Inside Anchor’s Journey to Product Market Fit and Sale to Spotify with Mike Mignano

You hear these stories about people flipping a switch in the product and then finding product market fit overnight. It was like that. It went from us pushing something on people to them just ripping it out of our hands kind of overnight. If we hadn't done that splashy launch, we probably wouldn't have been able to raise that subsequent round of funding. If we hadn't raised that subsequent round of funding, I think it would have been really hard for us to pivot when we realized the product wasn't working. If we hadn't pivoted, we maybe we'd be dead. But as I mentioned to you, Silicon Valley was pretty anti-podcasts when we went out to raise capital because again, it had been tried. It didn't work. If we went into VC offices on Sand Hill Road pitching where we ultimately landed for Anchor, which worked, by the way, which found product-market fit and grew exponentially really quickly, I don't think we could have gotten that funded. But because we got kind of the dumb thing funded, it afforded us the capital and the runway and the space to go and try maybe the more pragmatic thing, which ended up working for us. And the best founders have a point of view about the world, but are very flexible And sort of how they get there. There's like a determinism to end up at some future state, but a looseness around how. I think that's really important. I think people that are not super precious about what they build is important. And that doesn't mean low quality. I think that means a very high willingness to be wrong and thus also a very high willingness to take many, many shots on goal really quickly to get to the right answer. You mentioned having the balance sheet to absorb some shock. I think the way that you make that balance sheet last even longer is you do more with it. And the way you do more with it, I think, is you, you make fast but thoughtful decisions early on and, and you put yourself out there more. I think every time you put yourself out there, you put a product into the world, you learn something. And every time you learn, you make a better quality decision the next time. I'm really a fan of product-oriented teams that are willing to put stuff out there and, and fail.

Welcome to The Peel, where we explore the world's greatest startup stories I'm your host, Turner Novak, founder of Nana Capital, venture capital firm that's willing to put stuff out there and fail. I'm excited for this conversation with Mike Mignano. Mike is currently a partner at Lightspeed Venture Partners. Before Lightspeed, he spent 5 years building Anchor, which he sold to Spotify in 2020, and then led Spotify's podcast, video, and live products for 3 years. It's probably safe to assume every podcast you listen to, uses Mike's product, and we go way back to the very beginning and talk through how the team at Anchor pulled it off. We talk about podcasting in the early 2010s, how the market evolved up to today, and why the future of podcasts is video. We also talk about building Anchor and eventually selling to Spotify, including how they built a community of early adopters, pivoting the product after a splashy launch that captivated the tech world, the single decision That found the product market fit with only a few months of runway remaining and inside the sale to Spotify for an undisclosed 9-figure amount. Mike also shares his framework of doing the dumb thing and super goals, which are high-stakes focusing goals with a clear and urgent timeframe, open-ended method of achievement, and a single measure of success. Throughout the episode, we'll mention a few of the pieces that Mike's written, and those are all linked in the show notes. Mike also has an awesome podcast called Generative Now where he goes inside today's most exciting AI companies, which is also linked in the show notes. Without further ado, let's jump in after a quick word from Atio. Regular listeners of the show are already familiar with Atio. It's the powerful, intuitive, and easy-to-configure CRM built for today's modern company. It's flexible, easily configures to your unique data structures, and works for any go-to-market From self-serve to sales-led, it automatically syncs and enriches your contacts, emails, and calendar, creates custom powerful reports, and quickly builds Zapier-like automations within the interface. Atio has built a truly elegant product, and people on Twitter are describing it as the linear of CRMs. The next era of companies deserves more than a one-size-fits-all CRM with outdated user experience. Join OpenAI, Replicate, ElevenLabs, and more. Try Attio instantly at attio.com. That's A-T-T-I-O dot com. Or if you want to support the show, visit the link in the show notes and scale your company to the next level. Thank you, Attio. And now let's talk to Mike Mignano. Mike, how's it going?

Good, Turner. Good to see you.

Good to see you too. First question to kick things off: Can you talk a little bit about what is going on in consumer tech right now? What are the big themes you're following? What are you excited about? And then we can go a little bit deeper.

Sure. So I think the story of startups and tech investing over the past couple of years has obviously been enterprise and SaaS. Like that's, that seems to be where all of the opportunity has been over the past couple of years. Consumer has been a bit of a graveyard. I am of the belief that that's, that's turning and that's about to turn. And maybe not surprisingly, I think AI has a lot to do with it. You know, last year, 2023 was so much about LLMs, foundational models, image models, you know, all these new models.

This is like infrastructure level stuff.

Yeah. Investing in the technology. And obviously there were lots of really smart teams chasing those opportunities. But I think now we're entering a period where great builders have had exposure to this technology for long enough that, that the great products now are being baked. You know, people are in the lab. Cooking up the next great both enterprise and consumer products. And so I think we're about to start seeing a wave of great products emerge. In fact, I mean, it's a little, it's a little crazy to think about, but if you think about the 2 biggest success stories in AI right now, they're actually consumer products. ChatGPT, you know, the rumor is OpenAI is generating, you know, more than $1.5 billion in annual revenue. And the rumor is that most of that is coming through consumer subscriptions to ChatGPT. Midjourney, you know, largely, I would say, a consumer application and same thing generating supposedly in the hundreds of millions in annual revenue. So I think there's a feeling that, you know, a lot of the AI success right now is happening in the enterprise, but it actually hasn't really hit the enterprise yet. It feels like it started to happen in consumer. And then if you play this thing out even more and you think about what AI can do, Right. I like to think about AI as kind of like a resource, like a unit of work. You know, it's almost similar to labor or capital. You know, if we all have an abundance of, of work units available to us at our disposal, what does that do? That frees up our time to maybe do things that, that we care about, right? That we're more passionate about. And so I think, I think AI will actually lead to a ton of opportunity in consumer land, whether it be along the lines of entertainment, you know, education, self-improvement, you know, all these things that we've— if we won the lottery of time, like, what would we actually invest in, right? When, when somebody all of a sudden comes into newfound time, what do they do? They, they, they take up a hobby.

They start a podcast.

They start a podcast like you and me. So I think consumer I'm very optimistic about consumer, I guess, is the point.

Yeah, it's an interesting analogy. Like, you think about— if you just think about AI as a new technology, if you go back a couple hundred years, we used to grow our own food. We had to like farm and we had to do it by hand, right? And then there were tools to do it for us, there were tools to store it and distribute it, and now we don't even think about where our food comes from. There's pros and cons to that, but we used to spend the majority of our time on something that simple AI is just, you know, if you think about it, like exponential progress, it's just the new rung on the ladder of progress that's probably going to lead to a lot of stuff we don't even think about yet, that we don't even know exists.

Absolutely. Absolutely. So I'm really optimistic about consumer. There's a whole new blue ocean of opportunity of things you can build that you couldn't build a year ago.

So I kind of wanted to spend a bunch of time talking about Anchor, the journey, starting the company, take us inside, all that kind of stuff. Going back to the early days, maybe pre-Anchör, what was the audio space and maybe the podcasting space kind of like back before you even started the company, before you even started thinking about the problem?

Yeah, so I think, you know, still today in 2024, most of what people listen to in audio is music. Right? Music still makes up, you know, the vast, vast majority of consumption hours of audio content. Audiobooks are a growing medium and podcasts, you know, still a growing medium. But back then when we started the company, we initially started thinking about starting the company in 2014. So 10 years ago and podcasts were kind of just gaining popularity. But that's really when podcasts really took shape was around the era of the iPod. You know, Steve Jobs famously talked about podcasts in his introduction of the iPod and talking about how you could take your favorite, you know, radio shows along with you, download them to your iPod, much like you could download music.

That was in the announcement?

Believe it was either in the initial announcement or one of the initial announcements for sure. But, you know, they never really caught on. There was, caught on with the masses, right? There was definitely excitement about it. And I think, you know, if you look back to sort of Silicon Valley lore, there were some very famous VCs who, you know, who took big bets on podcasting, you know, like in the, in the late part of the first decade of the 2000s. And it never really panned out. And so around 2014, what I mentioned when we were thinking more and more about this, we, my co-founder Nir Zickerman and I, we had gotten into podcasts really just like everyone else. After the Anchor thing happened, you know, I would have people come up to me and be like, oh, you must know All of the niche podcasts, and you must have you must have great recommendations for what I can listen to. And I'm like, yeah, but I actually got into podcasts by listening to Serial, just like you know ninety percent of of of the world at that time.

