Wil Schroter, CEO, Startups.co
Paving the Way – How Wil Schroter Went from a Commodore 64 to Serial Entrepreneur
What happens when a young kid who hates school but loves his Commodore 64 becomes one of the first businesses to build these things called webpages for this crazy new frontier called the internet? A serial entrepreneur is born.
Rejected by every college he applied to, Wil Schroter decided to sit-in on classes just to save face. Everyone else he knew was going to school so it seemed like the thing to do. But even though he wasn’t earning any credits, he was still responsible for paying tuition which became the impetus for launching his first startup.
As a ten-year old kid, Schroter happily spent his time hacking away on his Commodore 64 and was connected to Quantum Link (an early online service for the C64) in the 80s – ten years later, when the Web was just beginning to gain traction, Schroter was at the forefront.
The First to Be First
Not only did Schroter start the first interactive web company, he left college to follow his entrepreneurial dreams before dorm-room launches were a thing. His first hurdle was to simply explain exactly what it was he was offering, both to those around him and to his customers.
When he told his guidance counselor that he was leaving school to start an internet company, her question was not “are you sure this is a good idea” it was “what is the internet?” His counselor wasn’t the only one who had never heard of this internet-thing.
Schroter recalls going door-to-door selling webpages to businesses. First he would explain the internet and then he would explain webpages. It turns out that people appreciated his hustle; he often heard “kid, I have no idea what you are talking about but I’ll give you $200 to build whatever the hell a webpage is.”
Schroter had no idea what he was doing when it came to running a business. He did not have the benefit of the stories of those that came before him (because there weren’t any) nor did he have the kind of resources early entrepreneurs enjoy today. Instead, he relied on hustle, “for all of the things I didn’t know, I was willing to work ten times harder” says Schroter.
Money Does Matter
In those early days, Schroter was selling a webpage for as little as $100 – he even traded a few for food from local restaurants. His pricing model was based on what he needed, not on the value of what he was delivering.
He soon learned that other early agencies were charging $10,000 for a webpage – so the next time someone asked him how much he charged he went for it – and it worked – a 100x price increase with a single bit of knowledge!
By 1997, Blue Diesel had an impressive client list that included IBM, Intel, MasterCard, and Chase Bank. But Schroter was also racking up a ton of personal debt – floating payroll on credit cards (the closest thing to angel investing in the 90s) lead him to amass a debt load of over $100,000.
A merge with inChord Communications led to the pitch of his lifetime to pharmaceutical giant, Eli Lilly. As he sat in front of this group, he clearly remembers thinking “This account is worth millions of dollars and a year ago I was making websites for food. How weird is the world. How weird is life!” They didn’t just win a portion of the Eli Lilly account – they won it all – $250 million a year in billings which soon grew to more than $700 million.
Not Cut-Out for Corporate Life
But corporate life is corporate life, even when you are the CEO. He hated the agency business –he hated feeling like he was selling his best ideas and soon left the company to start Virtucon Ventures.
At Virtucon Ventures, Schroter spent ten years working on a bunch of ideas in a bunch of spaces. It was his opportunity to truly indulge his creative side. The experience taught him that “it is fun to do a lot of things; but it is productive to do just one thing.”
Looking back on his own journey one thing stood-out, the loneliness he felt as an entrepreneur. There wasn’t enough support for founders at a global scale – he wanted entrepreneurs to have a repeatable path – tools that could carry them through the entire journey.
Building a Business on Deal-Making
Schroter’s newest business is focused on helping entrepreneurs conduct business planning, find mentors and find customers. To bring the best tools together quickly, Startups.co acquired five companies – each with a unique offering that fit perfectly into Schroter’s vision.
Each of the acquisitions was carefully considered. Schroter estimates that he considered nearly 40 different companies and only walked away with five deals. Each acquisition had to fit a very specific thesis:
- Is the offering part of the entrepreneur’s journey?
- Is the offering unique enough? Does the company’s offering do something that the entrepreneurs on our platform could not do on their own?
- Can we do something interesting through the acquisition that the company could not have done on their own?
Startup.co’s biggest deal was the purchase of Zirtual – the company had 400+ employees and was getting major play in the media – but something was broken. The company was losing money and Schroter was brought into offer his advice.
He saw what was hidden by the company’s fast growth – that they had 400 employees billing at 75% utilization, which is the same as having 100 employees billing at 0% utilization – a situation that would sink any startup. Zirtual did not have the financial controls in-place they needed.
The founders of Zirtual decided that they wanted out and soon asked Schroter if he wanted to buy the company. The platform fit with a need Schroter saw in his growing entrepreneurial community – his founders simply did not have enough time to do everything themselves and needed help from assistants that were already well-versed in startup culture. Zirtual fit perfectly into Schroter’s thesis.
Schroter’s Next Big Thing
As a twenty-year veteran, Schroter has a unique perspective. His love of being involved in literally every single aspect of the business (from doing the company’s taxes, to developing newsletter templates and writing copy) requires that he moves quickly – but he is really in no hurry. “I still have another fifty years to work on this stuff – it is really all I want to do for the rest of my life.”
