Matt, the CEO of Freelancer.com, puts on an entrepreneurship clinic in this episode. If you need a shot of startup growth adrenaline then get ready to be inspired!
→ What year did the freelancer launch
→ The twists and turns and it ends with a big win
→ His insights about what made that possible were getting a freelance just not monetizing well
→ What’s the primary thing he try to communicate to these young entrepreneurs
→ His insights about what this new generation get and doesn’t get as he looks out at them
→ His best advice for any startup is to try to grow
→ And a whole lot more
Bronson: Welcome to another episode of Growth Hacker TV. I’m Bronson Taylor and today I have Matt Berry with us. Matt, thank you so much for coming on the program.
Matt: Thank you for having me.
Bronson: Yeah, absolutely. Now, Matt, you are the CEO of Freelancer, dot.com, a little site that people might have heard of. It’s kind of the eBay of outsourcing. And usually I give some accolades of our guest, you know, at the top here when I bring them on. If I were to give all your accolades, there wouldn’t be time for interviews. So I’ll just mention a couple of them. You were named one of the 100 most influential engineers by Engineers Australia, and you’ve been named one of the top ten Australian entrepreneurs by Smart Company. And a million other things that you’ve done that’s pretty awesome online. So we’re really grateful to have you. So thanks again every time. Yeah. So let’s jump in here. Let’s talk about the story of freelancer. This is a story with a lot of twists and turns and it ends with a big win. So I like the story. What year did freelancer launch?
Matt: Well, what we did was we actually consolidated about 13 businesses in the space. So about 2007, 2008. I had left my last company where we built semiconductors and very complicated products, and I was looking for something to do next. And I was helping a few people with a few little web projects that were going on. And in particular, what I needed done is I needed a bit of data entry done, and I was filling a spreadsheet with about a thousand rows of information. I needed a name and address, a URL, an email address and so on. And I was trying to get like a little brother or sister or a friend of mine to do the job because I thought, you know, maybe I’ll pay them $2000 to $2 per row. It was a thousand rows, $2,000. And some little kid would love to do this at home, working at their own, their own pace, and make a bit of pocket money. Mm hmm. It took me months. I mean, obviously, four or five months later to find someone that to a few hours work, then they had soccer practice or exams or whatever it may be. And I really gave up in frustration. And for that sort of job, like a small project like that, you can’t really place an ad in a newspaper or a traditional job site. There was no really you could go. I mean, there’s about 2007, 2008. So in frustration, I went to the Internet and I typed in, I think some like cheap data entry or data entry online or something like that. And I came across a site called Get a Freelancer, and this was a site that had been running since 2004. It looked absolutely terrible. It looked like Craigslist. It was all in gray. I’ll make a joke saying I painted it in paint from left over from the U.S. Midway. It was just a really, really horrible, clunky looking site. The English was terrible on it. And so and I looked at it, looked like, look, there’s a lot of activity with people doing small jobs. Anyway, I posted the job and walked away and still thought about it. Literally forgot. Once when I had lunch I came back and I had 74 emails in my inbox of the 2000 1500, 400, 300, 200, $100. And I thought, oh my God, I thought, you know, I’ve taken me months to try and find someone to get this work done. I can’t I can’t find one locally. And all of a sudden I have 74 emails from people all around the world wanting to do the job for substantially less than I was actually willing to pay for it. Yeah, I thought to myself, there’s no way that someone will actually do this job for $100. So I just tried them. They went off and did it. It was a team in Vietnam. It was done in three days. It was perfect. And I just thought to myself, Oh my. The first thing I thought was, as an entrepreneur at home, just working as a one man band at that point in time, just trying to do a few things. I thought some that can hire an army on a credit card, and this is amazing. I could just sit on my armchair in my underpants or whatever and just going to come up, come up crazy ideas and just get people to do things. For me, I thought that was that was, that was that was just a dream come true for me because, I mean, my last business had about 100 employees around the world, etc.. It was yeah.
Matt: Yeah, yeah, exactly. Is, it is quite difficult to tell people what to do because a full time employee but know sitting at home just, just trying to get things done it was always so painful because you know I can program but I’m not a graphic designer. I can I can do I can I can I can come up with a business plan, but I can’t do something else and so on. So that was my first thought. My second thought is, Gee, this space is going to be huge. I thought just it just solves, you know, it’s will you have a painkiller versus a vitamin? The vitamins are kind of nice to have the painkillers, things that really solve sometimes. I mean, that was just I thought to myself, there must be so many other people that need to need a service like this. This is just going to be a huge space. And then I thought to myself, why isn’t there an eBay of jobs? I mean, there’s an eBay of products, this global marketplaces of products. Isn’t that pretty obvious? There’s going to be a category which is going to be a global marketplace of services that were huge.
