The Startup Hero Episode 1: Stewart MacGregor-Dennis

Hi, I'm Tim Draper, and this is Startup Hero, and this is our First episode, so we're very excited about it. And I have here with me Stuart McGregor Dennis, and we're going to be talking about his new business. It's called Turing, and tell us about it, Stuart.

Well, thanks very much for having me, Tim. So Turing is a cloud software suite with a particular focus on some email innovations. We've got some on the email marketing side and also with some of the financial technologies you've invested in, like Bitcoin.

So you're calling it a cloud software suite. You're not calling it a mail package. What happened there? What made you change? What made you think—

It's just been evolving. You know, we started with the email product, and then we've added other products. And so now we actually have 15 different applications within our suite. And so suite seemed like the more accurate description.

And so who's using it now?

So we've got a bunch of freemium users, which are— we have about 40,000 freemium users now. And then that's total registered users. And then there's sort of a number that's under 10,000 in terms of actual active.

And who are they? Are they salespeople? Are they finance people?

Are they people with a lot of email, people with little email? Right. So the freemium users are kind of all across the board. But that's why I've actually been focusing now on a few specific niches. And so, for instance, email marketers, and particularly event organizers who are using email marketing to increase turnout for their events and increase ticket sales, is one area where I've really been focusing on having more customer pilots with.

So you're— and you had this other idea we worked on together, actually. To figure out how people could pay to make sure their email got through to someone and make it so that that someone who they're trying to email to could pick the price as to whether they would accept an email or not from somebody. So tell us a little bit about that and what you're trying to make happen.

Yeah, well, this one's very exciting. You know, you came up with the idea. I've kind of run with it. We've now got a live service out there. The problem we're trying to solve is spam and unsolicited email. There's a bunch of email that's not actually picked up by spam filters that still you don't really want, or it's inconvenient to receive. And so we're trying to reduce the volume there, or at least make it worth your time by having people pay you to read it and respond. And so we've got our live BitBounce service out there right now. And I've got some exciting updates there and some challenges I'd love to discuss as well.

Okay, go ahead. Tell us about the exciting updates.

Well, so the exciting updates is, you know, I've been running some distribution for it, and basically now we've already processed over 40,000 spam emails. I've got over 100 active email accounts using— with BitBounce active on it. And we have seen— I just put in some tracking for Kind of the viral aspect of it. And we've had a few of those happen. So there's at least some people signing up for it.

So you've tested this, and they're starting to do it. Yeah.

Well, so the good thing is, so we've got about 700 registered users. A little over 100 have actually added an email account, and they have BitBounce active with it. And then in the last week, we processed about 36,000 spam emails.

Okay, but has anybody said, yes, I am willing to accept an email as long as they pay me 30 cents every time?

Right, so people say that. We've got people opting into that. The challenge here is how to increase the number of people who are paying. So we don't yet have that many of the senders.

Has anybody sent an email and paid?

Beyond the initial pilot? Not really in the wild right now.

So we have to figure out how we can get customers to get into the habit of saying, okay, I'm willing to pay 30 cents.

Right.

And are you using Bitcoin?

It's Bitcoin.

It's Bitcoin. So you can make, maybe by getting into the system or into the membership or something, you have to put down some Bitcoin.

Right.

And then you don't worry so much about how much is going and how much is coming back to you. And, and then maybe you can take a small percentage of it along the way.

You know, that's something we could do is have people, have some of the senders sign up and put their credit card and have a certain amount or buffer that— or credit that it then comes out of. But essentially right now it's not that easy to pay as well. They have to scan a QR code. And so I've been thinking, how do we increase— get more people to pay? And I think we can do that through things which might lower the barrier to entry. And maybe there's something like what you're suggesting where we get them to have some sort of membership fee that it comes out of initially.

Now what if you The other part of this I often thought about was create sort of a jiu-jitsu move so that spammers are just commercial products that can send you offers, but somehow segment those so that they come separately from maybe your business emails and your personal emails, and they pay you for you to go click on them and visit them and read them and do whatever. And then the business ones, maybe somebody pays you, but it's a different amount.

Right.

And then the friends, they're already on your whitelist, and you're happy to have that whole thing be free. Is there some way of doing that? Because I've always felt that Spammers have sort of a really good deal.

Right.

And it's like, I can just blast everybody for almost nothing. And, and, but then nobody really wants them. And so they just destroy all of it instead of saying, well, you know, actually I do want some Viagra or a loan shark or some drugs from Canada or from whatever. But maybe it's Coca-Cola or more of a legitimate business that needs to reach you, and this is a great way to reach people, but getting them to pay and getting the customer to get money might be kind of valuable.

