So, in other words, you’re making the same mistake again, right?

Sean: Sure.

Jason: Right? You built a platform, oh yeah, I forgot, I should find out who wants the platform. Well, we’re not sure but maybe someone does so we’ll go poke around and then you decided, OK. I’m going to build an app on the platform. But, nobody wants the app either, yet, right? Or at least you’re not asking people if they do.

Sean: No, we are.

Jason: You are? But no one said they wanted to pay for it?

Sean: No, no, no. We’re very early in the process of testing all this stuff, so I would say we haven’t confirmed or refuted whether people want this yet. The thinking is that bands, it’s very difficult to monetize music right now, just selling music and rising above the noise, is just hard. The thinking is that we can enable bands to expose the raw audio stems, let their fans personalize it and make their own mix, and they’re going to be much more inclined to buy that personalized mix.

Jason: Why do you think that that’s true? What evidence do you have that bands want to do that and fans want to do that?

Sean: I mean, it’s speculative. We talk to bands, they all seem to say, ‘Yes, it sounds like a great idea. Let’s do it.’ But obviously no one’s paid us yet. At the same time, we’re a month into it, so it’s too early to say.

Jason: Why are you a month into it, though? Why build it at all until you have at least a dozen people who are going to pay for it? Why write any code when no one’s committed to buy it yet?

Sean: There’s no code involved in Mix Fork. It’s literally using the exact same scratch audio technology and it’s just a way of packaging it and presenting it to people, so we haven’t invested a ton of time in that. I hope you don’t take that away from this.

My question to you is, given the limited scope of what you know about what we do right now, and that we do have a customer who’s buying the platform, we have this theory about, very similar to the last guy with the signature technology, that this consumer side of it, having bands actually pushing it out there and getting their fans to use it could broaden the usage of it, and then that just gets a lot of eyeballs and opens up doors for the platform side. Does that seem like a viable strategy to you, or what would you do if you were in our boat?

Jason: You can count on one finger, or one hand, maybe one finger even the companies who actually make a profit on API’s or platforms. It’s hard. Nobody wakes up in the morning going, ‘Man, I wish I had a platform. Man, I wish there was another API.’ It’s really hard to push it. People buy apps, not API’s, and you got no evidence that anybody wants to. It sounds good, of course if sounds good to me, too, but until people are opening up their wallets, it doesn’t count. Do you guys need to make money or is this a fun project?

Sean: No, no, no. It’s clearly, this is a business. We do have a customer, we have Songs Ink in LA bought our technology to increase the sign-ups and engagement and whatnot with their users where we delivered it yesterday. We do have a customer for that. It’s clearly not going to be a huge market, and so in absence of having a very clearly defined market, the thinking is that we can use this technique of working with bands to just get out there, get usage of it and worse case, have a bunch of people using the system.

Patrick: Jason, I remember on the last show, you were talking to a guy about the idea of building an asset that there are times that you can reasonably say, ‘Clearly I have an asset here, I haven’t yet figured out how to monetize it, but the asset itself seems worthwhile.’ How do you evaluate whether or not what you have built, so in this case, what Sean’s talking about, Sean, can you describe what the asset is that you have and that clearly has value even if you haven’t yet figured that out?

Sean: The asset is, we essentially ported garage band to the web. We made a browser based multi-track recorder that has the desktop comparable experience. That’s the asset. It’s a Silverlight, it’s a whole stack. We negotiated our cost down to zero, we’re running it on the Azure platform. It’s Silverlight based. It works pretty well. Everyone that uses it likes it, it’s just it’s not clear yet how we’re going to be able to charge for it.

Jason: So, let me put it a different way. Right now, nobody’s using Mix Fork because that formulation of this thing, that packaging, doesn’t exist yet. Fine. Let’s suppose 1,000 people are using it. Is that better? Are you making money? Is there some value to having 1,000 people use it instead of ten? What is the increased value of having 1,000 people using it instead of ten?

Sean: Sure, at that point we’re either charging the bands to do it or another strategy. We had this whole charity strategy we outlined. Maybe we create it as a fund raising tool for charities, pair them up with the bands and take a cut of the revenue from that. There’s one hundred ways it could play out and we just don’t know at this point.

Jason: Yes, it’s very hard to point to any companies making money doing something like that, and that’s the problem. Charities, number one, don’t have any money and bands don’t have any money. Very few bands make money. There’s a company I advise who does sell things to bands and it’s almost impossible to sell to them even though they have incredible competitive advantages.

One guy is in a well-known band and has amazing connections. They talk to Justin Bieber’s agent, Lady GaGa’s agent, people like that. That’s how into that market they are. It’s absolutely competitive advantage and it’s still almost impossible to get anybody to move at all, much less pay money for stuff. In their case, they’re actually generating new revenue from the band so it’s easier to take a cut because they’re not charging the band. They’re generating new revenue and then, obviously, it’s easier to take a nice big piece because it’s, essentially, free money for the band. So, if you can find some way to do that, it sounds good.

But, I guess, naively, it just seems like if the point is the fans can remix, well, they do that anyway. It’s easy to find remixes of songs. I get it that there’s the stems, I get all that. You say there’s a hundred ways to monetize it, but I don’t see easy paths to monetize it. There’s many ways and none of them are proven and it’s very hard to point to examples of companies that have proven any of those paths, especially with bands. There’s no prior art to point to and say, “See, a lot of people are making money doing this.” They’re not. You don’t have any evidence of your own in the business plan of people making money.

What I would do is this: let’s say there are one hundred ways to make money. I don’t believe that, but let’s suppose there are. Pick one or two that are the best ones, the easiest ones, and try to see if you can do that. See if you can get bands to pay for this before it exists. I know that sounds really weird, but, actually . . .

Sean: No, no. We’re on board with the whole lien. We’ve actually tested some subscription plans where we don’t even have the plans in place, but we’ve done multivariate and serve different plans and see who clicks through.

Jason: That’s not what I’m talking about. I mean, someone wrote you a check even though it doesn’t exist yet.

Sean: Is that ethical, do you think?

Jason: Yes. Sure. Of course. Well, A, If they literally write you a check, don’t cash it. B, you can give them a refund if you want to. In fact, you could even decide later you’re going to do a beta program, you’re going to do it for free,then thank them for coming on board. You can refund that because it’s really a test to make sure they are actually engaged and not just telling you, ‘Yeah, I guess it’s cool’, which is what they’re doing. If I’m a band, why would I say no? I’m going to let my fans do stuff that’s cool. Why would I say no? Of course I’m going to say OK. It doesn’t mean anything. It doesn’t prove anything. You haven’t learned anything about whether this is actually valuable to them or if they’re just saying ‘yes’ because, why wouldn’t they.

As soon as you say, ‘Write me a check for fifty dollars, that’s it, just fifty bucks,’ that’s when you start finding out if they’re willing to pay even fifty dollars for it. That’s what I would say to do. Decide on a couple ideas for what the business model could be and then go actually get some money. I mean, little money, not a lot. Not a big licensing deal, just a little something so they’re putting their money where their mouth is.

Sean: Sure.

Jason: You say there’s one hundred ways and it’s easy. I’m telling you, there are not one hundred ways, it’s not easy and almost no one is able to do it. So, if you have no evidence of, at least, a particular way that some people are picking up on, then it’s really hard to believe.

Sean: Cool. All right. Thanks for your advice.

Jason: Good luck.

Bob: Sean, are you still here? I just want to ask you one quick question. What if the band’s customers asked them for this service? Would they then listen?

Sean: Yes, like asking your doctor for advice when you’re in pain.

Bob: I think you need something, along the consumer side, that makes it really easy. When they pick a piece of music, they push a button and off goes an e-mail to that band saying, ‘I’m one of your biggest fans, but I can’t do X.’

Sean: Yeah. That’s a really interesting idea.

Bob: You need some demand somewhere. I can see the benefit, but you need some demand somewhere. Just wanted to throw that in.

Sean: Yeah. That’s a really good suggestion.

Jason: You know, Sean, let me also throw in something positive, since I just realized everything I did was taking a big dump on everything you said. Let me make this positive by throwing in another brainstorm. I really like what Bob said, in fact that’s what made me think of this. How can you make the band more money? If you could figure that out, you’re in. Because of course, every band wants to make more money. Every band wants to make more money. Kiss is really good at it all the way down to guys that are not very good at it, right?

For example, one way a band makes money is that people subscribe to be in their fan club. That’s like annual or monthly money. That’s the best kind of money that you can possibly have. Plus it’s elite that you can do special things for them. Everything about a fan club is this really powerful mailing list and they’re paying for it and you know who you’re best fans are and you can do stuff for them. It’s the best thing.

Patrick: They’re the ones who’d want to have a remake contest.

Jason: Aha, see this is what I’m getting to. What if the deal is who wants to remix the stuff using the, as you say the stems, or whatever the right word is? It’s only available to people who are in the membership club and the results are only available to people who are in the membership club. Other people can buy the thing as a CD or you get it for free when you’re inside the membership club or whatever, I’m just brainstorming I don’t even know.

What can you do to drive people to, for example, become a part of the fan club? That’s super-duper valuable. This is just an excuse to do something really awesome and that’s why they’re going to join then killer, right? That’s a great thing.

Man 1: OK. Cool. All right. Keep working on it Sean, thanks. Bob, thanks for unmuting there, or I guess being unmuted. One little point I want to make there on something Jason was saying, there’s kind of the view of customer development with the idea of having a button, seeing if someone clicks on it without, and then when they click on it says, this isn’t implemented yet. That is one way. There is nothing wrong with that, but as Jason was saying, an arguably simpler form of customer development is just finding some customers, just find people who are willing to pay you money. You have to decide which ones appropriate for your situation.

