Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike do a business model breakdown of Amazon Go. They talk about the biggest challenges the store may face including security and delivery logistics. They also explore the technical and social impact of the idea.
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Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to do a business model breakdown of Amazon Go. This is ‘Startups for the Rest of Us’ episode 320.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve built your first product, or you’re just thinking about it.
I’m Mike.
Rob [00:26]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob [00:31]: Well, as soon as our predictions episode went live a couple of weeks ago, we had a few comments to get posted into that thread. It looks like at least one, and perhaps two, of my predictions literally came true within weeks of us making them.
The predictions episode went live on the sixth or seventh of December, but we actually recorded it two weeks prior to that. One of my predictions was that there would be at least one more high profile bootstrapped startup self-funded acquisition. And I’d specified that by “high profile” I mean it’s a big company. It’s not some sale of technology. I was thinking it was actually going to be a much larger funded company acquiring somebody, and, sure enough, big congrats to Dan Norris and his team, because WP Curve looks like they were acquired. I think they announced it on maybe around December seventh.
Mike [01:17]: That’s awesome. Congratulations to Dan and the entire team for that. I also want to point out here that acquisitions were one of my predictions from the previous year. So, technically we’re both right on this one, I think.
Rob [01:29]: That is really funny. So you predicted for 2016 – which technically we’re still in – that there would be more acquisitions than IPO’s or something. And then my prediction really is for 2017, but I think it counts. As soon as we make the prediction –
Mike [01:41]: I think it counts.
Rob [01:42]: As soon as you make it, I think if it happens after that then you’re correct.
Mike [01:45]: Right.
Rob [01:46]: It was pretty cool. It was cool to hear that news, not because it made the prediction correct, but just because of all the work Dan’s done building his businesses and sharing with the world his experience in writing ‘Seven Day Startup’, and his content marketing engine book. He’s just done a lot of stuff. And now he’s doing Black Hops Brewing. He started an entire beer brand, like a microbrew, in Australia.
Mike [02:07]: Yeah. He started that a while ago, actually while he was running WP Curve. It’s been interesting to follow those things. One of the other predictions somebody pointed out was that I had a wearables prediction for last year and, apparently, Pebble decided to shut down and sell off all their IP’s. I think at the time that we recorded the episode we hadn’t been aware of the, but that’s another one. Then you also had an unmanned drone delivery previously happened as well. That happened about two weeks or so after we recorded the episode.
Rob [02:35]: It looks like on December 14th or something. So right there in time. They’re talking in New Zealand about how Domino’s Pizza’s going to start doing unmanned drone deliveries, and then Amazon did one in the UK. It was literally December 14th, Amazon completes its first drone powered delivery. I think this was yesterday. It’s kind of interesting timing. I guess these things are, I don’t know. I wouldn’t call them obvious. It’s funny, our predictions in the past, a lot of them never come true, and then we make a few predictions here and two or three of them come true within two weeks. It’s really odd.
Mike [03:05]: I do want to say congratulations to Cristoff and Benedict for selling out FEMTO Conf in Germany. This was on my list of predictions as well that more of these types of things would be popping up. But, to be fair, I knew about this one in advance, so I don’t know if we can really count that as part of a valid prediction.
Rob [03:22]: Very cool. So what are we talking about today.
Mike [03:24]: Today we’re going to do a business model breakdown of Amazon Go. If you’re not familiar with this we’ll link it up in the show notes, but you can go watch a video from Amazon that talks about their Amazon Go store. Essentially, it’s a new type of convenience store that doesn’t have any cashiers. There’s no checkout lines. There’s not even a self-checkout aisle. You just walk in, pick up your stuff, and it recognizes who you are based on when you checked into the store, and it keeps a virtual shopping cart for you while you walk through the store and pick things up. If you put something back it takes it off your shopping cart. Then when you leave it just bills your Amazon account and automatically charges you through that account so that they don’t have to swipe credit cards or anything like that. First reason I wanted to talk about this was because it’s a little bit different than something that we typically talk about. Typically, we talk about things in the self-funded, or bootstrapped, entrepreneur space. I thought it would be interesting to talk a little bit about a business that doesn’t necessarily directly relate to the things that we do on a day-to-day basis, but the other piece of it is being able to objectively look at business ideas. Part of that is when you’re evaluating your own business ideas, or your own products, and trying to get it into different markets, being objective about those instead of — obviously you want to be optimistic about the things that you can accomplish and achieve but, at the same time, you also need to maintain a certain amount of objectivity, and be able to recognize where problem areas are. I thought that by digging into some of the pros and cons in areas where Amazon Go might have some issues getting to market, or where things will work out in their favor or not based on the advantages and disadvantages, that they have that you can kind of extrapolate those things and be able to more objectively look at the things that you’re working on in your day-to-day or month-to-month.
Rob [05:08]: Yeah. I think it’s a good exercise to run through a business model like this – something that someone who’s trying to innovate on the model, in essence. I also think that it’s just a nice way to kind of wrap the year up. It’s a fun little diversion to talk about something as interesting as this, that is essentially a big company really trying to turn retail on its head; a big company that, while we think of them as a retailer in quotes because they’re ecommerce, they really don’t do much in terms of brick and mortar, and they’re trying to figure out how to automate all the things, and I think that’s a pretty admirable goal. So let’s dig in. By the way, if you haven’t watched the video – it’s a two-minute video – I really do recommend that you go check it out, because I was blown away by just the coolness factor of walking into this thing. You walk in, you push a button on your phone – which I’m sure it’s an Amazon Go app or whatever – push a button to let it know you’re in the store, then you just walk around, grab some stuff, and you put it in your bag or whatever. Then you just walk out and it charges you. This is where Amazon has innovated in such an incredible way. Online is the one-click checkout in Amazon Prime, where you only have to think about shipping. I spend so much at Amazon that I imagine that they’re going to name an entire building after the Walling family here pretty soon. It’s because of that innovation, right? It’s the one-click, no think, “I just know that it’s going to come, and it’s going to arrive from them.” And I think it’s the same thinking going into here. They’re just trying to remove all friction for buying stuff. Anytime I think about going to the store I think, “Ugh! Am I going to have to wait in line?” You have to whip out this archaic piece of plastic that’s been around for 30 years, and it’s slow. It works most of the time, and on and on and on, whereas it’s like if I can just be in and out I think it’s a really cool idea.
Mike [06:46]: Yeah. So to give a little bit more background about this. There’s one pilot store for the Amazon Go idea that’s currently located in Seattle, Washington. It’s only open to Amazon employees, and there’s not really any public information about a wider rollout. They’ve talked a little bit about possibly having as many as a couple thousands of these throughout the United States between 2017 and 2020, but they’re real sketchy on the details, and it’s not really clear when this pilot program rolled out. The idea is that it’s a small store. It’s only about 1,800 square feet, which is larger than the typical convenience store in the United States, but it’s also much smaller than a regular grocery store, which is anywhere from 45,000 to 60,000 square feet. So it really fits into that convenience store market. As we go through these we wanted to talk about a bunch of different areas, but the first question that I think we wanted to ask was, “Why would Amazon want to do this? Is this just a PR stunt, or is this something that’s really viable?” And as we talked about very early on, if you looked at their advertisements for the drone technology three years ago, you would have looked at it and said, “Well, it’s been three years. It’s just a PR stunt.” We talked about that right at the beginning of the episode. They just did their first unmanned commercial flight. So it’s interesting to look at this and say, “Well, they’ve got this idea. They know it’s going to take them several years, and that’s why they’re working on this pilot store.” I think that that’s a fascinating way to start, and I think that it’s very analogous to the way that entrepreneurs will start rolling out products, and work with a few individuals or trusted people that they can rely on for feedback, and get that feedback that they need, innovate, figure out what the kinks are, work those things out, and then roll it out to a wider audience. It really seems to me like that’s what Amazon is doing. I don’t think that this is a PR stunt. I think that they really believe in this. Now, will it actually work out in the end? Who knows. We’ll see. But it looks to me all indications are that they fully believe in this and they’re trying to work out the kinks right now. That’s why they’re using their employees to do that.
Rob [08:45]: Right. I don’t see it as a PR stunt as much as proof of concept, right? A MVP, where I bet they’ve been in labs working on this for a while – for a year or two – trying to figure out the technology. They say that they’re using visual recognition and all this other stuff. I’m thinking couldn’t you just use NFC base from your phone, or Bluetooth or something like that, but maybe that’s just impractical. I’m obviously not super up to speed on all that stuff. But why wouldn’t this be viable I think? What’s the biggest concern that you’d have in building this? It’s someone’s going to come in and steal a bunch of stuff. That’s the big thing. That’s why you have someone in the stores to make sure people don’t just come in and walk away with the stuff. And the question is do we think Amazon has the engineering prowess, and the money, to fund this to make that not happen. I think they do. I think that in order to get into the store, if you have to push this button on your phone or it doesn’t let you in the store, then now they know who you are, and if you went and stole a bunch of stuff, why can’t they just charge it? You know? That’s the whole point. I guess if someone snuck into the store, you snuck a friend in – I think they’re going to be able to figure ways around this, and that’s why they’re only rolling one out. They’re going to just see, and if that does happen I bet they’ll figure out, “Well, we do need a person on site at every store just to make sure people don’t steal stuff.” And at that point, they’ve figured out a lot of stuff. So do I think this is viable? Absolutely. I don’t think it’s a PR stunt. I think that Amazon has – they’ve come from shipping normal ecommerce sites, where you think back 10 years how long it used to take to get a book from Amazon, and it was whatever it was; a week, 10 days. Then they said, “We’re going to do everything two day, as long as you pay for Amazon Prime.” Then they have same day in a bunch of places. Now they want to go to basically instant. They want to go to where they can either deliver it directly to you, or you can just be walking down the street and Amazon is everywhere. It’s interesting when you talk about it being a convenience store, because that’s technically correct, but when I think of convenience store I think of like Circle K or Seven Eleven, which is kind of a – I don’t know – I’ll just say a crappy convenience store. I don’t tend to buy stuff at convenience stores. But the pictures they’re showing here is of – it’s almost like Whole Foods level quality stuff. It’s a convenient store with a lot of more higher-end stuff that you or I would probably be more likely to purchase, rather than hot dogs that have been sitting on a spinner for six hours, and Slurpies.