Matt: And then I thought to myself, why isn’t eBay done it right? And I think, you know, I thought, you know, just I was I was a founding team of one. And this is the hottest thing you’ll ever do being one person, because when you’ve got a team of three or four, you get up in the morning, you maybe go to the co-working space or maybe the office or even in someone’s garage, and you’ve got other people there to push you along. You’re having a down day that kind of bring you back up, etc. But when it’s just by itself, it’s really, really tough. And when I was. Telling people, look, did you know you could go online and you can get through a website? You can get someone in Bangladesh to go build a you know, design a logo for you, build a website for you, design a mobile app for you. Back then, the people’s responses were very different, so delighted I could see odds as obvious as global marketplace. The global globe global reach has global. You can get in on it from the world to do something for you. But back then it was like, you know, someone in Bangladesh was Bangladesh. Do they speak English? Do they have computers? I was just, you know, and I think Peter Thiel coined coined the term big uncomfortable secrets. Right. And you said that your anyway, there’s a big, uncomfortable secret that you can actually see the answer to. You know what the secret is and other people don’t. There’s potentially massive opportunity. Right? Massive opportunity. And the big uncomfortable secrets. Back in 2008, which is really just staring everyone in the face, was the fact that there are 7 billion people on the planet. There are 5 billion people out there about to join the Internet. And the other 5 billion people live on an average wage of around $10 a day or less, substantially less potentially. And they’re just like you or I, right? But that what I call PhD’s, poor, hungry, driven. Right. They are hungry, the more driven. And they just they want no, they want to work harder than we do. Right. And that just as capable, if not more capable. And that was really the big uncomfortable secret that, you know, in 2008, in hindsight. Now you go, well, of course, you could get someone overseas to do a job for you, but but back then it was actually people really struggled with that concept.
Bronson: Yeah. You know, I love that phrase because I think we underestimate how little it takes to get a lot done in terms of money. So you can build an empire on a few bugs, like you said, on a credit card. I’m not. Here’s what I’m interested in. You know, so you still get a freelancer and you said you consolidate that. And a handful of other companies, most often issuers build something from the ground up. You said I got a shortcut. I can consolidate these and hit the ground running. Yeah. What made that possible was get a freelancer just not monetizing well and you could come in and buy it at a good price and consolidate with others because you did it in such a different way. I’m interested in what insights you had there that made that happen.
Matt: Yeah, so part of it was really me lacking a bit of patience. You see, I just ran a semiconductor business for six years, and so designing semiconductors is about as complicated a product as you can think. This was a chip that ran a gigabits per second on network traffic. You had to design into network hardware. We had hardware engineers. It was a really, really complicated product. And so, you know, after walking out of that business, which ironically only a few months ago sold to Intel, but, you know, we’re talking 13 years after I sold it, you know, I was thinking about what I’m going to do next. I didn’t really have the patience to kind of go out there and make that first million in revenue because that first million dollars in revenue per annum, that’s the hardest million dollars you’ll ever make in your entire life. Well, I mean, once you get a business to about four or $5 million in revenue, it becomes more of an optimization research problem. I mean, you’ve proven that there is a market, you’ve proven that customers will buy the dogfood. Right? And it’s really then you can do things like conversion optimization, funnel optimization, turn a little knobs and dials and really just start adding it up. And if you if you kind of really methodical about doing that, then it’s a lot more straightforward than that first million when you really just prove me out. Well, the dog’s a dog food. Will people buy the product? Will they take will they buy the service? So what happened was I thought to myself, okay, this place is going to be huge. I need to get into it, right? So the first thing I did was I started writing my own site. So I started the traditional thing on Thursday, which is going to develop from scratch some cards. So I wrote a thing, a website built a website called Bid at Apple.com, right? And this was basically a clone of get a freelancer. And so what I was doing was, was hiring freelancers on Get a freelancer, the company benefits, right? So because I could write the code, but I couldn’t I couldn’t design the graphics or, you know, do the icons or things like that. So I was kind of getting people to kind of help me, kind of copy the site. It’s funny today because actually every couple of projects on freelancer is actually client freelancer. They’ll call me, kind of see, I love it.
Bronson: It’s so meta.
Matt: So yeah, exactly. So and get a freelancer itself was a copy of Script Las, which is a company I later on bought. And it’s actually funny because I’m like, What screw plants? I was actually going through the projects and I found the original projects where it’s said closed script plans to go get a freelancer. So it’s all inception.
Bronson: Exactly. This is better than Inception.