Jason: Just be clear, when I tell you, when I say things like, get people to give you money before you have a product that’s easy for me to say, right, because I’m not sitting there doing it? Except that’s exactly what I did at Word Press Engine. More than one of the companies at Capital Factory did that too and was getting, they had, one of them had over two dozen companies literally give them money before they had a product. It’s not in the abstract. You can do that when the product is really compelling and it really demonstrates that it’s compelling. OK. Let’s move on.

Man 1: All right. The next person we’re going to go to here is the young guy named, Seth Samuels.

Seth: Hey, How’s it going?

Man 1: Good. How are you doing?

Seth: Doing Great.

Man 1: Why don’t you tell Jason what the name of your business is and see if Jason can figure out what it does just from the name.

Seth: Sounds good. Thanks Jason for taking some time. The business is called Converati.

Jason: Converati?

Man 1: Converati.

Jason: Converati?

Seth: C-O-N-V-E-R-A-T-I.

Jason: The Illuminati of, the conversational Illuminati. So that’s people who sit around in smoking jackets and suck on cigars. Here’s what we think about people who smoke cigars and actually my wife smokes cigars so you know, but I know she smokes cigars and she drinks whiskey and she has this really hard pallet, it’s really awesome. You go to a bar and she get’s like a Guinness and a whiskey and I get like a Margarita. Then again, she’s a chef and awesome.

Anyway the thing about people who smoke cigars is they take a drag on it right, and the next thing is they turn their hand around and look at it. You got to look at the end, I don’t know why you got to take a drag and turn it around and look at that mother, right there. I don’t know what they’re looking for. Maybe if it’s still lit, I don’t know what’s going on but that’s part of the deal you’ve got to look at the thing.

So anyway, the Converati sound like people who are expert conversationalists who sit around in smoking jackets and look at the butt of their cigars and swirl their brandy in the glass and have amazing conversations with French intellectuals. What is it really?

Seth: Well, I didn’t have the French component normally added but otherwise I’d say that’s pretty spot on.

Jason: You know why? Did you know the French, intellectuals were philosophers in France. They’re like rock stars, best selling novelists . . .

Seth: Is that right?

Jason: Oh, absolutely. There’s a woman there, what’s her name, Elizabeth, someone probably knows and will put it up on the chat, but I forgot who it is, she just came out with another book, she’s literally like one of the rock stars of the country and she’s literally a philosopher. So anyway go ahead, I’m sorry, I’m monopolizing all of your time. So, tell me again exactly what it is that you’re doing in a sentence or two, and then what your question is.

Seth: Absolutely. Basically, it’s a great vehicle to connect people who have mutual interests, and that’s what we’re trying to do. My question is: I’m curious to hear what your perspective is on using mobile as an alternate approach to a broad problem that people have identified through customer discovery, what not. Specifically the broad problem is like I mentioned, trying to connect people who have shared interests but don’t yet know each other. They’re not friends on Facebook, but want to connect their conversation.

Just to give you some context, we started out focusing on the web as the context that people could come together around, like a web page. We found that comment lists and forums, as well as e- mail threads, were not great for trying to have a back and forth discussion. To try and solve that, we built a browser extension, to have those user conversations take place right on the webpage. But there were some concerns about install friction and scalability. Obviously it’s tough to scale a business based on a browser extension alone.

So we looked to mobile, since it’s more widely accepted that people will install stuff on a phone, but the premise felt different. The reason I’m calling in is that I”m curious about your perspective on how we can tell whether going after mobile is a complete pivot away from the initial problem, or an alternate approach, given that using a phone is is very different from using a computer, at least to look at web content and talk about it with people, and have a back and forth discussion about it.

Jason: What I heard you say, maybe I got this wrong, is that you started on the web, and it didn’t really work, even though the web should be the most frictionless and obvious place to do this. Then you did a browser extension, but obviously it’s too hard to scale installs, and it gets complicated. It almost sounded like you moved to mobile because it was easier to get something installed, which is definitely not a good reason to switch a platform and go mobile. Besides, the web is the easiest thing, where there’s nothing installed an everyone has it, including on phones. I don’t see why going mobile automatically is better.

I have two questions for you, one is about mobile. Why did you select other than the install thing? What is it about being mobile that’s actually important to your goal? The second thing is, you said your goal is to connect people with mutual interests. That’s what all of social media in the web is for. There are 1,000 sites that say, ‘Put in your twitter handle, I’ll tell you people you should follow and get to know,’ and ‘If you’re going to this conference, here’s how to get to know other people who have your interests,’ and, ‘You should read blogs,’ and all sorts of things, Facebook, and liking, and everything there is about connecting people with mutual interests.

That can’t be the goal, that’s what the whole internet is doing. Surely you have some more specific thing you’re trying to do here, like actually make them meet, actually make them talk, force them to meet each other almost like a dating game but it’s not romantic, or something. You’ve got to help me out here and give me a goal that isn’t just the goal of everything.

Seth: Sure. A specific example is, I went to a…

Jason: Give me your goal that isn’t just connecting people with interests, because that’s not enough.

Seth: The reason why we chose Converati as a name is that we felt that people who have shared interests, not just that they like something, but that they want to talk about it, whether it’s great food or a political issue, that conversation was the medium to do it. It just didn’t feel like there was an environment where you could have a group discussion with people, it was more like comments, one to many messages, Twitter, et cetera. You’re bringing up a good point, because connecting is very broad in and of itself.

So the goal isn’t just to make connections for people, but to help people have an environment where they can actually have a discussion with folks they don’t necessarily know, are friends with, colleagues, or what have you.

Jason: So it’s a forum.

Seth: Sure.

Jason: That’s what forums are. And there are already forums on every topic known to man. So what’s the difference between you and a forum?

Seth: The setup of Converati is not just to have a public space. We call them campfires, or huddles. They’re to allow people to form specific discussion groups, or forums, as we’re calling them within that larger group. In a traditional forum, anyone can jump in, and you have a big problem with trolls. Otherwise forums would be great, but trolls are the primary problem, and they skew a lot of quality. We want people to have an environment where they are able to form smaller group discussion settings within the larger group, but still find people to include.

Otherwise, e-mail would do that, but e-mail is only available to whoever it’s addressed to, and click ‘reply all’ upon responding to the group. Something where folks can have that quality discussion, yet allow it to be open to others to join in. In our case, we’re using a request-based system to do that. So if you’re not in a discussion, then you would request to do so. Instead, the premise is forming new small discussion huddles within a larger, crowded room, if you will.

Jason: And is this discussion based on lots of topics, or just one topic?

Seth: Given that we built the extension, we, in turn, didn’t focus on a specific topic. That’s one thought, just to be more focused. For example, politics is a great place where we could have focus, just because there’s a lot of back and forth debate. We weren’t necessarily sure how to focus in just on that, so right now it’s on any topic.

Jason: So is this sort of like Quora, but for different topics, because Quora seems like a thing where there’s a discussion group, there’s a little mini-topic, and they control the quality. There aren’t a lot of trolls on Quora. It’s pretty nice. Or Stack Exchange isn’t really a discussion. That’s like another step away from what you’re talking about. So that doesn’t seem right. But maybe Quora is a little bit, although I guess it’s still not a discussion. It’s still a one to many in an order, but it’s still not really a discussion like you’re talking about. Is that right?

Jason: I would agree. I would agree that Quora is interesting because it has that quality, but it’s still one-to-many.

Seth: So first of all, don’t say this is connecting people with interests, because I think what you’re saying is really valuable. Not just allowing, but encouraging conversations at the scale and quality control in which you can actually have a discussion on something, where you get to find people, in the sense that it’s a larger forum, but then when you actually sit down and talk to people, it’s more like sitting down in a room and just talking to a number of people. It might be two, maybe ten, probably not much more than that, and to be able to form and re-form these groups like you might at a party.

Maybe a good analogy would be, what’s the best cocktail party you’ve ever been to? You mill around the room, everyone in the room is awesome, and you form and re-form these groups that are small enough that you can actually have a real conversation. And the people in those conversations are intelligent enough and sensible enough and are not trolls so that you actually have something intelligent and something interesting happens there, and then you dissolve and re-form into other things.

That analogy, and doing that on the web, and getting rid of the troll problem, etc., that sounds really valuable, but I wouldn’t describe that as connecting people with mutual interests, right? That’s so broad. Is that right? Is that more what you’re talking about?

Seth: Yes, so essentially it’s digesting a large room to form that conversation group, I suppose.

Jason: OK, so let’s get back to the mobile question. You said we made a mobile app. So why would you make a mobile app? This doesn’t sound like mobile app at all. When I want to communicate to people a lot, I want to be able type, probably on a keyboard. I don’t know why I’d do this on the go, per se. I don’t get it. Why mobile?

Seth: We were, someone said, why don’t you look into mobile? I think you answered that partly, which is you don’t do it just to have an easier install, but that was one of the reasons, honestly . . .

Jason: No, no, because everyone with a mobile app has a web browser, and you already have this on the web, and the web is the easiest no-install thing. And it works on mobile and desktop. You already have the obvious platform for this, right?

Not that you couldn’t make an amazing rich mobile app to complement it, I get that, but that’s not where you are right now. You don’t have, like, an amazing thriving thing where everyone understands it and it’s super-popular and now you’re just going to enhance it with an amazing native mobile app. That’s not what’s happening, right? So I don’t know why you’re bothering.