Serial was like the like the Taylor Swift of podcasts back ten years ago, right? It was just like the biggest thing.

Yeah, it was the biggest thing. I mean, it it was really it was really groundbreaking. I think you know in terms of a narrative structure and storytelling and and you know investigative journalism, like it was. It was really powerful.

I don't—

did you listen to it at the time?

I didn't listen to it, but I know that it exists. So that's— I mean, that's saying something with how powerful it was.

It was incredible. It was incredible. And for me, it was definitely a gateway drug. And I started listening to other things. I got really into— I'm into sports, I'm into pop culture. So I was really into the Grantland Network. Grantland was Bill Simmons' media company inside of ESPN before he did The Ringer. I loved all that stuff. I liked listening to, you know, things like the Startup Podcast because I was building a startup at the time. I don't know if you remember that one from Gimlet.

I do not.

Another, another awesome one you should listen to. So, you know, I, I got into podcasts just like everyone else, but the difference was my co-founder Nir and I, we had just worked for a couple of years at a company called Aviary, which had the mission of democratizing creativity through Through a mobile app for photo editing, similar to the type of thing that was happening inside of Instagram. We offered a mobile photo editing SDK, and the whole product philosophy around that was that anyone should be able to be creative. Anyone should be able to take and edit and share photos, even if you weren't inherently talented or you didn't know anything about photography. And so when we started getting into podcasts, the two of us, we tried making podcasts ourselves, and it was hard. You know, we had to have the expensive microphone and you had to learn how to edit audio in GarageBand or whatever, you know, Audacity.

Yeah, I've used that way back in the day.

And coming from just, you know, building scaled consumer mobile products for, you know, photo editing, we were like, why can't this be done on mobile? And if this could be done on mobile, why couldn't everyone do this, right? Why couldn't anyone make a podcast? It just seemed, it was one of those things that seemed kind of obvious, but the more and more we looked into it, we were just like, yeah, no one's really tried this yet. That's weird. Now, naturally at the time, first-time entrepreneur, first-time founder, I think our ideas and our vision for the product maybe weren't as sharp as they could be. And we definitely went down some wrong paths. The company actually started more as like a social audio network. Than a podcasting platform, because I think we thought that like the way to democratize a form of media was to do it via social network, much like, you know, Twitter and Facebook did for writing and, you know, Instagram did for photography. That was the wrong decision for a number of reasons. But anyway, to answer your question, podcasting was sort of a niche medium and it was just starting to take off in terms of popularity. You know, there were maybe a couple hundred thousand podcasts that had ever been created. Spotify did not have podcasts in the Spotify app yet. You know, it was really like Apple Podcasts and a couple of indie podcast players.

So I used to listen on SoundCloud. There's the podcast I remember I listened to was called BiggerPockets. It was about real estate investing and it was just how do you get started in real estate investing? I had just graduated college and I was buying my first house that I wanted to be an investment property eventually. So I was like just learning the ropes. How do you invest in real estate? And it was a really good podcast. They just had a bunch of real estate investors on. It's just like when you listen to a startup podcast, you have founders and investors on. It was the same thing. And yeah, I think I, I don't even remember how I got new episodes. I think it was on their forum or something like it was, or maybe they showed up in the SoundCloud app or on the website. I can't even remember.

I remember when SoundCloud had a big podcasting presence. Yeah, for sure. That was one of the platforms we thought about. Distributing to in the early days for sure. But yeah, I mean, it wasn't popular. It wasn't a big deal, podcasting.

And there was kind of this concept that's not really as— it doesn't really exist there. I guess it kind of exists, but it's kind of been abstracted away. This concept of RSS was like the backbone of podcasts. Can you kind of explain what that is for people who've never heard that before and why it was so important in podcasts?

Yeah. So the way that podcasts got distributed and still to this day get distributed to a good chunk of the podcast listening platforms, I think including Apple Podcasts, was all via RSS. Now RSS was a standard of content distribution. It is a standard of content distribution on the internet. Really mostly got its origins in, or its traction, I would say, with blogs, right? So, you know, I'm sure you remember the days of Google Reader and, you know, all of FeedBurner and all these, these products that basically ingested RSS feeds that were getting spun off of blogs and you could use it to aggregate blog posts and news articles of things you wanted to read. Well, podcasts leveraged, and again, still to this day, leveraged RSS for distribution of podcast content. And so, you know, to publish a podcast, What you had to do was first you had to record it like we're doing now. Then you had to go and host the audio files on a file hosting service. The biggest one, or one of the biggest ones back then was Libsyn, which is still around. You had to pay to store the files, which even in 2014 to us, like seemed kind of crazy because, you know, we had free storage on Dropbox and Google Drive to, you know, thousands of, of, of gigabytes for free in terms of storage. But for some reason in podcasting, you had to pay. $20 a month to store like a couple hundred megabytes.

Wow. That's, yeah, that's huge.

Yeah, it's crazy. So you would store your files on one of these services. And once you uploaded your files, it would take them and it would organize them into an RSS feed. And then you would take that RSS feed and you would manually copy and paste the URL and you would paste it into all of the different consumption platforms, you know, backend admins like, like Apple Podcasts. Podcast Connect. You'd have to go and you'd have to set up a new podcast, paste in your RSS feed. Apple would ingest it. They would take a few days to approve it. And then boom, you'd appear in the, in the, in the Apple Podcasts. Wow.

That's annoying. Couple days to approve. I mean, that like kills all type of like iteration speed.

Well, that's for the first, like the first time you want to get listed. And then every, and then every time you publish an episode, it would just flow through. But to be listed the first time you had to wait, you know, for approval, similar to the, you know, the App Store, right? When you submit a new app to the App Store. But it was all powered by RSS. RSS was the standard that organized the files and the metadata around the podcast and got adopted by all these platforms for distribution.

Okay, so RSS sounds, from what you've said so far, pretty good. Gives you distribution anywhere you want. Were there any downsides to it? I think I've heard you talk about these before, but what were some of the downsides of RSS?

The distribution thing is a great point. I mean, it is, it's amazing the fact that everyone has adopted this standard because it means all you have to do is publish to this standard and you could get distribution on any of these platforms, many of which have many millions of listeners listening on them. That's the upside. The downside with this standard and frankly any other standard is once there's enough adoption of the thing, there's this inertia that happens, right? And it becomes very, very difficult to change the standard, right? If you want to make any changes to the standard, changing the standard in a vacuum really doesn't affect the entire ecosystem. It only affects where the change is being made, right? And so if you want to add a new field to the RSS feed to support some new feature inside of podcasting, the only way that's going to get adopted at scale is if every platform gets together and agrees that they should adopt this new feel, right? Apple Podcasts and Spotify and SoundCloud, for your point, and Amazon or whoever. And so you just end up with sort of like stagnation of features and innovation. And that's kind of the trade-off. You know, that's the trade-off. It's, I would say it's, it's, it's not a good thing or a bad thing. I mean, it can be a good thing or a bad thing, I guess, but for the medium of podcasting, which I think was already highly inaccessible because of the limitations of the technology and the software, I think it made it more inaccessible, in my opinion. I know this is a somewhat controversial opinion because people love RSS, and I love RSS as well for the reasons we mentioned. But, you know, a lot of people have for many years talked about the limited amount of data you get back when you publish a podcast. Or the fact that, you know, it's not interactive or the monetization, all, you know, it's all manual through host read ads. Like all these things really stem from the limitations of RSS.

