The Exchanges

Q was putting together my LATCA 100, the fastest growing ZAS companies. And I said, I should touch base with Hank, see how vitamins doing. And you were back and said, actually it's dead. And I said, what you were doing, like 1.2 million in revenue back in, what was it during February, March, May, 2016. When I had you on, what the hell happened? So let's start there. What happened?

A Yeah, sure. So we had a really fast run. Uh, we found, uh, Uh, that what we were doing with automation on social was really helping drive web traffic for small businesses and early stage companies. A lot of likes, favorites, follows, retweets, comments, mostly on Twitter, but it could work on like Pinterest and Tumblr, but Twitter was really working well for us. And, you know, we're charging a thousand dollars a month for the service. Uh, we were bringing really high quality traffic to our clients and customers and, uh, the growth is really happening rapidly. Like you mentioned, we got to a little over a hundred K a month and, uh, and recurring revenue and, uh, May 29th, 2015. I believe it was, we lost all of our Twitter accounts that we were running. It was thousands.

AI assessment note: “we lost all of our Twitter accounts that we were running. It was thousands.”

Q So tell me the hardest part about shutting it down. How'd you tell the investors? Was there any pushback? How'd you, what'd you do with the employees, the team?

A So, so the story goes, uh, I sat down with the team, a team of 11 at the time. And I sat down with them. These are great growth marketers. Some of the most talented people I've ever worked with. And I sat down with them and I said, look, guys, We don't know what's wrong or why this has happened at the time. We didn't know. We just knew that everything was dead. I said, we have 70 K in the bank at our burn rate. We're going to run out in like three weeks and then that's it. And I don't think there's any coming back from that. If we have two options, one, we push forward and we figure out the solution together, all of us and burn hard, or I got to cut it back to like three people and let everybody go and we'll have to deal with that after the, you know, we've figured it out with the extension of the runway and the team said, If human beings can still use Twitter and be a new Twitter user, we can figure this out. We just don't know what they've changed. And I said, all right, well then that's it. Let's all get in. We floored it and went straight toward the cliff. The sad news is it took longer than three weeks to figure out that it was a reduction in the automation threshold. It went from a thousand actions per day down to about 200 per day. So they did an 80% reduction in their tolerance. And that took us about two months to figure out long after everybody had sort of dispersed o…

AI assessment note: “our investors. It was all smaller checks. Nobody wanted to really defend their original investment.”

Q Was it 15 or 16? I thought I had you on in May, 2016 when you were doing that amount.

A So, oh, that's right. It was 2016. We've had a whole other year since then. 2017. It's been a blur. Yeah. So May 2920 16. Uh, we literally had zeros across our dashboard on the back end looking at all the accounts, and I, I thought, oh, man, something must, must be wrong with the dashboard, because there's just no way, there's just no way we could have lost thousands of accounts overnight, and it turns out we did. They were all suspended, and it took us a few weeks to figure out why, and it turns out that Twitter in particular had made changes to its platform to curtail automation across the board. It wasn't really our company that they were trying to battle against, In my opinion, they threw the baby out with the bathwater on that one because we were running a really good, solid business for early stage companies. However, Twitter is trying to clean, clean up its act and reduce the amount of automation that could be tolerated on its platform.

AI assessment note: “So, oh, that's right. It was 2016.”

Q a CEO, a smart developer, a smart market, maybe somebody like me that goes out and raises fifteen million on a token issuance. They then essentially, you know, convert all of it to fiat. So they are now out of the Speculation game on their own token they created, and they can essentially run with the money. There's no, like, checks and balances. What, what prevents people from doing that?

A Unfortunately, there's not a lot that prevents that right now. Um, what, what is happening just from the last year until now, really, the last six months, is, uh, You know, the crap, the wisdom of the crowd is really helping sniff out some of the bad actors ahead of time. Unfortunately, we've seen a few of them actually slip through the cracks and do, um, less than favorable things with the token sale raises. But yeah, we're in a very wild west period right now where, you know, you got a white paper out there with a product that is intends to go live on the first day of trading. You know, uh, it's kind of a, you know, it's, it's a bet. It's a bet on the team to not do irresponsible things with that money. Similarly to when, uh, you know, an investor is going to bet on a company and startup founders. There's just generally a lot more one-to-one diligence there, and here we don't have that diligence. I'm hoping that the wisdom of the crowd and, uh, you know, just the collective intelligence is going to help keep some of those bad actors out.

AI assessment note: “Unfortunately, there's not a lot that prevents that right now.”

Q Okay. And so is your day to day look like recruiting new founders to do ICOs basically on your platform?

A You know, uh, absolutely not. In fact, the opposite, the inbound is crazy right now. We, you know, we've, we've got a really high quality premium product and service and we were, we were the inbound, the inbound is not the issue right now. It's actually trying to create a streamlined product that is going to be, you know, a SAS solution to this. We know there's going to be thousands and thousands and thousands of, Of token sales out there. And it, it, it can't be a manual process, uh, for all of these different areas and building that SAS product along with our service angle is the challenge. And it's something I know a lot about from going from vitamin, which was almost all SAS to execute, which was almost all agency. So we've got a combination of that coin circle. That's what I work on daily.

AI assessment note: “absolutely not. In fact, the opposite, the inbound is crazy right now.”

Q And help us understand, why did you, were you just fed up with corporate, you didn't want to do the agency stuff anymore, or what, why'd you, why'd you start it?

