Joe Beninato of Tello sits down with JCal today on this episode of TWiST. Beninato tells Jason how iOS6 changed the face of his company. The two talk about everything from speakeasies to Kleiner Perkins, to the role of government (or lack thereof).
Distribution provided by CoudSigma. The cloud that adapts to you. Visit CloudSigma.com/This WeekIn, for a free $200 credit.
Today’s episode of ThisWeekIn Startups, is brought to you by, Hiscox. Go to HiscoxUSA.com/smalbiz, for your business insurance needs.
And, by SquareSpace. Use the promo code: TWIST10, when signing up, to save 10%.
Jason: Hey, everybody. Joe Beninato is, here, with us. He is the serial entrepreneur and founder of, Tello. Stick, with us. It is going to be an amazing episode.
TWiST title sequence.
Jason: Hey, everybody. Hey, everybody. This is, ThisWeekIn Startups. What is the program about? Really? You can’t figure it out? This. Week. In. Startups. This is the show, about, startups and entrepreneurship. Founding companies. Trying to make a dent, in the universe. Trying to build something, that is better, than, what came before. Trying to move the human species, the race, a little bit further. Make products that are, a little bit, better. Enrich the world. Add, a little, more joy. Today, will be no different. Today, we have, Joe Beninato, with us. Am I pronouncing that right?
Joe: Yep. Beninato.
Jason: What is that, italian?
Joe: Beninato. That means, of good birth.
Jason: I was just about to say, “beni’, is good. Beni. Beninato. Of, good birth?
Jason: So, is that, like, you come from a family of kings, or something? Or, that you, just, had a good birthing process?
Joe: My grandfather is from, Sicily.
Joe: So, watch out.
Jason: You know, Sicily. Was conquered, by the Moors.
Joe: Yes. Yes, it was. There’s a lot of DNA, floating around, in there.
Jason: One of the best scenes, from True Romance. Who is that? That would be, Christopher Walken and what’s his name? He just died. From, Easy Rider. What’s the actors name? Anyway. We’ll pull it up, later.
Jason: Dennis Hopper. O.K. Of, good birth.
Joe: Of good birth. Yes. Actually, I had never been to, Sicily. When, my family has gone back, there, they’re not allowed to stay in hotels. They have to stay in somebody’s house. Just, based on the name. The mayor, was Beninato. Someday, I’m going to take the kids, beck there. We’re going to see what it’s all about. I haven’t been there, yet.
Jason: He’s with a company, called, Tello. They’ve raised money from, True Ventures. I, always, get those two guys, mixed up, because, they do sort of the same thing. Get in, early, on promising startups. True Ventures. A good company.
Joe: Good guys.
Jason: We’re going to get all into that story. You’ve actually been with Roku, before that and Presto. And a bunch of other interesting companies. When.com, acquired by AOL.
Hiscox: But, first, let me tell you about our partner. This show is, I’ll be honest, doing tremendous. This is 300 episodes in. We’re hiring a new producer, to work on my show and ThisWeekIn Venture Capital. So, if you are a super fan. I love hiring the super fans. Jason Demant, he is running all of the sales. A big reason for our success. A former, super fan. He ran the Seoul Meetup. I love hiring super fans. They love the show. They watch the show, anyway. It’s always great, when you don’t have to tell your employees, “Please, watch the show.” “Well, I work for you, but, I don’t think, I really want to watch the show.” I hire people who watch the show, already. Give them jobs. What the heck. Anyway, we’re looking for a producer. If, you’re interested, you know my email. If you can’t figure it out, then, you’re not smart enough to work for me. To be honest. If you can’t figure out my email. Jason, is my first name. Calacanis, is my last. You put an @, between it, and a dot com, at the end, you’re going to have a pretty good shot, at finding me. Anyway. The show is doing great. The reason the show is doing great, is because, I have the best partners, in the world. One of them is, Hiscox Small Business. These guys provide, customized coverage and competitive pricing, on small business insurance. If you’re a small business, if you’re a startup, you need insurance. I know, it seems like one of those things you should put off. “Oh. I’ll wait. I’ll do that tomorrow. Next week. Next month.” Hiscox understands. That’s a hard thing, to do. You’re so busy. They’ve made it customized and tailored, depending on your industry and risk. So, if you’re an e-commerce person or you’re a social network, or, you’re a video game, a social game, those are different things. Or, if you’re a content company. It’s, kind of a, different thing. You fill out a little tiny survey, at their website. Then, they give you the coverage, you need. They don’t believe in one size fits all. They customize it. You may have a lower risk profile. You may have a higher risk profile. They need to know that, so, they can give you the best possible deal. You can get a quote, by going to: hiscoxusa.com/smallbiz. That’s right. You can follow, @hiscoxsmallbiz. It’s, really, a simple process. I had, Chris Sacca, on an episode. People consider that the best episode. Second, third… right up there with, Gary Vaynerchuk and David Heinemeier Hansson. People consider those, some of the best episodes. Actually, Tony, from True Ventures. People considered a great episodes, as well. Anyway. Chris Sacca, went and used, Hiscox, to get small business insurance, for his fund. For, the stuff he’s working on and the small businesses, he’s creating. That’s. Chris Sacca. Good enough for, Chris Sacca, good enough for, Jason Calacanis. Certainly, good enough, for you. Well, I don’t know about, “Good enough for, Jason Calacanis, is good enough for you.” You’re probably smarter than I am. Get, Hiscox and thank them. Just say, thank you, @hiscoxsmallbiz. I gotta tell you. There’s like, 10, 20, 30, super fans, that thank the sponsors, every week. I love you, guys for doing that. I really do. DomainNoob… you know who you guys are. And, gals. Thank you, for thanking the sponsors. Because, it means a lot to them. Thank you, @hiscox/smallbiz.
Jason: You ever been sued, Joe? You must have had a couple of, like, letters. As an entrepreneur. A couple of letters, here or there.
Joe: A few letters. Never been sued.
Jason: Never got to the, actual, lawsuit filed. But, a bunch of letters. Take this down. Do this. I’m a crazy person, here is something frivolous.
Joe: Scary stuff.
Jason: Frifolis? Did I just make up a word?
Joe: I think, there was an “F”, in there. An extra “F”.
Joe: Yes. Some employee stuff. Some weird, mysterious… oh, this happened.
Jason: “I was fired, for nothing. I’m a genius. You fired me, because, you don’t think, I’m a genius. I forgot, that it’s employment, at will, in The United States. So, now, I’m going to make some crazy “sugar” up.” You know, if you curse, on the show, it’s $10.
Joe: I, almost, wore my cowboy shirt. I’m not cool, enough, to do that.
Jason: None of us, is cool enough.
Joe: Chris, is one our investors, by the way.
Jason: Oh. Chris Sacca, is an investor. How is he, as an investor, by the way?
Joe: He’s great. He’s there, when, you need him. He’s not there, when, you don’t need him.
Jason: Ah. That’s an interesting insight. The reason you bring that up, is why? Some investors are up in your stuff, when, they don’t need to be?
Joe: There are many different types of investors. As you, well, know. I’m an engineer, by background. I call it, energy sources and energy sinks. An energy source is, wind at your back. You feel like the things they bring to you are helping you. As opposed to… I remember, one situation, where, somebody really wanted me to meet with a partner. Every board meeting, “You’re going to call, those guys? I know, they’re in Kansas City, but, you should, really, call them.”
Jason: So, it’s like, dumping people off on you.
Joe: Create work.
Jason: They’re creating work, that, you as the CEO, don’t think is a good idea?
Joe: This is after a board conversation and everyone has agreed. Let’s not do that. Then, on the one on one call…
Jason: You might want to investigate that, a little bit.
Joe: Yeah. I love investors, who are bringing great ideas, all the time. Who, are wind at your back. But, the ones… you feel, you’re dragging an anchor, behind you. They’re creating work, instead of, doing work. I, always, try to give investors something to do, for us. Sometimes, it’s harder. We have 15 investors. We have all sorts of seed funds. True and Bullpen. All sorts of funds.
