Episode 101 | Key Takeaways from Business of Software 2012
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to covering the key takeaways from this year’s Business of Software Conference. This is Startups for the Rest of Us: Episode 101.
[00:19] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:29] Mike: And I’m Mike.
[00:30] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Well, we are getting some submissions on the drinking game and in fact, Glenn Bennett submitted a comment on the blog and he said “Here’s some help with winning the drinking game; Alternatives to ‘a shoutout include Special thanks To, Many thanks to, Thank you to, We’d like to acknowledge,” and my favorite and I think I’m gonna start using this one, Mike, “We appreciate the acknowledgment of our podcast by…” insert name here. [Laughter] It’s just somehow, it’s a different sentiment.It is the same thing but so what — what’s really going on this week?
[01:01] Mike: Well, I was talking to our Virtual Assistant. She said that she got an iPhone 5.
[01:06] Rob: Awesome. Now, we had given her some Apple credit last year. Is that right?
[01:10] Mike: I think it was actually the year before. She hadn’t use them.
[01:12] Rob: Right.
[01:13] Mike: And because she is — kind of a Mac person and she got an iPhone 5 and started using it and ran in to a couple of issues here and there. It was mostly minor stuff that if you’ve been using an iPhone for a while, you’ll probably set those things up. She was switching from a BlackBerry to an iPhone. So that was kind of, I’ll say a rough transition. [Laughter]
[01:31] Rob: Yeah, I imagine. Yeah, it’s a big, big jump.
[01:35] Mike: But I actually got an iPhone 5 as well and I don’t know. The transition for me was pretty seamless. I basically just restored my iPhone 4 to my iPhone 5 and everything worked fine and the only issue I ran in to was that all of the ‘Save Passwords’ for all the applications, I had reenter in the credentials. But I think that’s more because the certificates no longer match up because it’s a different device and it just says, “No, you have to enter new password.” But that was really the only issue that I ran in to.
[02:04] Rob: Cool, that’s not bad. So I have a 4S and I’ve just upgraded to the new what iOS 6 I guess and there have been a few kinks with that. The podcast app is still pretty clunky. It’s getting better but it has quite a few bugs. I don’t know if you started using it. Apple needs to get their act together with that. And then the Maps App, I’ve heard a lot of complaints about because they remove, you know, Google Maps and inserted their own and it works fine for me for what I’ve used it for but sure, there’s been a lot of issues.
[02:33] Mike: I understand that there’s going to be complaints here and there but I was on my way to the Business of Software Conference and I forgot what the address was. So because I went from the iPhone 4 to the 5, I didn’t have Siri on my 4 so I pulled it up while I was driving, just talked in to it and said, you know, “Find the Intercontinental Hotel.” It found it. I just clicked the route button and it gave me turn by turn directions and talked to me and told me exactly where to go. And I had a GPS but I wasn’t using it because I’m like, oh well, I’m just going to Boston. I know exactly where I’m going and then I just thought to myself, wait a second, I know they’re doing construction. They’re rerouting some traffic. How do I actually get there? And it brought me right there. I mean I don’t —
[03:13] Rob: Yes.
[03:13] Mike: … have any problems at all. But our VA lives in New York City and she said one of the big things that she ran in to is that it doesn’t have a public transportation on it which I —
[03:23] Rob: Got it.
[03:23] Mike: … can see how that could be a huge issue if you live in a big city and that’s what you use. So —
[03:28] Rob: Right.
[03:29] Mike: That I can see being an issue.
[03:30] Rob: Yeah, they definitely have some catch up to do against Google and — So hey, I want to ask a favor. If you’re listening to this podcast and you enjoy the podcast, I’d love for you to go over to podcastawards.com. It’s an annual podcast award competition and people are nominated, different podcasts were nominated. And Mike and I would love it if — even if we were just nominated and made it to the finals, it’d be a great thing. We have never even — I hadn’t heard of it before this year but as I look back in history, it’s actually a pretty, pretty popular thing. So if you have a few minutes, head over to podcastawards.com and right — scroll at the bottom of the page and you know, if you’re able to nominate Mike and I for the both People’s Choice and the Business Podcast Award, we would very much appreciate it. We’d love the recognition and the potential to grow our audience there. What else is going on this week?
[04:18] Mike: One of our listeners named Justin Sikes dropped me an e-mail about an attack on Adobe’s servers where somebody got in to one of their built servers that was doing all of the code signing for, you know, a lot of their different builds. So, you know, it was probably doing stuff for packaging of their flash application and various other things. And it had access to their certificate server and because of that, somebody was able to hack in to machine and start signing their own code and then distributing that as if it was signed by Adobe. People will get these e-mails from these hackers and it would say, “Oh, please run this,” and if they ran it, it would say that it was actually signed by Adobe Software. And if they would look at it and just by kind of glancing at, you say, “Oh well, this is signed by Adobe. It must be trustworthy,” and you click on it, then it will infect your machine with all this malware.
[05:09] Rob: That’s bad news. You know what? I think maybe they should have been using AuditShark.
[05:12] Mike: I believe so too and I feel a blog post coming on about that.
[05:15] Rob: [Laughter] Yeah, indeed way to news jack it I don’t know if you refer that that term newsjacking but it’s jumping on the news quickly in writing a relevant blog post assuming your app or your, you know, your story that you’re trying to tell is relevant to that. So sounds like good opportunity.
[05:31] Mike: So how about you?