The Danger of Growing Too Fast
Schroter has seen it first-hand, the risks that come with seeming success. If you are lucky enough to have this problem, don’t let blowing-off operational metrics tank your dreams. Founders may say “we aren’t making any money now, but we will manage revenue later;” Schroter cautions that “maybe you will or maybe you will just poorly manage the company into bankruptcy. Be rigid in your financial controls – both money-in and money-out.”
What Raising Money Guarantees
Schroter is not a huge fan of taking on investors. “People are trying to calibrate this lottery ticket mentality of building a business – which is unrealistic; frankly it fails more than it succeeds.” He sees taking on investors as a guarantee that:
- You will be forever indebted to someone else
- You will likely never be able to get your money out of the company should you decide to sell
- Even if you build an amazing business, you won’t be able to pull money out
- How to survive a business with less than zero business experience
- The things you need to know on how to close more deals
- Learn how to build a community
- How to deal with growth pains effectively
- Tips on what it takes to build a successful company
Full Transcript of Podcast with Wil Schroter
Nathan: Hello fellow founders, entrepreneurs, and business owners. My name is Nathan Chan, and I’m your host and the CEO of “Foundr Magazine” and the host of the Foundr Podcast, and I’m coming to you live from hometown Melbourne, Australia. Wow, what a year it has been, 2017. This is our last episode for 2017, so I just wanted to say, guys, I hope you have an amazing Christmas and New Year’s, and I’m really pumped to be sharing with you a ton of amazing interviews for 2017. I’ve got, like, at least three months worth in the can with some incredible founders of some very, very big startups. I know you guys are gonna love this, and you probably might know the startup but don’t know the founder. So you’re in for a treat. 2017 is gonna rock. Let’s make 2017 the best year yet.Just a little bit of a recap, the Kickstarter crowdfunding campaign is over now. We have finished the crowdfunding series. I hope you enjoyed it, and I hope you followed along. Using everything that we shared with you guys, we did raise over $200,000. Our target was $50,000. Please do go check it out. You can still pre-order a book of “Foundr Version 1.0.” Just go to foundrmag, F-O-U-N-D-R M-A-G dot.com/book.
And now let’s talk about today’s guest, Wil Schroter. Now, this is a really fascinating interview. Wil is an extremely successful founder. He’s started and sold many companies, and he’s now the CEO of Startups.co. Funny story, actually, Wil and I met just after I left my day job when I finished up with Foundr, and we had some interesting conversations on, you know, what my plans were with Foundr, where I wanted to take it. And yeah, actually, we talked about many different things on potentially working together and doing all sorts of things. And he actually owns and recently sold us the foundr.com domain. So we have a bit of history, amazing guy, an incredible founder. I have a lot of respect for him, and our background is a whole nother story, so I’m not gonna ramble on much longer. But incredible guy, I’m so blessed to have met him and met him in person as well.
Just serendipitously, which is crazy, you know, he loved the name Foundr, he had Foundr.com. He loved what we were doing. We were talking about doing some stuff together, never worked out. But, you know, I still consider him a friend and incredible, successful entrepreneur that’s someone that I feel privy to have in my network. And he really doesn’t hold back. He’s acquired quite a few companies of late under the Startups.co umbrella, and he’s doing incredible things for the community. And he has a lot to share on what it takes to build and grow a fast-growth company, marketing, hiring, you name it. He doesn’t hold back, shares a ton of gold. All right, guys, I hope you have an amazing rest of your 2016. I’ll speak to you in 2017. Now let’s jump into the show.
The first question I ask everyone that comes on is how did you get your job?
Wil: Yeah, so funny story, that. When I first started early, early on in my career, first I had no intention of ever going to college, I had no intention of certainly ever going into business. And all of these things sorta happened in a bizarre chain of events. When I was graduating high school, I actually graduated at the very bottom of my class, got rejected from every college I applied to. And I actually didn’t care, because ultimately, no one in my family had ever gone to college, so me going to college certainly wasn’t something that anybody was expecting. And I didn’t like school to begin with, so taking more of it and paying for it wasn’t really at the top of my agenda.
Problem was, everyone else was going to college, and so I felt really embarrassed that I wasn’t going to college. So instead, I actually told people that I had gotten into college, because I hadn’t, and went to college for almost an entire year without actually being a student, which is essentially auditing classes, which I didn’t even know that was the thing, but you can pay for classes but not get credit for them. I did it just because I didn’t wanna be humiliated as the only kid in my school that didn’t go to college. But that always got me into college.
While I was there, I was a theater major, so once again, had no interest in business whatsoever but actually had a pretty good understanding of technology. And to put that in perspective, I got my first computer when the Commodore 64 came out around 1985 and was online with a modem and a 300-baud connection by 1986. So I was really early to online technology. At that time, I would have probably been 10 or 11 years old. So by the time I was in college and the very precursor stuff to the internet was starting to come around to the web, really, I was already pretty familiar with it.