Matt: So I wrote a rocket mind site and a downloaded social engine, which is basically a white label, Facebook in a box as my starting point. So I wouldn’t have to do a lot of the the core functionality and then kind of a hack to get to like a, like a classifieds module second to the auction marketplace in about two weeks. I have a basic site going where I could figure out really the business model and how it works and kind of just get a feeling for how I operate the business. And I started getting some, some, some customers in and so on. And then I do love survey of the space and I wrote a bit of a business plan. You know, people say today, in today’s day and age, don’t write a business plan. It’s completely useless that the old way of doing things if you give it to. Venture capitalist cetera, etc.. But, you know, a business plan is actually the you run a business plan for yourself. You don’t really write it for someone else. You write it yourself to just coagulate and get your thoughts together and really understand what’s going on. One of the best things I do when I think about starting an opportunity is I do a backup plan that can exercise and how do I make $1,000,000? So how many? How many? What’s the average cost of the product or service? How many customers? Why do I need what the gross margin look like? How how rapidly will they buy, how often they buy, etc.? And it just takes I mean, it’s amazing how many times entrepreneurs don’t do this right. You take the time to sit down for a half an hour and just figure out how, how, how hard as it relates to me to make $1,000,000, how many customers don’t it does that make sense? Because then you get a sanity check of is this a business that if I think about, then the organization required us to deliver that million dollars in revenue? Do I need like a thousand staff? What can I actually do with a small team? Right. Does actually do I need to know how much capital I need? Maybe if I’m selling a product. So yeah, it really takes a lot to get some huge benefit from just doing that back at that kind of calculation. So I did that and I thought to myself, okay, I’ve got a feeling now for how much money to raise from venture capital to go start the business. And then I looked out there in the space, in the space, that time was incredibly fragmented. You had about a dozen companies that had made some progress in the space that started probably as early as 1999, but hadn’t really set the world on fire. Right. A couple of raise, a bit of venture capital, a lot. Hadn’t spent a lot of it in the space for maybe four or five, six, seven, eight years. And then I thought to myself and then there’s hundreds of little guys, there’s hundreds of little guys who are starting all the time. They kind of come in the go to come and go. So I thought to myself, you know, yeah, no one’s really going to fund me at this point in time to be the 14th major entrant in the space. Right. And I was also quite impatient to get that first million in revenue, right? So I thought to myself, maybe I need to buy rather than build. Maybe there’s a way I can kind of acquire one of these sites for the less money that I was going to go raise to start a business from scratch. Mm hmm. So I just simply contacted a number of guys in the space content, about four of them, I think, and asked if I would be interested in selling. Of course, everyone kind of said yes. It all depends on price at the end of the day. Mm hmm. And ironically, get a Francis said we’re currently in due diligence with four of the companies we are interested in selling. And I said, we’ll just send you the information you sent them. So look now, look, the information. It turned out six companies were on due diligence at the time. So a couple of the competitors read due diligence as well. Some big Internet companies, including some listed ones. I won’t mention their names. And I thought to myself, wow, I asked him how much money he wanted for it. I thought that’s that’s a pretty reasonable price. And I said, okay, well, I need to jump on this. So what I did was I got an option agreement in place and I just read up on this agreement myself and I and I said to him, This is the way it works. Either you get the price that you want within 45 days, or I’ll tell you what, if I don’t get the money together, I’ll help you sell to the next offer twice the price. Even that was kind of win. Win is I get the money wants the 45 days so you get some of the help him help him. So I went out there and I basically just tried to raise the money and that was that was very difficult because traditional venture capitalists, they don’t really it’s like a management by end of an early stage company. Usually a management buy ins happen of late stage companies have a listing in the stock market doing a billion in revenue. The management team things to do a better job. They’re going to a private equity firm as a management buy in the management is going to get cut into the deal, etc. So I was trying to close the deal on two sides. So I was trying to close the deal with with the investors, not try to close the deal with with the vendor. Right. So let me tell you this. The hottest thing I’ve ever I’ve ever done. And all the while, the clock is ticking with the lawyers. So the legal bills getting higher and higher and higher and higher and higher. I’ll wake up some morning. I just go. Jesus, what I. What am I doing? This is kind of like the legal the legal bills into the six figures. At the moment. Nothing’s happening. The deal is going to be off. It’s like, yeah, it was completely nuts. But you know, at the end of the day, it’s going to be an entrepreneur. You’ve got to take a risk. He ever get a reward? I mean, not going to come at your future on a platter to you. So if you if you you got to take the risk sometimes and you know and sometimes you know, I mean, I left my last company. I made any money out of it. You know, you kind of feel like you’re at rock bottom, but when you’re at rock bottom is not for that. It’s the best place to be because you could take all the risks you want. Right. And the worst thing will happen is in two years of being exactly the same place as you are now. Right. So any worse? Exactly. I mean, it gets hotter in like as you kind of get married and have kids and a mortgage and a house and this that the other dog, the picket fence. But you have all these responsibilities. But but you can take risks when you’re younger. But anyway, so I went out there and eventually it turned out that yeah, what had happened is I’d gone to this guy, I thought, I thought as a failing team of one, you’ve got to build some credibility in the team, right? Because it’s really hard to be a founding team of one unless you’ve got a huge track record. And I had a bit of a track record, but it wasn’t a stellar track record. Like my last company was sold for a lot of money. The last company still puttering along, trying to build up a business. So I went to a guy who had just sold his business to Symantec, who sold PC tools, and by one of ours coming