[05:32] Rob: Two things I wanted to mention. One, HitTail is continuing to grow through — I’ve kind of found a couple of flywheels that I’m really tapping in to heavily. I’ve also been quite pleased with that new hire that I mentioned the contractor who’s working about 20 hours a week for me. He’s taken on a lot of responsibility and suddenly the other day I found myself on Hacker News for the third or fourth time in the same day and I realized, wait a minute, I don’t have enough to do. I actually to start some new initiatives like it’s to the point where I’ve basically off loaded the bulk of the day to day work on HitTail and I can either, you know, start some new marketing initiatives, this brand new stuff that I haven’t done because it’s too time consuming or I’m evaluating some of the acquisition opportunities and looking at potentially branching out. And it’s nice because it deals to a growing and the goal is that with these flywheels that he would be able to take them over from me. So it’s a forge in to a new territory here but quite please with how that’s going.
[06:25] Mike: That’s very cool.
[06:25] Rob: Yeah, and then the other that I wanted to mention I’ve just thought it was a cool idea I heard it on TechZing. I think it was an episode or two ago and it’s — the URL is thewhicher.com and it’s W-H-I-C-H-E-R. So it’s like ‘which way’ thewhicher.com. And it’s basically tournament split testing. So you can submit like five different versions of a logo and then have someone vote, do you like this one or that one. And if they pick that one, then it, you know, moves it down and then it’s that one or the next one, you know, two or three and then it’s three or four. And so it’s just a pretty cool idea. So I figured, you know, our audience could potentially find some value in that and I just enjoyed checking out some of the examples they had. So thewhicher.com.
[07:10] Mike: Cool. I think I’ve heard about that as well.
[07:15] Rob: So you went to Business of Software last week. I did not go this year, you know, it’s just — I’ve talked to Mark Littlewood four or five months and he said he was going to look in to angle it more towards enterprise stuff and they get some people who are like having IPO’s and just like a larger software audience, larger software companies, 50, 100 to 500 employees. And so I was kind of like torn. It was going to be a really big jaunt for me to try to swing everything and you know, in years past I’ve probably would have done it but I just felt like I don’t know that this is actually — that I’m actually going to get that much value at going this year. Now, from what I heard, I watched the Twitter stream and I’ve talked to a couple of other folks who went, it didn’t turn out that way that it was — perhaps a better year this year but I am definitely interested in hearing your take on that and of course, at this point I’m chomping at the bit looking to go in 2013 again. You, I imagine got a lot of sleep as usual.
[08:06] Mike: [Laughter] Absolutely — very, very little actually.
[08:09] Rob: Yeah, that’s how it always go. You still wind up — up till 2 or 3 in the morning, right, chatting with everybody?
[08:13] Mike: Yeah, I think I drew the line I think at 1 o’clock in the morning and I just said, “Look, I got to go.” [Laughter]
[08:19] Rob: Yeah because you stayed at home, right? You have like a 45-minute drive or did you stay in town?
[08:23] Mike: No, I stayed at a hotel that was about —
[08:25] Rob: Okay.
[08:25] Mike: … two miles away.
[08:26] Rob: Got it.
[08:26] Mike: So it wasn’t very — it wasn’t really far. It was short enough to drive. It only took me about I think maybe less than 10 minutes to drive from my hotel to where the conference was but — it was in a slightly different location. It wasn’t at the Seaport Hotel this time. It was at the Intercontinental Hotel —
[08:40] Rob: Right.
[08:40] Mike: … which is literally just up the street. I mean it’s about two or three blocks away but still same general vicinity. But while I was there, I had 15 people asked me if we were going to be doing MicroConf again this year.
[08:51] Rob: Whoa, nice. So I guess we’re not probably not going to have problem selling out again this year. [Laughter]
[08:57] Mike: I would guess not. I mean there were – and it was really funny because several of them had told me it was about two or three days in to the conference, they’re like, “Hey, you know, just want to let you know I was at MicroConf. I loved it.” And I’ve been telling everybody about it [Laughter].
[09:09] Rob: Oh no and you’re like “Shh, quiet. We [Laughter] only have 128 tickets.”
[09:13] Mike: Yeah, yeah.
[09:14] Rob: Yeah, we’re going to have to figure something out because just the e-mail list is growing fast and I don’t know, with only, you know, 128 tickets it’s — I almost bad that — for the people who can’t go who really want to go, it’s going to be a bummer. So we need to talk about alternatives and ways we can potentially expand it without just allowing of growing the conference to a huge size because that we will obviously want to keep that kind of that intimate feel that we’ve had for the past couple of years. If you’re listening to this and you’re interested in MicroConf, go to MicroConf.com and we do have an e-mail list and we’ll be — we’re going to start talking about it probably in the next few episodes and get in to more detail and thinking about the plans but it’s very likely going to be in Las Vegas and it’ll very likely be between I’d say somewhere between March and probably May of 2013. It’s a conference for self-funded startups and single founders. So are you ready to dive in to your Business of Software takeaways? Obviously since —
[10:05] Mike: Yeah.
[10:05] Rob: … I didn’t go and I actually was in Chicago for most of it. Aside from seeing the Twitter feed, I really don’t know much of what happen. So I’m interested to hear your take.
[10:14] Mike: What I do is kind of like what I do at most conferences what I’ll do is I’ll create a new folder and ever know and then for each speaker. I’ll just sit there and start taking notes. And there’s a lot speakers where I have more notes than others and I think part of that is just because there are certain speakers were I had more takeaways that were things that I didn’t necessarily know before or that I wanted to reiterate to myself later on. So for example, there was not so much that I took down notes from Peldi for example because I’ve heard him speak before. I’ve read a lot of his stuff. Same thing with Joel Spolsky and then there’s people like Kathy Sierra where I’ve got, you know, a few notes here and there and there’s others where like for example, Dan Lyons. I had almost no notes at all because most of it what he talked about was just his stories about running his blog as the fake Steve Jobs which was extremely entertaining but there wasn’t necessarily a lot of actionable material there as well.