Mike [11:04]: Yeah. I think that goes into the types of products that they’re offering into the stores a little bit. But I kind of want to step back a little bit to one of the things you talked about was just the security of the place, and dealing with things like hacking attempts and theft. As you said, having that pilot store, doing that as a proof of concept, and using Amazon employees. Those people aren’t going to be stealing from the store. They’re going to be exercising the system. They’re going to be trying to identify the edge cases so that they can work them out. I worked at Wegmans Food Markets back in the year 200,0 and we actually rolled out an online shopping project for Wegmans. It was only available in one store, it was a pilot program, and you could order your groceries online, and you would show up, and you would pick the stuff up. It was, I think, seven dollars, but it would save you an hour and a half to two hours of weekly food shopping. So if you had that extra seven dollars to spare, or you just want to throw it at it, you could just place your order completely online and you just show up at a designated time. You tell them when you’re going to show up. They’ll bring it out. They’ll put it in your car. I don’t even think you sign for it. They knew who you were, so you would just basically walk away with it, which was fantastic because your information was tracked. I think they verified who you were, but that was it.
Rob [12:15]: Sign me up. That sounds great.
Mike [12:18]: It was fantastic. It was different than some of the other online services where you would order it and then it would be delivered to you. This you actually had to go to a store, but you literally told them when you were going to show up and they would have everything all ready. And they would have people go out and do your food shopping for you. So, going back to the security of it though, because they’re having those people who are Amazon employees work in there and use the service itself, it kind of mitigates that particular problem. At least for now. It delays them having to solve that.
Rob [12:46]: You have to bet that they have already tested, and are going to have their employees test, “Try to steal something.” Like go, do it. Like the white hat penetration testers. Even though their employees aren’t going to do it intentionally, they’re going to probably try to game the system and figure out where the weaknesses are before they let real people in.
Mike [13:06]: One of the other things that you had brought up was the types of goods there. You had mentioned – this kind of played back into your thoughts of what a convenience store was. You mapped it back to Seven Eleven and various other types of stores. I had a little bit of a conversation about this with my wife, and after about five minutes or so she totally tuned out, which is why we’re having the conversation on the podcast, so that I can talk about it with somebody else.
Rob [13:33]: So that our listeners can completely tune out?
Mike [13:34]: So that our listeners can tune out. Of course. But in this particular case, if you look at the different types of stores out there… You’d mentioned that you probably don’t want to go there and buy a hot dog, for example. Is that something that they would offer? My guess is probably not. It seems to me like they’re positioning it more as something that you go in, you pop in there after work or something like that because you need something for dinner. You can buy pre-prepared meals and stuff like that and then just take them home and cook them — not pre-prepared, but everything’s pre put together and you just basically take it home and cook it. I feel like that’s the type of arrangement that they’re going for. One of the things they wouldn’t do, for example, is they wouldn’t couple it with a gas station, because there’s lots of other things that go along with that. You have to have people there manning it in case something goes wrong. In terms of the workers on site, I really feel like one of the challenges that they will have is that you still need to deliver stuff to the store. You still need to have the shelves restocked. You still have to have things get pushed to the front. There are some mechanical ways to do that, but you still have to have somebody on the back end kind of fulfilling some of those needs. Logistics don’t just take care of themselves. You can automate a lot of that stuff with Robots, but there’s only so far that you can go with that kind of stuff. You still have to have somebody there doing something.
Rob [14:48]: Right. I don’t see this as being a store with zero people in it. It’s probably a store with maybe 10% of the staff that you would normally need, or 20%. You know, some drastically reduced numbers. Because if you think about what Amazon does they do a really good job of cutting costs. That’s been their big thing is to drive costs down and get stuff to us very quickly. If you think about maybe the two guiding principles that Amazon has done since they launched in – whatever it was -’94.
I think that’s interesting to think about. You do still need to stock shelves, and eventually I could see them replacing that with some automated shelf stocking mechanism. I’m sure they have those in their big warehouses. But at first I would bet they’re going to have people in there doing it. And maybe at first they’ll have someone at the front door making sure nobody without pushing the button gets in. And maybe they won’t. That’s where it comes with these – they’ll run a pilot, and then it’s like launching an app, right?. You run your pilot, you see what happens, you see what people like and don’t like, you see what breaks, you see what needs to scale. Then I could see them automating things more and more over time, using human automation up front, and then with the big 10X, 100X thinking Amazon has, I can imagine that long-term they could feasibly want to completely automate these stores where there are zero people on site, but I would doubt that they would do that at the start.
Mike [15:59]: Yeah. In terms of the other logistics, you still have to get goods to the store. There’s a difference between shipping things to that location versus taking them in that location and then putting them on the shelves, or making them accessible for the customers. At Wegmans there was a fully automated and robotic warehouse, where – I forget how many thousand square feet it was – but it was just enormous. And they had, I think, two or three people there. And those two or three people were there solely to unload the trucks, put the pallets in certain places, and then machines would come and take everything and then stock it. Then when they needed something – they needed a pallet of whether it was frozen meat or what have you – they would just go over to a computer and hit a few buttons and boom, the Robots would basically go grab everything off of the racks and then pull it down and be able to deploy it so that the trucks could come in and pick that stuff up. It was fascinating that there was this massive warehouse and there was nobody in it. It was like a ghost town. It was very stark contrast to one of the other warehouses that we had in place there. I can see Amazon doing the same type of thing for, not just inside the store putting stuff on the shelves, but longer term. If you look at the way technology is going, you’ve got driverless cars. You could theoretically have a truck pull up and drop a bunch of stuff off, and then other Robots that would move things around inside the store. But I question how soon in the future that’s going to be. In terms of some of the technical considerations I’ve seen in this, there are questions about the item attribution and tracking. You had mentioned these a little bit it terms of the near field techniques for identifying items, or maybe RFID, or something along those lines. I could see a bunch of different ways that they could do that, but the question is how feasible is it to do that at scale? Pilot program will really eliminate a lot of those questions, or at least get answers to them, and it will help them figure out how to do things in the future. I don’t think that they’re really concerned right now on scaling that stuff. They’re just trying to figure out, “How do we fix this problem?” Or, “Where are the biggest problems that we have? Let’s prioritize those, and once we get to a point where we think that those are low enough then we can deploy this out further.” I don’t see that as any different than launching a new application or a new product. You have to figure out where those problems are, and then you get to the point where you say, “Okay, now we can start scaling this up. We don’t need a fulltime support rep, because we’re not getting the tickets that you would if you had launched it with problems.” One of the questions that comes up to me is, “What about the social implications of this?” And you had said with Seven Eleven this seems like a more upscale version of it, and kind of trends more to the Whole Foods type of store. But what are your thoughts on the social implications of a store like this? Is this something that you’re going to be able to make work in urban areas? Or does it have to be in a city? Are people going to be used to that type of thing? Are they going to get themselves used to it? Or is it something people are going to shun and say, “No. I don’t want anything to do with that.”
Rob [18:53]: I think just having the Amazon name on it. This is such a brand recognition thing. I think it will be a novelty at first. And I think if I saw one – the first time you see one, just like the first time you saw an Apple store, it’s like, “I’ve got to go check this thing out.” And if it’s a cool experience, and it delivers on what they say, I don’t see why you wouldn’t go back. But if that first experience is rocky, or maybe you give them two chances or something, I think it could be tough for them to gain traction, which I think is why they probably want to roll it out fairly slowly. I think that socially – this seems like just an urban thing. I can’t imagine rolling this out in a small town or something. But that’s just me. Just based on – it’s probably mostly based on the goods I saw in the ad itself. It just feels like something that that convenience, and that speed, and that transactional nature, I think, fits cities really well. People don’t necessarily want to take time to talk to the shop keeper like they might in a small town, so I do think this would be more urban oriented, and I think there’s plenty of room in terms of room for improvement in the grocery space. I think this could be interesting. There’s another implication here, and it’s of jobs. What about the jobs it will take away from people? I think there’s this whole conversation to be had around the idea of technology in general. It just takes jobs over time. It takes some, and it creates them. It “transforms” is probably a better way to say it. It takes from lower-skilled workers and it tends to create jobs for higher skilled workers. People protested – if you recall – the buggy whip manufacturers protested automobiles, and they said, “There should be no more cars, because they’re bad.” and it was going to put them out of business. And there were a bunch of strikes when automated, I think it was cotton gins, came out. The women who had done that by hand for hundreds of years. There were union strikes and all this type of stuff, and they said, “These things are evil, and it’s going to take jobs and you shouldn’t let them do it.” And so, you have to ask yourself this question is that, “Should we not have those things? Should we not have those advancements?” The same thing with factory Robots that are putting stuff together. They do take jobs, then they create jobs for people who can program and maintain the Robots, and they create other stuff. I think that is a thought process. It’s probably too deep into the weeds for you and I to specifically go back and forth on it in this particular episode, but I do think that’s something that’s going to start entering this conversation as they roll these stores out.
Mike [21:12]: Yeah, but I think that the idea of displacing the jobs, and really just moving those jobs from one place to another, is something to kind of consider here, because it ties directly into where would you put these stores? As you said, you kind of would probably tend towards urban areas, not towards the rural areas, and the urban areas are where those highly skilled workers tend to congregate. Part of the reason for that is that they tend to get paid more. The lower skilled workers don’t tend to live in the cities because it’s expensive to live there, and if you don’t have good marketable skills that demand that you get paid well for them, you can’t afford to live there. You can’t afford to live in New York City if you don’t make at least reasonably decent money, because New York City is way more expensive to live than other cities. So if you’re essentially replacing the jobs of those workers, and eliminating them, those people can’t really afford to live in those cities anyway, for the most part. Not to say that there aren’t a fair amount of exceptions, but you’re essentially displacing those skilled workers outside of the cities. It also ties back into Amazon having this awareness, or location information, about where their customers currently are, because they’re shipping to them already so they know what their addresses are, and they could use that information to identify, “Where is a good spot for a store?” I know when we worked at Wegmans they would spend a couple of years trying to figure out, “Where is the next store that we’re going to build?” And they would get all this demographic information from people, public sources. Try and figure out, “How much money do people make in this area? Is this going to be a profitable store? Or is it going to be a place where we’re going to lose money, or we’re going to have to shut it down? We’re not going to be able to do as many things as we want. Or are we going to be able to charge the prices that we want?” For someone like Amazon, if they can look at the average revenue per users of a particular area, and they know all this data around those people that says, “Hey, these people spend a lot of money with Amazon. Let’s put a store right in the middle of them.” Chances are good those people are going to shop there.