I would make it mobile-friendly. I would make it so if I go there on an iPhone, it’s very usable, of course, right? Because you don’t want to cut out mobile, but I don’t understand how this is a mobile play, per se. It sounds like that’s not your fundamental issue. Your issue is going to be to get a critical mass on some general topic like politics so you can form and re- form these groups and have enough people there where that’s a good thing, right? Is that not the problem?

Seth: So would you have a focused website, just like Quora’s approach, where they have the questions and all that exists within Quora’s walled garden? The reason I’m asking that is because we felt like the things that people would want to talk about existed outside of converati.com. They existed on the web page they’re reading when they get up in the morning, anyway. So that’s why we said, oh, let’s just build an extension so they can have the discussion right there. But there’s a lot of stuff that doesn’t work well with the extension.

Jason: Well, if we got your new analogy of the amazing cocktail party, then no, it doesn’t make sense for it to be around a blog post. A blog post may kick it off, but it doesn’t make sense that I would go to a blog post, then what? Because there’s some real timeness here. Not super real time, not like Twitter . . .

Seth: Quasi-real time.

Jason: Quasi, like there’s some decay, like if people haven’t talked for three months, because it’s high value. I don’t want to end up, as a user of this, I don’t want to end up with a thousand conversations which all sort of. . . every once in a while someone posts something, even if it’s good, because that’s not, I think, the value that you’re bringing. Would you agree with that?

Seth: Yeah, I would.

Jason: So even more so then, it doesn’t make sense to be on some blog post someone might read two years later. Right, I think you need to control that experience a little more.

Seth: Actually I think there is something interesting in that, however, where people find things at different points in time. If you start a conversation, you start it up with three people.

Jason: That I like. Using a thing that I just read to strike a conversation sounds brilliant. Right? Piece of news, an insightful blog post, an inspired blog post, something you disagree with. Using that as a tickler as the sand in the oyster, right, that’s going to make the pearl. That makes a ton of sense. I’m not sure it makes sense to have the conversation there.

Seth: Interesting. See that’s what I’m interested in. Like, OK, so then what happens when you read it? People do have the conversation there in the form of a comment list, but no one reads them because they are full of junk. So how do you cross the chasm, if you will, to go from reading to where the conversation is and will people get lost along the way?

Bob: Seth, I think you’re missing two points. First off, normal people who are doing their average sort of thing, don’t talk to strangers. There’s no real incentive. When an event happens, be it Columbine, University of Virginia, Mumbai, earthquake when you didn’t expect one, whatever. That’s when they want to talk to strangers.

So what if you had on the mobile side a way that you could put in things you’re interested in and if something, let’s say close to you geographically or close to you emotionally, happens, you could just push a button on this app and get connected to a trusted list of people who also want to talk. The point here is you gotta get rid of the trolls, but you gotta have some sort of emotional energy going on to get people kicked into talking to strangers.

Seth: You bring up an interesting point. Jason, I wanted to share this as well. One of the other reasons for mobile is, Bob you’re exactly right. It’s events that often bring people together. So one of the assets that we saw in mobile is that it can utilize geo- location, but that’s very different than web location, which is some webpage. So I would agree that geo-location is interesting because if you’re at a conference, let’s say. You go, you’re excited to hear what’s going on, but you don’t know all the people around you.

I was just at DreamCourse in San Francisco yesterday and that’s exactly what happened. I’m sure there’s a lot of people that would love to have that discussion. The most we do right now is we use a twitter hash tag, but again, these are one to many replies. They are very asynchronous. So that would be a strong point on the mobile side, but again a little different than what Jason was talking about, but I’m glad you brought that up, Bob, because that is the primary reason why, other than the easy install, that we’ve really looked to mobile as an interesting path to take.

Jason: I get the whole geo thing, except if you don’t have a specific use case for it in mind, then you’re just saying something that a lot of people are saying today, right? If, yes you have geo, but you don’t know what you’re going to do with it, are you actually going to connect people in real-time? Are you going to say ,’This guy’s in the same coffee shop as you, you should go talk to him,’ because if so that actually sounds like it could be awesome. But if it’s sort of just like, ‘Hey there’s geo, maybe someday we could something.’ Why are you bothering? You have a very difficult path. You have a networking problem. If you get to critical mass, good for you, but getting there is super hard and we’ve seen tons of these stack overflow knock-off kinds of companies. Dozens and dozens try and fail because they couldn’t get critical mass, not because their software was bad or they didn’t have good ideas, but it’s really hard to get critical mass.

So to me, if I’m thinking, ‘How do you focus your energy on something useful to you?’ That is your primary problem. That’s the thing to get over. Making the experience so amazing that it’s amazingly sticky is the thing you want to do. Secondly, make it viral after that. Once I’m stuck to it then it’s easy for me to drag in people that I feel should be part of the system. For example, stack overflow was sticky because of the rating thing. I guess Quora maybe is the same and also because it was an invite only thing to begin with. So it was a walled community. I was in there in that beta program, so I can tell you, super high quality, you wanted to be part of this, you wanted your rep to be high in this community because it was a group of people you respected and so forth. Like it had all these makings of exactly one of these rooms you’re talking about except maybe a little bigger. The kinds of things you’re talking about, high quality.

Then of course they had to open up the gates and see how to manage that, you’ll have to do the same thing. Quora again the same thing. That’s already really difficult to pull off and get critical mass for. Maybe like gmail and these things, actually Stack Overflow was like this a well, where you have invites. As long as you have a small group of trusted people who are zealous about the platform, because it is good, and then you give them this limited number of invites and as those people come in so long as their reputation stays high the original person gets more invites, because they’re inviting the people you want.

In other words you can easily build in the thing that allows you to grow and keep the quality high, for at least a little while and get to that critical mass where you’re rocking and rolling and then you can start experimenting with wider things. So that’s just a whole long way to say that I think that kind of stuff is your main problem that’s going to be why you are successful or not.

Unless you can, again you have this amazing theory of geo that’s like all different, then more power to you. But if not, you’ve gotta attack the main thing.

Seth: Just on that point, are you convinced, at least from your perspective, that that sticky component is easier to create in the web setting, the Quora like setting, as opposed to the mobile geo setting? Just from the little that we’ve spoken about each.

Jason: Well you haven’t yet told me why being mobile or being geo would be better or more sticky? So that means I don’t see it. Maybe there is reason. The other thing is I think being sticky is key. You want people who show up and do a conversation and come back and do more conversations. It’s so compelling that they would rather come back here and have the conversation than wherever else they might have that conversation or maybe not have it, right?

Patrick: I want to get Jason’s perspective on one thing Seth. Full disclosure I know Seth, he’s a friend of mine. Went through West Michigan’s Incubator Program, I think it’s related to what we’re trying to do here. What intrigued me about Converati from the beginning is I worked for a company that I love, Microsoft. And it is impossible for me to engage people online in meaningful conversations. I mean it’s comically impossible. Go to ZDNet and look at the quality of conversation. And if Seth can solve that problem. I have to think that’s valuable to companies like Microsoft.

So with that in mind, the problem of bringing civilized discourse to people who aren’t going to come to a Microsoft property necessarily, but might be a company like Microsoft or another big company who has issues with communication on the web, how would you think about that problem and approaching a business model that way?

Jason: I think there’s at least two ways to do the business model here. There’s the obvious one which is advertising which I hate, but Quora and Stack Exchange are big enough to pull it off. I still hate it though. I don’t think it’s in general a great way. However, I do believe in the whole sponsorship thing. What would make sense, let’s say it was about start-ups, then it would make sense for example, for BizSpark to be the sole sponsor of the whole site. So there’s not ads everywhere and you’re not bothering everybody, but it just says, ‘Hey this is an awesome thing the reason it’s totally free is because Microsoft wants these conversations to happen because they’re awesome and because BizSpark really does want to promote start-ups.’ Which they do by the way. They do try to sponsor things like that because they do want start-ups to succeed and they do want you to buy into their program because it’s a great way to get a bunch of Microsoft stuff essentially for free. So that makes a lot of sense to me at least to bootstrap up the company, get enough revenue to run it. I think that kind of big sponsorship makes sense.

Of course if you let them pollute things with inside the content, that’s going to ruin the whole thing especially when you’re too small and a little bit of that will poison the well and you’re all finished. So I don’t like that.

Now that’s all one side of things. Another way is you could take the old, remember when AOL was the big spammy thing? It was the cheap way to get online. Maybe you don’t remember. And then there was Compuserve. It was AOL V. Compuserve. The deal was AOL was super cheap it kind of sucks and everybody is like a 13 year old or crazy pedophile and that’s the deal on AOL.

Then there was Compuserve. Compuserve was expensive. I forget now what it was, but I want to say it was . . .

Patrick: 12.99?

Jason: No more. It was like 30, 40, maybe more. It was a lot more. So AOL was givin’ you essentially all free hours. But Compuserve was super expensive but as a result you had really high quality people. You didn’t have all those spams and trolls and things. And companies wanted to be there and sell their wares. It’s pre- qualified as people spent money and even spend money online in a world before online. So here was a place where they were charging people for entrance and that was the thing that kept the quality high.

I think you can actually do that. I think if you said to people, ‘Look the internet is full of crap. We’re going to charge $20 a month to be in the walled garden. I know that sounds kind of weird, but everyone in here is gonna be pretty good.’ And it’s an interesting way to select people. Some people you would want in there won’t pay. I mean it’s all true, it’s a weird choice, but I just want to bring it up as a business model where you end up with real revenue, perhaps slower growth, but every single person who comes is automatically sticky, they’re spending money to be there. As long as you don’t screw this up they’re going to want to be in this kind of place, and you’re not dependent on sponsors, although I suppose you could take them. Although, at that point maybe you don’t want to, because I paid money, now I don’t want to see an ad, right? So I just want to throw that out there as a way to simultaneously develop revenue and keep the quality high.