[11:11] Rob: Right and given that they have, what, 14 speakers it’s not like we can cover all of them and all the takeaways in a single podcast. So we will probably have to skip around to maybe, maybe your highlights or well, some of the more key points that came out of it.
[11:22] Mike: Right, right, yeah and I definitely tried to cut that down for this podcast because this podcast would probably be, you know, 10 to 12 hours long [Laughter] if do.
[11:29] Rob: Right, right. So kick us off. Was Kathy Sierra the opening speaker then?
[11:33] Mike: Yes, she was.
[11:34] Rob: Excellent, so it looks like her talk was called Making Badass Users.
[11:38] Mike: Yeah, I don’t know if that was the actual title of it but it was something along those lines like any titles that you see here in the outline, those are all just kind of a high level summary. But her talk really focused a lot on how our software — I mean how the things that we put out there, people talk about them because it makes them look good. It’s not necessarily about, you know, the software itself or how great the software is. It’s about how well it helps people do their jobs and how well it portrays them in their job. So for example, if you’re making a piece of software that, you know, does really good bug tracking. It makes you a good product manager because you can assign things to different people and get a lot of things done. And it’s not about the software being good at what it is doing, it’s about making the person good with their job is.
[12:20] Rob: Exactly. Now, I love Kathy Sierra. I mean she’s totally dialed in on this — on building apps and at making badass users and actually as a historical note, she as far as I know came out with the phrase of you have your app make people awesome at X. And when you and I were throwing around the original topic for this podcast and try to write the intro, that’s where we took “The podcast that helps developers, designers and entrepreneurs be awesome at launching software products.” It was from a Kathy Sierra quote.
[12:48] Mike: Uh huh. Yeah, that’s exactly right and it’s interesting the way that, you know, that kind of plays in to a lot of the different things that, you know, we’ve done over the years and you know, how this podcast turned out.
[12:57] Rob: Yeah, totally. So this sounds very similar to her talk two or maybe it was three years ago she talked to BOS. Did you ever see that talk?
[13:05] Mike: I did. And it was —
[13:06] Rob: Okay.
[13:06] Mike: … it was similar but it was —
[13:08] Rob: Okay.
[13:08] Mike: I guess she expounded on it a little bit more. I mean I think she got the impression that, you know, it wasn’t just about making your users awesome, it was making them awesome in what they do. So it was kind of diving in a little bit further. It’s like well, why does that work, what is it about your software that makes the users awesome? It’s like well there’s nothing really about that, it’s just making them awesome on what they do. That’s really what it is and she had a bunch of conversations with people and talked about how, you know, you shouldn’t confuse loyalty with bribery. So if you’re putting special deals out there or trying to get people to, you know, like you on Facebook for example, don’t confuse the fact that you’re bribing them with loyalty to your product. I mean you’re bribing them for Facebook like. It’s not that they love your product in some cases. I mean don’t get me wrong. There are cases where, you know, if you’re not compensating for that Facebook like and they do like you anyway on Facebook, then sure, you know, that could be construed as them actually liking you guys.
[14:04] But one of the things that she said that really struck home to me was that, you know, people don’t tell their friends about your product because they like you, they tell their friends because they like their friends.
[14:12] Rob: And what is that mean? Is that they’re trying to help their friends out?
[14:16] Mike: Yes, so she had this whole — it wasn’t really a comic book series but it was a series of slides where there are somebody talking about doing something. I think the example she used was Pinterest and it was basically, you know, people are not telling their friends about a given product or service on the internet because they like that service, they’re telling it because they like their friends. They want their friends to be happy. They want their friends to see new things and you know, they like their friends. So they’re going to tell them about this new service because they want their — to kind of expose their friends to this new thing that will help their friends’ lives be better. It’s not because they like the products or like they like Pinterest. It’s because they like this — they like their friend.
[14:53] Rob: Got it. So it’s not enough just to get the job done and just to help someone with the task at hand but she’s saying you have to just blow them away. You have to make them awesome. You have to make them a badass user because that like psyches them up and energizes them and gives them energy like so much that they want to go help their friends and they want to like evangelize your product to them?
[15:11] Mike: Yeah, that’s right. One of the other quotes she said was “People are loyal to themselves and people they care about.”
[15:16] Rob: Got it. That makes sense. Did she go in to any specifics of how to do that because this sounds like totally cool but how do I do that? Like let’s say I have HitTail, you have AuditShark, what do we do next, you know? [Laughter] Is there – or did she recommend a book or anything of getting more specifically in to how you go about doing that?
[15:33] Mike: Kathy is by far the person I have liked the most notes from.
[15:37] Rob: Really?
[15:37] Mike: There was a lot of discussion about designing for the — the post user experience. So after a product has been used by the customer or the prospective customer, what is it that you want the end user to say to their friends about the product? And it’s really about taking product’s planning to the next step. So I think at MicroConf Patrick McKenzie had talked about designing the user experience like the — like the invasion of Normandy and it was, you know, and Patrick’s talk was about basically scripting out exactly what you want your users to see and when they saw it so that the things that they needed were — that were relevant to what they were doing would show up when they needed them, not before or not after but like right as they were doing something. And it helps them get through the product especially if it’s a complicated product and in a way that really moves them through and makes them successful at whatever their task is. And I think that Kathy Sierra’s take on it was you really wanted to design for the post user experience.
[16:35] So after you’re done walking the user through the product itself and they’ve used your product, what do you want them to say to their friends? What do you want them to say to their coworkers? And I think that relates a lot back to what Patrick’s talk was about because if you script out that user experience, they’re going to talk about the products to their friends about how easy it was or how they should check this out because it will make their lives so much better or so much easier. And I think the two are very, very much intertwined. They definitely, you know, relay to one another like that.