Rob [23:06]: Yeah. That’s the beauty of Amazon has your home address, and so they know the location of the people who probably spend the most on Amazon, or who buy high end things. They have big time information advantage over their competitors. I think one of the other social implications that I didn’t bring up when you were asking about that is that the store essentially requires you to own a smart phone, and that has some implication in terms of the income level of the audience, or the potential customer. And I think that’s another one there. They’re just basically saying that that is a requirement, and they know there are so many people with phones who are willing to spend the money. I think that’s probably a good bar to have.
Mike [23:44]: Right. One of the actual challenges like with a grocery store of any kind is that the margins on grocery stores, on goods that you buy at a grocery store, tend to be really thin. They don’t make a lot of money on most of those goods. They also have to deal with what’s called “shrinkage”, which is generally referred to as stuff where the goods are just damaged, or food spoils. Stuff like that. Those types of things count against the margins that you would make on most of the goods there. I think that because of their targeting at people who have smart phones, those people are going to tend to be better off financially, and are going to be able to spend more money, and they’re going to be willing to spend a little bit extra money in order to get the additional convenience that I think a store like this would operate. In a way that disadvantage, you look at that and say you can only target these people. Well, those people have money. That’s not necessarily a bad thing that you’re targeting those people with money.
Rob [24:41]: One thing I think Amazon’s doing really well here is they’re leveraging their brand. And I think if you think about what are the parallels in our space, think about someone like a Brennan Dunn, who has an email course, and then an ebook, and then a video course, and then a conference. And think of ‘Startups for the Rest of Us’ and how it has the academy, and I wrote a book, and you wrote a book, and we have MicroConf. We’ve kind of leveraged the trust people have in us. There’s a lot of examples of this online. But I think that’s something that Amazon has as an advantage, is that imagine in it wasn’t Amazon doing this, and if we heard that a brand new company raised a billion dollars in venture funding and they want to roll these out across the country. “A”, we wouldn’t be talking about it on this podcast, because it just wouldn’t be notable, and you’d be thinking, “This is never going to work. I don’t necessarily trust the brand. Are they going to be able to pull this off?” Whereas with Amazon they have deep pockets, they do things really well, they make things work that seem like they’re not going to work, and frankly, I by so dang much from them that, for me, it’s kind of a no-brainer to at least consider and at least give them a shot. I think leveraging that trust and that brand recognition is something that is going to do really well for them here.
Mike [25:49]: The other thing that is gives them is that the fact that they’re Amazon they have all these resources that they can bring to bear on it to solve all of the smaller issues so that when they do scale it up they have those issues taken care of. But you had just said, “Well, what would happen if this was some unknown startup who raised a billion dollars?” My first would be Webvan, which they rolled out a billion-dollar infrastructure back in the year 2000 and the whole thing collapsed on them. They just couldn’t make it work because the margins on groceries tended to be so low, so they couldn’t get all the delivery stuff taken care of. But by doing that pilot program, by concentrating on one thing, and leveraging their existing resources – which essentially provides them a runway. They’ve got billions of dollars coming in on a regular basis, and they can experiment with this one thing over here and see if it works; see if it’s something that they think is going to be able to turn into something big down the road. And if it’s not, it’s not a big deal. But if it is, then they can kind of put gas on the fire and push it for whatever they can get out of it in order to make it a long term profitable thing that they can roll out nationwide. And that’s really the key thing here, is being able to leverage your previous successes to future successes, and make sure that you’re doing things carefully in a way that it allows you to experiment without breaking the bank. If you don’t have that runway of some kind you’re really just rolling the dice, and it seems to me like Amazon is doing a lot here to hedge their bets.
Rob [27:13]: All right. So to wrap us up, what are the chances that you give this? That they roll this out, and they roll out thousands of stores and it becomes a big success?
Mike [27:21]: Thousands of stores?
Rob [27:23]: Is that their prediction? It’s like 2,000 stores by 2020?
Mike [27:25]: It’s wasn’t real clear. Those were kind of guesses that I’ve seen online.
Rob [27:29]: Got it. So maybe just say critical mass, whatever that means. That in most major cities when you and I go, maybe it’s not Starbucks level on every corner, but that it becomes a viable thing, like however many Apple stores there are, that there’s that many Amazon stores.
Mike [27:43]: Yeah. I could see that happening, and I could see that happening with probably the next four or five years. Whether they get to 2,000 stores in the next three years I don’t see that happening, because there’s a lot of competition out there. I could see them certain types of stores that are already in place and offering to essentially replace them. Go to the management and say, “Hey, would you like to convert this thing to an Amazon store?” But Amazon also likes to maintain control, so I’m not so sure that they would really want to do those types of partnerships. They would really just want to say, “Hey, we’ll buy you out. Or we’ll take over your space.” Something along those lines. They’re going to have to figure out what their profits margins on each of those stores are per square foot and find places where it really makes sense for them to do that in a way that can undercut competition around them and help make sure that the place stays in business. I say this is better than even odds. I’d probably say 60% or 70%. I’m hesitant to go higher than that, but given Amazon I’m also very hesitant to go less than 50%, 50% on it.
Rob [28:40]: Yep. I think it’s going to work. I am bullish on anything Amazon tries to do in terms of their ability to execute and do crazy big hairy audacious things. So I think that we will before long be seeing Amazon stores in a major city near you. And that wraps us up for the day. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for ‘startups’ and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 312 | 9 Ways to Introduce New Ideas into Your Business
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about different ways to introduce new ideas into your business. These are ways to broaden your horizons as a business owner and learn how other people may be solving the same problem you are but doing so in different ways.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about nine ways to introduce new ideas into your business. This is “Startups for the Rest of Us,” episode 312.
[Theme music]
Mike [00:00:16]: Welcome to “Startups for the Rest of Us,” the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Mike –
Rob [00:00:25]: And I have a mouthful of food.
Mike [00:00:27]: – (laughs) And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00:00:32]: Well, I’m a little behind on launch, so I’m eating in here while I’m muted. Sorry about the ole mouthful-of-food thing. Things are going well. Went to Coverted yesterday, which is Leadpages’ conference, for the last two days, and so kind of getting over the extrovert hangover. I love going to conferences. I love meeting people, and I did a short talk about Drip and stuff along with Clay. It was good fun to meet folks, but then the next day just got to settle down into work-from-home day, which was really nice, so I can just be in my little cave listening to music and crank through some emails.
Mike [00:01:04]: Very cool. Yeah, I was wondering how Converted went. I saw a bunch of comments on Twitter, and there were some discussions in some forums that I’m part. People were talking about it a little bit. It was interesting. It seemed like it was a good conference to go to.
Rob [00:01:15]: What I enjoy these days is meeting new people. I was able to connect with Andrew Warner, who I already knew, because he spoke at MicroConf a few years back, and we’ve talked when I go on [?] and stuff; but I haven’t seen him in person in five years, maybe, so it was really cool. He threw a little – it was a whiskey tasting, in essence, but it was just a little party at his place. I was able to go up there. Derek and Anna were with me and Sheri, of course. It was good to connect with him. I’d never met Derek Halperin in person. I met Pat Flynn in person. These are all people that I’ve corresponded with in one way or another over the years, and it’s just kind of cool to meet them face to face. I also got to meet – I’d never met Ezra Firestone, who’s really big in the e-commerce space, but super cool guy, really interesting, and we had some good conversations. That’s what I really enjoy, is hearing the inside of people’s businesses, hearing what they’re up to and just connecting with them. It was fun. It was a good conference.
Mike [00:02:00]: Awesome. I’m just getting over being sick. I’ve been sick for a couple of weeks now. My wife got sick earlier this year, and she ended up with some – I don’t know if it was a bacterial infection, or virus, or whatever. Anyway, the doctors said that it was resistant to pretty much everything. It will go away on its own in eight to ten weeks, so I was deathly afraid that I was going to end up with the same thing. Fortunately, it seems to have mostly gone away at this point, so I’m very happy and thankful that that’s not going to be an ongoing issue for the next couple of months.
Rob [00:02:28]: Yeah, but even being sick for two weeks is a big bummer. Did it negatively impact your productivity?
Mike [00:02:33]: Oh, yeah. I couldn’t sleep at night. My sinuses were all congested, and it was just terrible. I was tossing and turning all night, not getting very much sleep, so my productivity nose-dived to pretty close to zero, but there’s not much you can really do about it either.
Rob [00:02:47]: You know, it seems like you get sick quite a bit. Do you feel like you get sick more than most people?
Mike [00:02:52]: I don’t think so. At least I hadn’t really thought about it. I didn’t feel like I got sick very often. It seems like when the kids go back to school, or if they have a break and then they go to school – I was talking about this with my Mastermind group earlier this week – it almost feels like the kids go to school, and they have all these viruses that they’re carrying with them, and they trade them around like Pokémon cards that nobody wants. Then they take them home and give them to their parents (laughs).
Rob [00:03:16]: Yeah, we had a pediatrician who used to tell us that the big spike in sickness is the week or two after school starts, and that’s exactly the reason. All the germs you’ve been carrying with you that your family’s gotten used to gets put back together, and then it just spreads like wildfire until everybody gets immune to it again.
Mike [00:03:30]: Yep. Other than that – on Blue Tick, I actually did make some progress on it. I onboarded a new customer into Blue Tick and restarted some discussions with some people that I’ve onboarded that had dropped off the radar a little bit to help understand why they’d stopped using it. Interestingly enough, there were a couple of cases where they said, “It’d be really nice if you could do this.” I was like, “Coincidentally, we can do that.” They’re like, “Oh, really? Let’s talk. Let’s schedule a meeting, and let’s set that up.” It was just interesting that there was a little bit of disconnect in some cases where the app can already do certain things, and they didn’t realize it, so just jumpstarting those conversations again and then working with them directly to help them set up that automation so that it’s integrated more into their systems. I added another paying customer this morning, actually, so –
Rob [00:04:16]: Wahoo!