Yeah, it kind of reminds me of maybe some analogies. If you think about video and audio, so if you like TV and radio back in the day, or maybe things like print, things like that, when the internet came around, it made a lot of those a lot easier to monetize essentially. Like you think about Facebook does, I forget what, I mean, they're doing like $100 billion in revenue. It might not be the exact number, but insane. It's like, you know, it's bigger than the newspaper industry was. You think about like how big is YouTube? All these like streaming platforms are adopting advertising. They're gonna pass TV eventually. But then when you compare radio with podcasts and just the size of the markets, like radio still, it's like $30, $40 billion, something like that. And I think podcast is like 2 or something. Like, it just, it just has not taken off in the same sense of some of these other mediums. So it's a super interesting point of— and me as a, like, having a podcast, it is pretty hard to make money. You basically just need to get big enough to the point where you can have someone say, hey, cool. I have no idea who's actually listening to this and no idea if anything's working because we can't really do much attribution built into the platforms. You know, you maybe have to do like custom code. I'll give you X dollars per episode. And it's just like how you used to do a, like an influencer type post on social media, or you used to do advertising in the newspaper.

Or a radio ad.

Or yeah, or a radio ad. Yeah.

Which, which is so, which is so the opposite to the way like advertising works on video right now, right? Because it's all streaming and it all exists within, you know, mostly one platform, right? YouTube, which by the way is the downside to innovating on formats, right? So So I'm talking about how RSS is limiting. Really the answer to that, or normally the way that that gets broken is by a single platform gaining massive market share and then innovating outside of the format on their own standard, their own format. And that's usually when you start to see like huge leaps and jumps in terms of functionality and data. The drawback to that obviously is then you end up with one or two or a small few of platforms that control an entire market. And obviously that has all these downstream implications around sort of customer choice. And so it's like, that's why I said like, there's, there's no right or wrong answer here. It's just sort of the reality that RSS, as amazing as it has been for distribution, is also the same thing that I think has led to a lot of this, you know, the stagnant sort of innovation that has taken place in podcasting.

And then kind of going a little bit deeper on the Anchor story, you mentioned something, you didn't actually do podcasting to start. you're doing more of a social product. Do you remember like the first couple weeks, months of starting to work on this? What were those like and how did you come up with that first idea?

You know, when I think we first started working on this, you know, before, before we even quit our jobs and we were just doing it sort of nights and weekends, and, and we had never started companies before, so we had a certain level of naivete to, to us. You know, you don't, you don't, when you haven't done startup, you kind of don't know what's possible and what's not possible. And also the other thing is neither of us were really trained in what we were doing at the time. So I was designing the initial app and my co-founder Nir was coding it. He was building an iOS app and he had never done that before. So neither of us had ever really done this before. And so it was totally like white, it was all white space, you know? And it was a lot of fun. We were just, yeah, again, I think we felt like, If we really want to, and this sort of goes to the point around RSS, I think we both felt like if we really want to innovate on podcasting, we have to have our own format. The whole thing has to exist within our app. It can't distribute to other platforms. And so we basically, it was like we were designing an audio experience from the ground up as if podcasting had never existed. It was like, what does it look like if everyday people get to record and share audio with each other and listen to it and interact with it? And that was a lot of fun. We were, you know, we were, we had this, we had this really strong product value around making everything audio first. And what we meant by that was all of these interactions of listening and responding and interacting with audio or the content, much like you would on a social network. We wanted it all to be able to happen when the phone was in your pocket, right? Because when you're listening to audio, you're not, you're not staring at a screen, right? You're walking around with headphones in your ears. So we were coming up with all these, these clever features around, you know, to, to like a piece of content, you just tap on the back of your phone when it's in your pocket and the accelerometer will recognize that.

And yeah, that's pretty cool.

All sorts of stuff like that. Or to record a piece of content, you know, we had this feature that a lot of people liked where you would just— you wouldn't have to pull out your phone, go into the app, go into the record screen. You just have to go into the app and hold the phone up to your ear like you were talking on the telephone. And we would We would pick up the sensor by the phone. We would recognize that, know you're trying to record, and we would just start recording, right? So just like little things like that.

And this was all pre-AirPods, right? Like this was 2015, like summer of 2015?

2015, that's right. Yeah, yeah, yeah. So it was a lot of fun because we were just inventing all these new features and ideas that, yeah, I mean, maybe quickly fast forwarding, a lot of these things never really panned out. But it was fun just to be able to try things. The other thing is we had a, you know, we had a, the two of us, I think, because we had never really done this before, we weren't too precious about what we were shipping to people. And so we were shipping things really, really quickly and getting feedback in real time. And that became sort of like this core value of the company, just to move really, really fast. And that was exhilarating, just shipping things as fast as humanly possible, getting real-time feedback from our small growing beta community and And then either scrapping something or doubling down on it. So yeah, it was a social network. I mean, it was the first version of Anchor was in many ways more like the Instagram of audio than it was a podcasting platform. And people really liked it. I mean, our beta community in those early days loved it. I think people, and this was all before we launched, before we had raised a real round of funding. We'd raised a tiny bit of funding, but people really loved it. And I think people felt like it was novel and unique because All of the other social apps that were out at the time were either photo social networks or video social networks. Snapchat Stories had recently come out and people were really obsessed with the stories format.

Vine was probably in its heyday, right?

Yeah, Vine was still around. And I think people were just drawn to this novel audio-first experience, which they hadn't really seen before. Even people that weren't into podcasts, it was just like, what is this weird audio social network? You know what? So I think there was a certain allure to the novelty of that.

What advice would you have to somebody else who wants to set up like a tight-knit beta community, iterate fast? Like what were some of the things you think you did right there or maybe mistakes that you'd advise people not to do if they wanted to do something like that?

You know, one of the things we did right was I think we were pretty shameless about trying to get all of our friends and family in. And that took a hurdle we had to get over a little bit. You know, where are we gonna get these users? Oh, we don't wanna, We don't want to bother our friends and family with our silly little app that we're doing. But I think at a certain point, we just leaned into it. And we sort of brought everyone in our lives kind of along on the journey with us, right? We really, we got all the people that I think cared about us most in our lives invested in the journey, right? We sent lots of, lots of updates to people, lots of personal one-on-one emails, we really brought everyone along. That was really, really helpful. And I think, you know, offered a little bit of a spark. Yeah. That had a little bit of a, you know, sort of a network effect with people then outside of our immediate social circle bringing people in. We also took every opportunity we could to to kind of demo the product in person for for people that we hadn't met. You know, BetaWorks was and still is a big a big part of the New York City startup community, and we had a friend that worked there, and you know she offered to let us demo there. And so, you know, we would go in there and demo, and and every time we did that, we'd get we'd get people that weren't our friends trying the app, and they would tell their friends. And I think just by being out there and promoting it and sort of getting it in front of people, before we knew it, we had this little organic community of people in New York City that were excited by what we were building and trying it and just kind of brute-forced it. And I think the fact that we were so vocal and we were so in touch with everyone in the beta community and we were shipping so fast, that feedback loop, I think, only further endeared people. And brought them in and sort of made them fans of what we were doing. You know, you hear a lot about people, you know, you hear people on Twitter talk about building in public and that whole thing. We very much adopted that ethos and that mentality, and I think it worked to our advantage.

And then, so you started building this when you were still at—

Adobe.

Yeah, it was acquired.

That's right. So we started doing it nights and weekends, and this was before we had raised any money. This was like early 2015. And that was a little bit of a nerve-wracking experience because, you know, you hear, I don't know, maybe we had heard horror stories about, you know, you can't really work on a startup while you're at another company. You know, what's property of the company? What's property of you? I think we were watching Silicon Valley, the TV show at the time. And I think there was an episode about, you know, what was that big tech company owning Pied Piper? I don't know.

Hooli is the company?

Yeah, Hooli. So we were really, really thoughtful around, we're never going to talk about this during business hours. We're never going to talk about this at work. We're never, you know, we're never going to write a line of code during, during work hours. It's only going to be, you know, late nights, early mornings, weekends, clear separation of church and state, right? And, and, and, and we got, and we, we got pretty far doing that, but more and more we found ourselves trying to find more time. You know, how can we invest more in this? This is working. The beta community's into it. How can we invest more and more time? And ultimately we realized the only way to invest more time was to get rid of our day jobs. And so that was like the moment where it was like, hey, we can either abandon this and move on, or if we want to see if there's anything here, we got to quit our jobs. That's, it's just, it's the choice we got.