That, by the way, is how a lot of very high-quality walled communities work today. For example, I mentioned earlier that my wife was a chef. Early in her career, she was a personal chef, meaning she comes to your house and cooks. There’s an association called the American Personal Chef Association. It costs a lot of money. It’s like $600 a year. That’s a lot of money to be part of some association. What do you get? You get a big binder of stuff that tells you how to be a personal chef. But here’s the thing, you get access to the forums. Forums is where you actually get to ask questions. ‘Oh, this happened,’ or, ‘I need a recipe for that,’ or ‘This person’s allergic to onions. What the hell do I do?’ These are all literal things. I didn’t make these up. They were super valuable, and high-quality because it was a paid walled garden.

Patrick: It’s the Angie’s List.

Jason: Yeah. Angie’s List. So there are examples modern. You don’t have to go back to the ’90s to find these examples, either. That’s an interesting path that sort of achieves all of your goals at the same time, maybe.

Seth: Yeah. There’s definitely some concerns around, just how it can grow. Obviously, you mentioned focus very early, and so I think charging for it wouldn’t be a bad strategy, either, in terms of obtaining focus on a really specific group, because if you say, or if one says, ‘I don’t want to charge because then no one will sign up’, well, I think there is an element of it where you don’t want everyone in the world signing up right away. You want to kind of control who gets in and things like that, and so it could be an interesting route. I hadn’t really thought of it ever, quite frankly, because it is pretty scary, but interesting to bring up.

Patrick: And the nightclub can still let people in for free if they want to.

Bob: And if you incrementally charge by idea, for instance New Zealand and J Query, then you can see where the interest is, and build those communities out.

Patrick: Yeah. Awesome. Well, thanks, Seth.

Seth: Well, thank you so much guys. I appreciate it again, Jason, and I look forward to seeing how this progresses.

Patrick: Sweet. I appreciate you calling in. Let’s go to another caller here. I want to go to someone who is very early on in the process. Let me see. Kari? Can you hear me?

Kari: Yes I can.

Patrick: I asked that question wrong. It was really, ‘Kari, will you say something so that I can hear you.’ And indeed, I could. So, Kari, can you tell Jason the name of your start-up, and see if Jason can guess what it is from that.

Kari: OK. The name of our start-up is You Grock It.

Jason: Oh. Cool. Why have I heard that before, though? I think I’ve heard of this.

Kari: You have not. The word ‘Grock’ is certainly around, but, yes.

Jason: It sounds familiar, which is good, especially if I have never heard of it before, and it sounds familiar. That’s awesome. You have pre-branding, for me, at least. ‘You Grock It’, that means you understand it. So I’m going to guess that it’s a site that teaches people stuff so that they can grock it.

In other words, I need to rock something so I go there and I can grock it. On the other hand, it could be exactly the opposite. It could be a site where I go there so I can laugh at people who don’t grock it, or don’t know what ‘grock’ means, actually.

Patrick: I have to chime in one thing. I actually, when I saw your email, I thought it was ‘You Groke It’. So capitals might be your friend as you brand these things. Even though I know what grock means, I thought it was about plants when I first saw it.

Kari: That’s interesting. I’ve been trying the capitals so I thought it was right. But we’ll be working on that.

Jason: So what is it?

Kari: So in this case it’s a bit of a bastardization of ‘grock’. It is a consumer electronics product to help families find misplaced stuff.

Jason: OK.

Kari: So in this case, knowing something is knowing where it is, and being able to find it.

Jason: So that’s not what the word ‘grock’ means. You know that?

Kari: I do understand that.

Jason: OK. Alright. So how does it work? So I lost my keys, but now what? How does it know where my keys are?

Kari: So what it uses, is it uses RSID technology. Its tags are small, lightweight, cheap, and battery-less.

Jason: Yeah. I know what they are.

Kari: You can put one on everything.

Jason: So that’s what I do? I have to stick crap all over my crap that I lose, and then, of course, it can find them as I walk around? It’s sort of like, when I press the ‘find’ button on my phone base and it starts beeping somewhere, except it doesn’t beep. I have to walk around with the receiver, right, and wait until it responds?

Kari: You have to walk around with the receiver and find it, yeah. That’s why our target market is families.

Jason: Yeah.

Kari: Because when the kids start walking, the stuff starts walking, and the kids don’t know where it is.

Jason: I had that on vacation. Abby, my 2 year old daughter, took my ring off the nightstand, and so it was gone. That’s all we knew, is it was gone, right? And we eventually found it in our backpack where she had stuffed it. Of course, she’s not also able to communicate that she had done that, or where she had put it, so we were just pretty lucky that I got it back. I get it. Although, I might not be able to put an RFID on the ring, but that’s OK, I could put it on my key chain at least.

Patrick: It would be a fashion statement.

Jason: Yeah. OK. I get it. So what’s your question?

Kari: My question is, our day one on this is Tuesday. We are that early, we’ve been knocking around with it but we’re going full-time on it next week.

Jason: Nice.

Kari: And there’s just two of us. And so, I want to know what advice you have for us in this extremely early stage, about how to prioritize all the work that needs to get done, and also how to assess when it’s time to hire a consultant, or when it’s time to just bring on the first couple of hires.

Jason: Oh my God. So is this thing built yet?

Kari: This thing is not quite built yet. Proof of concept is done, but it is not to the hand held stage, so that is obviously from a technical side the first thing we have to focus on.

Jason: Well, if you’ve been following the rest of this then you’ll know what my next question is. Who are the families who have said they are going to pay for this unit, and how many of them do you have on your list, and how much money did they say they were going to pay for this little package of a receiver and a number of RFID tags?

Kari: Well, I do have some answer to that, not as good as I’d like to have, but again, day one starts next week. I have a survey. We’ve been talking to…

Jason: Just give me a number, is it ten people, or 100, or one? How many people say they’re going to buy this thing?

Kari: I have 25 people who said they will pay for it, but not necessarily as much as I need to charge.

Jason: How much do they want to pay?

Kari: They want to pay $50 or under. I’m probably not going to be able to get this built with margins like that now, but . . .

Jason: Well, here’s the thing about electronic stuff, maybe you know this already since you’re embarking on this, but of course I did a start-up in electronics. Your initial stuff and your initial products are super expensive, it’s really hard to make a profit on those because it’s so expensive. But once it’s successful and you want to go make a million of the widgets, it’s incredible how the margins come down on everything.

And so, doing this for $50 is totally doable. The RFID stuff is really cheap and is only getting cheaper, the receiver stuff, all that kind of technology, I don’t know if it’s powering a screen or if it has Wi-Fi, but even if it has Wi-Fi, this wasn’t with the RFID, but we built a thing that was completely web- enabled and it was Wi-Fi and it had graphs and logs and crap, and the whole thing cost $15 in cost. So, you can make this for $50, $49.95 or something, eventually. So I wouldn’t worry too much about that.

But here’s the other thing that means. That means you have to raise money, or you have to have an investor, I should say. Electronics cost money. I’m sure you’ve already done the financial modeling before you quit your job, but you’ve got to have all this inventory and you screw it all up and you build these prototypes, and you’ve got to have a lot in stock, and then you ship it, and people ship it back. It’s incredible, the amount of cash that is just held up in the operation of the business, months and months and months of product is held up. And by the way, if you grow, it’s worse, because you have to buy ahead for what you’re going to be growing, and it sits there in various forms, parts, completed things, returns, shelf, etc., for months and months and months. So you have to have months and months of growth level amount of stuff sitting there, and that just eats money. And so you have to have a ton of money. So the first thing I’d say is, do you have a ton of money so that you can actually build and ship this stuff once you’re ready to do so?

Kari: We are able to self-fund through prototype, and I don’t want to go try to find money until I have something to show you how it works, and when you can see it working, the power there is strong. So, we’re set to self-fund until we go look for it.

Jason: OK. So you asked what to concentrate on. Here’s the thing. You’re going to have to raise money, so that’s the goal. The goal is not to be profitable, the goal is to raise money. So what is that going to mean?

The number one thing is traction, meaning actual consumers who rip the weird-looking prototype out of your arms, even though it kind of doesn’t work half the time, even though it’s way too expensive, they rip it out of your hands anyway, and they say ‘I have to use this.’ When that’s happening, and you can say look, they don’t want to pay me that much, but they paid me $50. That’s not working out yet, but people are spending $50. 20 people gave me $50 for this thing, and are using it, and here’s three of their stories where you have a little video of them going, ‘Oh my God, my kids blah blah blah’ and all this crap that makes it very real, that’s the number one thing you do when you raise money is show traction. Doesn’t have to be a lot, it can be 20, that’s good.

The number two thing is of course that it works. That’s what you just said, that you’re going to make something that works, so good. That’s the thing to focus on, a thing that actually functions as you describe, and have it be really nice. I think one of the annoying things that Apple has done is made it that consumer electronics is having to get better and more ergonomic and look cooler and all that stuff, which sucks for the rest of us, but that’s the case. It has to be the kind of thing where you go, oh, that’s cool, which is difficult. It’s [inaudbile] but it’s especially hard to do without much money because there’s a lot of packaging. Packaging is expensive, as you know, you’re not going to be making plastic molds or anything. But you’re not going to be machining and building plastic molds because it’s going to cost $30,000 so you’re not doing that. So you better not be spending your money on that.

You’re also going to have to find investors who want to invest in this, which is interesting because most VC’s is not in electronics it’s in bio-tech and hi-tech and so forth. I would find those people early and say this is what we’re doing. Of course, you’re not raising money yet, you’re . . .