Jason: That’s a lot of investors. Why so many?
Joe: It’s just the way it worked out, when, we did our $1M seed. We had, I think, at that point 10. Ron Conway, Marc Goines, and, Russ Siegelman. Chris was in. True was in. I’m, probably, forgetting people. I apologize. Naval was in.
Jason: You’ve had some success.
Jason: That makes it easy. In a way, for someone who’s had some exits or success, you actually have to keep a low profile, when, you raise that angel round. At this moment in history.
Jason: Because, you’re just going to be over-subscribed and people are going to get their feelings hurt.
Joe: AngelList is great, but, when you get, like, 50 requests from guys, who are dentists, in Florida… that’s a real example. I wanted to stick with people, either, I knew or I knew really respected… Chris was one of those guys. I hadn’t known him before, but, the guys at True, knew him really well. So, it worked out great.
Jason: They referred him?
Jason: Tell us. What is the mission of Tello? It’s changed, a little bit, hasn’t it?
Joe: Yeah. I won’t go, too much, into this. We started out doing mobile feedback, for businesses. One of your guys…
Joe: … has the Skweal thing. Which, is similar, in nature. We let people text or use mobile web to provide feedback, to businesses, restaurants, banks, whatever it might be. It turns out that the sales cycle, for… we were going after larger enterprise customers… is incredibly, long. Three months, to get them interested. Three month, for a pilot.
Jason: You’re talking, like Paint Barrier or some pizza chain?
Joe: Or, a big bank. Or, a big retailer. Or, electronics.
Jason: They’re scared to get that feedback, aren’t they?
Joe: They know, they need it. It’s just a slow process. In some cases, there are people in that organization, who, don’t want to get that feedback. You’re, absolutely, right.
Jason: Ah. So, I’m the guy, who runs the retailer. I’m like, “Let me collect all the feedback. Sort it. Give you, only, the good news.”
Jason: “Not the raw. You guys are idiots.”
Joe: We were sitting, there, in June. Apple. announced iOS 6. Our business was going along.
Jason: When you say, “Going along,” is that code for sideways?
Joe: It was interesting, but, it wasn’t going to be a breakout.
Jason: O.K. So, you knew, maybe, this could be $10M in revenue or $20M, in revenue? It’s not going to be $200M.
Jason: Is that the, exact, number you projected, in your mind? What did you think, in your mind?
Joe: Lower, than that.
Jason: Oh. You thought, this was a $10M business?
Joe: No, no, no. At the time, it was looking like, we could get it up to 5-10, pretty quickly.
Jason: Million, a year. In reoccurring revenue?
Jason: But, for you as a serial entrepreneur, now, this is your fourth time, at the show?
Jason: Seventh time, at the show?
Joe: Yes, sir.
Jason: Oh, God. So, your seventh time, at the show, at the rodeo. You just can’t get out of bed, and go to work, for a $5M-$10M, a year, business.
Joe: It just wasn’t interesting, enough. We were like, “What do we do?” There are some changes, we can make. Go after small business. Was one, for example. That’s really hard.
Jason: It’s got to be self-serve.
Joe: Absolutely. For this, it was hard to do that. So, we saw Passbook. Apple’s new…
Jason: Yeah. Describe what it is. For, people who don’t know.
Joe: Passbook is, in iOS 6, it’s a way for you to take anything that’s… a boarding pass or a ticket… anything that’s electronic, and put it into your phone. There’s a new app, that’s on your home screen, in iOS 6. Most of them have bar codes. I think of it as a bar code, on your phone. That’s, probably, the easiest way to think about it.
Jason: Here, it is. For, people who don’t know. If, you have a boarding pass or a Starbucks card, or, anything. They’re all filed in one little wallet.
Jason: Is this, really, Apple payments, in disguise, in your mind?
Joe: It’s coming. In fact, you can do payments, today, with things like a Starbucks card, for example.
Joe: So, you put a Starbucks card, in your Passbook. It has value.
Jason: How soon? I wrote an editorial that they’re going to do… I had inside information that… they’re going to do a PayPal type thing. Where, they do payments. How soon before your Passbook, just, has money in it. And, I can just give it to anybody?
Joe: As soon as, they release it. It could be next month. It could be…
Jason: So, you’re convinced, that they’re going to have a full-blown PayPal competitor?
Joe: They have to. I think, they will have credit cars, perhaps, before that.
Jason: Ah. So, you’ll have your Visa card, in your Apple Passbook?
Joe: In your phone.
Jason: Will they take a percentage, of that? Will it be a vig?
Joe: Currently, no. But, it depends, if it’s classified as in-app commerce, or not.
Jason: Right. They don’t sell physical goods as in-app.
Joe: They can’t take 30%, from Visa.
Joe: It won’t work.
Jason: They’re taking, 2%.
Joe: I think, it’s eminent. We’ve not heard anything about what’s coming. Obviously, Google Wallet is going after a similar space.
Jason: Google has, a PayPal straight-on, competitor?
Jason: Do you think, this is a step on the road to it? Or, do you think, that’s another product, that they may not get to?
Joe: I think, it’s all going to be bundled, into one.
Jason: And, it all going to be, Passbook?
Joe: I think so. You don’t bump things off of the home screen and put an app, on the home screen, of every iOS 6 device, unless, you’re serious. That’s what they did.
Jason: How much commerce do you think, will go through, Passbook? Do you think, $1,000, per user, a year? $500? $100, a month?
Joe: I think, more than that. You’re already, seeing… it’s been out three weeks?
Joe: You’re, already, seeing numbers. Major League Baseball. They deployed it, with four teams. 14% of the tickets, were in Passbook.
Joe: Like, in three weeks. We’re, in the play-off season.
Jason: That’s because the consumer said, “Send it to my Passbook.”
Jason: Now, do you think, Passbook becomes cross-platform? In order to succeed, does it have to become cross-platform? In other words, does Passbook need to be downloadable on Android?
Joe: I can’t see that, ever happening.
Joe: I think, those two companies, there are issues, that go way back.
Jason: But, Kindle goes across every platform.
Joe: But, it’s not in Apple’s style, to do that.
Jason: But, iTunes, they did. At a certain point, they cracked and iTunes did have to go to Windows. It took them… I don’t know, what? 5-10 years?
Joe: Five years.
Jason: Something crazy.
Joe: Maybe, with Tim Cook, at the helm, maybe, different perspective, on it.
Jason: Different than if, Steve Jobs, was running Apple?
Jason: Do you think, Steve, was right in his… I don’t want to use an inappropriate word. Let’s face it. He was a bit of a jerk, at times. He was a hard-ass. Let’s use that word. I mean, he might have been a jerk, at times. I don’t want to speak, poorly, of a hero of all of ours. He did have a little bit of an edge, there. A little hardcore… almost, to the point of illogical, at times. Like, almost, holding a grudge to the point, this is in your own best interest. This is in Apple’s best interest. So, you’re saying, he would never have let it be cross-platform but, maybe, Tim Cook will?
Joe: I’m convinced, based on what, Steve, said. He’s like, “I’m going to spend all of the money, we have, to crush these guys.” Right? That is not a simple statement.
Jason: Do you think, Tim Cook, carries that legacy, or no?
Joe: I think, Tim, will do what is in the best interest, of the shareholders. If they determine that going cross-platform is the right thing, I think, he will do it. So, you have to take the good, with the bad, right? I’m sure, you’ve had your share of criticisms, as a leader. I know, I have. The innovation and the spark, that comes, sometimes comes with an edge or with baggage. Or, whatever it might be.
Joe: Absolutely. I respect, Steve, for taking those stands and built some great products and the most valuable company in the world. Right?
Joe: So, you have to take that good. But, that doesn’t mean you’re cruel to people and you belittle them, in front of everybody else.
Jason: Right. Which, he did at times.
Joe: He did. He, absolutely, did.
Jason: Bill Gates, was known for that, in his early days. Of, absolutely, gutting people.