So did you, so what came first? I know you raised like a small round, I think from Betaworks. What came first, raising a little bit of money or quitting or in between? Like, how did you, how did you do that that first time going through that process?

We had heard from friends and mentors and things that, you know, raising a proper round of funding is a full-time job. And, and now having done it a few times and now being on the other side, I, you know, I agree it is, it is a full-time job. It's not something you can do while you're working a day job. So, you know, we're sort of faced with this, this this question of, well, do we quit our jobs and sort of get rid of the safety net and then go raise funding? Or how do we do this? Neither of us were in a position that we could afford to not work. I mentioned a few minutes ago that we had demoed at Betaworks where our friend Maya was working at the time, Maya Prerhovnik. We went and we demoed there and John Borthwick, the CEO of Betaworks came up to us and said, hey, he and Matt Hartman, another partner at Betaworks at the time, they came up to us and they said, Hey, we've been thinking about audio. We really believe in this space. And if you want to talk about maybe raising some capital from us, let's talk. So we went in there and we talked to them and we basically explained to them, we do plan to go raise a round of funding, but it's not really something we can do while we're working our jobs. And so we're trying to figure out the sequencing. And they made us a really compelling offer, which was, hey, how about we write you this tiny little check right now at a really favorable valuation to you. You don't have to do anything else. You don't need to go raise any more money, quit your jobs, come work out of our office for a few months. While you're working out of our office, you can go prepare for another round of funding. And then you'll have the time to go invest in that properly to take in the capital you need to give this a real shot. So that's what we did. We, we did the deal with Betaworks that enabled us to go put in our notice at Adobe. And, you know, a few weeks later, we showed up at the Betaworks office and just started working on Anchor full-time.

And then you— so kind of that period, was this early summer?

Yeah, you're— you've done your research. That was, uh, I think that was July or August 2015.

Okay. And then you were, you know, in the lab, quote unquote. You were cooking, I think was maybe one of the words you used earlier. You were working on this. What— at what point did you actually launch the product? I think it was You raised a kind of like a proper round, like a proper pre-seed round before you launched. Am I remembering that right?

Yeah, that's right. So, so we spent, we spent, you know, let's call it close to 3 months trying to get the beta in better shape, right? And just like something that we felt proud to demo and go pitch to a bunch of, a bunch of VCs. At the same time, Betaworks was a huge help in making a bunch of introductions to to VCs, both in New York and the Bay Area. And I would say after doing that for about 2 months, we're like, we're gonna go raise a couple million bucks, go do this. And I think at that point, the product was in really good shape. It was still a small beta community. It wasn't live for the public, but there were people in it. People were making content. And it was nice. Like it was a nice prototype. Now on the other side, oftentimes you see pitches where there's no product. This was like more on the spectrum of this thing was pretty baked and you could see what it might become. And we were fortunate to have those introductions from Betaworks, like I mentioned. And so sort of like right before the end of the 3 months that we were working at Betaworks, we went out to Silicon Valley and we sort of did the classic, you know, compressed everything to 1 or 2 weeks, try to cram the meetings in as tightly packed as possible. I was actually on crutches at the time because I had had a yeah, I'd had an injury that I had to get a surgery for, and so that was that added that complicated the process a little bit because now I was I was having to it wasn't really easy to move around. So you know, near my co-founder, I'll I'm forever grateful. I mean, he had to like in the airport push me around in a wheelchair. Like it was you know it was. It was a lot. There was a lot going on in our lives at the moment, but we did it. We went out to Silicon Valley and we took a bunch of meetings in New York and we ended up raising, I forget what the total amount was, but it was something just under maybe $2 million from a number of great firms, ENIAC in New York, SV Angel, great group of angels, really great group of people who were super supportive. And that's what enabled us to then go out and confidently launch the product a few months later.

And then how did you decide when to launch? Like when you're running a beta like this, what are any key factors you'd consider?

Yeah, so, so this was a social network, right? And I think it was really important to us that we had density in sort of the, the graph of people using it and also the content. We didn't want anyone to show up in the app and it to be a ghost town, right? And there'd be no content. So we spent a lot of time in the beta trying to come up with all these ways to kind of manufacture activity and content to a critical mass that would, that would give us the confidence to go and launch. And I would say we did an okay job of that, but I remember there was a time where Nir and I kind of looked at each other and we thought to ourselves, we could be doing this forever. Like we're never going to be satisfied with the amount of content in this app. And so we just have to launch and whatever happens happens, like let the chips fall where they may. But it was, that was a scary decision. I mean, we, there was nothing really, there was no proof that we would launch this thing and there would be enough content and enough activity in it that it would matter. It was almost like a little bit of a last ditch thing. It was like, at a certain point, we just gotta get this thing out there.

So how did you, how did you switch from not knowing really if it was gonna work? Like, what'd you do?

We just decided to go for it and You know, I think because we felt like we wanted there to be content, we took a different approach than I think a lot of people take, which is, and I don't know if this is the right approach, but it's the approach we took. We decided to go for the splashy launch, you know, like we're gonna line up press, we're gonna, you know, we're gonna write, you know, this big manifesto, we're gonna get all of our investors shouting it from the rooftops, we're gonna get the beta community. Which is now, you know, probably in the hundreds or maybe a thousand people. We're going to get them all talking about it. We kind of pulled out all the stops and we said, maybe that will get us content. If enough people talk about this thing, maybe that'll, that'll get us content. And so we lined all that up. We, you know, we, we, we, we packaged up sort of the funding news because we had some notable investors around the table and the story of the app. And we got, you know, some, we got a journalist who agreed to write about it. And then We literally by hand emailed every single person in the beta community, not a mass, mass email. We felt like if we really want these people to get invested in this launch and support it, we have to reach out to everyone by hand. I remember over the course of a couple of days, we probably manually emailed close to like 1,000 people.

Geez. Is that just like you have a message? It's like you copy paste and you may be like, hey Mike, it was great catching up last week. And then copy paste, like check out Anchor or whatever. Like we just launched. Yeah. Yeah.

We personalized all of them, but yes, it was, it was something along those lines where You know, we're copy-pasting a certain thing and we're giving them clear actions of things, you know, we would like their help with, you know, promoting it, tweeting about it, upvoting us on Product Hunt, all that stuff, you know. And in terms of making a splash, it worked. It was, it was crazy. It was unlike anything.

It was February 2016, March 2016?

That's right. And it was, it was, it was shocking to us how much activity it generated in the app. We went from having this really hacky backend where we could sort of view the content and moderate it. And on any given day, maybe there was like 5 pieces of content in there and we flipped the switch and overnight there was just like thousands and thousands and thousands of pieces of content in there.

So you probably used to listen to every single piece of content, I'm assuming. And then it probably pretty quick was like, we can't even stay on top of this anymore.

Yeah, it was crazy. And, you know, the, the, the thing about Anchor, that first version, again, it was a social network, is you could record a piece of content and then anyone could reply to a piece of content with their voice. And it made these almost like threaded voice conversations that you could listen to. So I'd listen to Turner say something for 2 minutes, then Mike might reply, then Nir might reply, and you just inline sort of listen to this. Remember, audio first. You just tap play at the top and it just goes through.

Autoplays all the threads.

Just auto plays. Yeah, everything almost sounded like a, you know, sort of a jerky kind of back, you know, start and stop kind of podcast in a way. And there were so many conversations happening in this, you know, to your point, we couldn't listen to everything, but all of a sudden there was a community, there was people talking, people, you know, it was, it was fascinating to see. It was, it was almost like a bit of a social experiment, kind of probably similar to the way like the Clubhouse guys felt when they first launched that. And it just went nuts. You know, all of a sudden there's just, There's people on this thing that weren't a day ago, you know?

It's gotta be awesome though, just people using what you made and people caring about it. Like you spent, I mean, we just talked, you spent the past year like part-time in all your free time and then full-time because you didn't even have enough free time to work on it. It's just putting your heart into this thing and people used it. I mean, that doesn't happen that often. Like that's gotta feel amazing.

It was cool. It was, it was really cool. It was exhilarating. It was stressful. It was fun. It was disorienting. It was hard to know what to do next.