Mike [00:04:17]: Yeah, things are, I think, moving in the right direction; but it’s still too early to tell for sure, I guess.
Rob [00:04:21]: But it’s forward progress, and this is like we talked about on our update episode a couple episodes ago. It’s really focusing hard on how do I get that next person to use it. If you are talking to five people and three of them have reasons they don’t want to use it, or objections, it’s figuring out, “Did I just talk to the wrong people, or do they need something that I need to build in order to get them to use it?” So, I think that’s good news. Onboarding a new customer and then adding another paying customer, I think, is pretty good progress for the week.
Mike [00:04:48]: Yeah.
Rob [00:04:49]: Yeah, on the Drip side, we actually launched a free plan last week. We had our $1 plan that had been running since Leadpages acquired us. We made the decision in tandem with Clay and those guys to just make it free at this point, so it’s free up to 100 subscribers. The hard part about free with email, and the reason that Mail Chimp has been one of the only providers able to make it work, is that you can really run into a spam issue, because people can send a lot of spam through you, and you don’t want that to happen because you have these sending IPs that need to stay solvent, so to speak. With the $1 plan, we definitely saw a lot of new spammers coming in. We were writing code constantly to get out ahead of it. Not to overemphasize it, but it’s kind of a machine learning algorithm, a little bit of AI, really focused, just looking at patterns. We can get out ahead of people sending now. We don’t have to wait for them to send to figure out, or to have some signals, that this person is likely going to send poor-quality email. It’s pretty fascinating looking at the data, and we’re digging more into that, but it allows us to launch that free plan. Of course, it takes resources, right? It takes that financial backing, and that’s what Leadpages has. They $37 million in venture capital they raised allows us to – we have six, full-time support people now. Can you imagine? We had one the entire time that we were bootstrapped. Then in the past 90 days, added, trained, onboarded; and we’re now fully staffed with five additional support people. It’s crazy. I couldn’t imagine having the bandwidth or the money to do that, so that’s the luxury of that side of the coin.
Mike [00:06:18]: Yeah, I can imagine the issues with the spammers. It becomes an arms race at some point. You have to deal with it and have to be out in front of it, but at the same time – it’s partially protecting yourself, but in essence you’re also protecting all of the other customers that you have. So, you can’t just let it go for a little while.
Rob [00:06:35]: That’s right. The good news is once we got big enough where we were sending tens of millions of emails, it matters a lot less. If someone gets in and sends 5,000 emails and 1,000 of them bounce, that’s a 20 percent bounce rate. It’s crazy. That is not good at all if you’re sending on your own IP. But when you’re sending 40, 50, 60 million emails, 1,000 bounces actually isn’t that big a deal. Since we’re able to catch people really quickly and stay out ahead of it – it felt good to figure out the signals, because before you experience it, it’s like, “How are we going to figure this out, and how are we going to find this?” But it became, like you said, a little bit of a game of cat-and-mouse, and it was a fun whiteboarding session with Derek and I to plot out all the things and then say, “How can we look at these quickly in real time without completely hammering the database?” You have to have all that in mind. You can’t just run queries every five minutes across everybody’s accounts. You have to figure out a way to do it pretty intelligently. So, that’s where we are. We’re definitely out ahead of it right now, but we notice that about every six months we have to upgrade our database. About every six months, we have a bunch of performance and scaling stuff to do, and about every six months we have to get out ahead of people trying to send spam, whether intentionally or unintentionally. Those six-month things are staggered, luckily. It doesn’t all happen at once, but it definitely is – we essentially have full-time people now working in all of those areas. Where before it was like all developers are building features to push the product forward, now we actually have one developer who all he’s doing is performance and scaling, and one guy who’s purely focused on just anti-spam stuff. These are the good problems to have. It’s the part of success that shows that you’re growing. You become a target as you get more prominent.
Mike [00:08:09]: Yeah, I had to add another server to my infrastructure a couple of weeks ago, so I know. Those issues are just a pain in the neck.
Rob [00:08:17]: Totally.
Mike [00:08:17]: Why don’t we dive into today’s episode? We’re going to be talking about different ways to introduce new ideas into your business. This applies to two different situations. The first one is if you are a full-time entrepreneur. You’ve been working on your own things. You’re self-employed. You’ve been doing that for a while. One of the challenges that you’ll run into is that you have a certain way of doing things, and it’s probably not obvious to you that there are other companies out there that are solving the same problems you are, and they’re going about them in different ways. So, the question is: Which of those ways should you be doing it? Are there other ways that you can bring in new processes, or new efficiencies, into the business, and do things better than you were before? And without having visibility into those companies, it’s really difficult to do that. The other side is if you are an employee of a company and you want to learn about how other people are doing things, you want to improve stuff in the current business that you’re working in, how do you go about doing that? How do you learn what other people are doing? Unless you change jobs, the answer is that it’s probably pretty difficult to do that. We’re going to talk about how to address that problem from both angles, whether you’re the business owner trying to bring in new ideas, or you are an existing employee in a company and you’re just simply trying to bring in new ideas, new ways of doing things either to solve existing problems that are just [cloogey?] and people have just dealt with it for a long time, or there’re things that are just completely blatantly done incorrectly because nobody’s really had the ability to stand up and say, “Hey, they’re doing this over here, and that’s a better way to do it.”
Rob [00:09:45]: Cool. So, let’s dive in.
Mike [00:09:46]: The first one is, I would say, probably the old standby that everyone goes to. The first one is books. I remember Lars Lofgren at MicroConf last year saying that he goes out, and he just – he’s a voracious reader, and he will download essentially a new business book every single week from Amazon and just tear through it. I think that that’s a fascinating way to go about learning and aggregating as much information as you can about how other businesses operate and how they’re doing things. I think it tends much more towards the business side of books, so it’s not really about the technical mechanics of how to do something. It’s how different companies are structured, what sorts of marketing efforts they do. The basic idea there is that you can pull a lot of good information from books, and you don’t necessarily have to read the entire thing. That’s one of the key pieces, I think, that factors into being able to get through 50 books in a year. It’s hard to sit down and read for a couple of hours every day. You can do it. It’s certainly possible, but I don’t think that most people have the time for that. If you can go through those books, read through the table of contents, start skimming specific chapters that are about things that you’ve never learned before, or that you’re aware of but not necessarily have a good knowledge of. That will broaden your base of understanding of a particular topic. From there, then you can go out and seek other information that’ll help you drill into specific areas that you find either helpful, or insightful, or just things that you want to learn more about.
Rob [00:11:09]: Yeah. What I find is when I’m stuck – and it may be stuck on a particular problem, or it may be just stuck wondering, “What’s next here? What’s next for the business? What’s next for me?” – I find that I go through these periods of just massive consumption of blogs, podcasts, books, other things we’ll talk about today. Then other times I’m listening to a lot fewer of them, but at different turning points I will listen to, through Audible, two books a week, like full-on business books. Like you said, I skip around a bit, because certain chapters are about things that either I know I don’t need, or are not going to be helpful. But I love the way that it gets me thinking along certain lines, and it kind of breaks me out of my typical patterns. I also take a lot of – I won’t say a lot of notes – but I take action notes like I’ve always talked about, where I think, “What action could this cause me to have in the future?” I don’t like taking just general summary notes of books, because I find that even if I refer back to them it doesn’t get me back in the headspace of what the book was saying. So, I try at the time to really take either direct quotes that I can use in my writing, or podcasting, or conferencesm or, I take direct actions like, “We need to think about doing this for Drip,” or, “Think about doing this for MicroConf.” or something like that. Gosh, I will read a lot, a lot of books. I actually think in the past – I talked about I’m getting more back into investing a little more lately. I think I’ve read maybe ten investing books in the past six weeks, and again, “read” meaning through Audible. It’s that kind of voracious consumption that I like.
The thing that I don’t like about books, as much as I do like listening to them, is a lot of stuff – especially if you’re looking at marketing approaches – if it’s kind of a tip/trick/tactic thing, once it’s in a book it tends to be pretty old. Even if it’s six to 12 months old, these things start to age, and they don’t necessarily work as well. If it’s in a book that gets popular, like the book about – you remember the one from I think it was the guy who ran sales for Sales Force. It was “Predictable Revenue”. He had this whole tactic of how to do the cold emails and all that stuff, and that just blew up. Everybody’s doing it now. It’s becoming less and less effective. There are still ways to make it effective, but it really has – it’s not as effective as when you first read it. Whereas if that had been a blogpost or a podcast, so many fewer people consume those. It actually makes it a better thing in the long term, if that makes sense. I take books for high-level stuff, but super-tactical stuff I tend, perhaps, to look more to podcasts.
Mike [00:13:18]: Yeah. Kind of a little side note that I wanted to just briefly mention here was that this is more about broadening your horizons and making sure that you’re, at the very least, peripherally aware of a lot of other things that are going on, or at least some of the things that are going on in other companies and, as you said, getting you out of those patterns that you’re probably used to operating in. This is very different than the just-in-time learning that you’ve talked about previously, where you have a particular problem and you consume as much information as you feel like you need to to get to the point where you’re about 60 to 80 percent of the way educated about it. Then you go start implementing things to learn that last pieces that really need to be taught on the job, so to speak. There’s a difference between broadening your horizons and that just-in-time learning.
[00:14:04] The second way to introduce new ideas into your business is to take a training course. There’s lots of training courses out there. There’s various sites, like udemy.com and coursera.org, udacity.com, skillshare.com. All these places are good resources to go out and learn about different topics that you’re interested. Sometimes it could just be you want to learn a new programming language because you’ve heard about it, and you’re interested in seeing what that has to offer, versus what you’re currently doing. It doesn’t mean you have to use it, but it is nice to be at least peripherally aware of what those things have to offer, and whether or not people with that type of background might be hirable in your environment. Is it going to be an easy transition for them? You can talk to different people about whether or not that would be an easy transition for somebody to make, from let’s say PHP to Ruby, for example. But going through it yourself also gives you a broader context, based on your own experience, how difficult should that be. Getting advice from somebody: “Oh, yeah, it shouldn’t be that difficult to make the switch.” that’s true for them, but it’s not necessarily true for everyone, and it doesn’t give you a complete picture of what it actually takes.