Joe: He, definitely, mellowed out. I remember, meeting Bill Gates, in the early 90s. When, I was working at a graphics chip company, S3. I was a young guy, demoing at Comdex.
Joe: That’s how old, I am.
Jason: Really. Yeah.
Joe: That was, sort of, the precursor to CES. Really nice guy. You could tell, in like ten seconds, he completely dissected, the technical architecture of the product. Scary smart.
Jason: Smartest guy in the room, in any room on the planet, basically. Very rare, for him not to be the smartest guy, in the room.
Joe: I was very impressed. I only spent three minutes, with him. Gave him this demo. As he’s walking away, he’s telling his two minions, who are following behind him, “A, B, C, D, E.” They’re taking furious notes. I don’t know, if he was going to go crush us, or, partner with us, or what. You could just see the brilliance, in that guy. Look what he’s done, now, with his causes. A great guy.
Jason: Yeah. Tell me about the business. Tello, is going sideways. Your team’s not super motivated. The board is, what?
Joe: The board is, me and Paul Martino, from BullPen. Jon Callaghan, is our biggest investor.
Jason: From, True.
Joe: Yeah, from True.
Jason: What do they think? You’re the horse, we bet on. You make the decision?
Jason: Basically, they think, that this customer service business is, too small, not fascinating enough, to you. To use a word. Go, find something fascinating.
Joe: The question was, “What else, you guys got?”
Jason: What do you got?
Joe: You know this. You’re always coming up with other ideas. As you’re going through stuff.
Jason: Sure. As any great entrepreneur… Phil Caplan, said to me, “Any great entrepreneur, has a million dollar idea, every day.”
Joe: I don’t know if I have them, everyday.
Jason: He said, “million dollar idea”, which, is not a big benchmark.
Joe: Oh. O.K.
Jason: I think, he said, “A million dollar idea, everyday and a billion dollar idea, every month.”
Joe: Wow. That’s pretty good. I hope that’s true. We started looking at some, other things. Leaving that business going. People weren’t bummed out about it. It’s, “Hey, there’s stuff, we can add to this.” We were looking, a lot, at location-based apps. What could we do to, maybe, deliver offers, as you’re walking down the street. As I dug into it, more, as we dug into it, more, we realized, there’s a zillion companies going after those spaces. As we spent more time, looking at Passbook, we realized, there’s something really interesting, here. I don’t know, if you’re aware of this. When, you send a pass, to somebody… I don’t’ know. Have you used, Passbook?
Jason: I haven’t used it, once.
Joe: We’re going to send you, your first pass, today.
Jason: O.K. Good.
Joe: It was on your screen. Right there.
Jason: I don’t even know… Where is Passbook?
Joe: It should be on your home screen, when you reinstalled, iOS 6. They took over, one of your spots.
Jason: There, it is. You’re right. They moved everything down.
Joe: YouTube, is gone.
Jason: Tickets, score card, coupons. So, I can just click coupons?
Joe: No. That thing, doesn’t do anything. On our website, you can, actually, send yourself a sample pass. Type in your email address, pick one, and send. You’re logged in.
Jason: I’ll do another window. If, I go to…
Jason: Putting “pass”, in it, do you worry… because, Apple, is a little IP crazy, do you think PassTools, is going to make them, a little, upset? Like, “Oh, too close.”
Joe: No. We have a great relationship, with them. Actually, it’s been wonderful, working with them. They, really, rely on the developer community to help them out. We did, a lot, of debugging. Trying to get it to where it is, today.
Jason: “Send yourself a sample pass.”
Joe: Pick one of those.You, just, gotta click on one of them. Click “send”.
Jason: I want the green one. O.K. sent.
Joe: You should get an email. What’s, really, cool about this is, you’re getting this little electronic thing. It’s like a PDF. Except, it’s a new file type. It’s called, .pk pass file. You click, on it. You open it up and it loads into Passbook. Now, you have your boarding pass, your coupon.
Jason: It’s like a standard, V card, or something?
Joe: It just holds everything, together.
Jason: Is it encrypted? Hard to crack?
Joe: Yes. In fact, part of the challenge of building passes is, you have to be an engineer to build a pass. You cannot be a normal human.
Jason: It’s not like, I’m going to fill out, some web tool, then all of a sudden, Bang?
Joe: In fact, today, I’m giving a talk, right down the road at the MacTech Conference, about how to build passes. At the end, I’m going to say, “Yeah. You can do all that hard stuff. Or, you can just use, PassTools.”
Jason: Right. So, you have, basically, an API to build these things, quick and fast?
Joe: Absolutely. What’s, really, cool about Passes is, they’re smart. So, they’re location aware. So, you put a boarding pass, on your phone. You walk into LAX, or you get near LAX, it pops up on your lock screen.
Jason: Oh. Even, on the lock screen?
Jason: So genius.
Joe: Let’s say, you have a coupon. $2 off, at Target, for pampers or whatever, it is.
Joe: You’re a mom and you walk into the Target. It reminds you, “You need to get your pampers.”
Jason: O.K. So, they’re going to wake up, as it were. When, you can use them.
Joe: You got it. They can be stored value, as well. That’s how you can do commerce, today. On these things.
Jason: When, it’s stored value, how does it do the clearing?
Joe: It’s got to be integrated, with the POS, on the back end. So, Starbucks, when your QR codes, get scanned, then their cash register says, “Oh, Jason, just bought a latte.”
Jason: From their database?
Joe: Exactly. Then, you can update the pass.
Jason: Apple isn’t even involved, in that.
Jason: Apple is holding the device, but, they don’t have… I’m just pulling it up, right now. They don’t have any… there you go. Delivered. At, PassTools. New store card, generated by PassTools.
Joe: The Apple Mail clients, now, recognize this new file type. It says, “Oh. This is a .pk pass file. You want to add this into Passbook. We’re going to get to your first pass. Which, you can promptly delete. There’s a cool animation, when, you delete it. Shreds it. You’ll have your first pass.
Jason: God. My Sparrow is taking forever, to load. Then, this is what the interface looks like. Here’s the interface.
Joe: I’m logged in. It shows you, what’s going on, with your passes. I sent one to, myself.
Jason: This is for the creator of it?
Joe: This is for the business, who’s creating this. Just, to rewind, a little bit. We said, “There’s an opportunity, here. Let’s go do this.” We cranked, from June, until September 19, when, iOS 6 came out. It was 7 days, a week. Non-stop. You know the drill. We launched it. It just exploded.
Joe: Thousands of businesses, using this. Everything from, small businesses all the way up to big guys.
Jason: $1,000, a month for 10,000 passes. You’re, basically, going at 10¢, a pass?
Joe: At the list price. So, big guys will be below that, obviously.
Joe: You know the phrase about pornography. “I know it, when, I see it.”
Joe: So, a good business, you know it when, you see it.
Jason: So, this thing’s rocketing? People are just signing up, by the thousands.
Joe: I’m not trying to be promotional. It’s unlike anything, I’ve ever seen.
Jason: It’s a great experience, as an entrepreneur. Especially, when, you’ve had… let’s say, not-break-out stuff, going on for the last year or two. Let’s talk about the hard times, when, we get back from this important, important sponsor break. Hey, everybody. Hey, everybody. Let’s stop, for a moment, and thank, SquareSpace. Number one, for sponsoring this great program, ThisWeekIn Startups. Where, we get to hear awesome entrepreneur stories. Like, we’re hearing, today, from Joe. Struggle. Success. Wow. Great. We’re right here, at that moment, when he’s having success. Which, is why he’s got that big smile, on his face. Going sideways, for a year. What, two years, sideways?
Joe: 18 months.