And this was like, just based on timeline, like right around South by Southwest too. And you guys were kind of like, usually there's like a product that encapsulates South by, like you were the product that year.

Yeah, exactly. That was crazy. It was very disorienting because we had never done this before and we were definitely naive. And we go from, You know, like I said, having a couple hundred or whatever people in the community to a few days later, we've got every investor in Silicon Valley reaching out. We've got celebrities on the app. We've got celebrities trying to get in touch with us to invest in it. We've got big companies calling up to ask to acquire us, just all of this madness. And it's hard to really know what to do. You know, our investors, one of our investors was like, you guys should go raise more money. And again, I'd never done this before. So my instinct was like, really? That we just raised money. We've got 18 months of runway, you know, whatever. And the advice was, well, no, you should spend it now. You've got, you know, you've got all this activity. You should double down. You should lean in. And the flip side, I had other investors saying, no, no, no, no, no, you should not raise money. You should wait until the data settles and you can find out if you actually have something here. You don't want to get ahead of your skis. I would say in hindsight, we kind of did a little bit of both. And I think that was maybe a mistake. I think we should have either decidedly said, we're going to go raise, we're going to raise fast, or we're going to get it. We're going to get the money in, or we're going to not. We're just going to shut down all those conversations and go heads down and just keep working. We kind of did one of these sort of in-between where we're sort of working and I'm taking investor meetings a little bit here and there. And that, so it ended up taking a little bit longer than it should have. And the reason I say it was a little bit of a mistake is just because I'm a big believer in when you're raising, you're raising. And you should acknowledge that because the time that you're spending raising money, you're not really working on product. If you're a product-oriented CEO, which I was, or you're working on product and you're just heads down. And so I was kind of doing both. And we had a small team at the time, so it was definitely a bit distracting. But anyway, we got it done. Fortunately, Accel took a bet on us, even though it was very, very much unproven. And frankly, after the hype and the excitement of the launch died down, it was pretty easy to see that as exciting as the launch had been, the app was really not working. It was not retentive. It was, there was a lot of excitement and I think people were attracted to the novelty of the product, but it wasn't retaining users. It was, it was a little bit of a, of a mirage. clouded by the fact that we had done this kind of splashy, hyped-up launch that attracted a lot of attention.

So would you, going back, would you do the hyped-up launch again?

I don't know. It's hard to say no. It's hard to say I wouldn't because I think all of the things we did, even though sort of in a micro sense, maybe they were wrong or mistakes, In the macro sense, I can also point to a lot of the mistakes that we made and point to how they led to things that unlocked some new phase of the business. Like for example, if we hadn't done that splashy launch, we probably wouldn't have been able to raise that subsequent round of funding. If we hadn't raised that subsequent round of funding, I think it would have been really hard for us to pivot when we realized the product wasn't working. If we hadn't pivoted, we maybe we'd be dead. So on an individual decision basis, it's hard to say I wouldn't do anything again because ultimately things did work out. I mean, even just like the decision to build a social audio network or social network for audio in hindsight seems kind of crazy and frankly kind of dumb. Now knowing what I know now, I'm pretty bearish on the notion that a social audio, a social network for audio can work at all. But as I mentioned to you, Silicon Valley was pretty anti-podcasts when we went out to raise capital because again, it had been tried. It didn't work. If we went into VC offices on Sand Hill Road pitching where we ultimately landed for Anchor, which worked by the way, which found product market fit and grew exponentially really quickly, I don't think we could have gotten that funded. But because we got kind of the dumb thing funded, it afforded us the capital and the runway and the space to go and try maybe the more pragmatic thing, which ended up working for us. Does that make sense?

Yeah, that— I mean, it makes a lot of sense, especially based on, you know, I think we had like— we talked about this a little bit beforehand and some of the stuff I've read that you've written, like, totally. I mean, being a VC, you see how it works. I think there's some truth to it is like, you need growth. Like startups need growth to survive. If you stop growing or you lose your momentum for too long, I mean, maybe there can be times where, you know, you, you're figuring things out, but you need momentum and you need growth, you know, in a macro big picture sense. And even, you know, minutely, like on the day-to-day, like you need to feel like you're moving forward. So I can totally see that of like, and like if you're going to have periods of, you know, less growth or, you know, you just stop for a little bit, the momentum shuts down. You need a balance sheet to, you need something to kind of shock absorb. So it does make a lot of sense.

The thing that I think it's made me realize now, especially as a VC, is when you're betting on an early stage team, you probably shouldn't get too attached to the product. You know, I think it's sharpened my thinking around what matters most at the earliest stages, seed stage, as an example. You know, I've, I've come from a place, especially as a product builder, I think I'm naturally drawn towards products or ideas But I think the longer I do this, the more I've sort of oscillated to the other side of teams and sort of surface areas. If a really compelling team is building in a surface area that is also really compelling, there's a certain level of confidence you just need to have that they're going to figure out the right product and that the current product they're working on, like having done this myself, there's a pretty good chance it's not going to work. And so the confidence to know that they can find the thing that will work is what's more important, I think, than the initial idea.

So I didn't think I was gonna ask this question because it's a little bit off topic, but it feels like a good, a good point to ask it. What do you think makes a good product founder? Like, if you're sitting there as a VC, this is your thought process of like, hey, this product might not work, but I'm making a bet on the founder or this team. What are you typically looking for? Like, maybe the soft skills or maybe there's quantitative things.

Yeah, I'm definitely looking for a strong sort of point of view about the future, you know, the future of maybe a certain market, not necessarily a prescriptive point of view, but kind of like, I believe the world is going in this direction, right? I believe the world is headed like this. And if we were to fast— if we were to run the clock forward, the world might look something like this. And so I think it's important to be building something over here, right? I think what's maybe the counter signal to that is X product will be the solution to Y problem. You know, I think founders, from what I've seen, the best founders have a point of view about the world, but are very flexible in sort of how they get there. You know, there's like a determinism to end up at some future state, but a looseness around how. I think that's really important. I don't know if you feel similarly. I also think people that are not super precious about what they build is important. And that doesn't mean low quality. I think that means a very high willingness to be wrong and thus also a very high willingness to take many, many shots on goal really quickly to get to the right answer. I mentioned a thing about us is we were shipping really, really fast. We didn't necessarily have religion about that early on, but now looking back on it in hindsight, I think it was critical. You mentioned having the balance sheet to absorb some shock. I think the way that you make that balance sheet last even longer is you do more with it. And the way you do more with it, I think, is you make really fast— I think you make fast but thoughtful decisions early on and you put yourself out there more. I think every time you put yourself out there, you put a product into the world, you learn something. And every time you learn, you make a better quality decision the next time, right? So I'm really a fan of product-oriented teams that are willing to put stuff out there and fail.

Yeah, tying back to Anchor, you put this product out. These were your words, like it was clear it probably wasn't going to work. What happened next? Like you kind of rate, you were a ton of excitement. Everyone knew about you guys. People had tried it. How did you go forward when you're like, okay, this probably isn't gonna work? What did you do?

Yeah, so one of the clear things we saw in the data as the months went on was that people wanted to create audio. That was a pretty cool learning. We were like, wow, people wanna be here and they wanna put themselves out there into the world.

Yeah, and that was the initial thesis, right? Like we wanna make it easier to just create audio content.

Yeah, but people didn't wanna listen to this stuff. This stuff was not compelling to listen to. And what was tough about that is there was a lot of inertia in the company moving in the direction of continuing to support this product. We hired an Android engineer to build the— we had iOS at launch, but then we brought on this amazing Android engineer to start building out the Android version. He was heads down, pouring months into building the Android version. But we realized this thing that people didn't want to listen to this, this tool and this sort of structure of the network is not conducive to people actually listening to this content. And so not only that, we just raised a round of funding from an investor that took a bet on the product that we had out there in the world. You know, fortunately, I think that investor probably knew something that I didn't at the time, which is what I just said a few minutes ago, that the initial product's probably going to change.

Yeah, I think— was, was that Brian O'Malley?