Rob [00:15:11]: Our third way to introduce new ideas into your business is, of course, through blogs and podcasts. I think this depends on the way you like to consume things. Some people prefer to read and skim, in which case blogs are for you. If you’re like me, you’re an audio generator and an audio consumer, so podcasts are going to be the way to go. What I like about podcasts is you can really niche down, and that’s hard to do with things like books and magazines because they need these bigger audiences. When I read business books, when I read – the last time I read “Inc.” magazine and whatever, the other entrepreneur magazine and stuff, the advice is just too general, because they’re looking at the entrepreneurs who’re trying to get started with stuff. That’s just not that interesting to me anymore. It isn’t helpful because the stuff is too general, it’s too beginner. With blogs and podcasts you can look around and you see the community of people that we’re hanging out with day to day. We go to MicroConf. We hang in on the same forums and that kind of stuff, and you can listen to their podcasts. Even folks who are not as far along as you are can often have really good ideas, and you can hear it just by them talking about their business. If you’re doing 50k MRR and there’s someone who’s at 5k or 10k, oftentimes they will have insights that can help you as well. I’m a big fan. We’ve had several episodes where we’ve gone through our top 20 or 30 podcasts, so if you’re interested in that you can look back through our archives to find out who we listen to on an ongoing basis.
Mike [00:16:32]: The fourth way to find new ideas or processes is to hire a contractor or a consultant. I feel like there’s a mild differentiation between these two that I can’t quite put into words. I feel like with contractors you’re generally hiring them for a particular skill set to achieve a specific job, but it almost feels like with consultants you’re asking them to solve a problem, and you don’t give them as many constraints. You don’t say, “It’s got to be done in this particular programming language,” for example, or, “It’s got to be done using these tools.” You essentially say, “Here’s the problem. Please help me find a solution to it.” Regardless of the differentiation between them, I think that there is a lot of value to be had by bringing somebody who works in various businesses into yours to help you achieve certain objectives. Part of the reason for that is that if they’re a contractor or a consultant, they have generally worked for a lot of different companies. It’s interesting. When you look across the spectrum at different consultants who have worked at a lot of different companies, they’ve seen a lot of things that you just simply wouldn’t have before, and it’s because they’ve been in so many different environments, they’ve solved so many different problems, and they’ve seen the same types of things over and over. Whether those are mistakes or how things are done well, they’re able to provide that information to you and give you some context about where you stand in relation to other businesses, and how they’re solving their problems versus how you’re solving them.
Rob [00:17:53]: Our fifth way to introduce new ideas into your business is to mentor someone, or be an adviser. I know that even way back in the day – let’s think 2008, 2009 – my blog was already up for three or four years, and people would write in for advice. That would, even not doing ongoing mentoring, would help me think through problems in a way that maybe I wouldn’t have thought through before. That was helpful. Then as things progressed and we had the podcast and MicroConf, all of that has helped me look at new ideas. People will bring stuff like, “Hey, I’m trying this new ad channel.” It’s like, “What? I didn’t even know that existed.” This was someone who supposedly I’m mentoring, where actually they’re giving me ideas. Then even more recently, I would say, as an advisor and beginning angel investor, I have really enjoyed the ability to look deep into these SaaS businesses that are coming up. These are essentially bootstrapped, that raised just a tiny bit of funding to help them get to the next level. I’m able to see all the numbers and what they’re doing and how they’re operating and how they’re executing and how the growth is. I can really get a lot of value out of that. Anyway, all that to say I think that this idea of mentoring someone in order to introduce yourself to new ideas is really one that I’m seeing take hold in my own experience.
Mike [00:18:58]: The sixth way is to do some consulting work on the side on your own. I think that you can do this regardless of whether you own your own business or not, because there’s always people out there who will place some value on the things that you know, and the background and experience that you have. Obviously, it’s going to be difficult to go out and do consulting in an area where you have no experience. That’s probably just not going to happen. But, at the same time, you can take the skills and experience that you have and try to take those into different environments, and try to solve similar challenges that other people are facing using their tools and their environment and the skills that you know and morph their environment. I think that as you start doing that type of thing more and more, you see different environments. You start seeing the different ways that people are doing things, and you get more of a sense of why they’re doing it that way. I think that that’s also very important. That sort of thing can also help you identify different business opportunities as well. When you’re doing consulting, because you see so many different things, you know that the same types of problems tend to come up over and over. If you’re working in one particular company, you don’t see them. You see your own problems, but you don’t necessarily see that there’s 30 other companies that are also having those same challenges. So, it can help you identify different business opportunities, but it can also open your eyes as to different ways of doing things as well.
Rob [00:20:015]: Our seventy way to introduce new ideas is to attend a conference with your peers. This would be something like I just talked about, like going to Converted, going to MicroConf, going to Business Of Software; figuring out where folks who are maybe a little bit behind you, a little bit ahead of you, are going. Go to the conference and meet people. What I’ve found is, even as my business has progressed, I’m still able to find people at different conferences. Even though there may be a lot of beginners at a certain conference, you can still find that if you can mingle with the speakers, or you can mingle with the folks who have businesses that are further along, you can get exposed to a lot of new ideas, new tactics, and jostle you out of your own thought process. An example – even at MicroConf Barcelona, I was talking to some folks, and they brought up the topic of investing, which is something that … It was right after the Drip acquisition, so I started noodling on this, like what to do with some new-found cash on hand. They brought it up, and I was like, “Whoa! I didn’t even know you guys cared about that, or thought about that at all.” Suddenly, they were throwing out ideas that they had, and ways that they were investing and ways of hedging things. It was just a cool experience to hear from these guys. In addition, they also talked about some marketing tactics, and some different competitors that were coming up in different spaces that were all relevant for stuff we were doing with Drip. It was something that would never happen in an online context. It wouldn’t happen on a forum. We probably wouldn’t’ve covered it via email, but sitting there having drinks for a couple of hours, just hanging around with interesting people doing interesting things and new ideas on a number of fronts, they’re just going to come out of that.
Mike [00:21:41]: The next way to introduce new ideas is to undergo a joint venture, or partnership, on a very specific project. I think that there’s a lot of different opportunities for this that people aren’t necessarily taking advantage of, because when people think “joint venture” or “partnership,” they tend to be thinking- – I guess with joint ventures, it’s probably not an extended thing. With partnerships, the mental image that comes to mind for people is, “This is going to be a very long-term thing that we’re going to be doing potentially for several years, so I want to be very careful about getting in and working on this with somebody else.” But there’s much shorter things that you can do that fall into that vein, such as writing an e-book, for example, or developing a training course, that do not necessarily require a lot of ongoing effort to maintain that particular product, but you can put those together and work with somebody else – whether it’s something that they came up with the idea, or you came up with the idea – or you find somebody that you just want to work with, and identify one, small thing that you want to do with them, and go through that. You can launch it, get it out there, and then you can move on and go back to your own business, or back to your full-time job, whichever you prefer. You will get the experience that goes along with that. One example that comes to mind that I’ve seen lately is the Big Snow Tiny Conf that I’ve gone to for the past couple of years up in Vermont has started expanding. Now it’s called Big Snow Tiny Conf East. Then they have one that’s in the west that’s run by Dave Rodenbaugh. Putting together a mini conference or mini meet-up for people is something that’s probably pretty new to Dave. I also know that Craig Hewitt is doing one over in Switzerland, or France, or something like that.
Rob [00:23:18]: France.
Mike [00:23:19]: Yeah, it’s in the Alps. Regardless, that’s kind of a new thing. You get to learn not just about working with these other people, but you also get to learn a new set of business skills that you otherwise wouldn’t be exposed to. I think that those are very neat ways to learn about new stuff that you could potentially bring into your business. Obviously, running a in-person group can be applicable to most businesses. Obviously, not all of them, but there are ways to leverage that in a lot of different businesses.
Rob [00:23:48]: Yeah. I think in terms of joint venturing, early on with Drip we did some joint venture webinars with different marketing teams, and we were blown away by the way some of them operated, just in how much of a machine they were in terms of processes and how well-executed. We just saw professionals doing it, basically. That experience alone showed us, “We need to up our game. We need to get better at just having refined processes and really going after what’s working and doubling down on that.” I think any type of JV, if you’re working with someone who’s sharp, you’re going to pick things up from them.
Mike [00:24:18]: The last one is to do some self-study and then blog about the experience. Obviously, self-study can take on a variety of different forms, but typically you want to have some sort of an endpoint or a goal in mind. Whether that’s to actually launch a product, or to build a training course, or even just to put together a case study – writing a book, for example, is something I talked to somebody about recently, and they just grilled me about all the different things to go into it, what comes with physical books versus digital books, how do you get the ISBN numbers, what goes into the layout and design for the book cover, and how the spine factors into it based on the number of pages, and all these little things that you wouldn’t necessarily think of, but they all go into that process. If you have to put that together and then present it to other people – whether it’s a blog, or a case study, or something along those lines – then you’re essentially teaching them. You have to understand the topic well enough in order to be able to teach it. If you can’t do that, then obviously there’s gaps in your knowledge, and those are going to show through. When you’re going through that process of putting together the teaching or training materials that go along with it after the fact, you’re going to be able to fill in those gaps, because if you look at that as a standalone work, the training side of it, you’re going to see that those gaps exist. You’re going to have to go back, and you’re going to have to learn those pieces so that you can educate other people. This really applies to anything. Teaching is one of those things that you have to understand a process or a product in order to be able to teach it to somebody else. One, it’s clear that you don’t understand it if you’re trying to teach it and you don’t. The second thing is that, by default, when you try to teach somebody something you understand it a little bit better because you have to present it in such a way that it’s easy for somebody else to pick up. So, teaching does help your own understanding of it as well.
Rob [00:26:04]: To recap, our nine ways to introduce new ideas into your business are through: books, training courses, blogs and podcasts, hiring a contractor or consultant, mentoring someone else, doing consulting work on the side, attending a conference with your peers, joint ventures and partnerships and self-study.
If you have a question for us, call into our voicemail number at 888.801.9690; or, email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening, and we’ll see you next time.