I think that's a great insight. I think right now we've basically been treating it as 2 types of email. There's the people on your whitelist who are your friends or contacts you want to freely email you, And there's everyone else. And there we've been saying, hey, you have to pay this bounce amount. But we could break that other amount into 2 parts where there's the business contacts, where the entrepreneur emailing you, and we say, hey, you have to pay the fee. But then there might be a different way that we'd handle some of the less legitimate spam email. Can you go into a little more detail?

How would you handle a new customer? Let's say I've just signed up. How do you get Bitcoin out of me to blast to people? And then how do you get Bitcoin into me? Are you setting up accounts for everyone?

So for the people that sign up as receivers of email, we set up a Bitcoin wallet for them.

Oh, that's great. So receivers, so they get one. But then how do you get—

And then they can request for money to be withdrawn.

So then I guess you'd go out to the corporates and you'd say, hey, if you want to reach these people, they're very influential people because clearly they're at least interested in having people pay them to get email. They don't want to talk about all the email. So maybe that becomes a really good target audience for whoever, IBM or—

You know, I think there absolutely could be an enterprise—

I'm looking for somebody who wants to reach all of those people.

Oh, to reach them.

So then you could go sell the big businesses and say, look, you want to reach all these people, you pay them each 5, 10 cents, they will read your email because they're only getting paid when they click and say, oh, okay.

I think that's a great idea, and basically there we'd need an effort to sign up some of these people, the influencers.

Are you setting a price?

We have a default to 5 cents.

Yeah, that's probably good. I mean, that's enough to— it's a lot cheaper than a postage stamp, and it's a lot more than what they're paying now.

The question, like, so how do we get someone like you to sign up for this in the first place so that I can then go and kind of sell, hey, You can email these influencers?

These influencers. That's a good question because I get tons of spam. I've had the same email address forever, and it's tim@draper.vc. Had it forever. So there, they just all heard that this is tim@draper.vc. So then they— but I get so many emails And the spam definitely disappears. The spam blockers are good. Maybe they're too aggressive because I'm not getting a lot of spam.

Right.

But the new time— first-time users, I think, get bounced back and then they have to make sure they're not bots and then they come in. But then I— my business relies on people being able to reach me. Because I'm always looking for new businesses. So somehow I don't want to deter them, but at the same time I need to cut way back on the amount of email I get.

But putting in a—

Because it is an extraordinary amount.

You know, but that's a challenge with this idea because putting in a payment, requiring a payment to email you is a form of deterrence.

Yeah, it creates friction. And it's kind of an interesting thing because a good entrepreneur is going to go ahead and set up.

Right.

And they want to reach me, they go ahead and they'll set the whole thing up. So maybe I don't lose much business in that way because I know it's at least an aggressive entrepreneur who figures out that they're going to find out how to pay their 5 cents.

Okay. So in order to get you to sign up, what do I need to do?

I think I need— first, I think it's got to be on Outlook because I'm trapped on Outlook.

That works?

Okay, once it's on Outlook— that's working now?

Yep.

Oh, that's great.

So that's part of the great thing about it is—

You know what we might do?

What?

You know how you'd get me on? I might try it.

Oh, great.

I mean, I've got some Bitcoin and I've got an account and I don't need more than that. And maybe this starts incrementally improving my Bitcoin. I think I'd set it a little higher than 5 cents. Because I think a lot of people would just, they pay $10, I don't know, they might pay $10 to come through.

Yeah.

Because they have the potential of raising a lot more than that for their business.

So you'd be willing to give it a shot?

I think I might, because it is really getting overwhelming. The amount of email that I get is getting overwhelming.

So when should I talk with your secretary about that? Yeah, when should I, yeah.

Well, I want to see it first. Let's work it out. I want to see the demo of it.

Okay, I've got a demo.

Okay, great. Let's do it. I don't know if we do it on the air, but we'll do it. And then once I've seen it and I like what I see, then I will try it because I think that would be really awesome. Because I do get an unbelievable amount of email, and it's like every time I I'm on the air, or every time I get mentioned in the press, or I get whatever, it's 10 guys are reminded that, hey, there's a guy who's a venture capitalist, let's send him our business plan.

Right.

And this might be a way to deter the ones who are just kind of saying, hey, I'm looking for an idea, or I have an idea, but not much else. So that would be a nice filter for me.

Yeah, you filter out the ones that are serious.