Jason: 18 months, going sideways. Then, Boom. Month 20. Yee-haw. We’ll get right back to that great story, you were telling. SquareSpace. Listen. I use it, everyday. It’s amazing. SquareSpace 6, is their latest product. Version 6. Look, at these beautiful sites. Parts and labor design, here. Gorgeous. These gorgeous sites, here, it is. Parts and Labor Design. There, is the iPad version. Boom. I flip the iPad version around. It’s, totally, aware. I click on the process and the products. I flip back. Look. That same part, on my desktop. I click, over here. Boom. It all looks the same. It all flows the same. HTML5. Beautiful templates. That’s what they’re known for. This, Dovetail. Gorgeous. Furniture. There’s a reason why, they get all these gorgeous design people to use their product. Because, it’s elegantly simple and gorgeous. That’s the idea, behind SquareSpace. I say, gorgeous website. You say, SquareSpace. Gorgeous website. SquareSpace. 24-hour support. 7 days, a week. For, creating these beautiful, professional-looking sites. I use it, myself. Every site, as I’m saying, is automatically resized for mobile. I can’t tell you, how important this is. You build a website, with some dude, you met on Craigslist. Dude on Craigslist, you hire for $50, an hour. He’s billing you $1,000, a month. You got $12,000, for the year. Then, you open your iPad, and it doesn’t even come up. Then, somebody says, “I’m a customer. I tried to get to your site. I couldn’t find it.” You’re like, “But, it’s working.” “Yeah. No, I was on my iPad.” “Oh! We don’t work for the people who have the highest-end devices.” Kill yourself. You’re going to go, absolutely, insane, if your mobile site isn’t working, today. When, everybody, is shifting to mobile. Commerce is shifting to mobile, in a big way. Go to: squarespace.com/twist. To try it out, for 2 weeks, free. No credit card required. They know, you’re going to love it, so much, that you will convert your trial to, a yearly or bi-yearly plan. Which, you’ll get 20% off. When, you decide to keep that free trial, and, they say, “Enter an offer code.” I want you to put: TWIST 10. You will get an additional 10% off. So, 20% off for doing the yearly or bi-yearly plan. Then, another 10% off, by using the code: TWIST10. Thank you, to my friends at SquareSpace. They do an excellent job. I, really, enjoy using their product.
Jason: O.K. When we left you, 18 months, of going sideways. Banging your head, against the wall. Apple puts out this Passbook. What? You were just watching the Keynote, live, and said, “Hmm”?
Joe: That’s it.
Jason: That’s it?
Jason: As, an entrepreneur, how do you know, “Hmm” and breakout success? How do you get from, “Hmm. There’s something, there,” to, OMG. Dozens of people signing up for thousands of dollars, a month? I’m assuming.
Joe: I was trained, as an engineer. I’m a MIT grad. I think, very, logically. When, I came out of school… This is a great lesson, for entrepreneurs… I didn’t, quite, trust my gut. You play poker. I play poker. You learn, over time, that your head can be saying, one thing, “Your odds are, against you.” Your gut can be saying another. “That guy is full of crap.”
Jason: That guy is bluffing me. Or, attempting to.
Joe: So, when, an idea comes along. There’s equal parts, analytics: evaluating the opportunity. Is Passbook going to take off? Is anyone, ever, going to use this thing? Will businesses support it? Then, there’s, sort of, your instinct of, “Holy crap. This is going to be big.” That was our experience. We were looking at other stuff. I’m, still, trying to remember, how we said, “O.K., That’s the one.” Because, it’s such as haze, right now. Because, we’ve been going, so fast. These are the calls you have to make, as a CEO. Of course, the team was, very, intimately involved. We have a great group of people. When, you go home, at night… you’ve been through this… it’s all, on you. You’ve got people on the payroll. You want to keep making the payroll. You want to make sure, these people don’t have to get laid-off. Whatever, it is.
Jason: Heavy, is the head, that wears the crown.
Joe: I don’t know that many people, really, understand that. You have a responsibility, to your investors. Imagine, if I screw this thing up. I’ve got 15 of the world’s best investors, who, I’ve just lost money for. That’s, probably, one of the things I’m most proud of, in my career. Is, never, having lost money, for an investor.
Jason: Well, that’s a nice feeling. It’s makes it, so, easy for you to raise money. You can, just, pull that card.
Joe: It, really, helps. We just said, “Let’s go for it.” We weren’t sure, what was going to happen. Then, we launched it and it’s really going to take off. The proof is in the pudding. We release our API, in about, a week and a half. That’s when, the big guys will start generating passes, problematically.
Jason: It reminds me of, The Last Emperor. You remember, seeing the film, The Last Emperor?
Joe: I did, see it. It was a while ago.
Jason: I gotta watch this film, again. There was this great scene, in the film. Where, the little kid comes out. The great big hall, is out there. He’s, like, looking at the throne. Long before, he’s named, or, whatever. He looks at the throne. He’s like, “Go sit, in it.” He’s like, “I don’t want to sit, in that.” He sits and he looks. He’s like, “Whoa. I don’t want to really be, in this seat. This is not a fun place, to be.” So, how much runway did you have left, when you launched Passbook?
Joe: We had…
Jason: 6 months?
Joe: 6 months. Yeah.
Jason: Do you think, you could have raised more money, for the previous vision? Do you think it would have been, “Hmm. Pack it up. Pack it in.”
Joe: Maybe. It would have been hard.
Jason: You would have had to blow, a little smoke?
Joe: Uh, yeah. Frame it, in the best light. I’d prefer, to say.
Jason: You have to be, like, “This is possible.” But, everybody, would know, “Hmm.”
Joe: I know, we can raise money, for this business, if we need to. We can, actually, be profitable, before we need to, now.
Jason: Of course, the jerk-VC question, when, you go to raise money, from these idiots… I’m talking about the bad VCs.
Jason: I’m not talking about the good ones.
Jason: But, you’re going to get, some dopey VC, who’s never run a business, in his or her life. They’re going to say to you, “What happens, when, Apple releases a tool, like this, themselves?” What do you say to, dopey VC? Other than, “That’s a great question. I would never take your money.” What do you say?
Joe: First, of all. You build a great relationship, with Apple. We’ve done that.
Jason: Why is that important?
Joe: First, of all, when you have problems they, hopefully, respond quickly and fix them. If you want your product to work, that, kind of, helps.
Jason: So, a technical blocking tackle.
Joe: It was a two-way street. Because, all the stuff we were banging on, was fixing Passbook, in a way. So, that was really helpful. Then, you’re probably not going to get a heads-up on, “Oh. We’re about to crush you and blow you out of the water.” But, you can get a sense of, what’s going on.
Jason: How do you think, they would phrase it. If, they were planning on going into this? Would they, just, cut off communication? Would they be like, “This is not the best place to focus your energy.”
Joe: I’m not sure. It could go, completely, dark.
Jason: Going dark?
Joe: Yeah. That would be one tell, tell sign, that something’s going on. You know, they are buying up companies. Kind of, quietly. I forget the one they bought, yesterday.
Jason: Yeah. They bought, a little, HTML5 consultancy.
Joe: I forget the name.
Jason: What’s your take, on that?
Joe: I have no idea. I was wondering, if apps are the future, why do you need the HTML5 guys? That seems very odd, to me.
Jason: They, also, built a bunch of, Q&A and video stuff.
Jason: I’m looking at it, thinking, “No one, has built a viable YouTube competitor. These guys had a bunch of video experience. They launched a little video platform.”
Joe: So, Apple’s picking off, each one of their former Google partnerships.
Jason: Well, that would make sense. To go down the list and go, O.K., Siri. They hired the A9 guy. Obviously, siri.com, will become a search engine. That’s my belief.
Joe: I believe that.
Jason: You will go to siri.com and you will search. They will have a competitor to Google, that, they’ll claim is not a competitor. But, it will skim the top 10%, of searches, 20%, of searches, then, the top 50%. The fall back will be, whatever. Algorithmic search, that we know, today. But, people want to get an answer and Siri, is about answers.
Joe: They, did maps. Right? Whether, or not, people think, they’re any good.
Jason: What do you think?
Joe: I have no issues.
Jason: Yeah. I don’t understand, why everyone is complaining.
Joe: I think, where it matters is, if you live in New York City and you want the transit stuff, like subways and buses.