to Symantec. And he made a lot of money on that. But I didn’t actually click. He made a lot of money. I, I just I just knew him because we were trying to put his software on chip and supply the people. So I said, Look, you’ve sold a company in the space. You’ve built up a big consumer Internet company. Just go on the board of directors. I’ve got these investors are potentially pitching us term sheets on you, bringing you into the meetings. So he came on to the meetings and of course, the investors were more interested in it rather than funding a small early stage deal like, oh, well, $300 million exits, how about you come into a fund as a partner? And eventually he got frustrated. He got frustrated. You said, I’ll just give you the money. And I said, Really? And so so he gave me the money. So he’s the he’s the major investor in the business. And I’m asked to acquire. And let me tell you, it’s really interesting seeing I mean, it’s it’s been a massive turnaround business, right, operation. If you and I want to probably write a book called Big or Growth or whatever, what can I talk about? All the steps we took to kind of take it from where it was a time I still got $1,000,000 a year in revenue to where it is today, where we’re listed on the Australian Securities Exchange with almost a half a billion dollar market cap. But, you know, the very, very early days were I mean the site was horrible, it was always grays, it was clunky, the English was terrible, etc. And the first thing I said was, Well, let’s just try and spruce up the graphics a little bit. Let’s just kind of get going from black and white TV to kind of not really color. But let’s go to kind of maybe as a Panavision, a little bit like colonial Mexican crime, remote vision or whatever. So I got a friend of mine in New York to kind of just design and just a skill. Mm hmm. And I personally went in there, and I kind of just edited all the templates and kind of put the skin in that you can go you can go to the Wayback Machine. You can see how horrible it was in 2004. Ironically, the business started in February four. 2004 was the same day Facebook started. So come the good. If I was kind of running the business back then, it was quite competitive. But, you know, so we kind of put the put some basic graphics in. At the time there was no staff. The guy I bought it from was actually a Swedish guy living on a fish farm in Vanuatu. And so, you know, crazy, crazy sort of guy. And it had three Ukrainian programmers and I had one customer support agent for half a million users based out of the Philippines working the graveyard shift for $2 steady for an hour. Well, and so, you know, the Ukrainians were up in arms. They said, don’t change, don’t change it from black and white to color. It hurts my eyes. It’s terrible. It’s never going to work. This all this Western thing you’re doing, it’s it’s a horrible thing. So I went ahead and did it. And let me tell you, the first thing I did, which is really important that everyone should do this is whatever business you have is due to dashboard. Right. So what I did was I had some scripts, just had a chrome job that was running periodically on an ally job, a daily crunch job, and a weekly con job and a monthly crunch job scan. Put a query into the database and I just plot this using new plot on plot a dashboard of revenue projects users. I’d start off with just the key drivers. Right? And of course, I had Traffic and Google Analytics. And so because the important thing about that is anything anytime you make a change, you’re going to measure the impact of that change. The worst thing that people do today is they do things like they change their entire website in one go, right. And some things are good, some things are bad. They’ll move the badge and pull out and you get some sort of net effect and you don’t know where you are. Yeah, well, the methodology I’ve had all along is let’s try and write down a change to some fundamental units. Make that change, measure the results, measure it in a statistically significant way. You can’t just say it’s Apple, then you’ve actually got to look at it’s very basic maps and Google and Google Analytics will do the math for you and the content kind of experiments, right? And there’s plenty of other tools like Optimizer and so on. They’ll do various forms of B testing, but you make the change. You measure with that good or bad. If it’s good, you keep doing that, it’s bad. You revert and you try something else, right? And you come with ideas all the time. You come it generation, try a bunch of things independently, test each of those little things if they’re good, move forward. If they’re back, move backwards, right. So we just changed the graphics looking at the stats and let me tell you, revenue doubles straight away like this. And I could just.
Bronson: Tell you, telling me the Ukrainians didn’t have insight there.
Matt: Well, I think we we probably increased both the conversion level, the landing page, 1% to 2%, right? Yes. It was something like that. Right. That small. But but it was just amazing because people would go to the old site. But look at what is this? This this is horrible. No blaze. Yeah. So you are like and maybe some people would convert. So the conversion was pretty awful, but it was double what it was before. Yeah. Now all of a sudden that went from $1 million in revenue a year to a $2 million run. Right. And of course, all of a sudden the next $200,000 a month, you can start hiring people. So I hired a couple of small engineers, etc. I hired a customer support person. Right? Of course, now the customers get better customer support. So they’re happy. Yes, they use the site more often. You get they get projects, get posted, they come back more often, etc.. Now I have some engineers to fix some of the problems on the site.
Matt: I know some of them. There’s a whole bunch of problems at the time they the the business model was fairly similar to today where it’s a 10% commission on the work that goes through. But they had a thing known as a gold membership and the gold membership at the time was $12 a month. But for $12 a month, your commission got reduced from 10% to zero. Right. And so the thing was 76% of the business was going through 0%. Right? So this giant washing machine on the Internet where basically money would go in, money to go out and there’ll be no revenue generated. Right. So I so that’s kind of yeah, people had a very good run on 0%. We just make it to 3%. It’s a very reasonable figure. It’s still cheap in the PayPal transaction for the most part. So we made it 9.95 instead of $12 and 3% instead of 0%. Of course, net revenue went up the next year. I could hire more people with more people, I could do more things, etc. And really it was just this huge optimization problem at that point because it was really just, yeah, how do I model the funnel? And everyone should know about funnel optimization, traffic converts to sign ups, converts to purchased products, converts to repeat customers. And you can break it down some little micro steps.