Business plan. The other thing I'd like is some way to have a bounce email that says, that says, hey, if you are submitting a business plan, maybe you go to my site, but if you really need to discuss this directly with me, then you can do this $20 Right. I think that might be kind of interesting.

So what we could do there— so the way that BitBounce works is when someone emails you and they're not on the whitelist, they receive an auto-response and it asks them to pay, right, for the email to go through.

Oh, that's terrific.

Yeah, and so what we could do is have a custom message.

So I would give you my whitelist, which is probably a huge list.

Yep.

And then all of those people would not be affected by this. And then the gray list would get a bounce, and then they would come back in.

Yeah, so they get a bounce, and their email is moved to a special folder that we create called unpaid. And so it's still in your email system if you need it.

Oh, so I'm going to still get it?

You're still going to get it, but it's not in your inbox. So theoretically, you shouldn't take a look through the unpaid folder. Because they haven't paid you to see it, right?

That's really interesting.

I think you've thought this through. We have.

I think this is to the point it might be really very effective. And then if people start to be able to build a— I mean, like, you want to email Donald Trump, right? It would be a very expensive thing to do, but, you know, if he said, okay, you can email me, but you got to send $1,000. A lot of people would send their $1,000, and that way you'd get— how much do you get out of it?

Well, right now we're thinking 15% of the transaction fee, but that's still open to determination. I mean, what do you think is inappropriate?

That's what I was going to ask you.

Well, I feel like 50% is too high, because I think people are going to look at that and think, hey, that's too much of a cut that they're taking. But 5% Right.

I even think 10% is. So it's in between there. What about 20%?

I think you could do 20%. You know, Uber takes a 20% cut from Uber drivers. Yeah.

And there's—

I think people are okay with that.

And 30% is what Apple takes. Apple takes 30%. Uber takes 20%. Amazon takes 15% from their affiliates. So I think you're in that range. It's kind of like a range.

Yeah, I think 15 to 30%. Right now we've been thinking 15, but based on what you're saying, might be able to go above that.

Yeah, I think you might want to try going above that. Maybe you start at 15 and you move it up.

I've got people signing up on the receiving end. You know, I mentioned I have 100 active accounts. 86 of those were in the last week, and at least some of those are starting to come from the virality part of the auto responses. So I can grow that piece, but then I've been needing to get people to start paying, the senders to start paying, and I want to make it easier for them to pay, but then it sounds like I also have to— I need to get people like you to sign up.

Yeah, if I sign up, what might be— it might be a press event. Whenever— actually, this is maybe a good press strategy. You get me to sign up and And then it's like, if you can reach Tim Draper through BitBounce, then you can meet or reach Mark Cuban through BitBounce. I love it. Each one is a new press event, you know, because eBay was brilliant this way. I bought it on eBay.

Right.

It's like I bought a nuclear power plant on eBay. I bought a pair of sunglasses. I bought a Pez dispenser all on eBay. This could be— your PR campaign could just be like famous person after famous person after famous person who say, you know, yeah, and this is what I think I'm worth.

So in the same kind of way that I'm—

You could start.

I think that's a great idea. In the same kind of way that I'm coming on early in your TV show here, do you think you'd be willing to be part of such a personality campaign?

Yeah, of course. This would be fun.

Okay. Well, I'll mention that to Karen, or your secretary, when I follow up as well.

That'd be great. So tell me about the other bit, the base business. I mean, let's go back to like what you are doing right now before BitBounce. But I think BitBounce might be— there may be— that may be your full-on blowaway business.

I think it could be. I think it's high risk, high reward. You know, there's a few elements of the model that if they work, could be very big.

And I'm kind of seeing how that goes before I sort of Actually, before we get into that, why don't I say, if any of you out there think BitBounce is a really interesting idea, why don't you go to Tim Draper at Facebook and leave me a comment as to what you think of the idea of people paying to reach other people on Facebook.

Well, full credit to Tim for coming up with the idea. I think it's awesome. We're building the implementation, but he invented it. A little kind.

Too much kindness there, I think. We know who really does this.

Well, I don't know. I don't know. In terms of the bread and butter business, essentially— because I wanted to have a more conservative thing as well. As this. We were getting a bunch of freemium users, and some of those were converting, but it was sort of sporadic. I was wanting to identify a niche that were getting the most value, so I ran a bunch of pilots, and it turned out the one that is working the best is really email marketing. For event organizers is really the one where I've narrowed down. I've got some of those are party throwers. And then I've got a pilot with a San Jose sports team with 2 of their ticket sales teams. And I've got some others that are— so it's kind of any kind of ticket sale.

So it's anything where they— it's an event where they're going to blast out to a bunch of people.

