What a Paying User Means | Startup Grind Founder Derek Andersen

This is the same for everyone. Success, you've seen this, success is not like this. Anyone you see, any story you read, if they're like, they're not true. If it looks like this, it's a lie. It's an absolute lie. Matt Rogers, the founder of Nest, said that being an entrepreneur is the best day and the worst day on the same day. I just had one of those the other day. It was the best day and it was the worst day in a 12-hour span. And I've probably had some version of that before, but it's more dramatic now. And I can tell you that that is the best description. You've felt this. You wake up, you get an email, check your phone in the morning, you get a great email. Today, this is on. It's on. And then 6 hours later, you're like— You've you feel like you just came off this huge high and you don't know what's happened. That is totally normal. So this is 6 months into Startup Grind. We hosted an event and 4 people came. And I was building— this was just this fun thing we did once a month. This is project, project. That's some advice for you and you're in a little bit of a different environment to do this, but try and keep things as a project as long as possible. As soon as it becomes a company, it becomes much more real. There's much more pressure. I had 2 years of StartGrind before it was not a project. That time— I talk about time. Time is your friend. The longer you can draw something out and learn from it and have iteration cycles, the better you're going to be. But 6 months in, 4 people showed up. I got into my car and I said, What am I doing? This is a complete waste of time. And I talked to a few friends about it and I sucked it up and I said, no, I'm going to give it another shot. And the next month, this was the room. And we got a new speaker, we changed the format, we did— we learned from our mistakes. And this room was full of people. The most interesting thing about this picture is that I didn't know any of them. And the other interesting thing is I'm still friends with a lot of them. This was almost 5 years ago. And so I realized, well, hey, maybe we have something cool. And then this was the next month. And we got a new room. And we rented chairs. And we didn't break all sorts of fire codes. And we had a better speaker. And then a few months after that, we were doing it at AOL. And it was packed. And there were 500 people RSVPing to the event. And people started coming that were attending, and they'd say, hey, I love your values. I love your community. I love your brand. Can I do this in my city? And I said, well, that sounds like a really terrible idea, but we can try it. There's nothing to lose. As long as I don't get sued, it's OK. And so I really— I didn't think— I didn't understand it. But we did it in LA and we did it in New York and it worked. It was incredible. I was shocked. The other thing that happened— well, this is our first event in LA. These are the guys that I told you that I helped on the marketing when I first left EA and they paid me $80 an hour. These guys, this shows you over time. So that was, again, that was 5 years ago when they started their company. Today it's called Zephyr. Anybody ever heard of Zephyr? A couple of heads nodding. Zephyr's— I've got $350, but it's probably worth $500 million now. And anytime you hear music or you see movie clips on YouTube and you're like, wow, why hasn't this been pulled down yet? That's because the movie studios are monetizing that now. They used to pull everything down. Now they just leave it and they just monetize it. And these guys, their technology is the technology that makes all that possible. This is not what they started. They started as a site called Movie Clips, which just showed movie trailers on movieclips.com. And they evolved and they iterated. If you've ever watched a trailer on YouTube, the channel is probably Movie Clips. Do you remember? Have you— does that— have you heard that? Yeah. That's not what they started as, but they realized, hey, why are we doing it on our site? We should just be doing all this on YouTube. And like that business they sold, and that was like a $20 million business, Movie Clips, and now this is the new business. So again, over time, who would have known? I would have never known that they would have done that. Another thing that I learned at these— in this series of events is a good lesson for you guys, is all the events were free. And it was a passion thing for me. It was never about money. Frankly, it's still not about money. It doesn't mean I don't want to make money or I don't want— every good entrepreneur wants to have a return for their investors and their families and themselves. But that's not the driver. But what happened was we had— let's see if I've got it. I don't have it here. But we had this guy that attended the event and I saw him walking to the back and he walked over to the pizza and we have free food and he stacked pizza like 10 pieces high. And then he took it and then he walked out. This was like before the event even started. And I realized like, freak, like this isn't a community, this is like