[17:06] Rob: Very cool. So for listeners out there, if you weren’t able to catch the live stream, it looks like if you to businessofsoftware.org, they’re going to have all the talks edited, processed and posted online in the next month. So it should be by the first week in November. So that’s — sounds like Kathy Sierra is a good one for folks at your mark and then probably watch once that’s online.
[17:31] Mike: Jason Cohen’s talk was really interesting because that was all about data and metrics and how they can make you do totally the wrong thing. And it was really interesting because one of the first things that he showed was an A/B test that I think he used Google Analytics but it showed an A/B test between two different pages and page 1 was, you know, some variation and page 2 was supposed to be some variation. And if you look at the graph, page A did, you know, significantly better than page 2 and it was over the course of like a month and something like 24,000 data points which you would think would be statistically significant but when you started digging in and looking at actually what was being tested, what he said was there was a company that he was working with in Austin where they were very, very driven by data metrics and split testing and they split tested all these different things and after about year, they started looking at their split tests and their conversion rates and saying, “Well we’ve split tested all of these things.
[18:31] We’ve always chosen the one that is supposed to go on the right direction, yet our conversion rates between last year and this year are really not any different. So what’s going on?” So what they did was they took a page and then they took a copy of it and they split tested between the two and they found that over the course of the month, one of them did like significantly better than the other one. And the problem was that they did not find a statistically significant result like they didn’t wait long enough is really what it came down to.
[18:58] Rob: I see. So he’s not saying that A/B or split testing doesn’t work. He’s just saying that it’s more complicated than most people probably think. They think they can throw up a split test and just look at it as it approaches. Boy, this one is really creaming the other one so it must be better. There’s actually quite complicated formula for doing split testing and I know that when you use Google website optimizer and it’s now actually integrated in to Google Analytics that you’re supposed to wait until the end of the term. They actually declare a winner at some point but it always takes longer than you think it’s going to and so what he’s saying is you have to wait until they declare. You can’t just can’t make a call early on. Is that —
[19:37] Mike: Yeah.
[19:38] Rob: Is that a big takeaway? Okay.
[19:38] Mike: Yeah, they really is and he added a link. We’ll link to it in the show notes but it was basically the A/B hamster where there’s a hamster and they show it. They given an organic carrot and a regular carrot and it’s over this course of like ten different choices for the hamster. And 8 out of 10 or, you know, something like that, it chooses the organic carrot. So you’ll think, oh well hamsters like organic carrots but the fact is that it wasn’t a statistically significant margin. So unless you waited long enough, you really wouldn’t get an answer.
[20:12] Rob: Very cool and you know, I think we should know as we’ve — you and I have just been assuming people know who the speakers are like Kathy Sierra is an author and a consultant and she is a big time in the UI and UX user experience stuff. Jason Cohen is well a serial entrepreneur and he just raised funding for WordPress Engine. He has sold a couple of companies for cash and is just a super intelligent capable dude who’s done a lot of good thing for entrepreneurship and he shares that with people on his blog and at SmartBear.com. So Dharmesh Shah, he’s the founder of HubSpot in addition to he had a company before that but I think they cashed out on as well. It was retro funded but he also blogs it on at Startups.com and has one of the largest startup followerships, you know, online. So he speaks every year. I mean he’s a fixture of Business of Software and I always get tons of value out of his. So what he talk about this year?
[21:03] Mike: Well, he talks a lot about setting the culture for your company and determining, you know, the future of your company based on who you hire. And one of — I took on a couple of different quotes from him and one of them was “Strive not just to build a great startup but strive to build great entrepreneurs” and his comment about that was that when you’re hiring, you’re not just competing against other startups when you’re hiring. So for example, you’re not just competing against Google or Microsoft or Fog Creek or any of these other places, you’re also competed against people doing their own thing. So they may decide, well I don’t want to work for you, I’m going to build my own stuff. So that’s something to keep in mind when you’re hiring because, you know, you have to be able to offer an entrepreneurial culture to people so that they don’t want to go create their own stuff. They essentially want to work within your own company and be paid to do it as oppose to saying, “Oh well I’ll take a really, really low salary for a while and build my own thing.”
[21:56] Rob: Right. So for those of us who don’t plan on hiring employees soon, were there takeaways not regarding like company culture and that kind of stuff?
[22:04] Mike: Well there is one about finding the right types of customers and he said you don’t just want customers, you want crazy loyal fans and it kind of related to setting up barriers of entry and he related it back to HubSpot where they’ve grown the company. And one of their big barriers to entry for other people is that people who sign on with HubSpot love HubSpot. They love HubSpot for not only in what they do but for what they allow them to do and you know, he basically said that this is a strong barrier to entry because it dissuades competition. When you suck and your customers hate you, it’s really easy for competitors to pop up but you’re going to have a lot less competition by virtue of the fact that your customers love you because when people are out there looking for ideas of things to build, they’re essentially drawn to these companies that suck. They’re like, “Oh well, I can build something better than them because they’re terrible and their customer support is awful,” or “Their product sucks.” If you are really good in a lot of different areas, people are just dissuaded from building a competitive products to whatever it is that you have because not only is your company good but your product is good as well.
[23:12] Rob: Right and then people like you and so they don’t want to jump ship. I mean I think PayPal is a great example of this and so is Quicken or QuickBooks. I guess it’s Intuit that makes them but you know, you see — I mean there’s Stripe and Square coming out of the woodwork. There’s several other payment processes that are coming out the woodwork to kind of compete with the dislike of PayPal as well as — well, I won’t say everyone, most people don’t like QuickBooks and so there’s all kinds of, you know, financial apps that come out including Mint and inDinero which we talked about before, LessAccounting, all those guys. I mean they’re just a really wide open market. But if QuickBooks which owned like 90% of the business market at one point, the small business market, if they were obviously delighting their fans and making their users awesome, it would be much, much harder to get in to that market. So that’s cool.