Episode 297 | How to Charge for Startup Ideas (With Guest Ken Wallace)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Ken Wallace, of MastermindJam, about his new project Nugget. Nugget is a subscription based product that sends you startup ideas on a monthly basis. Ken talks about the origins of Nugget, some of the negative and positive feedback he got pre-launch, as well as his launch strategies.
Items mentioned in this episode:
Transcript
Rob [00:00]: Before we roll this episode of ‘Startups for the Rest of Us,’ you may have heard that my startup DRIP was acquired by Leadpages in the last week. And if you tuned into this episode to hear Mike and I discuss it, unfortunately Mike was on vacation this week. So this week is an interview with Ken Wallace. I think you’ll really enjoy it. But be sure to tune in next week and possibly for several weeks after, where I expect there will be a lot of discussion about the acquisition, the thought process. There was so much that went into it. It was months and months of conversation. In addition, we’ll be talking about the mental side of this, the psychological side, over on my other podcast ZenFounder at Zenfounder.com. So if you’re interested in hearing more about that, sit tight. That’ll be coming. But for now let’s dive into this week’s episode. In this episode of ‘Startups for the Rest of Us,’ I talk with Ken Wallace about how to charge for startup ideas. This is ‘Startups for the Rest of Us’ episode 297.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Ken [01:14]: And I’m Ken.
Rob [01:15]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Mr. Ken Wallace, welcome to the show.
Ken [01:20]: Thanks for having me. This is amazing.
Rob [01:22]: Yeah, it’s awesome to have you here. So for folks who don’t know you, you’re probably best known for starting MastermindJam which has kind of the become the defacto recommended MicroConf and Startups for the Rest of Us service for finding other startup mastermind members. You’ve also been to several MicroConfs and you host The ‘Nights & Weekends’ podcast with our mutual friend Craig Hewitt.
Ken [01:44]: Correct. Yes. Sure. I’ve been to five MicroConfs actually.
Rob [01:47]: Indeed. Wow. Have they all been Vegas, or did you make it any of the others?
Ken [01:49]: All Vegas. Yeah.
Rob [01:50]: Cool. And you’re coming to us from Chicago, is that right?
Ken [01:53]: Yeah, the Chicago area. We actually live in northwest Indiana, so yeah. When I first started coming to MicroConfs, I was commuting the 90 minutes every day into downtown Chicago.
Rob [02:01]: And since then, you work from home now as well as with MastermindJam on the side?
Ken [02:04]: Yes. Correct. So full time working from home now, and MastermindJam. And then now Nugget.
Rob [02:10]: Indeed. And that’s what we’re here to talk about today. And the reason I wanted to have you on is I feel like there’s a lot of value in what you and Justin have put together in terms of doing something that may be counterintuitive to some of the common wisdom we hear about in blog posts. So when we were talking about this offline you said, “There’s common wisdom of like ideas aren’t worth anything, it’s all about execution.” And yet you’ve started Nugget, which is at Nugget.one. And so that’s Nugget.O-N-E. And, in essence, you are selling startup ideas. You’re selling access to new startup ideas.
Tell me about what you’re up to and kind of how you guys got here.
Ken [02:44]: Right. So, the selling access to startup ideas, we find that a lot of founders – a lot of entrepreneurs – seem to get stuck in a step. All entrepreneurs, I think, we have in common the knack of looking around the world and seeing a world of abundance, and seeing ideas everywhere we look. And the problem is how to pick one, how to validate one. And a lot of times entrepreneurs – especially tech founders -will pick one that feels interesting or feels close to home, but they don’t pick one that actually has a waiting customer on the other end that is willing to pay them money. So, what we do is we source ideas that are definitely from a person who is willing to pay money today to have this problem solved. And then we send those out to the paying audience. So what you get in addition to the actual business idea, you get a person that says, “I am dying to pay for this. I would 100% pay for this, or pay for it out of my own pocket if we could have access to software that did X, Y and Z to solve this pain point.” But then we also give you a community to help you execute on that idea and to clear the next hurdles that come up.
So, back to how we started. Justin Vincent – you might know him from the Techzing podcast – he approached me a few weeks ago asking if I was willing to help him out with Nugget. And he had kicked around a few other name ideas for this. But the point was one business idea every single day, and find a way to monetize it and find a way to really help entrepreneurs through this. Now Justin and I have kind of been – he’s been helping me out just kind of as a mentor maybe or a mastermind of two where we just kick around ideas for how to grow MastermindJam, and also kick around ideas for what was going to be his next business since he had a successful exit from Pluggio. And so, we’ve been talking for months. We met on another discussion forum, Discuss @ Bootstrapped.fm, where he posted an idea saying, “Hey, wouldn’t it be great if there was a service out there that matched people to mastermind groups.” And at that time I was maybe eight months into MastermindJam, so the sphincter tightens a little bit and you’re like, “Uh, oh. Competitor.” I was looking at him as not only a competitor, but he had just had a successful exit, he’s got time on his hands, he’s got some money in the bank, he’s going to eat my lunch. Like right away. So I reached out to him immediately, and I knew a lot about Justin from listening to Techzing and listening to some ‘Startups for the Rest of Us.’ The two podcasts have kind of had a good relationship for a long time. And then so we just kind of developed a friendship from there. Basically, I reached out to a potential competitor, I opened the kimono, I showed him exactly how MastermindJam worked, what the business was like, what the challenges were, what the hurdles were, what the vision was. And he said, “I love it. I love that business for you. And I don’t love it for me. So what else can I do?” And from that point forward, we were just helping each other out to find a good business fit for him. And he helped me out tremendously for MastermindJam pricing or for different business model questions. So that’s how we kind of became friends.
Rob [05:24]: Very cool. And for those listening, there might be MastermindJam customers or people who’ve considered using your service. And you wanted to be very clear that you are not shutting MastermindJam down and that you’re basically pursuing both ideas at once.
Ken [05:38]: Yeah, that’s correct. MastermindJam is really at a point where it’s largely automated. So all the processes that match people into groups just happens automatically. You sign up, you get it put in the queue and, based on your answers to the onboarding questionnaire, the computer algorithm basically does the rest. Really I only need to step in every week if there’s a problem with that, where maybe somebody’s answered questions in a really restrictive fashion so that the computer can’t really find them a match in a timely fashion. Or if there’s something going awry in a group and members need me to step in and help out. That’s really what I do for MastermindJam. So, on an ongoing basis, I had a few extra hours every week to help Justin out with this. So, yeah. MastermindJam can keep doing that, can keep growing. There’s still some things I’m going to do to help with marketing for that because as the MastermindJam business is, it’s almost like a marketplace where you need a certain traffic of people to make the thing work in a timely fashion. So, I still need to market that to make sure it’s viable for the people that sign up.
Rob [06:34]: For sure. Yeah, and like your – You know the headline on Nugget is, it’s changing but it says, “Receive a new business idea in your email inbox every single day. Receive a shiny business idea, receive a fresh business idea.” And so the idea is that you guys are, essentially, sourcing business ideas. And are they limited? Are they mostly, let’s say, like SaaS business ideas? Or are they software-based business ideas? Are they B2B, B2C? Is it filterable, or have you just focused on a single line, like a vertical?
Ken [07:01]: They are all over the map. The ideas are all something that can be approached with an online business. So it’s SaaS, or it’s like an ecommerce site. You know, something of that nature. Something that can be focused on online, and marketed online, and the perspective customers can be reached online. Those are really the only requirements to get through our gauntlet. The ideas range from an app to help parents find video games and mobile apps for special needs children. That was the one that just went out this morning. We had a food truck owner requested an app to help him locate where the upcoming events are in my community, “Where I can go to find foot traffic for the food truck.” These are all kind of like software ideas. There’s some biotech ideas, there’s some healthcare ideas, there’s some eBay auction tools, there’s some Amazon FBA reseller tools to help them track cost-of-goods-sold in their FBA inventory. Really, from day to day, all over the map.
Rob [07:55]: Cool. So you’re offering these business ideas and you guys have been live for how long?
Ken [07:59]: We went live last Monday morning at midnight.
Rob [08:02]: Okay. So you’ve been live for about a week and a half and your launch was –
Ken [08:05]: Yeah, June 28th, 27th.
Rob [08:06]: Yeah. And your launch was pretty good. I know both of you guys but I didn’t hear about it from you that you launched. I heard about it from the broader entrepreneur startup community. You were on Product Hunt I knew. You said you got on Ask Hacker News. There was something else. Tell us the story of like how that came about, and was this a carefully kind of calculated launch? You and Justin got together and said, “We’re going to kind of hack this and submit it to all these places”? Or did you stumble upon these thousands of visitors that you received on your launch day?
Ken [08:33]: About three weeks ago Justin and I got serious about this and we’re like, “You know what, let’s move forward with this. I think we can maybe make this work. The only way to find out is just to get it in front of customers and see what happens.” Justin and I both are in a situation where we both have day jobs and a family and a limited number of hours we can devote to this. So it kind of dragged on for about a week and a half. And I think I was the bigger hurdle. Justin could devote more time to it than I could. But the problem was I was the tech guy. So he kept waiting on me to get the site up, and get the messaging out.
In that process of getting all the landing pages up, and the logo on things, and trying to choose a tool to use as our membership site and our discussion forum. In discussions Justin had with his Techzing cohost, Jason Roberts, and also Jason and Justin’s friend Phil – who is also on their show once in a while – they were adamantly against the name Nugget. So they pulled Justin aside and just grilled him for about an hour on why Nugget was a horrible idea moving forward, there’s a lot of upside to changing the name. And so, they kind of – three quarters of the way – convinced Justin that we needed to change the name. So Justin got on slack with me, and this was here about maybe ten days ago now. He said, “Look, we’ve got to change this name. Jason and Phil cornered me, and they really want us to change the name and here’s all the arguments why.” And I’m like, “Look man, you’re in charge of the branding and a creative. I’ll go with it. I don’t think it’s a good idea. I think it’s a waste of our time. I don’t think our audience really cares about the name right now. I think they really care about solving those hurdles in their business. So, if we’re going to change the name let’s do it. Let’s make the decision tonight and let’s just get it done.” And then we spent many evenings in a row just trying to get everything transitioned over to the new name, the new logo; we’ll leave the placeholder on the old site so if somebody happened there they get redirected gracefully to explain the move. In the middle of all this, Nugget.one is still up collecting waiting list signups. In the middle of all this, somebody mentioned us on Ask Hacker News. And suddenly we have all this traffic, now, coming to the site.