Matt: And I was just optimizing those conversion rates. I just focusing just on grinding it out. It was just really just month by month by month grinding it out. And I know a lot of people have philosophy about our business supply side. Forget short term revenue, just think about the long term, you know, and so on. And just, you know, just just focus on that. And I’ve got a completely about completely different attitude to that. I have no idea what’s happening in three years from five years, the technology might change. There might be like complete. I mean, the landscape could be different, right? I mean, ten years ago, there was no Facebook site, right? I mean, like like things change so quickly. Right. And so but I can tell you one thing. I may not know what’s going to happen in three years, but I can tell you in one month from now, I’ve got a pretty good idea what’s going to happen in warm ups and downs. We’ll release this feature upgrade. The feature upgrade will increase the conversion from 38% to probably 50% in that particular area. That would make this will bump in revenue, which means that this will happen if you and if you methodical about that and every little change you’re measuring and everything, you’re testing a testing statistically significantly. So, you know, if it’s positive, positively good or it’s bad and you move forward with the good and you do more of the good, things need to be less of the bad things and revert eventually you get that right eventually and just grind it out.
Bronson: Yeah, I mean, that is such an awesome story of just pure, quintessential entrepreneurship. So first of all, you have to write that book called Growth. I mean, you just have to I mean. I honestly think you’re probably one of the original growth hackers. Before it was a thing. Before we were talking about it, you were thinking about business automation. You were thinking about, you know, the things that growth hackers think about now. And that’s why I think freelancer, it is a step ahead of everyone else or you’ve been optimizing for years already and we’re just kind of figuring out a lot of this stuff. So you have to write the book. And second, I would, you know, tell people go to freelancer dot com because when you look at it, you can tell it’s the end result of a lot of data. I mean, when you go to it, it is so easy to use and so friendly and so precise. There’s so much to learn just from, I’m sure all the data that you’ve seen on your dashboards over the years that are over the years, that people can get a lot from just looking at how well and how easy it is to use freelancer dot com. So there’s a clinic just looking at the site right there. Mm hmm. So let me.
Matt: Put it this right. I mean, that’s right. I mean, one of the biggest things I’ve done, actually, is, is the way I structured the organization today. We have 350 staff around the world. I’ve got three major teams. I’ve got the engineering team, which gets things done. I’ve got a customer experience team which is really focused on 24 by seven support in 15 languages to help customers. But then the magic in the companies, the growth team. Mm hmm. So I actually have no marketing people up on my salespeople. I’ve got no advertising people. But what I’ve got is about this team called growth, which now outnumbers probably around 35 to 40 people. And the type of people in that team, they’re the sort of people you’d see in a quant group, in a hedge fund, math stats, comp site, physics, mechatronics, you name it. Mm hmm. And the way we think about growing the business today is when we go in, we don’t want to spend a dollar of engineering time unless we think we’re pretty sure we’re going to make much more than a dollar back. And so everything we do, we of have a hypothesis before we do it. We say we’re going to do this feature because we think it’s going to improve something. We don’t just say, Ah, hand way. We make the cup’s customers happy. We say, we think the customer will be happier because this thing will convert better, because they will have less confusion in the navigation or whatever it may be. And so then we go along and we do it and we test the results. And if the result was good and again statistically significant, then we go do more, etc.. So that team is really the powerhouse of the company. And really it’s it’s a blend of product strategy. It’s a blend of stats, it’s a blend of it’s a blend of a whole bunch of different things. But it really is the new way of doing things.
Bronson: Yeah, absolutely. And I love that you mentioned it’s kind of like what you find in hedge funds because, you know, hedge funds are the Nasser of finance and you kind of have the nassr of growth sitting inside of your organization. And it’s such a unique mix, the kinds of people you listed off there. That’s odd. In a good way. Yeah.
Matt: Well, the thing is, today is the way I see Internet companies that get big really, really quickly. Really, it comes down to these growth teams and they really are like hedge funds because in a hedge fund, when you’re investing, you come up with a strategy for investments. If you get in early and you get in fast, you can make windfall profits. If other people start copying your strategy, you get a thing called crowding. And when crowding happens, everyone loses. Right. And it’s a bit like that. I mean, the way I see the entire industry today is every year there’s another platform that comes along that has a billion users. So it was Google, then it was Facebook. Next it would be like Instagram or whatever it is, etc. And the guys who get in early and discover ways to advertise really cheaply or get to customers cheaply or get the viral growth happening. And these distribution platforms, do you remember with a billion people on the platform, if you can really figure out how to crack and market your process, you get instant distribution to 1 billion customers. I mean, never before in the history of mankind. Could you distribute your product or service so quickly. So you’re getting fast on Google and people liking a demand. Media did that with great organic SEO or CRM strategies. You can make windfall profits if you get in early on Facebook like Zynga did, right? You can grow extremely quickly. I mean, Zynga found that 27%, 28 billion revenue, 2011 went public. Right. You can make windfall profits really quickly. The problem is after the first guys go in there and then you start going in, you get crowding and then ultimately small business comes in. And when small business comes in, better heads up know how to manage their their AdSense budgets. They don’t know how to manage drive base cost for everybody. They’ve got a gazillion dollar CPA custom cost acquired customers like a gazillion and they have no idea. And then and then you got crowding and then and then no. Makes any money and then you have to move on to the next thing. Right. So. So it really is a lot like it really is a lot like a hedge fund, right? When you count your strategies, right? Just kind of get in there, hit them, hit them fast and keep to yourself. Fine. Yeah.