[23:58] Mike: Next was Peldi from Balsamiq and he talked about a lot of different things. Most of it was things that I’ve heard from him before. The two takeaways I got from his talk was that right now he’s in a midst of researching organizations that have a flat hierarchy because one of the issues that he’s running in to is that as he’s trying to grow Balsamiq, he’s running in to problems where he’s the bottleneck. He’s basically making a lot of the high level decisions and he’s trying to move more to a situation where the employees are making the decisions and he is trying to remove himself from those day to day things. He’s looking at other companies where they have much more of a flat organization and one of the things that he pointed out was I think Valve Software has like a PDF or an employee handbook or something like that where it tells developers what their life is going to be like when they’re working at Valve and it pointed out, you know, that there is much more of a flat organization where there is not as much management and that the employees essentially dictate the direction of the company, not some top level management and you know, he’s looking at that just kind of a model and was asking some people in the audience for feedback and said, “Hey, if anyone wants to come talk to me about this particular type of arrangement for business, now it’s working out. You know, I’d love to talk with other people about it.”
[25:14] So I thought that was really cool. I hadn’t really considered the idea of building out a company in a very flat organization like that and I’m really curious to see what sorts of companies are possible with that arrangement. I mean could you imagine being in a, you know, a 500 or 1,000-employee company where there isn’t really a level of middle management it’s just like everybody is kind of doing their own thing and doing what’s best for the company and the management is just kind of air?
[25:39] Rob: I can’t imagine that but only because I’m never seen it done. But I believe it’s possible. I just believe — I don’t know that it’s ever been done before but it’s certainly cool to see Peldi thinking about it because he’s the kind of visionary that could put something like that in place. You know, it would definitely be — I mean that’d be something that would turn to a Harvard Business School case study if he could pull that off. I’ve heard of some companies and I’m trying to think — I think Xerox PARC was one guy, the Palo Alto Research Center and they invented the, you know, what — Ethernet and the laser printers and the mouse and that’s what Bill Gates and Steve Jobs had walked through when they picked up on that stuff. That was I’m pretty sure a flat hierarchy and I think there was one guy leading it and there was a bunch of researchers. And he only got up to — he got up at about 75 people, maybe a hundred and he could manage them and they were all doing their own little individual research projects. You know, you just don’t know because they weren’t turning a profit, right? They were funded by Xerox to do a research whereas Peldi is looking at creating an actual like a for-profit company that does that. So obviously, interested to see how he does it.
[26:42] Mike: Yeah, I mean — from the talk it certainly seem like they were companies out there that were doing it but there just wasn’t a lot of publicly available information about —
[26:51] Rob: Right.
[26:51] Mike: … how it’s actually done. So —
[26:53] Rob: That makes sense.
[26:53] Mike: I think he definitely identified some companies that were doing it and he just wasn’t quite sure how it was being done. So…
[26:58] Rob: Right.
[26:59] Mike: The one really awesome quote that I heard from him though was about VC funding and he said, you know, here’s the quote. He says, “As soon as you take VC funding, you get a boss and a kitchen timer.”
[27:08] Rob: That’s awesome, indeed and I have, man, I’ve talked a lot of entrepreneurs. It’s not that VC funding is bad, it’s just that you need to know what you’re getting in to before you go after it and that’s probably a pretty good analogy of a boss and a kitchen timer because I definitely have a timeframe. Most funds only go out to ten years and so they’re going to put you in the trash can or want you to cash out, you know, if you go — if you go up past that point.
[27:33] Mike: So after that was a guy named Mikey Trafton and he was from — I’m not real sure. It’s either Blue Fish or Fire Ant. I think Blue Fish was the company he used to own and then Fire Ant is his new one. And he was talking a lot about building a great culture and gave a lot of tips on how to attract better employees who are good culture fit and they ran in to some issues back when the economy crashed and he was going to have to let some people go. But because he had focused so much on hiring people who were a good culture fit for his company, when he basically called everyone together in a meeting, he said, “Look, we’re going to have to let people go if there’s any way that anybody is willing to start taking pay cuts, then you know, we can hopefully, keep some more of our people on.” And he said that by the end of that day, every single person that worked for him had come in and said, “I’m willing to take a pay cut so that, you know, other people don’t get let go.”
[28:24] Rob: Wow.
[28:24] Mike: It’s just, you know, a very amazing and compelling story about how if you build your company in such a way and hiring the right people who are a culture fit not necessarily a skill set fit that your company will be better for and you can pay them less. I mean that wasn’t, you know, the moral of the story but if you’re hiring those people, then they’re going to be willing to, you know, kind of put their necks on the line with the company to help you out when things get rough.
[28:50] Rob: All right, very cool.
[28:51] Mike: So next was Dan Lyons and if you haven’t heard of Dan Lyons, he was the fake Steve Jobs for the longest time. And I didn’t get hardly anything out of his talk. He did talked a lot at the very end about how to get in front of the press and how they weren’t going to let you get away without their pound of flesh. But one of the things that kind of stuck with me was that the advertising trend that he identified which was, you know, this TV dollars where people used to throw tons and tons of dollars at getting TV time and then on the web it’s, you know, you’re getting dimes and he called them digital dimes. Then now it’s trending towards mobile pennies where you’re getting much, much less for your advertising dollar which changes the landscape of, you know, how advertising is done in that particular medium. And he didn’t have any specific conclusions about who is going to profit from that or who is going to ultimately survive but it was just the matter of this medium is changing, advertising is changing and either you migrate with it or you end up dying.