So, previously it was six or seven hits a day, which were mostly Justin and I. And then suddenly we have 50, 60 people hitting us that hour. And I’m looking at the Google analytics thinking, “Wait a minute. Why is the meter pegged? Why are we getting so much traffic?” You track it back and it’s this thread on Hacker News. So I said, “Justin, we’ve got to stop and rethink about this. You can’t switch horses midstream like this. We’ve got this streamer traffic coming in and it would just be confusing to everybody; confusing to the people coming over, confusing to the original person that posted us. We need to rethink this. Maybe if this is a name change that has to happen, we do it later in a more organized fashion. But right now, this is like switching midstream. This is changing your name in the middle of your Super Bowl ad.” is the analogy I used. And so he’s like, “Fine. Fine. Let’s leave it as Nugget.”
Well, the problem with that is we had transitioned so much over. Now it’s, “Okay, put everything back to Nugget.” So we’re just wasting so much time on thinking about the name. So we finally get everything back, we’re going through the motions of doing all the testing that you do before a launch, and we didn’t really have a solid launch date in mind other than he and I were just kind of tired of not being live. We’ve got a lot of people that are signing up on our really simple landing page and we just wanted to know, we’re dying to know, how many of those people were willing to put a credit card down. We hadn’t asked them for money yet. A lot of people are always willing to sign up for Beta, but it doesn’t really matter until you ask them for money. So about 11:30, midnight on Sunday night, I sent out an email to a few people saying, “Hey, can you just double check, make sure the language is good, make sure there’s no bugs in your browser, that kind of thing.” Well, one of the people that I emailed with was Haydn Shaw. And Haydn shoots me an email back saying, “Hey, this looks great. It’s really interesting. Want me to post this on [Product Hunt?] for you?” And it’s just one of those moments where you’d really like to say no. It’s like in the pit of your stomach it’s like, “Uh, I don’t know if we’re ready for that.” But it’s like, “Yeah, go ahead. We would really appreciate that.”
The problem with that was at this point I still don’t know any details. I don’t know when he’s going to push it live, I don’t know. Is he going to do it right then? Is he going to do it Tuesday or tomorrow morning? I had no clue. So, the next morning – Monday morning at 8 a.m. – I get an email from Haydn, “Hey, I just put it on Product Hunt. You’re going to want to jump in there right away and start answering questions.” So, suddenly we go from, I think, up to that point in a week of having just the trial page up we had 180 people sign up for just the waiting list. Suddenly, that day 4.5 thousand people visited the site.
Rob [12:53]: That’s awesome.
Ken [12:54]: It was just off the charts. And suddenly, I had to actually turn off the stripe notifications because it was distracting. I would actually stop and try to look up the customer and just find out details about who could this possibly be. It was just distracting throughout my day job business day. So it was a good problem to have.
Rob [13:10]: It always is. The day that you turn off the trial notifications and the new sign up notifications. Awesome. Cool. So had you guys done any prior validation to this? I know that Justin had emailed me several months ago he asked my opinion and for some thoughts on it and I think he had a mockup of a PDF or something. But is that what you had done? You had emailed several people?
Ken [13:29]: Um-hmm.
Rob [13:29]: Did you have validation that like, “Yeah, you should move forward with this.” And got to the point where this launch started? I mean, we’re kind of working backwards at this point, but –
Ken [13:36]: He sent out a lot of emails like that and so did I. I talked to Craig on my podcast about it. Craig hated the idea [laughter]. I talked to the people of my Mastermind group about it. They loved the idea. I got a lot of mixed messages. And at the end of the day, we got enough positive signals that we thought it’s kind of like where there’s smoke there’s fire. And that’s what caused us to put up the initial landing page. It was a one-pager: “Here’s what we’re going to do, we’re going to send you this every day.” There really was no talk of a community. There was no talk of any other add-ons. It’s just like, “At some point we’re going to ask you for money, but here sign up for this.” And 80 people did. So that just kept giving us good vibes that this at the core there was something there that people wanted.
Rob [14:14]: Yeah, to get 180 that quickly it tells you that somethings going on here. Whether everybody’s going to be willing to pay for it or not is another thing. But at least you have some validation that there’s interest here. So you guys have had a lot of conversation about the business model, I suppose. I guess it’s always been – since I’ve heard about it – it’s been a monthly subscription. I know that you probably started at a low price and have moved it up. Did you give it to anybody for free, or has it always been a paying service? Talk about how you guys thought about that and what levels you’ve been at and whether that’s worked or not.
Ken [14:41]: Right after the initial landing page went up, I saw Paul Jarvis and Jason Zook launch emojibombs.com. And it was kind of a similar idea where – I can’t remember if it was daily or weekly – but they send you basically emoji that’s been personified into a character. And they send it to you in an email at $11 a year. You just click “Buy Now” for $11 a year we’ll send this thing to you. And I know the PDF he probably sent you is a lot more complicated than just this simple one-pager, “click here to buy”. So he was like, “You know, just to validate that this is right let’s put up that landing page.” So that was kind of like the start of our talks. It’s like, well if people are willing to pay $11 a year just to have something fun, would people pay $11 a month to get an actual business idea that’s actionable, and that they can actually take it and run with it; that’s been vetted and analyzed. Would they actually pay $11 a month for that? And so we sent that around to a few people. Like, for instance, [Greg Polumbo?]. He got back to me. He said, “Look, the idea is interesting. But at $11 a month do I believe that you’ve got a business idea in there that could potentially earn me five or six figures every month?” He’s like, “No, $11 feels amateurish for what you say your offer is.” And I’m like that’s interesting. So people really do attribute the potential value of the product – even before seeing it – from the price. And Justin and I know how much time we’re putting into analyzing these business ideas, but we can’t also charge for that time. So, it’s not like a one for one. This is a $1000 idea so here, pay us $1000. So we just settled on let’s start at $49 and we can test up from there. And for a few people on our trial-to-paid conversion list we can actually test coupons or discounts if we need to if that proves to be too high.
So before the launch day – “launch day” because it was all kind of unplanned – the business model changed a lot. So initially, for the first day that we had the trial landing page up, we said, “This is free right now, but it’s eventually going to be $11 a month.” And to those people – the ones that signed up – we offer it for that, because that’s the deal they saw. So we’re willing to grandfather them in at $11. But we quickly took down that offer and took away any mention of price just so we could see if we could communicate with people on the side and see what price points they’re willing to go to; $25 a month, $49 a month, is this a $100 idea? The problem is you get a lot of confusing feedback from people. You talk to my podcast cohost and he figured, “I don’t want to pay monthly for this. Because if your business is good that means I’m going to churn after two or three months. But if your business is bad, and after three months and I’m still paying this monthly fee and I haven’t found a business idea, I’ve got to ask myself why am I still paying. Because your goal is to give me business ideas.” So this is all good feedback that we’ve been working through.
Rob [17:25]: Yeah. That makes sense. Pricing is really hard. My two cents is I think making this truly a monthly business is going to be tough, and that probably you’ll want to go with just an annual upfront or – I don’t like lifetime, but that’s the concept here. It’s that someone really is kind of just paying to have access to this for an extended period of time. It’s funny, I was talking at lunch with some folks and I said, “You know, SaaS providers, if you look at a lot of them, they’re trying to go towards annual and all the WordPress providers who do annual they’re trying to go towards monthly.” It’s like we’re all trying to go for what the other guy wants.
Ken [17:56]: Grass is always greener.
Rob [17:57]: All the annual guys with a one-time fee, they want more flat revenue, whereas the SaaS know that the flat revenue takes forever to grow so we try to go for the big upfront cash payment, which is the annual payment. So, I think in the end there’s pros and cons to both and my guess is trying to go for a higher price point, but perhaps not recurring or really infrequently recurring like annual, feels like a better fit than trying to pay monthly. Because your churn is going to be – the same reason everybody points out – if your service doesn’t work, they’re going to church. If it does work, they’re going to churn. You’re in the worst position there.
Ken [18:30]: This was an endless debate, because we feel that – equal to the value of the actual ideas – we feel that maybe the ideas are almost a hook to get you into the community to get you executing on the ideas. If that makes any sense.
Rob [18:41]: It does. And I think if you’re able to monetize either a community, or you’re able to add add-on services or if there’s anything else there –
Ken [18:48]: Exactly.
Rob [18:49]: – this could be killer lead gen. But you’ve got to get that stuff going.
Ken [18:52]: Yeah, come for the business idea, stay for the – It’s almost like a masterminder, the community that’s helping you accomplish your goals.
Rob [18:59]: And what’s funny is I was looking back. So Justin had emailed me May 9th, which was about two months ago, and he had sent a PDF of this. And I sent a few different responses and I said, “I think this idea might have legs the way you’ve presented it. It will have high churn but that doesn’t mean you shouldn’t do it, because if you can get it running you can start add-on services like landing pages and courses on building and launching and I think you should go for it.” And then I replied again and I said, “Oh, and by go for it I mean don’t write a line of code but get ten people to commit to paying you $50 a month for it. And then launch the damn thing manually and see how it goes.” And so, that’s kind of where you ended up. It’s kind of funny.
Ken [19:31]: Well, we had a long discussion about that too, because originally we thought, “What about $9.99, because nobody’s going to churn at $9.99 if you’re seeing business ideas coming through right. Because it’s kind of a fear of missing out kind of thing.” And it’s like Rob advocated $50 a month, so $11 is still more than $10. Your email kept pushing us higher up the value chain.
Rob [19:53]: Yeah, what a trip. I remember thinking about this and thinking the way that a lot of us would – gut feeling – we would want to make this cheap because you think, “Ah! Business ideas. They’re a dime a dozen.” But I think what you’re providing – from what I’ve heard. I haven’t used their service, but from what I’ve heard the vetting and kind of the depth that you’re going into with these ideas is far beyond just a two sentence summary of something in an email. And I think there’s a lot of value there. And even if you have one fifth of the customers, if you’re charging five times more I actually think you’re going to be better off, unless you really are going for a volume plan and doing up sales later. But if you’re going to make money from it, I feel like there’s value here. Speaking of that specifically, talk a little bit – like maybe one example of – what is included in these emails. Because when I heard – I think I heard you explain it on ‘Nights & Weekends’ – I was surprised and impressed with the level of detail that you’re going into and kind of the resources and the research and the other stuff that you’re including when you get this idea.