Bronson: Well, let me ask you about this, too. You know, you had a buyout attempt at around $430 billion. I’m sorry, million dollars Billion.
Matt: I’m going to do it now.
Bronson: Apple. I didn’t know it. Now for $30 million and you turn down the buyout and you end up going public on the Australian Securities Exchange, like you mentioned. Yeah. And overall it was the right decision. It was risky and some people were telling me not to, but ended up being the right decision for you guys. How did you what did you know to turn down for 30 million? Because that takes some guts.
Matt: Well, I mean, you have to understand why we were as a business at that point. So we’ve been running for so much four and a half years. We are bootstrapped the entire way. So I didn’t take any more capital in the pot from my original capital to buy the first site. We consolidated a number of businesses along the way, so we’re taking out the competitors as we grown. And the good thing about taking out a competitor is you don’t just grow your market share, but you also take out a competitor from the mix. So I guess it’s it’s it’s a good strategy if you can get to the right price. But of course, you got to weigh the pricing up versus the other your other channels for acquisition. But we got to a point where, you know, you would be running along with it. We had a bunch of term sheets all the way through from 2009 to 2013. We had term sheets, some late stage private equity, got guys and bases and even though they were in Australia and we don’t really have much of a venture community, all the US funds, they’re very active down here. They come down here all the time. Every quarter they’ll be down, you know, scoping out, looking for opportunities because they’re running a business as well. And you know, with valuations heated in the valley, they’ve got to look elsewhere to find their opportunities, but they get to.
Bronson: Know about it.
Matt: They’re getting crowding in their strategy so that they have to go elsewhere. And we’re very similar sort of economy and and so on. So we have all these options. We could have sold the company, we could have taken venture capital, we could take private equity, we could have so on. And then and then we had some guys are looking at something for us and they said, well, we thought about listing the business. And I said, Well, it’s funny you mention that because I do write a lot frequently on technology policy. And I have said that I think the future for technology investing will be the stock market, right? Because if you look at industries like mining, for example, if you’ve got a mining company and you’re just getting going, you don’t go to a mining venture capitalist on Coal Hill Road, knocking on doors, running a business plan and a convoluted preferred stock, you know, deal that takes six months to negotiate, right? You just go to the market. You write up a document which is called a prospectus, which is an offering document. You lodge it, you write some funds, you go. Right. Likewise, if you’re a multi-billion dollar business and you raise $1,000,000,000, just write an offering document and it’s just you go and effectively this is crowdfunding equity is a stock is crowdfunding equity from the general public, which is the way to got right. But for some reason, the technology you’ve got as a middleman and the middleman is called a venture capitalist that comes in there and loads everything.
Bronson: In that way. Even though it’s so true, though it is.
Matt: It is so. So I’ve written a lot about it saying I think this is the future for the tech investing market and particularly in Australia where we don’t have a technology venture capital industry really because I never really got to series that I had the series I they blew all their money. I never got the series base. We never knew. We never had an industry down here. But I thought about it and then, you know, no one really want to be the first right to try something, you know, offering, you know, I take risks. But what about. But there was a company called zero zero and it’s a fantastic business. It’s a cloud accounting software business. It’s now backed by Peter Thiel and so on. But it’s absolutely going gangbusters. It’s is taking on Intuit, it’s taking on MYOB, it’s taking on all the traditional packaged software accounting companies, and it’s growing like wildfire. And they went out and listed very early on a little market known as the New Zealand Stock Exchange or the New Zealand Securities side, and that went really well for them. And then they come across the Australian Securities Exchange to get access to more investors. And you know, at that point in time they were only about a year and a year and a half or so ahead of us in revenue. So growing at a similar sort of run rate per annum. You know, we were growing revenue at the time a little bit up to 80% per annum and that was I think by 80% their market capitalization was about $2 billion at that point in time. Right. So the Australian securities market is the fourth biggest market in the world for equity capital issuances. In fact, more money was raised on the ASX in the last five years. The Nasdaq. Right. The only thing is. Yeah, exactly. The only thing is it’s mining. It’s in mining and resources primarily and there’s very, very small tech sector. It’s tiny, but there’s a lot of money that’s come out of the mining industry since the GFC, the global financial crisis that’s weighing to invest in industries other than mining. Right. And you know, mining’s great when it goes up and it’s like the tech industry almost, but it’s been driven by commodity prices, right? So you can make windfall profits, you can lose a lot of money. It’s highly volatile. There’s a lot of money looking for something other than resources, wanting to diversify. And people have jumped into zero because it was just a global player. There’s nothing like on the market and so on. And yeah, have you heard the expression, Yeah, it’s good to be a big fish in a small pond. The small fish. The big, big ponds. Right. Zero was a big fish in a small pond. Right. If you look at the tech sector, I mean, these guys were in New Zealand today. There’s something like six or 7% of the entire index, which means every fund manager has to buy 6 to 7%. If they’re an index manager to buy at 6 to 10%, that fund has to be in zero shares. Right? That’s great. So they’re all buying the stock, right? When you have a lot of buyers and sellers, stock goes up, right. And then down like a rocket. I mean, their stock price is like a parabola and recently recently at a 5 billion market cap. Right. I mean, it’s like it’s absolute parabola, amazing business, global player. So I looked at that and I said, gee, I’ll be happy with that. So we thought, let’s take a risk, right? So we took a risk if we went down that path. And of course, the minute you kind of go on the process of going IPO, that flushes out a lot of people who might be interested maybe in buying your company and so on. So we had a few people kind of come to us and say, Well, gee, before you do this, let’s have a chat. Because they’re all obviously afraid that the market will them price your stock at something. It’s going to be more expensive for them to buy you in the future. Yeah. So anyway, we went