Yeah, that was Brian at Accel. And, you know, hugely supportive investor. And I think, you know, after looking at the initial data for a while and kind of constantly trying to get back to that initial launch spark, we realized we gotta rethink this thing. And the way that we thought to rethink it was we need to invest in the tools. This audio, people wanna make it, it's not that good. So what can we do with the tools to make the audio good? That's the power of technology and mobile tools that democratize creativity. We need to lean into that. So we scrapped the app. We made a conscious decision that we're gonna shut this thing down. We're gonna rebuild it with a new format and new tools for creativity.

So did you keep it going and kind of sunset new features or did you just like close it?

We kept it going. We kept it going, but we stopped shipping things. The community started to get cranky. They were like, what the hell? Like this app's a ghost town. Nobody's, no new features are coming. What are you guys doing? Fortunately, we were, we had, you know, great sort of community manager and a great person doing, you know, sort of marketing stuff on the team and continued to invest in the community despite the product not really innovating or moving forward while we were working on this new format that really leaned into new creative tools. And we launched that, that version 2 almost exactly a year later.

Yeah, I think you've, you've mentioned you had 3 months of runway left.

That was later.

Oh, interesting. Okay, so you launched the creative tools. How many months of runway did you have left at that point? Do you remember?

I don't remember the exact amount, but I'll get to the, I think the point you're talking about. We launched the second version of the app and I mean, it was again, kind of like you said, we poured our hearts and soul into this thing and we launched it and it kind of blew up again.

And there was no, like, no, was there any like hype building or just, it just—

We did once again, I think, do like the press and we sort of unveiled the new Anchor. And I think again, people were like, wow. And the funny thing was you mentioned South by Southwest. I think it once again hit right around South by Southwest. People were talking about it. People were writing about it. There was a lot of love. The user, the community thought it was a great upgrade. And immediately we saw the quality get better. We were like, wow, this content's good.

And what was the update again, or the newest, like that launch?

Yeah, so there were a couple things. On the creation side, we added all these tools like for easy editing, adding background music, adding little interludes, features that you could record with people remotely so you could have almost like these collaborative conversations, like all these things just to make the substance of the content better. And the other thing is we changed the format from like a 2-minute audio file to almost like more of a story where the narrative could just keep going on and on. You could just keep adding to this, which meant that the length of the content got much longer. And funny thing is we started to listen to this audio and think, wow, this is really— this is a lot better. Sounds like a podcast.

Was it still inside of the app? There was no RSS?

Yeah, it was all inside of— it was still our own format, but it started to sound like a podcast. And You know, again, I think back to what we talked about earlier. We wanted to innovate on audio. We felt like to do that, we needed to own sort of the format end to end, keep everything internal. But we were like, wow, this, this is sounding like a podcast. And the users started to note that as well and, and say, hey, you know, I'm making this thing, but nobody wants to download Anchor to listen to the one podcast that only exists on Anchor, but no other platform. What's that about? We were pretty adamant that we were not going to listen to this feedback. We were like, that's not what we're doing. We're building our own thing. We want to build this end-to-end closed-loop system so that we could innovate and we could ultimately strategically own the entire platform.

Which I think is probably a very good strategy if you can get the platform big enough.

Correct. I tend to agree. And so we were shipping new features, incremental things, and we were engaging with the community, doing all the same stuff we did. And I think over time, this thing became a sticking point. We started to see once again that the product was not super attentive. And it got to the point where, you know, one day Nir and I, we sort of looked at each other and we're like, what are we doing here? You know, we're kind of plodding along. We launched this new feature several months ago. It's maybe growing a little bit here and there, but it's, you know, it's not explosive. And we started to look at the bank account and we started to sort of back into our cash-out date and realized that, you know, at the latest we were going to need to go raise a round of funding, I think roughly 3 months from that point. And we were like, if we continue on this trajectory, when we go to do this raise, we're dead. It's just not going to work. You know, we know VCs well enough at this point that this is not a compelling enough story. To do the next round, and so I had been reading a lot of a lot of Paul Graham, and you know startup equals growth was always an article that had resonated with me. And you know we decided to adopt a similar framework, which in retrospect I call super goals. But you know really what it was was as a team we sat down, we we made a conscious decision that we said you know as a team we would sit down and we said. We need to grow 10% week over week for the next 3 months. We have to, in terms of our active creators. We have to. That is the only thing that matters. It does not matter how we get there. And any idea can come from anywhere. As a team, it can come from a new feature. It can come from some sort of crazy marketing initiative, but we're gonna meet as a team every single day. And we're gonna see where we're at along that trajectory. And if we're not on the trajectory to hit the goal, we're gonna do something different tomorrow to get there. And if we miss a week, we don't build 10% from where we ended up, we build on 10% from where we were supposed to be.

So you might have to do 13 or 20%. Okay. And what are— so, so super goals, just really quick to make sure we get it all defined. I have it written down if you want me to read it, but like, what is a super goal? How do you define that?

Basically, like, the way I define a super goal is sort of an existential, high-stakes, you know, forcing function for the entire company or an entire team. You know, I think it is a bigger company, you could put it in for a specific team. But, you know, in this, in the case of like a 12-person startup, it is the only thing that matters. Everyone is responsible for helping hit this, and anyone can be responsible for generating the ideas, and the actual things needed to go and hit that. It's the only thing that matters. Every other KPI, whatever, it's dropped. That's basically a super goal. And I think the other thing about it, which if you wrote it down, you probably wrote it, it has to be timeboxed because there needs to be real stakes.

Yeah, because otherwise you can just be like, we didn't reach it, but we'll just try again next year or something.

And everyone has to adopt this. I think oftentimes when you set goals with fixed deadlines. It's like, oh, these are self-imposed. It doesn't matter. So the other thing about a super goal is like you really need everyone to buy into it. And so to accomplish this super goal, everyone needed to be aware of the stakes, which was if we don't hit this, we will not be able to go raise our round and the company will be dead.

And you had zero revenue at that point, right?

Zero. Yeah, zero revenue. So we did that and we, everyone adopted this. We said for the next 3 months, we have to hit this 10% week over week growth goal. And we started meeting on a daily basis and we started generating ideas. We started shipping features and we were, we were having some success, but it felt like it was going to be an uphill battle. And I think somewhere along the way, maybe, you know, a month into this, we're having moderate growth.

You still had the app of like, you need to be inside Anchor.

Yeah. Yeah. We started thinking about this, this thing from the users that, that, that, that we just talked about, which is hey, maybe we should be distributing off-platform. Per your point, seems like a better long-term strategy to be internal to the Anchor app and keep the closed ecosystem, but users really want this and people are making content. We have to pull some of these ideas off the pile and try them. And it was a big philosophical debate inside of the company for, I don't know, maybe a couple of weeks. And we ultimately decided we're gonna try this. So we hunkered down and we spent the next couple of weeks building this whole RSS And for sure, we didn't have RSS at the time inside the app to go back to the RSS thing. And, you know, we basically built a feature where you could take this, your anchor station at the time, tap a button, we regenerate RSS feed, and then we would actually go submit it for you. We didn't tell you this. We didn't, we didn't tell you what was happening, but we would actually go and submit it manually on your behalf. And then once you were approved by Apple or whoever, we would paste your podcast URL inside of our backend, you would get it on the frontend. Boom, now you got a podcast.

So it was kind of all those problems we talked about in the podcasting space. You were like, all right, let's just go solve as many as we can, make it as simple as possible. To your point about, you know, maybe like founders, find founders that have a mission, democratize audio, make it easier to create, tying it all back, that's ultimately what you did. You just made it super easy to create a podcast.

Yeah, that's it. It's like so simple.

All these, these like 2 years of just slogging out, probably doing like, from a business perspective, like I feel like it's like economic value, like probably more of like strategic positioning if you own it end to end. But it was like super hard. Like it was almost impossible. Like you would have never got there.

I don't think so. Again, because I don't even know if it would have got— would have gotten funded. Anyway, we shipped that. And the moment we shipped that, The growth went insane. It just, you know, you hear these stories about people, you know, flipping a switch in the product and then finding product-market fit overnight. It was like that. It was like it went from us pushing something on people to them just ripping it out of our hands kind of overnight.