Ken [20:49]: Well, the one that went out just this morning I spent three hours on it. We give the industry it’s in – or the niche, whatever you want to call it – whether it’s B2C or B2B. We give you the original user – we call it the “user submission”, but you can think of it as a user story – the actual unedited “I really wish this pain were solved” text that we got from the potential customer. And then we go into our analysis, and we try to do kind of a who, what, and how with the analysis. So who is this target audience? Where do they hang out online? Are there ways to find them? Where are their forums? Where are their communities, Facebook groups, whatever? We look at the what. What is it they’re asking us to provide? Is this technologically feasible? Is this something that’s easily achieved or you need a huge funded team? Are you building Uber or are you building a new WordPress directory? What end of the spectrum is it on? And then we talk more about the how. We dive into the how of like you want to look at these competitors and these other technologies in this space. And so, we do kind of a really thorough kind of run-down of what questions you’re going to have before you would dive into even looking more into the business. Like, “Who are my potential customers?” How you’re going to achieve the technological hurdles that we describe. And then we have usually at least three or four – but the one last night had eight or nine – links of resources that was like must reading after you read this references from what we talked about.
Rob [22:05]: And so a question that might come up in someone’s mind is, so you’re sending these business ideas out and there are tens, hundreds or perhaps eventually thousands of people that are going to be getting these. Are they less valuable – or I would say they are less valuable if a bunch of people start them all at once. Do you have any mechanism to keep 20 people on your list from snatching one idea and running with it?
Ken [22:26]: This is one thing that we’re experimenting with. When we launched we had three pricing tiers. We had the free trial, then we had the middle tier which was the standard $49 a month or a yearly for $490, and we had the higher tier which is advanced access to Nugget. So you’d get the business opportunity seven days before anybody else saw it. That was $97 a month. We hit 2000 MRR in the first two days of launch because we had people signing up for all four of those paid plans. We validated that those numbers work, that people are willing to pay all four of those plans – the $49, $490, $97, $970. And so what we ended up doing was realizing we, at the time, didn’t have enough of these ideas in the queue to start giving people advanced access plus having the normal stream of people. And it was splitting our time in a way that we didn’t want to do. So we downgraded all the advanced access people to regular paying. So that totally adjusted the revenue curve right there. So everybody that signed up at $970 or paid for the year of advanced, they got downgraded to the normal plan.
So right away we were in conversations with those people that signed up for advanced access. So now we know, this guy signed up, he wants to see all these ideas before anybody else. So you reach out to him. “Why is that? Why do you want to see these ideas?” For a lot of these people, they said, “I don’t care about the community. I don’t want anybody seeing an idea before I get to. I want the opportunity to skim your database of ideas, cherry pick the ones I want and have exclusive access to it.” Almost like on Getty images or istockphoto, you can have exclusive rights to an image. Same kind of deal. So we do have an audience that wants that. But on the other end of the spectrum we have an audience that doesn’t care as much about the ideas and they really are begging for the community, which leaves us kind of torn. For instance, before you and I got on the phone, Justin and I had a 40-minute call with a customer just to talk about that, because he was really excited about the community and kind of ho-hum about the ideas.
Rob [24:18]: What a trip. So you’re split there and I’m wondering – I mean, I’m intrigued by someone willing to pay for exclusive access, because could it be something where everybody pays $49 a month and that’s kind of the entry level and then you see how many views certain ideas have had – or all the ideas – it shows 50 people have viewed this idea. And if you want to buy exclusive access which basically removes if from the database from then on, you pay a one-time fee of however much. $50, $100, $200 depends. Is that something that’s been discussed?
Ken [24:50]: Yes. We’ve been not only discussing that anytime a customer comes at us saying, “Hey, you should do this.” we’re like, “Great. How much would you pay for that?”
Rob [24:56]: Yeah. Totally.
Ken [24:57]: Because here’s the stripe link. That kind of thing. We had one customer say, “You know, I like the idea but I wouldn’t pay more than $3 a month.” And it’s like, “Well, thanks anyway.” Another customer reached out and said, “You know, I like this idea but money’s tight right now. I couldn’t pay more than $15 or $17 a month.” And so we said, “Would you pay $20 and here’s a link? We’ll make that happen for you.” So those kinds of discussions have gone on. Customers have reached out and said, “I would definitely pay for exclusive access.” We’ve been in deep conversation with those particular customers of, what would that look like? What would the community see? Would they suddenly see this idea vanish from nowhere? There was four days of discussion and it’s just gone. What happens at that point? So we’ve really got to dig into that. But we are definitely toying with that.
Plus, there’s the advantage here that once we get a corpus of these nuggets – 30 days, 60 days, 1000 nuggets even – suddenly you can build really cool tools that help people analyze. Because before we put out the nuggets – I mean we have all these things in a database and we have facets of information about each idea. So, “Is the idea bootstrappable or not? Is it more of a funded suited thing? Is it B2C or B2B? Is this a marketplace? Is this idea really a marketplace? What industry is it in?” So somebody could log on and if we had a search tool to sell them exclusive access to, and say, “You know, I’m not interested in the daily feed, but if I could just search and see if you have any healthcare ideas that are bootstrappable with this tech, blah, blah, blah, and just look at what you have. And then maybe even set an alert; like email me when something like that shows up. I would pay a monthly fee for that.”
So we’ve had customers that are like, “Oh yeah. We would definitely sign up for that.” We’re so early right now we don’t have enough of these opportunities in the can to make that kind of a tool even worthwhile because you’re not going to log into a tool that has ten ideas in it. You want at least a thousand.
Rob [26:39]: Yeah. I have a question for you piggybacking on that. I guess it’s really two questions. I’ll break it into two pieces. One is: from where are you sourcing these ideas? And I understand that this is kind of your secret sauce. This is your Coca-Cola formula so you don’t have to tell me everything precisely, but how much are you talking about that?
Ken [27:00]: Justin told everybody on his podcast so I think I’m okay talking about it.
Rob [27:04]: Alright.
Ken [27:05]: When Craig asked me that question, I was all cagy about it on my podcast.
Rob [27:08]: I remember.
Ken [27:09]: I was listening to techzing and he’s telling everybody how it works. Right now, we’ve got a few channels in mind that we’re going to eventually be sourcing from a lot of different channels. Right now, just to get started, we’re using Mturk – Amazon’s Mechanical Turk.
Rob [27:22]: I knew it. When you didn’t reveal it on ‘Nights & Weekends’, I was thinking, “I bet they’re using Mechanical Turk in a very clever way.” The thing here is, you can tell us exactly how it’s done. It doesn’t matter, because I would never go to the lengths that you’re going to go to to find an idea and, yet, I would pay for ideas. You know what I’m saying?
Ken [27:39]: Yeah.
Rob [27:41]: It’s only going to be the people who are going to bitch and complain about your $7 a month price point that are going to go do it themselves. Anybody who is actually probably going to spend the time, and has at least a modicum of money, is not going to go through the process that you guys are doing today and that you’re going to get better at, right? If you do this for six months, you’re going to be way better than us even if you told us the whole approach to doing it.
Ken [28:02]: Yup. Mturk, I don’t know if you’ve used it, it’s kind of a hassle really. It’s not at all user friendly. And there are things that you can do through the API programmatically that you can’t do in their user interface. There’s a ton about Mturk that sucks. So we don’t want to be wholly reliant on that. Like, it was down for four days for no explanation, and it just came back up. But initially, when we first talked about this, just to see if it was feasible, Justin went on – it was like 7 a.m. on a Sunday – and for an hour he had this, they call it “”hits”, so he put the hit out and we were going to pay $1 for anybody who submits and idea to us. And then people, at 7 a.m., started submitting tons of ideas. That’s just how it begins. If we got this good a quality of ideas on a Sunday morning at 7 a.m., what would happen if we did this every day. So we’ve been testing what times a day that certain kind of people that have certain kinds of ideas that fit our audience are around answering these questions. So there’s a lot of learning that we’ve done on Mturk. But that’s right now how we’re getting the ideas. In the future, we can’t be wholly reliant on that but it’s doing good for now.
Rob [29:08]: Right. That makes sense.
Ken [29:09]: In fact, it’s given us more of a backlog than we can actually handle.
Rob [29:13]: Well, that was going to be probably my final question. The obvious question was when you’re talking about cranking out 30 ideas a month, 360-ish a year, you wonder – as an outsider – can they keep this up? Can the quality still be high? How many business ideas can someone possibly generate? And I guess what you’re saying is you’re not really generating them out of thin air. You’re using a massive distributed nervous system, essentially, of a lot of different brains.
Ken [29:40]:Yeah. Crowd sourcing.
Rob [29:41]: Cool. Well, sir, we’re at time. I really appreciate you coming on the show today. I feel like our listeners probably got a look into a couple things. One is how to cleverly use a third party service like Mechanical Turk to build a business on, which I think is cool. I always love ideas like that. And like another is that you guys have moved fairly quickly. I know it’s been weeks in between maybe the initial discussion, but I got an email from Justin less than two months ago and you guys launched within that period. And, as you said, got to 2000 MRR for a certain glimpse of time. And then, you’ve essentially gone against some conventional wisdom which says that business ideas aren’t worth anything. It’s all about execution. But you’re value adding is what it is. You’re not giving two or three sentence summaries, you’re giving this whole email with the research and like you said, you spent three hours on it and there can be value in that.
Ken [30:29]: Yes.
Rob [30:30]: Very cool. Well, if folks want to keep up with you, where should they look?
Ken [30:33]: You can go to Nugget.one. We are also on Twitter @_nuggetone. And also you can just email us at feedback@nugget.one.
Rob [30:41]: And if you want to hear more of the ongoing developments of this I would check out the ‘Nights & Weekends’ podcast with Ken Wallace and Craig Hewitt. Thank you very much, sir.
Ken [30:51]: Thank you. It’s been a joy.
Rob [30:54]: So, if you have a question for us you can call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt. It’s used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