Patrick: Find those people, those investors.

Jason: Those potential investors early and you’re saying, ‘Look, I’m not raising money yet but I want to tell you what we’re doing because I want to be able to come by in three months and show you what we’ve done.’ Another one of the greatest things you can do, when you don’t have a track record yet as a company, is create a track record by talking to them. Ping them every month and saying now we’re here, now we’re here, now we’re here. Mark [??] calls it just connecting the dots. Showing them that there’s more than one dot otherwise you show up at their office and they have only one data point, the crap you said that day.

You can develop a three, four, six month history with them, even though they’re not investors, just by showing that you’re making progress. I’d say that’s the number two thing after traction that’s hardest to find in a company that you’re trying to invest in, is people who actually get stuff done and makes progress from month to month. Progress can mean we learned this is total crap and we had to start over goddamn it, that’s progress, that’s great. Discovering early that you’re wrong, being introspective and moving on that’s progress too, all that stuff’s progress right? Especially since you said you quit your job that means you should be making a lot of progress every week or month.

If the goal is raising money then you have to be thinking what am I doing to achieve that. Showing traction, showing, in other words really having proof from the customers, showing data points which means talking to them now even though you’re not ready to raise money. Then of course, a product that works, that’s probably the big three things.

Kari: Cool.

Patrick: Hey Kari, I met this inventor, in my area of west Michigan, he told me he built a better box cutter and this guy’s all passionate about it and was actually quite profitable, a simple little invention. He was at a start up event evangelizing to the people there who might be inventors to attend local inventors users groups essentially. He said, ours in our area we’re really good for fiscal inventions. Have you sought out those kinds of groups in your area?

Kari: It’s a good point. I’m in a bit of a remote area, but I’ve been seeking those out more virtually. My co-founder is our technical guy and he’s been seeking that out through personal contacts and stuff like that we are trying to build up [inaudible]

Patrick: I would seek out mentors, people who can keep positive but who have succeeded in building physical things that you can meet with and get inspiration and coaching from, because there are people who have succeeded at this and I would do what they do.

Kari: I appreciate that and the same vein, my co-founder and I both really believe in leaning and trying to apply the [inaudible] the hardware has been interesting already and it’s just going to get more so, if you guys have any resources there feel free to [inaudible].

Patrick: Yeah. Write it down and write a book on it.

Jason: Well, you say that except that’s where lean came from is building hardware, right? That comes from Toyota’s production system, that’s building stuff. So of course there’s a lot of priority on that. I would say this don’t get all caught up in whether something’s lean or not. The goal is not to be lean. The goal is to be successful and lean has a lot of these great principals, which pretty much comes down to the shorter the iteration is the better. Learning counts as value, especially early on. Be introspective and honest with yourself and I would add with your customers, but that kind of thing. Those are sort of the principals of lean that are of course easy for you to apply in any project that you do and are probably wise because it helps you deal with the uncertainty and risk. Those are hard to processes that help you cope with unknowns.

I wouldn’t worry about that too much. The place where you can be super lean is where you discuss things with your customers because there is no reason why you can’t develop as much information as possible from them about how much money will they pay, why are they buying it, what does it have to do to be understood, do you have to be able to drop it in a pool? Probably. That doesn’t mean you’re prototype has too, but the more information you can gather, if you walked in later to an investor meeting to where you talked to literally 100 people well, actually you talked to more you have a list of 100 people that literally will pay you $50 or at least you have the amount of money each one would pay and with all this information like yeah people want this. This is the demographics of the people. Are they families with two or more kids? Is that the perfect customer? If you can figure out what that is, which you don’t need a prototype for by the way, you can just do this. You should also be able to prototype. You can do this at the same time without any doubt.

If you put all this effort into that and you walk in going ‘Look.’ ‘Cuz you’re going to walk in and say, ‘I want money and when I get it I’m going to do X’ and X is sell some units or whatever. So if you walk in with the complete demographics. If I know exactly who are target customer is, then you also know how to advertise to them or call them or find them or go to some meet-up that they go to. Like maybe PTA is the perfect place, maybe it’s soccer moms, I don’t know how you find them, but if you have the demographics, then you can go find them.

So this is all what you might call validated learning, if you’re using lean terminology, but these are all things that you can do that are all very valuable that show you are business minded. So that when you walk in, for the money, this is another risk area which you’ve helped alleviate. You know who they are. You know where to find them. That’s very valuable. A lot of companies, in fact, callers today, right, they have a product, but they don’t really know who their perfect customer is and therefore where to find them. That’s something you can definitely accomplish.

So most things about this company you cannot accomplish without money. Right, it will never be in a nice pretty case all shrink wrapped and at Best Buy without some money. Which is fine, it just means that those are all things not to worry about right now and focus on the raising money part. So there’s a lot of things you can do that a lot of people won’t walk into those same people’s offices with. So like my first reaction is, ‘It’s obviously useful, but I don’t think people would buy it.’ I’ll tell you why.

To me this is like selling backup software. People don’t buy backup software until their hard drive crashes. At that very moment that their hard drive crashed, they’re very susceptible to buying backup software, but at almost no other point in their life do they want to do it. No one wakes up in the morning going, ‘Man I should really buy backup software.’ You just don’t and then you get screwed and then maybe you go out and look for it. And that’s a very difficult sale, because it’s the kind of sale where you catch someone at a certain moment in their life. A small, brief moment in their life where they are the perfect customer, they are going to spend 50 bucks right now, so they never lose their keys again, or whatever. That’s the moment, but it’s very hard to sell stuff where that’s the moment. But you can totally disprove me and I think you can. You can disprove me by finding those hundred people that say, ‘Well I don’t know, I’m not necessarily in that moment right now, but I’m telling you I would whip out my Visa and give you $69 plus shipping and handling right now for it.’ And you would totally disprove my worry on that.

Kari: So here’s what’s interesting and where I’ve gotten the 20 people from so far. I’ve done a demo, that is a slide show with a mock-up. We’ve done a survey and I’ve just done interviews on it, and next week we start going hard on it. What we’ve found that is really fascinating is that combines with what you just said is that the initial survey after the demo is lukewarm to OK. ‘Yeah I see this problem, yeah, I have it.’ Two weeks later they’re calling me back, ‘Are you done with that yet, I’ve lost so many things in those last two weeks and knowing that this product existed or might exist, I need it now.’ So better than backup software, you misplace things a lot more often than you crash.

Jason: OK so that’s interesting. There’s good and bad about that. The good part is you can implant this concept in their head that it is a real need and they will come around and see that, I love that part. The bad part is, you said, ‘After a demo.’ Well that’s not how you’re going to sell this thing. It’s going to have to be mass marketed.

To be clear you’re doing the right thing. ‘Cuz right now you shouldn’t be taking out an ad, right. I’m just sort of jumping to the end of the story and what the investors are going to see as like, ‘How do we sell a million of these?’ It’s gonna be ads and spots on things and stuff like that. So it’s great when it’s an impulse buy you see a thing, ‘Oh yeah’, and I buy it, perfect. But you’ve got this weird time delay. So somehow they have to be able to see an ad for it and it stick enough in their head, unlike a demo which is obviously sticky because they just spend 15 minutes with it. But it still sticks in their head enough that two weeks later they remember and go get the thing. That part is actually very hard. So what that means is, you need to have a way to be sticky when you first show it to them so that you can follow up later when you know they will be ready to buy.

So if that’s another thing to think about. How would I do that? How would I tell someone about this, but in such a way that it’s sticky enough either because I continue to e-mail them or because it is in their mind because they keep seeing it every day or there’s some mechanism which two weeks go by and they’re still thinking about it. So if you can think of some marketing mechanism, not that you’d implement today, right, but would be a mass-marketing system for that. That’s compelling.

Kari: One of the other things I’m trying to test early now is tag lines and messages to see. My theory, I’ve gotta test the theory, is that people aren’t looking for a solution because they don’t believe the solution exists. The solution is, ‘Don’t be so stupid to lose your stuff, don’t let the kids lose your stuff.’ And that’s not a solution because I don’t want to think about it because it’s painful. If I see that there’s really, actually something that might solve this problem, I’ll notice it when I misplace stuff. I’ll allow myself the emotional pain of noticing how painful this is because I see there might be a solution. That’s the feedback we’ve been getting.

Jason: Here’s what I would do about that. I would decide how it is you could reach some people. That could be AdWords. That could be guest posts on some blogs, maybe mommy blogs and so forth or organization blogs. That kind of stuff. Actually, Bob can speak to that really well. That kind of thing where the kind of people who would buy this would be and you’d know who that kind of person is better than I would.

Test this by doing the following. You have a landing page. A one page landing page that just describes what it is, says, ‘Never lose something again because it’s just like when you lose your phone and you press the button on the base and it finds it.’ Or some kind of super easy analogy where everyone gets or maybe just a picture of something beeping like sonar from the corner of the room. Something like that where I can tell in 5 seconds what this does, 3 seconds what this does. With a box that says, ‘This product is coming soon, if you sign up now to get on our waiting list, there’s no obligation. When we do come out with it we’re going to give you 50% off,’ or something like that and that’s it. Just see if you can get people to do that or Kickstart.

In other words because you just said ‘I can get in front of them and then I can do this.’ Again, you can do that without a product and you should. Now you’re going to have a mailing list that you, by the way you can go do stuff to. Like send them a survey to find out more about who these people are. You could maybe get some of them on the phone ask them how much they would pay for. When you do come out with it by the way, hopefully you have the list of a couple hundred that you can poke to get the first dozen or two dozen units into their hands or something. So there’s all kinds of value out of doing this. You’re proving something about the business and what people wand and you’re also developing more customer development opportunities and you’re developing your alpha test list. All kinds of reasons to do this. And you can do this now. Let’s just say between now and when you raise money, you can do this so that you again, as you might say in Lean, you have all this learning knowledge about the market, and how you’d get there, and how you’re going to sell, and what the price point is, see how valuable that is?