Jason: Yeah. O.K. That took Google forever to add. That was added that in, like, year nine at Google.
Joe: I know. Have you looked, at the 3D view? It’s, like, tremendous.
Jason: It’s sick.
Joe: It’s, like, an SGI workstation, on your phone.
Jason: Right. For, people who don’t know what that is…
Joe: I’m sorry.
Jason: SGI workstation, was how you used the internet, in 1993 or 1994.
Joe: Yeah, and, like, high-powered graphics. 3D rotational models.
Joe: I flew around, New York City, the other day. The thing, like, blows your mind.
Jason: It’s mind-blowing.
Joe: Clearly, they’ve got a big bet, there. Wallet, is going to be a big deal.
Joe: Maybe, they do a video thing.
Jason: I gotta think that, Facebook, Yahoo, MicroSoft, and, Apple will all make a YouTube competitor, or, play, on that. I think, Yahoo had one, at one point and they shut it down. MicroSoft had one, called, SoapBox, I think, is what they named theirs. Then, they shut it down. Just, little experiments of anybody could upload a video.
Joe: I think, the world, probably, needs one of these other big guys to do something, like that. YouTube, is amazing. I heard the story, about PSY, The Gangnam Style guy. Apparently, even, at $15 CPMs, with the number of page views, he gets 50%. Right?
Jason: 55%, if he’s a partner. My guess is, he’s not getting $15 CPMs. On that partnership level, $1.50, $2, net, to him. 500M, would be a $1M.
Joe: Every parody, he gets something on. Someone, did the math. It was, well over, $10M. Just, off of YouTube, already.
Jason: Yeah. I did the math.
Joe: You did the math?
Joe: What did you come up with?
Jason: I thought, if he had 3 or 4 hundred million… at the time, it was 3 or 4 hundred million. I said $2, at the first 200M. Then, the last 200M to 300M views, might have been at a higher CPM. Let’s say $5. So, whatever you want to call it. A million bucks, sure. Why not? Could be a million bucks.
Joe: That’s awesome.
Jason: I didn’t even think, of all the people who used the song, in the parody. Means, he gets to claim their video.
Joe: Mitt Romney style. Did you see, that one?
Jason: No. I didn’t see that one. I’ll go check that one out.
Joe: That’s a good one.
Jason: What did he say, yesterday, in the debate? I don’t know when this is going to air, but, we just had one of the debates. He’s got books, full of women?
Jason: Binders, full of women.
Joe: Binders, full of women.
Jason: Wow. He is a mack daddy.
Jason: Binders, full of women. “I’ve got binders, full of women.” Really? When, you make those slip-ups: “47% of people, don’t pay taxes. They’re freeloaders. I’ve got binders, full of women.” You don’t make that many slip-ups, if it’s not, actually, who you are.
Joe: I know, some people, are disappointed, in what the president has been able to do, the last four years. I just don’t want a guy, who has no foundation, and, just waivers in the wind. “You need me to be, all the way, on the right? I’m all the way, on the right. You need me to move back to the middle? I’m there.”
Jason: What’s it going to take, to win. He’s a winner. He wants to win.
Joe: I get it. Winning is good. But, I’d prefer…
Joe: Somebody, who has a little bit of principal. I met, President Obama, before he was elected, at a fund-raiser, out by us. I brought my two little kids. One was, I think, 7 and 5, at the time. You’re a dad. The way you know, somebody, is real is… he’s a tall guy. My daughter’s, probably, this tall. He bends down and gets down, on a knee. At a fund-raiser, in a suit. He just talks, to her.
Jason: These guys are pros. They know, exactly, how to court.
Joe: I’m, from Chicago, originally. Maybe, I have a soft spot, there. I just prefer, somebody, who’s real. Let’s leave it at that.
Jason: Yeah. We gotta get off of the politics talk. I’d 2/3 of the people, who watch this show… most of the people who watch this show, are independent, critical thinking, libertarian types. People who believe in less government and more individual responsibility.
Joe: Yeah. That’s me.
Jason: Certainly, tons of freedom. If, you think, from a libertarian perspective and less government, none of these guys are, really, that efficient or creative. So, many problems, in society, entrepreneurs could solve, like that. How would you solve the health care and obesity crisis? We were talking about that, before, we got online. Losing weight. We’re, both, losing weight. What would be the entrepreneurial solution, like… How would you 2/3 of the country’s obese. How do you solve that problem?
Joe: That’s a great question. I don’t know, if I have an answer, for you.
Jason: What would your process be?
Joe: Well, I’d start thinking about incentives. We were talking earlier about, it just take a few calories, a day.
Jason: Right. Margin of error.
Joe: For me, a couple of months, ago, I just started on, Tim Ferriss’ 4-Hour Body.
Jason: Which, is basically, he’s cribbing the Atkins. Basically.
Joe: It’s very similar to Atkins. Although…
Jason: Which, is smart, by the way, because, if you take carbs and sugar out, you win.
Joe: A few changes and it’s working.
Jason: You look thinner. Yeah, you’re face is much thinner.
Joe: I’m trying. I’m 15.
Jason: I’m 21.
Joe: I gotta…
Jason: Protein diet works.
Joe: It works.
Jason: I’m not doing, Tim Ferriss. I’m just doing no carbs, no sugar.
Joe: I don’t know, Tim, from Adam.
Jason: I do. He’s a nice guy.
Joe: But, it worked, for me. Now, I’ve gone out and told, probably, 10 people. More, now.
Jason: Net promoter score.
Joe: Yeah. So, like, a little change like that, where you just get rid of white carbs. I think, that is the number one problem, in America.
Jason: There’s a great book, Wheat belly. There’s another one, called, Why We’re Fat. It points out wheat, flour, and sugar.
Joe: Things, like, this New York City ban on large soft drinks. What a load of crap. So, you can buy a 2-liter bottle, but, you can’t get the…
Jason: But, you do know, that it does incent certain behaviors. So, if there were no 16 oz. bottles… now, personal freedoms basis, you should be able to get as many bottles, as you want. But, it does incent behavior. If, you give people 16 oz., they drink 16 oz.. You give them 12, they drink 12.
Joe: Yeah, but, in libertarian, sort of, way. So, what about french fries. Are french fries, good for you?
Joe: So, are we going to outlaw french fries, as well.
Jason: I think, what’s interesting about it is, I think that, Bloomberg, is talking about it on a, totally, different level, than we’re talking, right now. I think, what he does is, he knows this is going to create a massive dialog.
Joe: Just publicity.
Jason: Yeah. He knows, in his heart, “This is stupid.” Like, “If I ban large sodas, people are going to buy two.” He knows, it’s stupid.
Jason: But, what he’s doing is, he’s saying, “Let me seem like this Machiavellian, control-freak maniac. Everybody will talk, about what we’re doing. Which, will heighten the discussion about it. Even if, what I’m doing is silly.”
Joe: Maybe, you’re right.
Jason: That’s what I think, he’s doing.
Joe: Soda is evil. I love it, as much as, the next guy. Coke Zero, is my solution, to that.
Jason: Yeah. Although, that’s a little bit, too.
Joe: A little bit. But, not, nearly as much. One a day.
Jason: I think, entrepreneurs should run the government. It would be, so, much better.
Joe: I don’t know. Maybe, we’ll do something, next time around. Go attack it. The startups, who have gone after healthcare, or anything, in that space, they get crushed.
Jason: Of course.
Joe: I think, they just get dejected, from hitting their heads against the wall, non-stop.
Jason: Yeah. It’s, one of those things, for people have to get a really true scare… people are getting surgery, to tie their stomach bands. There’s ads for it, on television. That’s the state of how ridiculous this is. That’s the way people think, they can solve their problem.
Joe: I know lots of people, who struggle with it. It’s just hard. I, actually, give a lot of credit… there’s a guy, Yogan Dalal. He used to be the lead guy, at Mayfield Fund. He left and he’s, now, running a startup. He’s probably… I think, he’s in his 50s. It’s called, Glooko. It’s a blood glucose meter. I think, it’s somehow tied into your…
Jason: Gluco, huh?