Yeah.

And that's what your software is good for, right?

Right. And one of our pilots has— he's an event organizer in Chicago. He has about 46,000 people that that he has on his mailing list. And we were able to provide him with a much simpler interface that is cheaper to send out to his masses and with better analytics. And so on the simplicity part of it, he says, you know, when I use something like MailChimp or one of these things, it takes me a bunch of time to write one of these emails. I have to fiddle with all these templates. I just want to pull up a window and write an email pretty quickly and be able to send it. That kind of value proposition of simplicity, less price, and better analytics. I see, so it's simpler than using MailChimp? Yeah.

I see. So if you really just want to get something out, you just— it's as easy as sending out an email.

Exactly.

But it can go out to your whole list, and you have a way of managing that list for people?

Yep, it can go—

And you take care of the unsubscribers?

We take care of the unsubscribers, we take care of deliverability, making sure that it's not marked as spam, all the kind of parts there.

So you really do have a lot of features. So, and that is a different customer than maybe the one—

Oh, it's totally different, probably.

But it's the same product. And ultimately, is the goal ultimately to replace all of the email packages in the world so that they all use you, use Turing, or is there something else?

Something else, a bit bigger. You know, I want to have— I want to make Turing Cloud a major contender in essentially cloud enterprise SaaS software. And there's a few suites out there with Google Apps, with Microsoft Office, with Zoho Cloud, with Oracle Cloud, Salesforce Cloud, and we actually have different business functions that you can run on Turing Cloud right now, mostly sales and marketing and collaboration and productivity right now. And they're sort of being on the cutting edge with BitBalance as well.

So this is—

But that's sort of the grand vision. In the short term, I got a high-risk thing with Bitcoin, and I got a very conservative thing with email marketing and a specific niche there.

I see. Ultimately though, you're hoping this is something where you sell direct to enterprise.

Yep.

And those enterprises then can use this in any way they want.

You know, here's an example of that. Because, so most of the people that I'm talking to right now, the pipeline I have, are email marketers, event organizers. But I had a commissioned sales guy that I brought on recently, and he set up a call with State Farm. I talked with one of their regional managers. He manages 50 agents, which each have their own field office. When I was doing the demo, he was like, yeah, the email marketing stuff looks great, but maybe they could also use the collaboration features, and maybe they could use the chat. I know they're pretty disorganized, and they're on their own internal software system. That's an opportunity for us to go beyond email marketing and to sell some of the other aspects of our suite. I'm kind of opportunistically looking at places where I can sell the broader suite, even when I'm more focused on the email marketing as our core revenue stream.

And the driving force here is all text communications, right? I mean, email communications.

Yep, but we support SMS, we support voice, video, and other things as well. Email is really our wheelhouse. Email is where we've developed We've developed a bunch of innovations. We've got regular email, sales email, email marketing, Bitbounce email. That's really where our strong suit is, but we kind of have offerings in other— we have other offerings.

So, and how do people pay? What is the cost of this when you get So it depends on how they're using it.

If they're using it as an email marketer and they're using it above a certain list size, so say it's getting into the thousands, then I charge in proportion to the list size that they're email marketing.

Oh, so that would be like MailChimp.

Right, and then I basically undercut MailChimp.

Okay.

If they're using it for a smaller market, then it's a per-user license. So, you know, I've got another pilot. They're a consulting firm. Their lead list sizes are like 25 people. And so they were testing out 5 different lists of about 25 people with different messages. And to them, that's more where I'd approach them with a license fee of like $49.99 per user per month.

If you— but then have you gone after any enterprises for a SaaS model? site license or something like that where it's per seat?

Well, per seat, what I mean by per user, right?

Yeah.

So I'm using per user as a synonym for per seat. Oh, okay.

Oh, so you are doing that. You're going after the enterprise at the top and trying to get the whole organization to use you.

You know, it's a bit of both right now because I'm not trying to go after Fortune 500 companies right now. I think it's too early for that. Those are too big fish. I'm going after— some of the pilots are sole proprietors. Some of them have 20 salespeople, like the sports team I was mentioning. It's organizations between 1 and a few hundred people right now that I'm targeting.

Okay.

But I'm definitely having— I'm trying to— and it depends. Sometimes the appropriate decision maker to talk to is the CEO, and sometimes it's the head of their event marketing.

How about your own company? Who's in it? What have you— I mean, is this— you've done a lot of this yourself. Do you have anybody else working with you? Is it just like, I'm driving this thing and the company is starting to roll and I'll add people as I need them?