Bob: Kari, couple quick things. First off, the URL and the name doesn’t work for me. However, smallthingseasilyfound.com is available. Next, you’ve heard of Square, the credit card reader that you plug into your iPhone? If you can go that way and I have no idea if you can, that would be a way of shedding 9/10 the cost of the device. Third, I’m not so sure about the mommy thing.

Kari: I’m not so sure what you mean by go the way of Square. I know Square, but I’m not sure what you mean.

Bob: OK. They have a postage stamp credit card reader that plugs into the iPhone. So they’re using the iPhone’s storage power, all those good things and that becomes a different device. Now it’s a credit card reader.

Kari: That’s actually what we’re going to do. You’ll attach to your smartphone.

Bob: The third thing, I’m not necessarily sure moms and dads are necessarily the people who are going to pay for this. I think that people who are concerned about surgical tools, automotive tools, construction tools, aircraft tools, etc., are the type of people who, not without a blink, sign you a big check.

Patrick: That’s interesting.

Bob: One aircraft tool in the wrong place will ruin your day and the plane and everybody. So I’m thinking that it’s more approach. It’s for people who have small things and they need to be easily found.

Kari: Yep. I don’t really want to say pivot, because I’d rather not pivot there, I’d rather make that the next step.

Bob: You leverage. You leverage what you got. Everything else. It’s a different website and maybe not even much more than that. But I’m just suggesting that, “Small Things Easily Found, that’s going to have a whole lot better SEO for you than ‘You Groke It.’

Kari: Where we were going with ‘You Groke It’, was to do something like Tivo, and define a different word for looking or searching or finding.

Jason: But you’re not using a different word. That word already has meaning. If you’re going to define a new word, which I actually agree with Bob, but if you are going to define a new word, then actually define a new word, not one that comes with baggage.

Kari: I hear you.

Patrick: Cool. Thanks for calling in. I appreciate it.

Kari: Thanks for all your help.

Patrick: All right. We have time for at least one more. Videm, are you available?

Videm: Yes, I’m here.

Patrick: That was you who had a question about newsletters, correct? Is that something you’d like to ask?

Videm: Yes, exactly Patrick. It was just a question that came up at that particular moment. It’s not a very strategic question but still, again my name is Videm [inaudible], I am actually from [inaudible] product name. We have a product called Stress Stimulus. I was wondering if I’ll be given the same guessing game about guessing what a product is about?

Jason: OK. Stress Stimulus.

Videm: Right.

Jason: Wow.

Patrick: I think we just experienced some.

Jason: Yes. Stress Stimulus. Stress is the silent killer and we all have it even if we don’t want to admit it and we think we can go on forever. Maybe if you induce it on purpose, you can show people where it comes from and how it feels so they can find out what the stimulus of stress is in their lives and therefore manage it better.

Videm: It’s actually a tool for stress testing and low testing web applications.

Jason: Oh, that’s good. I like that. So what’s your question. Let’s get to the question.

Videm: Actually the question is that we’re now at the point where we need to get a newsletter going with the product news. I’m receiving everyday maybe half a dozen newsletters, but I don’t keep them for too long in my Outlook.

Jason: Right.

Videm: I wish I kept all the copies of these well illustrated and well worded e-mails to use them as a sample or as a template, but virtually I can’t find them. In other words, there is no service which will allow me to search those e-mails that are widely available, like newsletters, which can be used as a template.

Web content is well indexed and well cached these days, but it looks like e-mails are not as much.

Jason: OK. Well, first of all it’s easy to get examples of newsletters. You just sign up for a bunch of crap and wait. Then you’re going to get a bunch in about a week. That was easy. Here’s the thing. I don’t think that’s what you should do, because listen to yourself.

You said, ‘I get a bunch of newsletters, the thing is I didn’t keep them. I just deleted them. I wish I had some.’ Yes. You didn’t keep them, because they’re not that useful. You just threw them out. In fact, if there were some that were really good you wouldn’t have thrown them out. You would have archived them and you would have had them.

Or you would at least read them regularly and you would already know what they are, what they look like, and what kind of content they have. This, to me is the problem with most newsletters. Most of them are so boring and useless, people don’t read them anyway. I’m not sure why you bother with a newsletter when it’s going to be so bad.

The thing is this: if you just want to do product updates and that’s the point to just communicate product updates with your customers and that kind of thing, awesome. Go get a free blog over at wordpress.com, I would say use my company WordPress Engine, but don’t. Go get the free one at wordpress.com, right?

Post your product updates there, people who want to read it via RSS can, people who want to get e-mails can. Everybody can consume that the way they want to. You can also Twitter about it I guess or any of that other garbage. You’re done. That’s it. You did product updates. If that’s all your going to do, there’s no reason for it to be a newsletter or anything like that.

However, if you actually want to make a real newsletter, and get value out of it, I think that’s awesome, too. Then it’s not product updates, it has to be something good, which of course means good content. You could spend literally a career talking about building newsletters that people actually want to read, and building a business off of it.

Another problem you have is when you look online for advice about newsletters, a lot of times it comes from people who literally make money on the newsletter, which is not what you’re talking about. You want to use the newsletter to do things like get more users of your product, or maybe cultivate your existing users, not necessarily to make money selling an eBook, which is what most newsletter advice is.

You have to be careful about most of that advice. But still, to the extent that advice talks about how to build a thing like a newsletter that people want to pay to get, well gee, if your newsletter has those same elements, that it’s so good that you would pay to get it. Awesome, right? You just got a newsletter people will read especially if it’s for free.

I would sort of turn the question back on you, although also I should throw this over to Bob because he’s been thinking a lot recently about making money on things like a newsletter. I bet he has some more insights for you, but I would turn it back on you and say like why do you even want a newsletter? What are you trying to get out of it? And therefore, is the newsletter the right form? If it is, what’s the right question because it isn’t copying all the newsletters that you think are so uninteresting that you delete it.

Videm: Right. Actually the newsletter is one possible mechanism. The goal here is simple. We ran a product beta for about five months.

Jason: Wait, wait, just tell me what the goal is in one sentence. The goal is?

Videm: The goal is, just get updates to people who signed on already to mail requests.

Jason: OK. Well, then forget it, you don’t need to copy forms, you just have what I said, you just have a public blog. People can subscribe to it, or if you have a mailing list, like a MailChimp or something like that, just go to MailChimp and get a default template that doesn’t look like ass and they have plenty of them that look fine, and do it. I mean, if that’s all it is then you don’t need to spend any time duplicating something. You’re done.

Videm: Yeah, I agree with you, but one thing that, this is an enterprise too, so most of the users would be corporations and I think they have a little different standard when they look at the new company.

Jason: No, no, no, no, no. So, at Smart Bear, I also sold to enterprises, we did six and seven figure deals, these are big companies, OK? To this very day, our product update e-mail comes out of that terrible mailing list software that everybody uses. Do you know what I’m talking about? What’s that thing called?

It’s like text only, it’s weird. It doesn’t even have a logo somewhere. It’s the worst possible thing, that’s how we do it. Right, we’ve got like over a 100,000 customers, it’s a huge company, it’s enterprise like, no, that’s completely not true. And to the extent that you do want to look professional though, right, and have your e-mails look good and not look like what I just described, that’s a perfectly valid statement that you don’t want it to look like that. Cool. Once again, you go to MailChimp or Constant Contact or Emma or any of those things, they all come with professional looking templates. You just click on one that has stuff you kind of like and type and your finished. It’s going to look plenty professional. If it’s just product updates and your not trying to get more out of it than that, then you shouldn’t spend more time than that on it.

Videm: I’m saying, it’s perfect. It makes things much easier, I thought that there is some kind of standard and it would be better if newsletters were more presentable.

Patrick: No, I work for a big enterprise and I care much more about spelling and grammar than any visual cues. I prefer plain, actually. In fact, actually, I’ll be specific, I am for more likely to read your newsletter if it looks good on my mobile phone than if it looks nice in my browser. Which means, keep it simple, because if I’m standing in line, yeah, I’ll give your newsletter a read. If I’m doing work, I’m going to delete it just like you do.

Videm: But Patrick, I want to ask you, would you read a newsletter which is in text only format, not even HTML?

Patrick: Of course. Yeah, I wouldn’t care. If I cared about what it was you were sending. As you said at the beginning, you delete most of the ones that you receive. I’ve kind of been judicious about unsubscribing from most of the newsletters that I get when I realize that I’m not really reading them.

Jason: You have to think about it for a minute. If you get an e-mail that just looks like text, it came from a person. Because when people do one of those spammy whatever newsletters things it’s all fluffy and it’s got a picture of somebody that’s clip art and, right? Like, when you just get an e-mail from a human, it just looks like text and those are the ones you read. And the other ones, you automatically associate with, uh, some newsletter? Did someone subscribe me? No, this is a tool I use. It’s worst, a lot of times, actually, to have it be all fluffy and look like all that stuff. So, it could be the best thing that you can do is make a text and literally say, ‘Hi first name, comma. We just came out with a new release of blah blah version 3.8. Here are the list of new features. Colon. Bullet A, bullet, bullet, bullet. If you have any more questions we’re always here to answer. Thanks. Signed, you.’ That’s it, like, because that’s what you would e-mail, people would read that.