A Yeah, so I had been working in the big agency world, which was, um, it was invigorating for a while, you know, making TV spots and, you know, big websites and things like that, brands with big, uh, budgets, but, you know, I actually had goals in my life that I had wanted to hit in the agency world, and I hit them all, and then was kind of stuck. I wanted to work on a Super Bowl ad, I wanted to win some awards, and I wanted to make a lot of money and rise up the ranks fast. So I was lucky to work on good teams with good brands and push them hard and get all those things done in a three year span instead of a 30 year career. And so I was like, alright, well, what else, what else do we do? And then the answer is the same thing over and over. Make more ads. Win more awards if you can. Make more ads and then make more ads. And we'll pay you more money and then make more ads. And that's just It seems like a, um, a cycle that doesn't end, and I, I'd much rather be making things that never existed and change the way people think instead of just more ads.

AI assessment note: “I had wanted to hit in the agency world, and I hit them all”

Q Yep. Ok, so let's fast forward, so that company failed, you then launched Vitamin right after that, is that right?

A I took a year and consulted back in the agency world, don't call me a whore, but I did kind of whore myself out there, and I was able to make back a lot of, a lot of the money that I lost. It turns out, if you come back to the agency world, With all this startup experience, it's like coming in with like a, like coming out in naked with like a beard and a machete being like, I've been in the wild. You don't know what I've seen. And, uh, and it made it really good to consult there because I could play bad cop in the room on a new business pitch or on a, on a campaign pitch and tell them how stupid the ads were and how much smarter it would be to do it on mobile or to do it with an app or to do it with this or that. So, um, so I spent a year consulting and that gave me, um, a foot to stand on. To start vitamin with my co-founder Justin, uh, because once, once I met him and we talked about what the possibilities were, knowing what I knew about social media strategy, big brands, uh, you know, marketing from the top, uh, my co-founder Justin had been doing from the bottom as a consultant in social and growth, and he knew how to squeeze blood from the stone with no budget. So we put our brains together and made what is now vitamin, uh, and, and jumped.

AI assessment note: “I took a year and consulted back in the agency world”

Q Totally agree. Number three, is there a favorite online tool you have, Hank, like FreshBooks?

A Um, we use QuickBooks and really enjoy it. We use Stripe and Stripe is very effective. I got to tell you, Google apps, Google apps. I don't know what we do without that. If you guys don't know what that is, I mean, you can have a Gmail account, but you can run Gmail for your business that gives you, uh, an email address through your business, your whatever.com. And then all of the tools that go with Google from the calendaring to the, you know, Google docs and passing Google word docs and Google Excel sheets. Um, it really is like the, the gold, the, the de facto. I don't know. I don't know what we do if we didn't have the Google apps.

AI assessment note: “we use QuickBooks and really enjoy it. We use Stripe and Stripe is very effective. I got to tell you, Google apps”

Q Okay. Those investors, are they asking you now, what are you going to do next? We want to invest again.

A Oh, absolutely. The thing, you know, the thing that I found was it wasn't that they didn't believe in the team or in our capabilities, mine or anybody else in the team, they did. There's a trigger that's happening. I think a lot of investors have seen this or have heard stories about getting burned by building a SaaS company on the back of another platform that could kill you is a very dangerous thing to do. And my million run rate business died, but I've, you know, there are 10,000,020 million run rate businesses that also died. Same fate, building on the back of Google or YouTube or whatever. And I think that that's just an automatic trigger to say, let's cut this and do something else because the odds are coming back.

AI assessment note: “Oh, absolutely. The thing, you know, the thing that I found was”

Q So Hank, just to be clear, you are, when you say personal versus the 250 K, the business raised, you guys, I guess, weren't paying your guys' yourselves salaries out of the two 50 K, so you were eating up your personal savings?

A Uh, yes. Okay. And we paid a tiny salary out of the two 50 K as well, but it didn't last very long, the three of us. So yeah, and then sold my car that bought a little bit of runway. We got a pilot with a major brand to do something in the nightlife space, and that was only like 35 K. And, uh, and then from there, we proceeded to go round and round with that brand for about nine months, trying to figure out a deal for a much bigger play as an alcohol brand for a bunch of their different brands. And we couldn't come to an agreement, you know, in the agency world, you go round and round on scope for six, seven months, and that's how it works. But I thought in the startup world, you certainly would move faster than that, but they would not move faster, the brands are the brands. So we ran out of money. The bonus, my co-founders both wound up catching, uh, uh, their wagons to a star. My iOS developer, who's a brilliant guy, got snapped away from me by Snapchat. This was two and a half years ago, so that would make him employee number 17 at Snapchat. And, uh, now he's the, the lead of the iOS team over there. And, uh, so he's, he's about the happiest 26 year old in the world.

AI assessment note: “yes. Okay. And we paid a tiny salary out of the two 50 K”

Q Okay, so you shut it down. You launched an agency in between. What'd you grow the agency to, and then what'd you sell it for?

A Yeah, so the agency, uh, was, uh, partnered up with Amplify, uh, Dot LA, the startup accelerator in Los Angeles. They have really high quality program writing check size about 200,000 and they'll do 10 companies a year right now. So it was a really high quality group of companies that we knew needed growth marketing and could use agency style service like what we did with vitamin only, um, human instead of machines. So we weren't violating any sort of policies. So grew that company to pretty close to million run rate as well in the first year. And it's an agency. So we're not talking about SAS here. We're talking about You know, having a dozen or so clients and, you know, they're all paying, you know, five to 10 K a month, you quickly can get to that run rate. Um, but with the human capital on there, the margins were different. It was a very different kind of business. And, uh, and, you know, we saw that it wouldn't scale the same as a SAS business. And that was a really important thesis. We went in thinking, what if we could automate, I don't know, half to two thirds of the processes so that we could kind of You know, crank through a lot of clients and the learning there about six months in was early stage companies are so needy, uh, that that's not really a thing. It has to be a custom build every time across the entire spectrum because they don't know their, uh, early stage …

AI assessment note: “grew that company to pretty close to million run rate as well”