a startup homeless shelter. Like what have I created, you know, what is this monster? And I said, look, this guy doesn't share my values, this guy is not like the people that I thought attended the events, this is not the purpose, like this is like the worst pizza you can buy. If he's that hungry, if he's hungry enough to do that, there's something wrong with what's going on. So I said, you know what? We're going to start charging. And if nobody comes back, nobody comes back. But we'll get the people that want to be here, and we'll get a good crew. And the next month, to my shock and amazement, 60% of the people came back, but they paid. And more importantly, It was the highest quality 60% of the room. So all the homeless startup people stopped coming, which was good because when they would sit next to you, they didn't care. They didn't help you. They didn't— if they're doing that with pizza, trust me, they're not people you want to talk to. And you'll meet these people. You'll go to events, or you'll see them, or whatever. You'll meet some of these people. But these are not the people we wanted in our community. And so price became a barrier. Yes, we got a little bit smaller and we could do— we do this now across the world. We could do free events and sell out the house and have thousands of people. When we do a free event in Silicon Valley, 2,500 people register. But we don't do that because it just— it's not the community, it's not the environment we want. And so if you can get someone to pay for your product, sometimes even at the earliest stage it's hard, right? But I learned this lesson from a guy named Steve Blank. Has anybody read any of Steve Blank's stuff? Highly recommend Four Steps to the Epiphany. Put it on your list. Amazon it today. It's kind of like a textbook, but it's a textbook you need to read. It's— Steve Blank was— everybody know Lean Startup? Mm-hmm. Okay, so Steve Blank was Eric Ries' teacher at Stanford, and Eric Ries' Lean Startup learnings all came from Steve Blank. And Steve Blank, I approached him— A while ago and I said, hey, he's an advisor for our company, I said, Steve, we're thinking about this product and we think these people are going to buy it, we think they're going to pay this much and we're just going to make this thing happen, it's going to be amazing. And he's like, great, how many checks do you have? And I was like, what? What do you mean? I don't have any checks. He's like, how many— I was like, I don't even know what you're talking about. He's like, no, how many checks? I was like, well, the product's not finished. He's like, I don't care. How many checks do you have? How many people have actually put down money for this? I was like, well, I've done the research. I've done the focus groups. We've talked to everybody. We've gone in depth. We know this many people are going to buy it. This many people have said they'll pay this much for it. We have it all dialed. He's like, no. That's absolutely not the way to do it. The way you need to do it— he's like, you come and you bring me 20 checks. Because I think what you're saying is not going to happen. Because I think I understand this customer as well. And you go to them, you get 20 checks, then you come back. I said, OK, fine. So we went back to all the people that said they would be a customer. And we went back and we said, OK, look, the product's going to be done in 2 months. We're asking you to preorder. We're going to give you all these incentives to preorder, all these bonuses, all this other stuff. If you preorder now, you're one of our first customers. If we don't launch the product, we'll give you the check back. We're just going to put it in an envelope. We're not going to cash it. But we just want you signed up as a— Early beta customer, preorder the product. Are you willing to do it? And all these people that had said they would all suddenly said they wouldn't. Hang on. And as Steve says, he says, when that moment happens, when you say, will you write me a check, watch the pupils of their eyes dilate. And really, that's when you take out your pen and listen. Because when it comes right down to actually paying for something, when it comes down to actually That's where the buck stops. Will they actually pay for it? And if they need it so bad, if they need it so, so bad, they'll preorder it. And that's a hard— it can be kind of an awkward conversation to have with people. But lots of mediums do this, right? I was in gaming for a long time. If you've ever been in games, you know the preorders are like— this is not an unfamiliar concept, right? You can buy your movie tickets for— Marvel tonight, you know, that's coming out later this week or next week, or you can buy movie tickets for Star Wars coming out at Christmas time. So, like, but if you sit down with your customers and they say, yes, I would love this product, ask them to preorder it. Ask them to write a check right there on the spot, and then just see what their reaction is. Don't force them to do it. Don't do too hard of a sell. You can sell, but wait and see what they say and see what you can learn from that. So, Tim, I'm curious,