[29:52] Rob: Right and for those who haven’t of Dan Lyons, you said he was fake Steve Jobs, he had a blog where it was called like Fake Steve Jobs and he was blogging as if he were Steve Jobs. And he’s a reporter and a columnist for some other job, then even wrote a book called Fake Steve Jobs and then eventually he came out, you know, a couple of years and said who he was. And yeah, so that makes sense. I mean he’s not a startup founder so never a lot of, you know, advice for some starting up but definitely would have knowledge about the media and advertising.
[30:21] Mike: Next was Gail Goodman who — she’s the CEO of Constant Contact and Constant Contact is a lot like MailChimp or AWeber and you know, helps companies that want to establish an e-mail relationship with their subscribers and give them updates about different things. And she talked about this the SaaS “long slow ramp of death” which her thinking was that eventually Constant Contact when it was founded back in the late 90’s would end up with this hockey stick growth and it never really turned out that way. It was funny because she had talked about having this flywheel that, you know, as opposed to a hockey stick and you’ve been known in the past to talk about, you know, accelerating the flywheel and things like that so that–
[31:02] Rob: Right.
[31:03] Mike: … you can build upon your earlier successes and you know, that propels you forward. Well she used the kind of the same analogy so that basically that throughout the history of Constant Contact there’s never been a silver bullet where they found one thing that works really well. It was just continuous incremental improvement and they are at the point now where they’re on track to do, I think she said $250 million worth the business and $40 increments from her customers.
[31:29] Rob: Wow, that is incredible. Constant Contact is the e-mail marketing software I know about. They’re the first one I’ve ever heard of. Yeah, they’re MailChimp like you said from the late 90’s and so they certainly have a lot of legacy stuff to deal with but I can totally see that being around for 13, 14 years would just bring it to that point I can’t imagine — I mean a SaaS business that generates that much revenue $40 a month subscriptions. It’s really impressive. I actually heard and watching the Twitter and the folks I’ve talked to that her talk was quite good. So that’s definitely I want to have your mark to watch in its entirety when it’s released here in he next month.
[32:08] Mike: Next was Paul Kenny and runs his — it’s a kind of —
[32:12] Rob: Isn’t it a sales consulting operation where he like helps people who come to your company and help train your sales people and help train you how to sell your product that thing?
[32:21] Mike: Yeah, but he talked a lot about how you can learn from what customer say to you so when you’re selling in to a customer and they say no, you can essentially learn a lot more from a qualified no than from an unqualified yes. And he said that the sales conversation with no resistance rarely ends in a deal being done. So if you’re talking to customers and they’re not raising objections, they’re not really questioning you about anything, chances are really good that they’re not going to buy from you either. So it was all about how to help the customers either raise objections or identify what their objections are and then kind of put them back in their core to, you know, help you get the answers that you need to identify whether or not your product is a good fit for them because there’s almost never a time where a product is 100% awesome fit for a particular customer. Sometimes it takes a little bit of hand holding and convincing to say, “Okay. Well this is how this product can fit in to your environment and this is information to kind of get you over the fears and objections that you currently have.”
[33:22] Rob: So here’s what I like about Paul Kenny. I’ve seen him speak every year I’ve been to Business of Software and in general, I don’t like sales people as a rule, right? I don’t think of most us do but Paul Kenny is the nicest guy and he is a great sales person and he’s not the slick slimy sales person you think of and he says that when he gets up there. He says, “That’s a bad representation, a misrepresentation and customers don’t like you when you act like that.” So he talks about how to be smart and be nice and how to do it right without fitting in to that stereotype. And so I just really respect what Paul Kenny has to say every year even though I don’t do enterprise sales which, you know, is most of what he focuses on. I still learn something from here every year and I wind up taking notes because it gives me more insight in to just the overall selling process. Even if it’s not face to face, everything he says, almost everything he says applies to, you know, what stuff that I do online or via e-mail as well. So awesome, I bet that was a good talk.
[34:16] Mike: It really was, you know, I’m skipping ahead a little bit hear but Dan Pink was the last speaker at Business of Software. And he had a lot to say about sales reps as well where he basically broke down the numbers of the population and said that basically 10% of the population is in sales of some kind and he had a bunch of studies and showed some of the statistics and showed some case studies where he was able to show that, you know, from the day that he had that the best sales reps are not the extroverts. Because everyone hires extroverts, you know, especially for sales reps because like, oh they’re outgoing, they’re going to be able to go out and get the sale and everything else but what he showed was that I think the dollar amounts that he showed where introverts get an average for every hour that they work is about $120 and extroverts get about $125. But the people who fall in the middle get around a $155 which is a pretty significant margin above either of those numbers.
[35:10] And you know, he had a couple of different theories for why that was but he was showing that the people who are in the middle tend to relate to other people a lot better and they can kind of fluctuate up and down the scale a little bit versus the people who are at extreme ends. If you’re really introverted, you’re not going to ask for the sale. If you’re really extroverted, you’re going to push too hard for the sale whereas those people in the middle, they’re much more likely to be able to talk to people and reason with them and listen. He’s like, you know, that’s one of the big problems with sales reps is they don’t shut up. [Laughter]
[35:42] Rob: Cool, so who was after Paul Kenny?
[35:44] Mike: That was Noam Wasserman and Noam is a — I think he’s a Harvard professor. And he had a ton of data on startups and most of it was on the reasons for failure within VC back companies. And he had something like data from 4,000 startup companies and about 35% of the ones that failed, failed because of product development or market problems and you know, basically product market fit problems and then 65% of them failed due to people problems. And one of the really tell in statistics that he had was that the people who stepped away from their CEO and Chairman of the Board roles made roughly twice what the other founder of companies did. So if you are a startup founder and you kept both the CEO and the Chairman of the Board role, then chances are you’re going to walk away with about, I think it was $3 million. But if you walk away from both the CEO and the Chairman role, then you would make roughly $6 million from, you know, startup.