So how did you navigate that? What were some of the best decisions or maybe mistakes you made?

Well, we went and we raised the round once it was working.

So do you remember you shipped it? Was there a certain like thing in the metrics? Like you grew 100% that week and just suddenly it was like, okay, this is—

Yeah. I don't have the numbers in front of me, but yeah, like I've looked at the chart and, you know, it was like going like this and then it went like that and it just like kept going. It just never stopped. And there was a feedback loop too. Sorry, there was like a viral loop too because now these podcasts would end up on Apple or whatever and people would say, you know, I did this with Anchor. Other people that wanted to make podcasts now knew that they could come to Anchor and do it. So there was this, you know, there was this viral loop that was happening.

Did you do anything like in the description, like podcast created with Anchor?

All that stuff. Yeah, we did all that stuff. And there's a whole strategy and tactic around that.

Well, yeah, so anything specifically that you did to like kind of unlock and enhance the growth even more?

Well, so first thing is, again, the positioning of the app at this point was still around the social network, but now there was this sort of bolt-on feature that let you sort of distribute if you wanted to take that optional step. Once again, we decided we're going to rebuild the app and we're going to make it all about podcasting. We're going to change everything about the apps and build a web app that it's no longer this audio social network with this bolt-on feature that lets you distribute if you choose to. The whole thing is going to be about producing your podcast and distributing it to Apple and Spotify, et cetera. And once again, you know, that took us a couple months to build, but the beauty of it is once we launched it, it was all so clear. The positioning of the product, the onboarding, the activation, sort of the funnel that we led you down. It was just, we put you on these rails where it was just so obvious what this product was for, who it was for, what it did. And that alone, to your question, just really accelerated the growth, right? The value prop was just undeniable. But the other thing we did is we started to think about, hey, how can we make this thing grow even faster? And so to your point, we started to do all these things like putting things in the show notes, And inserting little audio ads at the end. Hey, you know, this, like, I think Maya or somebody on our team recorded a little thing. This podcast was made with Anchor. To make your own, go to anchor.fm. And so then came the time to, to monetize, right? Because now, you know, a couple months later, fast forward a year, this, this product was big. This community was big. We seemingly, you know, overnight doubled the amount of podcasters that had ever existed in the world. And every month that passed by, we were increasing the size of the market.

How big were you? Like, it, What was kind of the scale at this point?

Maybe a million creators.

I don't know.

It depends where we are, where we are in the story.

That's like a, that's a lot.

Yeah, this thing got big quick. And we realized that we had an opportunity to monetize podcasts in a way that had never been done before, which was we could bundle them. We could bundle them up and offer advertising across a network of podcasts, whereas previously advertising in podcasts had been sort of this one-to-one kind of sales process where an advertiser reaches out or an advertiser or an agency reaches out to one podcast. agrees to do a host read ad, and, and, and that's how it happens. So we could instead build technology where, you know, large chunks of, of users would get a notification in the product and it says, hey, you know, Squarespace wants to advertise in your podcast, read this ad, insert it here, and you'll, you'll get paid every time that ad gets played. That was, that was our sort of solve to monetization.

And just curious, why was that a big deal for somebody who doesn't understand how podcast ads work?

Yeah, so it was a big deal because going back to the RSS thing, the data was so limited in podcasts and there was no way to aggregate the data at scale that the only way an advertiser could really figure out what podcasts were worth advertising on was to look at the charts and basically say, what are the biggest podcasts? Those are the ones I wanna advertise on, right? That was how you found the biggest shows. And so if you were not one of the biggest shows, you would never be able to advertise because there was just not a process that was automatic enough such that you would ever be included in any sort of ad deal, let alone like the tracking and the accountability of the actual campaign to know if it worked. And so all of, you know, I'm exaggerating, but something like maybe only 1% of the podcasters were actually making money. And you had all these other people, hundreds of thousands of people that were earning zero. Now, all of them being on our platform, we could effectively monetize the long tail at scale. That was really the bet of, and, and, you know, this is similar to how YouTube ads work or, or, you know, AdSense, like it was really just taking that playbook to, to a medium that was too fragmented to ever really have that in it before this point.

And I think you guys did a new super goal, which was every podcast can generate ad revenue or something. It was something like that.

Yeah. When we wanted to, when we, when we, when we launched this, we really wanted it to be such that you turn this thing on and you could start making money on day one.

Like your very first podcast.

Literally your very first podcast, you're just any user. We wanted to, we wanted there to basically be a toggle where it's like start making money and you turn that on. And from the moment your podcast starts getting played after that, you would, you would make money.

So how'd you, how'd you try to get that to work?

So we went out and we hustled like crazy to get advertisers and we signed up, you know, a number of the big podcast brands that were advertising at the time. And, you know, credit to the team for hustling like crazy to do that. It was a motion that was was brand new to us. But still, when we got just about to the finish line, we didn't have enough advertiser demand to fulfill the goal of getting every podcaster monetized. And the way that we were monetizing this was on a CPM basis, meaning we only paid if a podcast episode got heard, right? And so one of our engineers had this genius idea. Again, you know, the idea with super goals, everyone's trying to generate ideas to accomplish the goal. It's constantly checking in. Somebody had this brilliant idea that, well, maybe Anchor could be the sponsor. Because if you really think about it, yeah, it might sound like it's too expensive to say every podcaster gets paid, but we were still kind of small enough on the listening side that in aggregate of all the long tail, it was an amount we could probably afford. And it was also a temporary measure until we brought in enough advertising demand.

Yeah, so it was probably just like sponsoring one big podcast. But you spread it over the long tail or something like that. And it wasn't, wasn't permanent. It was just, let's just kickstart it.

Exactly. Exactly. And, and so that was the idea.

And it was probably an incredible ad for Anchor too. Like probably worked so well.

So this goes back to your question from earlier around what'd you do to drive growth? So we did this idea and again, it was a brilliant idea. And, you know, all the top podcasters got matched with Squarespace or whoever else we had brought on. And, you know, the, the, the people that didn't qualify for those, they would get matched with Anchor. And we turned this thing on and we, you know, we launched the product. Product was a huge hit because all these people could make money that previously hadn't made money before. But some, you know, somebody on our team started to notice something in the data. We were tracking all the podcasts that had ads in them. And then we were also able to do sort of this hacky kind of attribution. of where the growth of Anchor was coming from such that we could do a calculation of kind of like the CAC for, for all of the different channels we were, we were, we were marketing on, which were very, very few at the time, including this, this Anchor ad on the Anchor network. And we found that it was this insanely efficient marketing channel.

Really? Using your own product basically to market?

Yeah, and it made sense. So if you think about it, imagine you have a— well, you do have a podcast. And, you know, a host read ad of you saying to a podcast listener of your podcast, hey, I made this podcast with Anchor. Anchor is awesome because it's free. It enables me to make money. I can do it from my phone. It lets me distribute to every platform. Like, it was so authentic because it was all true, right? It was all true. And there were hundreds of thousands of people saying this. So if you're, if you're a listener to podcasts, you're hearing all these different people basically say the same message. It was like the perfect form of brand advertising. And so the efficiency was, was insane. And that pushed the growth up even further such that, you know, we were, we were growing like, like crazy.

So it was obviously, it was working. Was there certain like revenue? Like, are you allowed to say like, was it a couple million in revenue, tens of millions, or like users? What was kind of the It was very nascent.

And the truth is the way we had oriented the business at the time was really around winning market share of creators. And the other thing that happened right around then was we started to engage in discussions with Spotify to be acquired, which then started to absorb all of my time.

I thought it'd be really interesting to kind of take people as much as we can inside that process. I think you also mentioned you turned down a Series B. I don't know how much you've talked about that before, but can you just talk through just those couple months, what it's like to get acquired, what kind of things you were thinking about and considering specifically? Like, you also probably could have kept going, raised a bunch more money. Just take us inside all that.