Patrick: I’ll describe to you an exact site that does that. Go to kissmetrics.com, go to their blog and sign up for KISSmetrics blog and you will have an example of what Jason just described. You know, their nice, it says: ‘Hi Patrick, thought you might be interested in this topic today.’ That’s all you need to do. Just copy them.

Videm: And it’s OK, even to sign it with your name in oppose to my company.

Jason: No, it’s better, it’s better to sign it with your name because I read e-mails from humans. I don’t read e-mails from robots. Humans sign their names to things.

Patrick: Definitely.

Jason: I mean, what do you think is going to happen if they see it came from a human instead of from a marketing department, that they’re suddenly going to decide to stop buying your software? I mean what do you think is going to happen?

Videm: No just to play devil’s advocate, they can say well its lack of one person company or two people company?

Jason: No here’s what you do, you sign it, ‘Videm comma Director of Client Relations.’ Right, that doesn’t sound like a small company.

Videm: Right

Jason: And it’s true.

Patrick: Or it’s just, I mean, it’s perfectly reasonable that the presidents sends the newsletter, that’s perfectly normal.

Jason: By the way if 37signals, the founders and presidents is where the e-mails say they come from and Fog Books, it comes from Joel [??], like these are products with millions of users and very big enterprise customers, too. It doesn’t matter and again they’re only getting this if they bought your product already. We’re finished with all that, if they didn’t want your stuff they already didn’t buy it. They’re already customers, they’d have to decide to un-buy it or cancel or something and they’re not going to do that on the bases of whether you signed it ‘Videm.’ But Bob you’ve got some newsletter, you’ve been researching these letters recently, right? Do you have any advice for Videm?

Bob: Yes, a couple of things. Girst off, conversion rates on fancy picture e-mails is lower than text like nice topography text like e- mails. That’s one. Two, if you’re doing engagement for purposes of getting customers that’s one thing, if you’re just putting out announcements to your base, yeah, go with the blog but if you have something to share with them, that is valuable, and they’re not a customer, than you can make sense of this.

Three, there’s a company called TeenyLetter.com, MailChimp bought them today. They fit right in the space between gmail and MailChimp. So you can send out as a person a newsletter that feels really good as a newsletter/e-mail and it looks really professional, and by the way it’s free right now, I would definitely check into that.

MailChimp by the way, at least to my opinion, is the single most important technology other then what you do with your website, that a start up can do. Because that’s, as of the way things are now, if people want information from you, if you can pass that hurdle and get into their inbox you have a much more meaningful opportunity with them than just having more stuff out there. Make sense?

Videm: Perfect, yes.

Patrick: Videm one more thing, if you have fewer than say 300 people that you’ll be sending this to, do you have fewer than 300?

Videm: Well about 300 actually.

Patrick: OK. Check it, one more tool to look at is Send Personally. It’s an Outlook add in, anyone who is still managing to listen on this call, you receive an e-mail to me that I sent, was sent personally. It’s an Outlook add in that you just create your email and instead of hitting the send button you hit the send personally button and it goes through the process of everyone whose on the two line, it creates a separate e-mail for them. I mean it’s just so insanely simple and then the other thing is to Jason’s point about being personal with the way you send it, then it literally is coming from you, from your Outlook e-mail, and it feels like your writing an Outlook message and I think you can even just, I think it will expand a mailing list so you just have a distribution list in Outlook and boom that’s your news letter, done.

Videm: Yes I was looking at Gray Benefits because you can merge it with whatever customer data base you have.

Patrick: Yes it’s a great little product for like 30 dollars, it’s awesome.

Videm: Perfect. Made a lot of notes. Thank you guys.

Patrick: All right I’m going to un-mute people; everyone as we wrap up here and if anyone has any additional questions.

Sergei: Well if you guys have a five more minutes I’d like to ask one?

Patrick: Sure it this Sergei?

Sergei: Yes.

Patrick: All right Sergei, what’s your question?

Sergei: We’re still guessing the company names or?

Patrick: Yes let’s do that.

Sergei: It’s Useability test.

Patrick: Oh hello, I’ve seen you on Twitter a bunch of times, right?

Sergei: Yes.

Patrick: I mean it seems like it’s a great name right, even if I get it wrong it’s still a good name. It seems like its useability testing, I assume it’s online because everything else takes effort and we know how people respond to having to take effort to do things even when they’re valuable, so, it means I can make an account with you guys and say, ‘I want you to visit this website or do whatever, here’s some goals I want people to take, I want them to videotape it, I want them to talk, I want them to do things, like try to sign up for my thing, or use a feature and I’m going to watch while they do it. And get all those awesome things that Steve Croak tell me to do and I don’t feel like buying pizza for someone to bring them in and you’re going to do it online for $100 and I’m going to get three of these videos and it’s going to be amazing.’

Sergei: There are a couple of companies that actually do that, but, no, I am actually going to try to stay away from the direct involvement in observing the users.

Jason: OK. So what do you do?

Sergei: Actually the type line of the company is Usability Testing Tools, but the long version of it is Usability Testing Tools For Everyone. But before I get to everyone I need to make sure that I actually run it by people who actually use it in the industry. I recently posted a message on one of the groups on LinkedIn, and I offered a coupon if anybody wants to try it for a year and I think about in a month I got about 70 people asking for coupons. So, all of them are usability experts or usability analysts. That kind of people, so, I got pretty good feedback. One lady from Portugal is teaching a class at the University to usability people and.

Jason: OK. Let me interrupt you. What’s your question?

Sergei: OK. Unrelated to this all. One of the people that actually replied to my e-mail and tested the tool, he contacted me and he said that he would like to see if he can collaborate and he would like to help in anyway. The question is, I don’t really have cash, you know, I have a couple of people signed up but I told him up front that I don’t have money to pay you. What can I offer him? How do you evaluate the company at this early stage?

Jason: What do you mean he wants to collaborate? What the hell does that mean? Be specific, he wants to write code for you? He wants to sell stuff? He wants to be a partner? What does he want?

Sergei: Well, I haven’t really talked to him yet because I don’t know what to offer him.

Jason: But what does he want to do? I mean is he a coder, is he selling, what?

Sergei: No, he’s not a coder, he used to do something sales. He’s in some sort of occupation, director of, uh . . .

Jason: OK. So complete the sentence.

Sergei: Accounts or something, so it sounds like he would be good at.

Jason: All right. Hello? So, complete the sentence: The role he would have at Usability Test is everyday he would . . . what?

Sergei: I don’t know yet, he called a couple of times to speak to Charlie.

Jason: Well, then this is really easy, forget it. We don’t even know what he’s doing, this is crazy. I mean, the answer is . . . let me finish. Hello?

Sergei: He got great reviews from people, he is more of a project manager type, I guess.

Jason: You can’t even tell me what he does. You can’t even tell me whether he is going to sell, he’s going to support it, he’s going to demo the product, he’s going to do marketing. Like, you can’t even tell me what he’s going to do. I’ve asked you now like three different times, in different ways, what is he going to do? And your like, well we don’t know, maybe a little of this, maybe a little of that. Well, then forget it. He needs to, you know, anybody that joins your company, whether it’s an employee or something else, because you don’t have money so then it’s equity and dah, dah, dah, they need to significantly move along whatever it is your trying to do. Like, get paying customers, or, maybe move it from 70 to 1,000 people doing the demo, or something that significantly changes what you’re doing, otherwise you don’t have the time to risk on somebody you don’t know, and train them on stuff and what if they don’t work out? Which they probably won’t by the way. You know, you don’t have the time for that kind of stuff, unless, it might have a huge effect. And so, he may have a huge effect but you can’t even articulate what it is.

So I would just respond to him and say, ‘Hey, you want to collaborate. That’s great, I love that you love what I’m doing. I read the recommendations people left you on LinkedIn, it sounds like other people like you, that’s awesome. What do you think you can do for me?’ If he can’t really answer that then I think, he has. And if he can, then you’re having a conversation around that. He might say, ‘Well, I’m a great product developer.’ My guess is that you don’t need a product developer because you are a product developer. If he says, ‘I’m a product manager.’ great, you’re a one person company, you don’t need a manager. You need people that do stuff. If you’re not building something or selling it, I don’t know what you’re doing when you’re a three man company, right?

So, or maybe he says, ‘I have a magic touch where everywhere I run around people magically buy stuff from me.’ Oh, that sounds good, that sounds like something you need.

Sergei: Well, if he can prove it, you know. I’m not just going to take the word for it.

Patrick: Absolutely.

Jason: Well, OK, but at least he has to be able to articulate what it is that he proposes, the effect that he proposes he can have on your company. Either he hasn’t said or you haven’t heard because I keep asking what he’s going to do and it’s like, ‘Well, I don’t know, some stuff, manage some stuff.’

Sergei: Well, at this point there is so much to do that I could probably use help in any field, but I agree, I need to know what he is doing. But again, let’s say we talk and he says, ‘I can sell stuff.’ Do you I just ask him to try it for commission, percentage, not the company but the sales or?

Jason: That depends on a lot of stuff. Do you have something that’s salable in the first place? Or are you setting him up for failure?

Sergei: I do have something to sell.

Jason: No. You just said, no one’s ever paid for it. So no you don’t, you . . .

Sergei: No, there are a couple paying customers.

Jason: OK. So, maybe it is. It all depends on the situation what it is that makes sense. Of course, you try before you buy with humans especially, when you’re a one person shop. What you said is, ‘There is an infinite amount to do here I can use help with all of it.’ Not true at all. You don’t need an accountant because you’re not moving money enough. You don’t need lawyers because you’re not doing anything like that yet. You don’t need a project manager because there is nothing to manage. You may or may not need a sales person, if this is like a $1,000 product, then it would be great to have a sales person because that’s the kind of sales it is. If this is a $20 a month product, then you probably don’t need a salesman.