Joe: It’s like Glooko. Or, some weird spelling, like that. I just thought that was really cool. He’s probably made enough money, forever. Now, he’s going to give back. He’s hired a team, of, lots of people, out of Stanford. That’s a cool thing. Maybe, I’ll do that, someday.
Jason: How do you manage burn-out? Obesity, is one of the things. Stress, anxiety. When, you’re trying to go after a seven week rush, like this Passbook project?
Joe: It’s hard. Throw into that, making sure your wife doesn’t divorce you and your kids know, who you are. When, people get to that point. First thing I do, I schedule two work-outs, every week. I work out with a trainer. He kicks my ass. Actually, two trainers. It’s a little bit expensive, but, the cheap-skate, in me, doesn’t want to miss those appointments. Tuesday, thursday, 8 o’clock.
Jason: What about, the rest of the team?
Joe: The rest of the team, they all have their methods. Some are cyclists. So, they go and do that. Some just like to walk. One guy is a runner.
Jason: How do you deal, overall, with the burn-out? How do you get people to work 90 hours, a week? After, you’ve had 18 months of moderate success and say, “This time, it’s going to work. This time, it’s going to break out.”
Joe: It was a challenge. It’s like a sprint. You know you’re going to go all-out. Then, you’re going to relax. After, we launched, all of us, probably, slept for a couple of days. Catching up on stuff, watching the numbers. You do need to, sort of, decompress. People took long week-ends. Went away, a little bit. That’s how startups are. There are sprint times and there are chill out, relaxing… and relaxing is 60-80 hours, a week, instead of, whatever. We don’t have a vacation policy. I insist that people take vacations. Like, “Go. Take your wife, somewhere.” Or, girlfriend or whatever. It is hard. Some days, you’re sitting there, going, “Why am I doing this?”
Jason: Right. What do you do, on days like that?
Joe: Joe: You’ve been there, right?
Jason: Of course.
Joe: Those are tough days. People say, “It’s lonely, being the CEO.” It’s the loneliest chair, there is.
Jason: Why is it so lonely?
Joe: Well, you don’t want to show weakness, to your team, to your board, to your investors. I find it helpful, to have confidents, advisors. For example, Marc Goines, is a good friend of mine. He’s a great investor. If, there’s something I, really, want to talk about, I can give Marc a call. Russ Siegelman, the same way. Just, level with them. Say, “Here’s what’s going on.” Not that you can’t do that with, your other investors, but, it’s a different level of intimacy. If, you know what I mean.
Joe: Yeah. I think, one of the most important attributes, of being an entrepreneur… you can call it stubbornness. You can call it passion or relentlessness. It’s, there is a mountain, in front of you. If, you’re building a startup, there is a mountain, in front of you. You’re not going to walk into a Google AdWords business, just by rolling over. So, there’s a mountain, in front of you. You have to, now, figure out how to get past that mountain. Is it, go over, is it around the side, is it through? What is it? You’re in the middle of it. Something’s not working, it’s up to you to change the trajectory and go a different way. There’s a lot of pressure. Some people can’t handle it.
Jason: What’s your technique? How do you release, all that pressure of, “I can’t show weakness, to the market, to my employees, to everybody. Yet, I’m a little bit panicked, about this. And, the stress is building. And, it’s not working. And, we got 6 months of runway.” How do you let that pressure cooker, not explode?
Joe: Some nights, it’s really hard to get to sleep. Some people read. I, always, watch one show, before I go to bed.
Jason: Just, one show.
Joe: Sons of Anarchy, last night. The new one, was on. You know, Sopranos, Mad Men.
Jason: I watched Homeland, last night. One episode.
Joe: What it does is, it forces me to think about something else. In those moments, when, you’re not fixated on… I’ll wake up, at like, 3 in the morning, some day, and I go, “Oh, man. I going to Jason’s show, today. I gotta be on. I’m giving a talk, after that. I got to make sure the slides are ready.” Your brain, just, your to-do list is building. You’re like, “I better write this stuff down, before I forget.” So, I think, you just have to relax. Taking time away. Biking, for me, really does it. Because, you gotta pay attention or you end up flattened, on the side of the road.
Jason: You got to be, in the moment. You gotta get that flow experience, as they call it.
Joe: Then, you’re open to the idea, coming to you. And, it comes. It always comes. It’s just, when and where. Some people say, I’m a little high strung. I try not to let it get to me. But, that pressure… that”s hard. Especially,
Jason: So, basically, you’d be lying if, you said, you had that completely under control. That you have an easy solution or silver bullet.
Joe: You never do. You never do.
Jason: If you do, does that make you not a great entrepreneur? If, you lose your edge. If, you’re not panicked about failure. Panicked about not winning. Week number 3, you’re saying, “I gotta get these things under wrap.
Joe: It’s Andy Grove. It’s, “Only the paranoid survive.”You asked me, “What happens if, Apple does that?” I’m thinking about, “What happens if, Google does that?” What happens if, a new competitor comes, along?” You’re under attack, from all fronts.
Jason: That’s really built to last. If, you want to be built to last, you’ve got to watch out for those unknown unknowns. You know?
Joe: You do. You and I, share a little commonality, in our upbringing. My grandfather, came from Italy, with my grandmother. Came to Chicago, opened a bar. Which, eventually, turned into a restaurant. Supported four families, for 50 years. I learned, so much.
Jason: What was the name of it?
Joe: The restaurant, believer it or not, the specialty was Bar-B-Q ribs. Larry King, once, called it, “The Best Bar-B-Q ribs, in America.” It’s, no longer, around. It’s called, The Glass Dome Hickory Pit. It’s an amazing part of my history. Which, I’ll never forget.
Jason: What’d you learn? Did you work, in the restaurant?
Joe: Oh, yeah.
Jason: What did you learn, from working in the restaurant? What age? What was your first gig, busboy?
Joe: I read, your quarter-stealing story, a couple of years, ago. It was awesome. I was everything. I was a busboy. I was a dishwasher. I was a host, at one point.
Jason: What was the age, at which, you first remember doing some task of work, for the family business?
Joe: It was before ten. I don’t know… 7, 8.
Jason: What was it? Polishing the silverware? Setting tables?
Joe: Just cleaning up stuff. Whatever, needed to be done. I wasn’t the… what do you call the guy, who cleans up the sludge, after the bar closes.
Jason: The porter.
Joe: The porter. Yeah.
Jason: I did the porter work, when, I was 8, 9, 10 years old. My grandfather…God rest his soul… 6:05 mass, at Saint Anselm’s. Every saturday and sunday. After mass.. he was the usher. There’d be six people, in this mass, by the way. Four of them, were ushers. One, of them was me. One, was some old lady, who was asleep, in the second row. I would bring up the sacraments. Then, we would go, at 7 o’clock. My dad, would still be at the bar. Playing cards…
Joe: From, the night before?
Jason: Yeah. Playing cards or backgammon, probably. Two or three thousand dollars, on the table. This is the 70s.
Joe: Backgammon, for cash. That’s a…
Jason: Guys, were into him and he would be drunk. He’d have five scotches, in him. Ten scotches, in him. He would be playing backgammon, with guys. They would be buried, five grand, three grand. Mafiosas. Bikers. Everybody was there. That was cleaning up the bar. Hard work.
Joe: Absolutely, hard work. My dad could never come to… if we had a little league game, or something like that, at 4 o’clock.
Jason: Out of the question.
Joe: He was working.
Jason: Out of the question.
Joe: I was born, in Chicago. Then, we moved out to the suburbs. So, he had a 45 minute drive, to get to the business, everyday. It was hard work. I think, a lot of my work ethic and my passion for it, comes from my grandfather and my father. They worked hard. They had fun, at times. They had problems, all the time. You cannot imagine running a restaurant, especially, in those days.
Jason: Oh, I can.
Joe: In Chicago. The stuff that would go on.