We were really fortunate that throughout the journey, we were building a relationship with Spotify. In fact, Daniel Ek, obviously a very, very busy person, CEO of this massive company. I mean, when Anchor originally launched the first version, the one that didn't work. Yeah. One of the first people to reach out to me to catch up was Daniel Ek. And he was just, he was a fan of the product. He saw it, I think on like Product Hunt or something just like everyone else. And it was like, this is cool. You're building something in audio. Let's catch up. So I was in the really fortunate position of, you know, having the opportunity to start building a relationship with him and Spotify from the earliest days, which in hindsight, I think is really important. You know, now having gone through an acquisition, a couple acquisitions, both from the builder side and on the other side, you know, did a few acquisitions and went Spotify. That's really important. I think having the runway with a person or a team or a company, these are, you know, much like fundraising is like a marriage, M&A, Probably more so the alignment around vision, strategy, you know, it's so, so important. So we were building that relationship with Spotify for a very long time. And we had, without revealing too much, we had discussed the opportunity of merging a couple of times before. But this moment sort of after this sponsorships launch, became a lot realer. I had gotten to know Gustav Söderström, who's now one of the co-presidents of Spotify and chief product officer, chief technology officer. And much like with Daniel, a lot of alignment around sort of the future of audio and being able to innovate on podcasting in many of the ways that we talked about earlier in the conversation, you and me. And it seemed like if our mission was really to democratize audio, the more and more we talked to Spotify and understood what their plan was, it really felt like that was The best way to do it. And so, yeah, to your question, could we have kept going? Yes, we had this offer on the table from one of our insiders, actually. I won't reveal who because I don't know if this person wants me to, but we had a very generous offer on the table, but we were also looking at the landscape and looking around at the things we needed and looking at the direction things were going, and it was not clear that it would work. If we kept going. And it was very clear that we would accomplish our mission if we sold.

Yeah, because it's almost like Spotify had that network that you were going to probably have to try and build. Like, they kind of like closed that piece. It's almost like you let it go, but then by joining Spotify, it's like, okay, well, they kind of did that for us almost.

Exactly. And if you follow the trajectory of the product and the strategy post-acquisition, I mean, I thought we were growing when we sold, but the growth, I mean, reached heights I never could have imagined pre-acquisition. And the other thing was we just saw what a lot of the other players were doing, namely one company in particular, which will be left unnamed, but I'm sure people could figure out who it was. And not only was that company not investing in podcasting similarly to Spotify, it was pretty clear that this company was going to make things much harder for us. In a way that would have really jeopardized the company and the product offering. And so joining up with Spotify was a way to avoid that. And frankly, now in hindsight, I think if you just look at sort of the M&A activity in podcasting over the past couple of years and kind of the market, it feels like Spotify has kind of accomplished their mission in terms of podcasting. And it also feels like the startup, the opportunity for podcasting startups has changed quite a bit. And so, you know, I often do think to myself, yeah, maybe we, maybe we could have kept going. The growth trajectory was, was straight up and to the right. But I also think in hindsight, the timing, the timing probably couldn't have been more perfect. Although, you know, we couldn't have known that at the time.

I think I saw public numbers. It was something like $130 to $160 million was like the amount of the acquisition, but seems like a pretty good outcome at the end of the day. For employees, investors, and then for Spotify too. Seems like it's a good place to end up.

Yeah. I mean, I won't comment on the number, you know, want to be respectful to the many agreements I signed when we sold. But no, look, I mean, I think given the small amount of capital that we raised, yeah, it was a great outcome for everyone. You know, we know some of our earlier funds, I think it was very, very material to those funds. I think 1 or 2 funds that returned the fund. You know, our employees, nothing makes me happier than seeing, you know, great people get rewarded. And some of our earliest employees like really had an amazing outcome. Obviously, obviously it was life-changing for my co-founder and me in a way, in ways that we never could have imagined when we started this thing. You know, going back to earlier parts of this conversation, just being super naive about what we were building and what challenges we would face. It was all very, very surreal. And yes, for Spotify, you know, if you play it out and you think about what's happened since, you know, I think Spotify is sort of undeniably the podcast champion. Of course, now as the medium has shifted to being more about video, YouTube is obviously also a big player, but, you know, Spotify had 0% market share only a few years ago and Apple had all of it. And it's kind of now Spotify is the market leader. So It worked out, you know, and it was a— it was an incredible experience.

It seems like some people were like questioning Spotify's podcast, and I think their earnings came out. It'll— by the time this gets published, maybe about a month ago, most recent earnings. Seems like Spotify did pretty well on podcasts. Like, what would you say Spotify did, did well just in terms of how they navigated the whole podcast spending up? Seems like people are using it. Seems like it's Working positive gross margins, I think is what I saw in the last earnings. I didn't actually read them yet, but it seems like it's working.

To win podcasting from being at zero on podcasting to then needing to win it, you needed to do a bunch of upfront work, right? You needed to, first of all, you needed to get a bunch of listeners to now switch their behaviors just to Spotify. And to do that, you needed the biggest shows in the world, right? Like you can't go from having 0% market share to being the market leader and not have Joe Rogan or Serial or Call Her Daddy, right? And so—

My podcast's not gonna do that for Spotify. I have my couple thousand listeners.

Same with mine, same with mine. So you need to have the biggest shows in the world, and to do that, they had to pay. The other thing is if you wanna build a really robust and healthy and growing business on top of podcasting, you do need to upgrade the infrastructure. You know, back to the point we talked about at the beginning of the podcast around RSS and the limitations, And the limitations that had on advertising. There is a lot of upfront work that goes into that. And I actually think even though there has been much written over the past year about Spotify's pullback and all of this, I have sort of an opposite point of view, which is there were a bunch of upfront investments that needed to be made to bring the listeners over, to upgrade the infrastructure. And now as a, you know, As someone external to the company looking at the earnings just like you, it seems like the fruits of the labor are starting to emerge.

Yeah, they were investments.

Yeah, exactly. And so I actually, and I'm biased, I was there, I was a big part of that whole journey and that strategy, but my perspective was or is that it worked and it required a big investment, but now it's starting to pay off.

And it seems like video is kind of the next frontier of podcasts. Is that fair to say?

For sure. And so that was a big thing that my team worked on when I was there and I believe continues to work on was adding videos to podcasts on Spotify and upgrading all the creator platform to make sure that that can be supported. And again, maybe this goes back to your first question about what's the future of podcasts moving forward. I think that does bring Spotify into new territory and it introduces new competitors, right? YouTube, obviously the biggest player in terms of video, you know, UGC video content. And now by podcasting being a visual medium, which I think actually had a lot to do with the pandemic and the fact that a lot of in-person podcasts went to being remote and people using remote software like Riverside, which we're using now, you know, a lot of podcasts sort of upgraded to video, which meant that they now started to distribute their podcasts on YouTube. Right. And so now we move from a place where podcasts were for many years was largely an audio-first medium to one where it's kind of, if you don't have a video, you're kind of at a disadvantage. Right. And so, yeah, it should be interesting to see where things go from here. I mean, I'm obviously bullish on AI and all the things that AI can do for podcasts. It's been fun to see platforms like Spotify experiment with localization. You know, I'm sure you've seen some of the things around the dubbing. Yeah, you can listen to it in any language. I think there's a ton of opportunity there. And obviously clips have become a big part of the podcast game, you know, taking your podcast, cutting it into clips using AI for wider distribution on platforms like TikTok.

So it's so hard to grow a podcast. It's like the hardest thing to grow.

Yeah, but that's going to get better too, also due to AI, right? AI and machine learning completely changed the way we all discover music content. It's hard to imagine how it won't have a similar impact on how we discover podcast content.

Yeah. Well, this has been an amazing conversation. Thank you for taking so much time.

It's, it's been a blast. Thanks so much, Turner.

And I hope you, the listener, had a blast. If you don't wanna miss future episodes of The Peel, subscribe to my newsletter, The Split, in the show notes, and you'll get new episodes plus the transcripts in your inbox every week. If you wanna support the show, share this episode with a founder friend, who could benefit from hearing Mike's story. And if you want to go deeper on all the topics we hit on, make sure to check out Mike's podcasts and all the posts we discussed in the show notes. Thanks again to Mike for coming on. Thanks to you for listening. I hope you enjoyed. See you in the next episode.