[36:44] And again, this is average over the course of 4,000 startups but it was really interesting that the number was doubled like if you step away and the rational behind it was really because the people who have the ideas and the motivation to kind of get the company started are not the same types of people that are going to be able to get the company sold.
[37:04] Rob: That’s fascinating. That actually ties in to something I was reading the other day and the exact details escaped me but it was something to the effect of every fast-growth startup needs three roles over the course of its lifetime and it was the visionary which is right at the very beginning, having the vision and pushing the crew, you know, working long hours and just getting the product to where they can sell it and then there was like the entrepreneur and that’s kind of getting things up, scaling things, getting it to a sustainable business and then there was like the executive or the manager or some role like that and that’s, you know, the person obviously who scale sit up and builds an organization and makes — puts a lot of process in place. And it was saying that most of the time these three roles are not the same person. It’s very rare to see someone who can do all three and so, this actually ties in to that quite nicely.
[37:55] Mike: Yeah, and it was really interesting some of the things that he had talked about was equity split between the founders. I have some of the numbers here but he basically had a bunch of statistics about who split equity with the company within a month of founding and he said 73% of the founders split the equity within a month of founding. And he said 33% of it is an equal split, 21% has a huge gap of equity with there’s a greater than 40% difference between what the founders get and then there’s 90% have a large gap which is 21 to 40% difference and he had examples of all these different things. And one of the things that he talked about was is it wise to split equity basically within that first 30 days.
[38:39] And one of the examples he said against that was ZipCar where Robin Chase and her founder for ZipCar which I think they went IPO and have this like massive organization at this point but they basically talked about it upfront, had a handshake agreement where they were going to split the company 50/50. And over the course of the next 18 months Robin Chase did the vast, vast majority of the work and the other person put in virtually zero and now the company is massive but, you know, that other person who just agreed to it via a handshake, you know, got 50% of Robin share because they just, you know, Robin wanted to get that out of the way and didn’t ask the right questions. And I think her comment was something along the lines of that was the dumbest handshake she ever made.
[39:19] Rob: Right, that’s tough and that’s a lot of that goes in to that is vesting, right, is that you shouldn’t, everyone shouldn’t vest immediately. You should have a 3 or 4-year vesting plan even for founders so that if founder drops out or stops working on it that you essentially you fire him. You let him go from the company and then they stop vesting and they do keep some portion of that while they were working but, you know, after that they basically don’t own anymore of the company.
[39:44] Mike: Yeah, so one — the rest of is talk was about some of the founder dilemmas including that equity and whether static split is okay and if so, when is that okay and you know, what the investor or monetary dilemmas are about starting the startup so whether you’re bootstrapping, self-funding or taking outside money. It was a very fascinating talk but it was also a very — because he’s a professor, it seemed like it was very much a classroom setting. [Laughter]
[40:10] Rob: Yeah, that makes sense. There was a lot of positive buzz on Twitter about it. A lot of people were saying, you know, that it was a good talk. So if you’re saying it’s a classroom setting that mean it might have been boring or a little —
[40:21] Mike: No, definitely not. It was just something —
[40:23] Rob: Okay.
[40:23] Mike: … you would expect to hear on a lecture hall.
[40:25] Rob: I see, a lot of stats and such.
[40:26] Mike: Yeah, a lot of stats, a lot of declarative speaking style.
[40:30] Rob: I see.
[40:31] Mike: He actually walked up and down the aisles a little bit as if he was teaching in the classroom.
[40:36] Rob: Right.
[40:36] Mike: You know.
[40:36] Rob: That makes sense, that’s his style.
[40:38] Mike: Yeah.
[40:38] Rob: Oh cool, I have to take a look at that one. So next up was Noah Kagan. You know, I’ve seen — both you and I have seen him speak in the past and he always has is own unique style for sure and he pushes the boundaries. I saw a couple of tweets that were – I don’t know, they were calling in to question [Laughter] his — the tone of his talk. One of them said like “This was the most insensitive and insulting talk I’ve ever seen in a professional conference.” [Laughter] Obviously, he always has a lot of good stuff, a super smart guy. He’s founded AppSumo and he has grown it to 7 figures plus and knows marketing and knows how to do that. How do you find the talk? Was it cool or did you feel uncomfortable at any point?
[41:14] Mike: I think calling out people in the very beginning about trying to find the thinnest person in the room and the heaviest person in the room was probably a little uncomfortable.
[41:22] Rob: Got it.
[41:23] Mike: But I think a lot of the talk it revolve primarily around the fact that he had gotten away from his root so like he had started the company. He started AppSumo with the concept of bringing great deals to people and bringing people things that they would want for their businesses and that they just didn’t necessarily know existed. Bringing them cool stuff and he had gotten a way from that such that he was basically just spamming people and that’s what he said. I mean those were his words. He’s like “We got to a point where we were spamming people and I didn’t even want to be on my own e-mail list.” And he basically just said that was a huge mistake and I guess he went from within the course of like two months where they had like their best month ever and then with two months later they had their worst month ever and —
[42:10] Rob: What —
[42:10] Mike: … he let go a bunch of people. He let go half of his staff and sent out — actually and e-mailed apology to people saying, “Look, you know, we’ve gotten away from our roots. This is what I’m going to do to change it and let’s get back to delivering stuff in your e-mail box that you actually want to see.”
[42:26] Rob: Wow. Yeah, that’s crazy. I saw either a Twitter or post from him right after that where he basically said go to AppSumo.com and look and there was — I went and there’s a personal letter from him that basically said what you said a kind of apologize and just said, “We’re getting back to our roots.” And now I’m looking at it and looks like there’s a — there’s like a letter. It’s almost like a blog right now. I mean I guess they still have products it seems like he’s trying to go back to the roots and figure out a different approach. What a trip, what a — like a vulnerable thing to do in front of that audience.