Jason: Oh, yeah. You get shaken down. The guys, who, were taking your garbage, all of a sudden, would say, “The price has gone up.”
Jason: “How much?” “Double,” Protection money. Cigarette machines.
Joe: It was right next to, Comiskey Park, near The White Sox. So, we would have fans and on a good night, 500 people would be, in the place. It was a great experience. Sort of, my early entrepreneurial experience. Luckily, I went off to study engineering, then, went right to Silicon Valley. I never got involved in ownership or management.
Jason: What was your craziest story, like, Mafiosa guys, or whatever. Now, that it’s all over, you can tell it. What’s the craziest? You tell me a crazy one, I’ll tell you a crazy one.
Joe: My grandfather shot a guy.
Jason: That’s crazy. You got me. You win.
Joe: During prohibition. Prohibition, came along… I forget the years of prohibition. In the 20s?
Jason: The 20s.
Joe: They didn’t have liquor. If, you’re a bar and you don’t have liquor, what do you do? You start cooking food. Bar-B-Q ribs and other things. Then, you go to Canada and you bootleg whiskey.
Joe: What’s it, Boardwalk Empire. Same thing. Apparently, a cop came in. Something was going on. He wanted a drink or he found the stash, or whatever. He was like, “You’re out of here.” A fight ensued. He shot the guy.
Jason: He shot a cop!
Joe: Yeah. I don’t know all the details. I remember, my dad… he passed, last year… he told me. He was probably about 6, or something. Right? Somebody got shot and they handed him the gun. A little kid with a gun.
Jason: They’re, like, “Take this.”
Joe: “Go. Get rid of this.”
Jason: Go. Get rid of the gun. He’s throwing it, in the river.
Joe: I don’t know what happened, to it.
Jason: Somewhere, it’s in the river. He should tell you where it is. You could send a scuba team, to go get your grandfather’s gun.
Joe: Apparently, it ended up, it was warranted.
Jason: You gotta get that gun. Aww. Your dad never told anybody, where the gun is? Did they retrieve the gun?
Joe: He went and hid it. Then, when everything settled down, they went and got it. There was an investigation.
Jason: Wow. That’s intense.
Joe: That was in the 20s. It was crazy. There were all sorts of people stealing from the restaurant. Boxes of steaks, walking off. Or, shrimp or whatever the expensive stuff was. Setting up stings and figuring out that stuff. In those days, there weren’t credit cards, right.
Jason: Cash. No video cameras.
Joe: I remember, the cigar box. That was in the safe. That’s where everything was.
Jason: 100 grand, easy.
Joe: I’m, so, happy to have experienced that, growing up.
Jason: As crazy and as hard and As family-breaking, as it can be, it’s also family-bonding.
Joe: Oh, yeah. It was my dad and my three uncles. Two of them, weren’t talking to each other, at any given moment, in time. Sometimes, three.
Joe: It’s like, “Are we going to uncle Mike’s?” “No. We can’t go, there.”
Jason: We gotta go work, together.
Joe: Then, the next month, this guy is on the shit list.
Jason: Ohhh! First one.
Joe: Beer, for the team.
Jason: 10 bucks. Yum, yum. We will make change. We gotta get Square, in here.
Joe: Yeah. I have a credit card.
Jason: We prefer, cash.
Joe: Maybe, you’ll accept Passbook, someday.
Jason: Absolutely. Send us a Passbook, for a keg.
Joe: I was looking through the stuff. You and I, both, went to catholic high schools.
Jason: Both, went to catholic high schools. Where did you go?
Joe: I went to Marist High School, in Chicago.
Jason: O.K. Was that Brothers?
Joe: Marist Brothers.
Jason: We were the Sumerian Brothers.
Joe: Sold companies, to AOL.
Jason: Yeah. We, both, did that.
Joe: Didn’t stick around, long, in my case. I don’t know how long you stuck around.
Jason: A year. I did my year. I was, sort of… to call it working, would be generous.
Joe: Launched products, at the Wall Street Journal D Conference.
Jason: Yeah. We, both, did that.
Joe: I don’t know, if it was the same year.
Jason: Maybe, it was. Five years, ago.
Joe: That was Presto.
Jason: Presto, you sold to HP.
Joe: No, no. Presto’s still going.
Jason: Oh. Still going.
Joe: Presto’s a long story. Incubated, at KP. With, Russ Siegelman. Who, eventually, left.
Jason: Is K.P. a disaster, right now? Would you consider taking an investment? Would you consider, taking their money, right now, as a VC?
Joe: I had a, really, bad experience, there. I would not.
Jason: What happened?
Joe: So, Russ funded Presto. Eventually, he left Presto and Randy Komisar, took over.
Jason: Randy Komisar, famous, allegedly, for giving a book of erotic poetry to…
Joe: To, Ellen.
Jason: …to, Ellen.
Joe: I won’t comment, on that.
Jason: I will. If, that’s true… Let me tell you my benchmark. I will not be alone, with a female staffer. I know, this sounds crazy. Or, a male.
Joe: It’s not crazy.
Jason: Especially, not a female. Cause, I am such a target, that, I don’t do meetings, alone, with anybody, anymore. If, I’m taking a meeting, with anybody, unless they’re on the senior management team, I am going to be in the meeting, with other people. The last thing I need is somebody saying, that I said anything inappropriate. I never say anything inappropriate. Maybe, at a poker table. But, never, in business context. Who, would ever, in there right “F”ing mind, would give a co-worker a book of erotic poetry.
Jason: Allegedly. And, personalize it. Then, ask her out to dinner, because, their wife’s out of town. Who… I know, Randy. Not well, but, I met him. I pitched him, on Mahalo. He’s written a bunch of books. Smart guy. He seems like a good-looking talented, interesting guy. Allegedly, whatever. If, any of this is true, any percentage of it, is true, what a loser. What a loser thing, to do.
Jason: Can you not find another woman, to ask on a date, than, the person sitting in the office, next to you? You are a huge loser, if the only woman, you feel confident asking out is, the person who happens to work, with you. That poor woman has to go to work… we don’t know the details of this case, so, I’m not making any judgments, here. Based on, that kind of behavior. If, he didi it or not. But if, other people do it. If, you’re sitting there, and you’re trying to pick up the woman you work with, you are an “F”ing loser. A complete, utter loser. Go, to a bar. Go, to Match.com. Go, to Craigslist. Don’t be stupid. You moron.
Joe: In general, it doesn’t end well, usually.
Jason: It’s so dumb.
Joe: I wouldn’t know.
Jason: But, anyway, your business gets handed off to, Randy.
Joe: He and I, just, didn’t click. He’s like, “We gotta bring somebody in.” Brought in a guy. Former, Intuit guy.
Jason: To, run the business?
Joe: To run it.
Jason: Oh, boy.
Joe: I was “chief strategy officer.” Promptly, burned through, almost, $50M in capital.
Joe: Somehow, miraculously, the company is still alive. It’s actually operating and, probably, break-even at this point. That was a really hard thing to go through, for a couple of years. It was a long, drawn-out thing. Cause, I didn’t agree with what was going on. I had to do it, in a way…
Jason: You lost control, of the company?
Jason: The investors had control?
Joe: A good lesson.
Jason: How many board seats, did you have? How much control?
Joe: There were three investors, at that point. Then, me and ostensibly, a seat for an outsider, at that point. Basically, once, you get past two, you’re in trouble.
Jason: How many votes did you have, on the board? Of common?
Joe: Just one.
Jason: Then, there were, like, 2 or 3 investors. So, you were like 3-1.
Joe: The problem was, only one investor, really, believed there was a problem. That was Randy. Unfortunately, the other two guys… when, you’re investing in a deal, with the mighty KP, you don’t want to piss off KP, cause, you many never get another deal, again.
Joe: That’s how the legend goes, right?
Joe: I was, literally, told by one of the other board members, “Joe, I think it’s bullshit. I agree, with you.”
Jason: That’s $20, but, keep going.
Joe: I’ll keep going. “But, if I ever want to be able to do something, again, with KP, I need to be sure, I’m not on the wrong side, here.”