Well, basically I've got— I've had a number of contractors that have been part-time on the development side. I've got— well—

What did they need you for? I mean, what did you need them for?

Now I don't actually need them for anything because I basically learned how to do everything that they did. But I had them do a few specialized roles. Like, I wasn't as good at some of the front-end stuff. But now, actually, lately I've been minimizing costs and doing much more of the development work myself. But for a while, I had someone in database stuff, someone who's an expert on the backend stuff, someone who's doing some of the CSS stuff, which is kind of like lower skill, which now I'm just good enough at. But I had basically specialized just to fill in and move faster.

And you're also in charge of getting all the enterprise customers going.

Yeah, I'm doing sort of everything. I've got a bunch of contractors. I've had a full-time designer working with me. And then I have 2 sales guys right now. One of them— Sorry, I just had to clear that up. One of them is a sales advisor that I brought on, and I just have an advisor agreement, but he's been joining me on all the calls and discussing the pipeline with me and everything. And then another I just brought on in a commission capacity. We gave him a really attractive— we're giving him like 50% commission. But no salary. So I've basically been very lightweight, and I'm, you know, that's one of the things we've been looking to discuss is starting to move towards raising a round of funding where we can sort of expand the team size. But right now I've basically been—

I don't know, you've been pretty effective with a small team.

Well, you know, I think—

You might be better off just sort of going the way you're going.

You know, part of me is sort of seeing how this next period unfolds, because if I close on some of these You have to have customer relations going. Well, a bit of both. Because if they're large enough in terms of revenue perspective, then I might not need it as— I know I've really got the cost right down, but I might not need it as much in terms of we might be profitable. But at the same time, the more of those people comes on, the more customer success and support work there is. And there's still debugging work that I have to do. Like with these pilots, I'm very hands-on. Some of them I've had to do quite a number of iterations of product improvements just to make them happy.

I'm always trying to look for viral solutions. What are you doing to make your customers into your sales force?

Right now we're doing that with Bitbounce. We're doing that with Bitbounce by saying, sent from Bitbounce. I mentioned that we've had some people sign up, like a handful.

Maybe it should say more than sent by Bitbounce. Maybe it should be sent with Bitbounce, the product that makes you money if you read the emails.

Oh.

Or something that—

You know, that's a great idea. I'm gonna put in a tagline in the email too.

I'll just think through the tagline, but I think it's something like that where you want You want them to not just know your name, but know what you do, because this is— you have to educate this set of customers.

Totally, because it's a totally new thing.

Now, are you doing the same thing with emails sent from Touring?

No, and that's partly because I think our paying customers don't want to—

Well, what if it's free?

So it's free. I am thinking about doing that.

Seems like something you could do if it's free.

You know, but the honest— my honest thing thing is, I'm actually deemphasizing the freemium aside from Bitbounce.

Oh, you're trying to get them to pay right off the bat.

Well, not necessarily that, but I'm looking at— I'm focused on a more enterprise sales process where I'm generating leads, I'm taking them through a pipeline of demo, pilot, or proof of concept, trying to negotiate deal, and trying to focus on building up the business through that rather than trying to get a bunch of free users and then getting them to pay. And that's just because I've been reading up a bunch, and it just seems like— well, I think that's just going to be a more effective strategy right now.

So we're going to close with this last question. Who is your favorite superhero, and why? And how do they relate to your business?

Well, obviously Tim Draper.

No.

Because of his great business mind. My favorite superhero, you know, this has got to be most people's answers, but I love Superman. He's just— and that's just not necessarily—

He's right up there.

Yeah, it's not necessarily the strength or the laser beams, but it's just the resilience. You know, he can just be hit by anything and he just keeps going. And I think, you know, there's been a bunch of challenges along the way where I had my co-founder bail, I had You know, deals don't go through. I had people trying to— like bad actors I've encountered. And you just have to kind of keep persevering through it.

Go forward. Yeah.

His invulnerability.

You were also a student at Draper University.

Yeah.

Tell me, did you get anything out of it? And what did you learn, if you learned anything?

Well, I got your investment, which was great. And I think that relationship is really important. And I got some friendships. It was a good area to kind of— I started my business there. So it was a good starting point. It kind of provided a framework for that. And I think that idea of— I sometimes encounter people that say, oh, just go for the quick exit, or build this sort of really small thing and get that bunt almost.

Right.

Whereas Draper's like, hit the home run. They want you to think big. And just that ethos has sort of stayed with me.

So that was important. Great. Well, you're our first superhero. Thanks so much.

All right. Thanks, Tim.

Terrific.