[42:56] Mike: Yeah, it really was and I understand how people, you know, there were some people who took some of the things that he said and said, “Whoa, that’s, you know, totally inappropriate.” It obviously wasn’t the intent.
[43:06] Rob: And it wasn’t the point of the talk either, right?
[43:08] Mike: Yeah, it’s like —
[43:09] Rob: Yeah.
[43:09] Mike: I mean you could take just about anything that anyone says either on this podcast or in a conference talk and either blow it out of proportion or take it at the wrong way and really focus on that one little section of it but I think in general he — it was more of a good broad message about making sure that you stay true to the users because they’re the ones who put you there. It’s not — it’s not about you. It’s not about your product. It’s about you servicing the people who buy your stuff basically.
[43:36] Rob: Okay, so looks like we have one left. I guess Bob Dorf was after Noah?
[43:40] Mike: Uh huh. So Bob Dorf is a colleague of Steve Blank. Both of them argued that business plans belong in the Creative Writing Department at colleges which I thought was really funny. He said startup enemy number one is the business plan. It was interesting because the, you know, the way he said it and I don’t know of the whole history here but it was along the lines of when Eric Ries was going through their classes, they basically said, “Hey, we’ll fund your idea but you have to basically use our methods and prove out this theory that we have,” and it was all about the Lean Startup movement which is kind of really where all of that stuff comes from. So it’s very interesting to kind of see the mentor behind Eric Ries about how that process is done and you know, how to always be innovating and in constantly seeking customer feedback and challenging the business model that you’ve put in in place and using the same approach just not everyday of the week. His comment about business plans was no business plans survives first contact with customers just askWebVan.
[44:40] Rob: Nice.
[44:40] Mike: He says —
[44:40] Rob: So we talked about business plans and that you shouldn’t write them.
[44:43] Mike: Yes.
[44:43] Rob: All right, cool.
[44:45] Mike: You know, the one really stark quote that stuck with me was he said that “A startup is a contemporary organization designed to find a repeatable process for identifying customers and building what they want” which I thought was just an incredible way to describe, you know, what a startup is and how you should go about building your business around that concept so that you are always building stuff that people want as oppose to building stuff that you think people want that they don’t really care about.
[45:10] Rob: Right, right. Well, it sounds like it was quite an eventful BOS. I’m sorry I missed it this year and I certainly looking forward 2013. Any other highlights or things that you should mention that, you know, don’t fit to kind of this outline we put together?
[45:24] Mike: I ended up missing the lightning talks but, you know, other than that I mean a lot of the conference was just talking to other people and what they were doing and what they were building and you know, giving ideas and getting ideas from different people.
[45:37] Rob: Very cool. Any discussions about AuditShark?
[45:40] Mike: Yeah, I did have a few discussions about AuditShark here and there and one of the things that stuck with me was I was talking to Noah and Adii and Noah had asked me about what I was working on and I told him AuditShark and he — you know, I’ve started to explain what it was and he’s like “Who would want that?” And I said, “Well, you know, one of the things that there’s a very start contrast between people who have been hacked versus those who haven’t.” And since Adii was standing right there, I said, “Adii, would you have bought AuditShark which is security software for servers before you were hack,” he’s like “Absolutely not.” I was like “Would you buy it now because last year at MicroConf you almost didn’t come because your server was hacked?” He’s like, “I absolutely would buy it.” And —
[46:18] Rob: Right.
[46:18] Mike: … it got me to thinking. I was like, “Well why haven’t I kind of latched on to that earlier?” Because —
[46:23] Rob: Right.
[46:23] Mike: … I’ve thought about that before I just haven’t really — I don’t know why for some reason it didn’t occur to me like that would be an awesome marketing angle to go after and say, “If you’ve been hacked, this software could help you prevent that from happening again.”
[46:35] Rob: Right and that’s the thing, right? Because before you’re hacked, it’s more of a vitamin and then after you’re hacked, you know that it can happen again and it’s much more of kind of an aspirin thing like it’s more of like you feel the impending threat because you’ve seen the realities of what can happen. That’s it, that’s a good insight and you know what’s funny? One hallway conversation, one simple question from someone, can do that and that’s what this conference is. Whether it’s BOS or MicroConf or you know, a Lean Startup get together. I mean it’s just — it’s like this one sentence or this one introduction could make the whole conference worth it. So although there’s tons of stuff in the talks themselves just run through, I always find that the hallway conversations have as much or more value than the talks themselves.
[47:16] Mike: Yeah, I mean just that one comment from Noah just like that paid for the whole conference. That’s just like that one insight is like oh, it’s suddenly just something clicked to my brain and it’s like that is a very, very good marketing angle that I could use to get in front of the right type of customers for AuditShark because even at the beginning of this podcast, I’ve mentioned about Adobe being hacked. I didn’t thought too much about exactly what happened with that but my understanding of how they were hacked was that they’ve like many companies that are large they had built their server and they’re supposed to check and then they put it on their environment but unfortunately, they don’t ever checked their servers again or at least that was the implication from the article. And that’s what AuditShark is designed to do. It’s designed to go in to those servers and check to make sure if they’re still configured the right way. And apparently the server had slipped through and for some reason did not go through the right process so it had never been checked to see if it conformed their security standards. And that’s exactly what AuditShark is designed to do.
[48:13] Rob: So all you have to do now is find the list of companies that had been hacked, bam! That’s your marketing list.
[48:17] Mike: Yup.
[48:20] Mike: So I think that about wraps us up for the Business of Software overview. If you have any questions or comments, you can call it into our voicemail number at 1-888-801-9690 or you can e-mail it to us at firstname.lastname@example.org. Our theme music is an excerpt from ‘“We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to this podcast in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.