Jason: Wow. Wooww! That is gangster.
Joe: I’m like, “Where is your moral fiber?
Jason: That is such bull.
Joe: That, really, bummed me out. Because, I try to do business, with people that I respect and I trust.
Jason: That’s growing up, in Chicago, Chi-Town. Your word is your word. How you treat people, is how you will be treated. That’s garbage. What a rat. What a cheese eater.
Joe: I was known, for being hard on employees. I demanded, a lot, from people.
Jason: High standards.
Joe: Very, high standard.
Jason: Well, you work for your three uncles and your dad. You got a high standard.
Joe: Born, on February 24. Steve Jobs’ birthday. I was told, “You have some of those qualities, but, not all.”
Jason: That’s insulting.
Joe: I was told, “You’re just, too, hard on people.” One of the people, who supposedly, I was hardest on, was director of marketing and really, wanted to be our VP. Great person. I’m still in touch with her, today. I said, “You know what? For this company to go, where it needs to go, we need to get you someone who’s a rockstar, who can mentor you.” She was on a rapid pace, but, she wasn’t there, yet. That, kind of, pissed her off. That turned into, “Joe is difficult.” Ultimately, it led to me getting replaced.
Jason: So, she went to the board and started complaining to the board?
Joe: She was close, with Randy. From a previous…
Jason: OOHHhh. Whoaa.
Joe: Not, in that way.
Jason: Well, who knows? Allegedly. Wow.
Joe: You know, what gives me hope is, two years, later I get a phone call and it’s her. She said, “Joe. I went off. I got my VP title. It was at another company. I want you to know, you were the best manager, I ever had.”
Jason: Now, she appreciates the fact, that, you had a high standard.
Joe: “The other guy was a loser. He gave me the title, but, it’s sort of like, do I want to join a club that would have me as a member?”We, sort of, patched it over. That experience, really, taught me about the quality of the investors. You’d think, I would know. That was number six. I should, probably, know by then.
Jason: Listen. If, you… a reasonable person, would say, “Kleiner Perkins, is a legendary firm.”There’s, obviously, great people who work, there. Mary Meeker, is there. John Doerr, is there. Some of these people, we know, are awesome. But, it is luck of the draw with, which partner replaces the partner. That’s the fear. Right? Some partner, that you trust, gets replaced by a partner, who is… whatever.
Joe: It was the most horrible business experience, of my life.
Jason: How does it inform, when, you start Tello, Passbook. How does it inform, the way you did company formation, specifically?
Joe: The first, few investors were all people, I knew and trusted. Marc, Russ. Russ and Marc, were investors, in Presto. They had lived through all the BS, that went on.
Jason: There were guys, who were loyal soldiers, to you.
Joe: They were like, “You got rooked.” They were behind me. That’s number one. Number two is, maintaining control, as long as you can. That’s being capital efficient. Not raising, too, much money. Not spending like crazy. I look at things, like, Color. I know Bill.
Jason: Yeah. Bill’s a smart guy. Great guy.
Joe: Peter Pham.
Jason: Peter Pham’s a smart guy. Great guy.
Joe: When, I heard, they raised $41M, in their series A, I said, “This has disaster, written all over it.” Now, Bill, had always returned capital, to people.
Jason: That’s why, I was pro-it. I said, “Listen. If you’re putting together your A and B round, and, you’ve got a great idea and the patents, this must be some phenomenal product, there. We know, that, these are two phenomenal founders.”
Joe: And, DJ, as well.
Jason: I was like, “Yeah. What’s the harm. These guys got the money. It must be some great patent and some great IP, there. Screw it.”
Joe: We were right down the street. We were, two blocks away from these guys. When, I hear that, or, you hear about, Steve Perlman’s company, OnLive, and what was going on, there. There’s just weird things, that happen. So, I… in this case… tried to be, very, capital efficient. I think, we have been. We built real value.
Jason: On low single digit millions.
Jason: You like it that way, better. Why? It keeps you, a little bit, hungry?
Joe: It keeps you lean.
Jason: It keeps you lean.
Joe: You get, too, much money and you start spending…
Jason: A big stack, at the poker table, you start playing a wider range, of cards.
Joe: That’s, exactly, the analogy. Right?
Jason: You start chasing it.
Joe: You chase it. Some nights, the flush hits, on the river.
Jason: Sure. You get paid, big.
Joe: Some nights, you keep chasing it and you never catch up.
Jason: You lose five pots, in a row. Then, you get felted, for 20 grand.
Joe: I think, for me, personally… this is a style thing… I’m not the guy who goes out and raises $20M. Does the road show and the hoopla and that other stuff. I prefer, to be, sort of, underground, build something, then, show up.
Jason: Look what I got.
Jason: I struck oil.
Joe: That’s my…
Joe: That’s my M.O.
Jason: Yeah. I like it, as an M.O. Listen. Great interview. Continued success.
Joe: Thank you.
Jason: You’re hiring, I take it. Obviously, you guys are doing, very, well.
Joe: We are hiring.
Jason: You have a high standard.
Joe: Very high.
Jason: Would you say, at times, you’re unreasonable, or, that you have a consistently high standard?
Joe: No. I’m unreasonable, sometimes.
Jason: With yourself? Do you hold yourself to the same high standards?
Jason: Is that the disjoint, sometimes. You hold yourself to such a high standard and the upbringing, you have other people who’ve joined, who have never been held to that standard? It’s just not compatible, with their life experience?
Joe: Some people can handle it. Other people, it just breaks them.
Jason: How do you know, when, you’re hiring?
Joe: You don’t know. If, you worked with them, you know. But, you run out of people, at some point.
Jason: Do you have little tests? Little hacks?
Joe: I try to look at the adversity, they’ve faced, in their lives. You asked me, “What’s the craziest thing that happened, at your dad’s restaurant?” So, “What’s the weirdest thing, you’ve seen, in a company?”
Jason: Oh. I like that one.
Joe: They start talking, about themselves. Then, they go into politics, maybe. You can kind of get at, what makes them tick. I’m doing this, because, I’m a product guy. I’m doing this, because, I want to be famous.
Jason: Make a lot of money. Whatever, it is.
Joe: I remember, in the Valley, when the bubble was big. Back in the late 90s. People were flocking in, from all over the place. I was just thinking to myself, “What a bunch of pretenders.”
Joe: Like, “Get these people, out of here.” Sure enough, the bubble popped. Everyone left.
Jason: Sure. Out. Done.
Joe: I think, we have a new era, of that, going on, right now.
Jason: Every, tuesday night. 9 PM. Bravo television.
Jason: Produced by, Randy Zuckerberg. Poor, Randy Zuckerberg.
Joe: The bar has gone down, so much, on starting a company. You can raise $50K and you’re a startup.
Jason: Yeah. It’s easy.
Joe: It makes it, a little bit, harder. The real companies and the real entrepreneurs, they’re out to build value and returns to investors. Not just for the fame and glory, that, you and I both share, everyday.
Jason: Fame and glory. You’re, either, a genius or you’re an idiot. Right? Depending on the day. This has been an amazing show. Joe, you’ve been a fantastic guest. If you want to work at… should I say Tello or should I say PassTools?
Joe: Say, Tello.
Jason: Probably, I’m guessing, first email@example.com, would work?
Jason: If, you’re up for it. If, you’re up for a demanding boss and a great company, that’s on the rise, working in the iOS ecosystem, no better guy to work for. Hardcore, but, a genuine mensch, of a guy. I know. We play cards, together, sometimes. A really good guy. Thank you, to my friends, at Hiscox/SmallBiz. Everybody go, get your customized coverage, with competitive pricing, for your business. Tailored for your business. It’s never too early, to get yourself some insurance. Of course, SquareSpace. I love you guys. Yum, yum. @squarespace. 24/7 support. Beautiful professional-looking sites. Make sure, you use that code: TWIST10. For an extra 10% off. We’ll see you all, next time, on ThisWeekIn Startups. Bye-bye.