down the path. Let me tell you, as you going down the path, you’re stepping into the void, right? Stepping into the abyss. You have no idea what you’re doing. Right, because you’ve never done it before. But every step along the way, things started getting better and better for us companies. Companies started coming out saying, Hey, don’t go public, come, come, do something with us. You know, start gaining more recognition. The press, you stop the press, stop writing about you as a start up and start running about value is like a national hero of a company. Right? Because we were saying we were saying, look, we’re going public because all our companies go overseas to America. We want to keep them here and build a world class Internet company that’s going to be in country sets of the press. All the the whole the whole tide changed. Changed that. And then we went public. Let me tell you, on the day it was it was pretty funny. I Twitter was going public at the same time and Twitter had that big banner of the Twitter bird on the front of of of the exchange in the States and the Australian stock market want to do the same thing. So we had we have a big neon bird, like a giant neon sign and that was the front of the Australian Securities Exchange. So you had that going and you know, on the day that it went public it was a very small offering. We only listed $50 million of stock. We kept it really tight on purpose to maximize success because we wanted to make sure it was 86.9% of the stock at the time. So you want to make sure that try to maximize success by keeping as many, if fewer sellers as possible and maximize the number of buyers. So it was absolutely phenomenal. I had so much interest. I can’t remember exactly what the number was like $300 million worth of interest in a $15 million of the stock. So, yeah, and I was just carving up the stock, trying to figure out who to give it to, who not to give it to. And I had some real rock stars coming in at the float, and on the opening day, you had to go ring a bell at the market. And the issue price for the shares was $0.50, right? So because in Australia we usually issued between $0.20 on the dollar, in other states you do have a higher dollar, but it’s just a yeah, it’s just a perception thing of kind of way where you had to buy the stock up. But down here it’s usually about size and I’ll try to look on the screens where the stock price was going to cross and I had to go ring a bell. And I told the media there and the cameras got I felt like Justin Bieber for like 5 minutes. Right? Everyone was screaming and carrying on and they told me the last person to fly the company was a Japanese guy who was so feeble ringing the bell that he couldn’t even hear it. So I said, So give the bell a good bash. So let’s try to figure out what the price was. And I couldn’t see $0.50, so I was looking at 65 or $0.80 or whatever, and all I could see was 2.50, right? I didn’t know what that was. Right. Some of the stuff like that’s the stock price. Like I ring the bell, I rang the bell and actually broke the bell. I actually ripped.
Bronson: That’s the way to do it. Break the bell.
Matt: All a bit out and the whole thing went off and the stock actually opened up. It opened the door to lows, $52.60. So it was actually the biggest opening ever on the Australian security stage was up basically five times on open 500%. It was 520, 400 $0.22. And it was it was crazy. I broke the whole thing. The head of the stock exchange actually framed it and he puts on the wall with a picture of me breaking the bell. And he said, This is what new technology does to old technology. So that was pretty good.
Bronson: That’s not so well. Thank you so much for taking us through that story. I mean, that that’s not inspiring. Then you just weren’t listening. That’s awesome. Now you also teach a class on technology value creation at the University of Sydney, and I’ll ask you a couple of questions about that as we wrap up here. What’s the primary thing that you try to communicate to these young entrepreneurs? You have them in your class. They’re starry eyed, ready to do stuff. What is it you’re trying to instill in them when it gets down to it?
Matt: We live in a land today of unparalleled opportunity, right? We’re in a gold rush right now. I mean, Michael Andreasen said stock was eating the world. Every single industry is being remapped and reshaped. Software and technology that I can possibly think of. Right. And there is just there is so much opportunity now to go and correct businesses really quickly, really cost effectively. Right. You know, companies that companies are starting I mean, Apple took about eight or nine years to get to $1,000,000,000 in revenue. Right. Google took about 5 to 6 years to get $1,000,000,000 in revenue. Zinc-Air and Groupon took two and a half to three years to get to $1,000,000,000 in revenue. And then you’ve got things today like Candy Crush, Kim Dotcom Supercell, which just taking like 18 months to get $1,000,000,000 in revenue. Right. And because the world’s getting hyper connected right there, there are 2.4 billion people on the Internet, which means you could distribute a product or service to 2.4 billion people instantly. If you can harness these distribution platforms like Google, Facebook, Instagram, maybe Pinterest and the future will be many more of these things. So. There’s just massive opportunity. It’s it’s really easy to get going. I mean, all businesses in some way, shape or form or Internet businesses. Mm hmm. And it’s really cost effective to buildings that businesses. And that’s why, you know, Y Combinator and Techstars, they’ll find companies 20 grand or 50 grand or whatever it is, because you can put four people in a room, feed them noodles for four months, pop out the other side, and then you can see if you got traction or not. Right. And and the traction is no longer the 1999 metric of eyeballs or whatever the track. The traction today is just revenue. But you can really start a business and come out of that. Right. And and the speed at which you can grow traffic, I mean, Pinterest went from nothing to the 16th biggest website in the US in a year that was more attractive than Craigslist. And I hadn’t even heard of it until I got to like. Yeah. So that’s like four girls. So. Well, people figured out that the dark matter of the internet is women. Yeah, believe it or not, all these guys in Silicon Valley have been building products for other geeks, but mainly men in Silicon Valley. And actually, if you put a product or service, the other 51% of the world’s population maybe might do something. Maybe I have some possibilities there. But the possibility. Just a possibility, right? So, yeah. And if you’re young and you’re broke and you just come out of school or university and you don’t know what you gonna do in life. Now is the best time to take a risk. Yeah, right. Because what’s the worst thing that’s going to going to happen? Right. You spend two years building a business and you’re still broke, but you’ve had some fantastic experience in the process. And this thing, this thing gets harder and harder and harder to do. As you get later in life, you have responsibilities and kids. And so so it’s a really it’s an amazing time to actually go out there and build a business.