What you need is an online marketing expert who can get a whole bunch of people in the door, is awesome at conversion funnels and all that kind of stuff. Maybe even start a newsletter about what you’re doing because that might actually be a really smart thing for this kind of field, to stay on the top line with people. Especially since this is the first of many products you expect to make so you want to make a relationship with those people. That’s a whole other kind of person.

So I completely disagree with you that there’s lots to do and that you can use help with all of it. You have a limited amount of time and taking on anybody in any format is a lot of time suck and a lot risk and is not going to pay off as much as whatever you think it is.

I run into this all the time by the way. I am constantly working with somebody, I hire a consultant even an employee and I have these expectations of what I think it’s going to do for me and for the business. This is not a disparaging statement, it’s just that it never works out to be as good as you’re hoping it will be. That’s not because of them, it’s because you have these expectations that they’re going to magically make certain things go away. It just never works out the way. I still have that problem. I still think that, I have to consciously think, no, it’s not going to be that good. I still have that problem it’s human nature.

That is why I am kind of focusing and saying, no it’s not true that anybody can help you. It’s not true that it’s OK to go into some nebulous thing with someone because he can sort of have sales experience or he’s not a programmer or something. Not good enough. You need to know exactly what it is that he’s proposing, that he’s going to do for the business and you have to believe that that’s a really big deal. That if he does that, and even if he doesn’t do it that well, he can still change the business by an order of magnitude, 10x more customers, or 10x more revenue, or whatever. Something important to you. If you can’t find that then the answer’s an automatic no. That’s easy.

Sergei: OK.

Patrick: Sergei, if you haven’t already, go to businessofsoftware.org and find the blog and they just posted the transcript, and especially the video, of a talk Jason did last year where he goes through the process of getting a sales guy involved. What was the name of the sales guy, it was the hipocrafal [SP] name? Phil?

Jason: Frank.

Patrick: Frank, and go through that and he explains a lot about why you shouldn’t doubt yourself in contact support and with sales people. If you haven’t watched that, it’s great.

Sergei: OK.

Patrick: Thank you so much.

Jason: Me, jumping on you about this, it’s because I am telling you most, maybe all founders on earth, make these exact errors. Absolutely me included, and like I said, to this very day, to this very day I go up against these things and have to consciously, actively remember that’s not how it is and rethink it myself. So I’m jumping on you only because I see me in you and I see almost every founder on earth in you and I want so desperately for you to not make this error, at least not this time and not this way. Make it some other way. Don’t think for a second . . .

Sergei: I’m buy myself and I’m not accomplishing a lot and I’ve got to do all these taks and I’m not making progress on my code and . . . [SS] . . . I feel like I need to do something because you read those glorified stories of how teams build.

Jason: I hear you and I’m not arguing with any of that stuff, that sounds great. So what I’m going to do again . . .

Sergei: I’ve got to take a leap of faith at some point.

Jason: No. No. First of all, you try before you buy. I mean yeah, it is a leap of faith at some point, but that’s really sounding like you’re jumping off the cliff with total risk. Number on, you have to at least have a plausible idea of what they’re going to do for you. Number two, you try before you buy. You try it for two weeks, four weeks, whatever. Number three, of course, you do reference checks and that does not mean stupid things people write and link in and even calling the references is difficult because people say nice things because they’re listed as references of course they say nice things. It’s better to find someone else that was also at that company they worked with, that’s even better. But even if you talk to that person, you have to take it with a grain of salt, and think, ‘This person’s going to say reasonably nice things. Are they really over the top nice things, or are they just kind of nice things?’ You have to kind of judge that. Like, there’s a lot of nice things you can do to, to sort of help that.

But again, it has to come back to how this is going to completely change what you’re doing today. Not just out of feeling of like, ‘I’m by myself, I need someone.’ OK. Good, but that’s not the reason you picked this guy. You could start soliciting for a co-founder, you could start soliciting that on hacker news, or going to local meet-ups, or finding other people online that you have an idea of what could be the ideal co- founder, and then solicit them. Like, these are all good ideas if you want to go out and get some more help. That’s cool.

But, again, you have to be focused on what it is you want from them, because you’re only going to get half of whatever you expected anyway.

Sergei: Sure.

Patrick: Thanks for asking your question, Sergei. Thanks to everyone for staying on with us this time. It was as pleasure for me, I hope it was a pleasure for you, as well.

Jason: Bob, do you want to say anything?

Bob: It’s always neat when you can take a look at somebody else’s issues, when they’re going to start up, and see the thought process toward solving that, and I’m looking forward to the next one.

Jason: Yeah, me too. If I could leave with something, it’s this. It’s very easy to give advice. It’s very easy for us to tell you what to do, and so, and we’re not necessarily right. You just said in one sentence what your company does and we don’t know anything about you. We don’t know what your goals are, we don’t know personally where you’re at, and, you know, there’s like all kinds of things that are actually important, if you were to dispense advice properly. And so, this is not dispensing advice properly, actually. This is taking a stab with a very small amount of data and hopefully giving you, what you should really take it as, these are some good ideas. These are some things that are maybe worthy of consideration, but the best thing you could do is take away this sort of attitude, whether that means more self-doubt, or whether that means, no there isn’t just one way to do it, or, ‘Yeah, I do have to decide what’s really important to me and then focus on those things.’ I think that’s some of the themes that, just for whatever reason, appeared today, and those are useful and things that you can take away and actually apply, because obviously those are good things and easy to miss when we’re doing the day to day aspects of the business.

And just to be self-deprecating again, again like, there’s so many things that I do, for example, at Word Press Engine everyday, where if I were not doing it, and looking at myself, I would be admonishing myself, ‘Why did you do this when you should have done that? How come you made this choice? How come you’re not asking those questions?’

Because when you’re in the midst of it, you can’t, you don’t have that perspective that an outside person gets. So, you know, I wouldn’t be surprised if a lot of you on the call actually had some of these thoughts to listening to other things, even though it’s hard to do it to yourself. And so another thing to do is to form little communities. I think there”s a company here that might be able to help with that. But form these little, like, little support groups and find people who are going through this kind of thing, and have these kinds of discussions because you can attack each other, in of course, in a constructive way, like we did today, and that is valuable. Being more introspective and listening to other things, and then, of course, making your own choice in the end. And we will do more of these, so i you make some progress, or if you don’t, hopefully you’ll call back in the future and we can do it again.

Jason: All right. Thank you very much, Jason. If anyone has any feedback, I sent you an e-mail. Feel free to reply back and I’ll make sure it gets properly handled. Thanks!

36 responses to “Episode 2: Smart Bear Live!”

  1. Hey Jason, it looks like the first 4 company’s URLs are relative and not absolute… just a heads up.

    Thank you for providing yet another platform for all entrepreneurs to ask questions and get some needed advice!

  2. Hi Jason!

    Loving the show so far, especially this episode – I learned a lot from it.

    One comment I’d like to make: your co-hosts don’t get a whole lot of input.  I don’t know if this is by design (ie. maybe they only want to make the occasional comment) and so far they haven’t been anyone one I’m familiar with, so maybe I’m not even that interested in what they have to say… ;-) But it seems “unbalanced” with you doing 90% of the talking.  Maybe in the next one you could alternate letting your co-host(s) be the first to respond to a question or something like that?

    Anyway, keep up the good work!  I can’t wait to hear the next episode!

    Best regards,

    • You’re right, it was unintentional, and Pat and I discussed it afterwards.  One problem is that Bob wasn’t in the room but Pat and I were.  Another is that I talk too much.  :-)

      In the first episode I think Josh and I had roughly equal airtime — that’s the balance we ought to have.

      It’s an important area that I need to improve in next time; thank very much for the feedback!

    • As Jason said, we talked about it … there were various reasons for the imbalance – Bob was remote; I was focused on the call and recording technology; I wanted to hear what Jason had to say as well (particularly for the startups I already knew personally) … and I think I was a little nervous, too.

      Glad to hear you MIGHT have wanted to hear what I had to say :P

  3. Hi Jason, any chance of a transcription appearing? Would be a great help for readers like us :)

  4. Very interesting with lots of valuable insight. It’s amazing how so many startups still forge ahead with heads buried in their awesome product and defend their predetermined action, rather than listen to their potential customers, business experts/ investors and their markets (if defined!).

    • Well shoot I did exactly the same thing. We all do, automatically. It’s easier to stick with what we know and what we’re passionate about.

  5. These podcasts are seriously awesome! Please keep the show going. Can’t wait for the next.

    BTW, I’m guessing the best way to say thanks to rate it on iTunes?

  6. At first glance I thought run time would be way too long at 1:45 but found myself pausing and coming back.  I think 1 hr would be an idea length.  Jason, LOVE the way you boil things down to a very simple question/answer. I tend to make questions way more difficult than they really are.  You give very direct and candid feedback which is hard for entrepreneurs to come by when we’re shaking the same friends and family trees.  Not afraid to call it as you see it, caught me a little off-guard but I really liked it!  I may wait a few episodes before calling in with my own questions :-).  My brother and I recently started hosting a radio show here in Austin as well and we would love to have you as a guest, http://www.austinilab.com.  I look forward to the next episode. -Kyle-

  7. I’m to impatient to listen so I read the transcription.  I was surprised by the depth of knowledge and found I read it all at one sitting, a rarity in the days of multiple-site multi-tasking.  Very interesting discussion, terrific recommendations for helper admin tools like toddledo.   I really enjoyed the advice for starting a company: start a project or a hobby on the side.  That one is still bouncing around my head as I write this…

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