Bronson: Yeah. Now, as you look at those young entrepreneurs, you know, every generation has things they kind of excel in naturally and things I just can’t get their head around because of their conditioning. What is it that this new generation gets and doesn’t get as you look out at them?
Matt: Well, I think, yeah, we have a lot of inertia being a bit older because we had to grow up in a different world back then. You know, as a kid, there was no mobile phones, there was no yeah, computers went on every desktop. And, you know, I was pretty excited to get my Atari 2600. That’s right. Console and 1979, you know, and so on. And I think, you know, it’s just a lot of it is just you’re not bogged down by any of that, you know, you know, you’ve had a mobile phone ever since you were born, right? Just as it’s an extension of your brain. It’s like it’s actually a mobile phones, like a neural implant right now. And it’s going to go from here to Google Glass to in your head. Yeah. Pretty soon it’s going to be basically yeah, it’s an extension of your brain. And so people is natural about how how they interact with mobile and I think about mobile apps. Yeah I think about software stuff has been around. Yeah, it’s been it’s been pervasive ever since ever since so young guys have been growing up. So just they just skip a all of stuff that we had to go through and just go right through to the technology wise, not.
Bronson: Get what is it that they can’t get their head around? Because I’ll give an example. Like when I hear your story, I don’t see a young guy trying it because you acquired companies consolidated home, you deciding get on the Australian Securities Exchange like you went a route that took a grown man strength. You know what I mean? Like, what is it that.
Matt: Yes, you kind of have to file a couple of times before you can you can actually do well. I mean, this was actually my third, I guess, what I call real company. And and you learn so much from when you file because anyone can hold the right up when the sea is calm, that’s when the shit hits the fan that. So you really learn how to steer the boat, right. So yeah, I’ve been through two businesses and they, they, they, you know, one wanted filed, one didn’t go so well. But I eventually did sell, but not for it, not for a huge success. And you just learn so much from that. I just wish I did it. I call it my $30 million MBA because I raised $30 million in my last my last business and it took six years. I just wish the $30 million MBA was like a $5 million MBA. That took two years. Yeah.
Bronson: Exactly. Yeah. Yeah. You may not a freelancer if that’s what happened. So.
Matt: Yes. So, you know, if I didn’t have that background, I would have to kind of get get to where I am. I am now, but.
Bronson: I’m still matters. End of the day.
Matt: I think I think it’s a lot of things. I think people don’t think through the business model very, a lot. When I think about businesses, I think they you know, they’ll come up with all sorts of harebrained ideas. But, you know, just doing basic things like the back of the envelope calculation of what does it take? What was it take to get a billion in revenue? What’s the organization do I need? How many staff do I need? People don’t think a lot about things like sustainable competitive advantage. What is the thing that we have that will continue to lead us to win. Yeah. Into the future. Right so a lot of people have think about, you know, one shot wonders, you know, gadgets and so on that they’re not really sustainable businesses. And, you know, I think the amazing thing is we live in a world today where the whole wealth of human knowledge is online. Right? If you want to go learn something, it’s a lab there. Yeah. So I think that, you know, I think yeah, I think we have to pay less a lot more. Just get out there and just educate themselves as much as possible and not think of education as a as a as a chore, but as something that really makes themselves get to the next level. Right. And it really it just it’s amazing. Get a Udacity or Coursera or any of the growth hacker TV or it’s just everything’s out there now that didn’t exist before. Right. And I think I think you just need to take advantage of that. Yeah. Right.
Bronson: Awesome. Well, Matt, this has been incredible interview. People are going to get so much from this. I’ll end with the question I always end with and I might know how you’re going to answer it, but I’ll leave it up to you anyway. What’s the best advice you have for any startup is trying to grow?
Matt: Just try a lot of things, measure everything you do, and keep doing the good things and cut back on the bad things. Make sure otherwise it’s statistically significant.
Bronson: Yeah, well, that’s great advice. And on that, thank you so much for coming on Growth A.V.
Matt: Thank you very much.
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