So long story short, when I was 19 and I was in college, I started noticing that this new thing called “the web” was starting to become popular. And this is going into about 1993, 1994, and I realized I was one of the few people that actually knew how to make a web page. So as what initially started as me just trying to supplement my income from my college career, turned into one of the first interactive agencies in the world.
Nathan: I see. And when you say “interactive agencies,” what do you mean by that? Is that a web development agency?
Wil: Yeah, which at the time, no one knew what that was. To put that in perspective, when I told my guidance counselor at the university that I was quitting college to start an internet company, her question wasn’t why was I quitting college. Her question was, “What is the internet?” Because, figure, there was a time when nobody had ever heard of it. And that’s when we were starting the business. And so we were one of the first companies building web pages professionally as an actual agency.
Nathan: Yeah, wow. And when you say “we,” you had a business partner at the time?
Wil: No, you know, I always think of “we” in the term that, obviously, there’s a lot of people that make things successful. I was running as a solo founder, less than zero business experience, because I didn’t even understand how business worked much less how to start a business. And a lot of the things that we don’t think about now as far as the climate of starting a startup didn’t exist back then. I’ll give you some examples, because it really makes you think. The first is there weren’t really many popular examples of people at 19 years old dropping out of college to start a company. In fact, I was pretty certain that not a single person, when I’d told I was starting a company, had any words of encouragement. And people hear that now and say, “Hey,” like, a lot of people didn’t think I should do it, but at least everyone knew that it could be done.
Back then, no one knew it could be done. You had, like, some early versions of Steve Jobs and Bill Gates, but those seemed like total outliers. It’s not like now where you have entire batches of people graduating from YC or 500 that are sub-22 years old. Back then, it was unheard of. And so all the feedback I got was, “Stay in college. This is the dumbest decision you could ever make.”
Nathan: So why did you do it?
Wil: Well, to me, it was the first time that I was building something…mind you my academic career…that I was building something and getting rewarded for it. I was always a creative guy. I was always highly motivated. I was just never very academic. So for me, sitting in a classroom and responding to tests was never very interesting. But if you gave me something where I could just create from scratch, I’d go all day and I’d be the most motivated person.
Nathan: I see. So how did you get clients? How did you learn that…
Wil: Yeah. Well, this goes back to my other point about the time period. We have a phenomenal amount of resources available to us online where we can find education, pretty much any topic you could possibly imagine, 20 people have wrote something about it. Now that said, back then, there was nothing like that. And so I didn’t have any frame of reference for what a business plan might be. I had no frame of reference for what a sales call should look like. Your scope of who you could be influenced by were the people that you might know, and I didn’t know anybody. And certainly, no one in my family had any background in business, so I just kinda figured it out as I went. I literally walked across the street from my dorm room, because I didn’t own a car, and started walking down the main street at the university and walking into the doors of every business along that street explaining to them what the internet was and asking them if I could build them a web page.
Nathan: Wow, that’s awesome, man.
Wil: Yeah, it was the internet equivalent of quite literally opening up a lemonade stand. It couldn’t have been more basic, but it worked, right? Enough people…it blows my mind, but enough people just saw my energy and my hustle and said, “Kid, I have no idea what you’re talking about, but I’ll give you $200 to build whatever the hell a web page is, because maybe it’ll bring more people to my local bar,” or what it was. So, I mean, the beginnings couldn’t have been more humble. But if you just do enough iterations on anything, you start to learn quickly. And my feeling was for all the things I didn’t know, I’d just be willing to work 10 times harder in order to make up for it. And that actually kinda worked out. It’s not always the best approach, but it kinda worked out in my case.
Nathan: I see. So what happened next? You launched this business, no one really understood, but you’re hustling like crazy, building web pages for people. Tell us what happened next. You dropped out of college.
Wil: Sure. So at the time, I’m still in school. So, you know, I’m working during the day, taking classes at night and on the weekends. As I’m starting to get more and more assignments from folks, I’m learning a bunch of things. First thing is I’m learning that my value has more value than what I was charging. One of the things I didn’t understand at the time was I’d walked in and I’d say, “I’ll build you a website.” And they’d say, “How much will you charge me?” And I would say, “$100,” because at the time, $100 was all the money in the world to me. And so I priced based on where my head was at. I priced based on what I thought was a lot of money. I didn’t price based on what the value was of what I was actually delivering. Huge mistake.
I was even at a point in that first year where I’d walk into a restaurant and I’d say, “I’d be willing to make you a web page in exchange for food.” That’s how badly I didn’t understand pricing, although, to be honest, I remember being wildly excited about that food. So again, these are very basic beginnings. However, what I would come to learn soon thereafter, as I heard about other agencies getting into this and what they were charging, I’d talk to a client and they’d say, “Wow, you know, you’re only gonna charge me $500 for this. That’s odd, because the other company we’re talking to is gonna charge me $10,000.” And I’m scratching my head saying, “$10,000 for a web page? That’s even possible?” Again, didn’t know any better. But I was really keen on tuning in to those things, all those little things that I would pick up on from other people. And so the next client I’d talk to, they’d they, “How much is your website?” I’d say, “$10,000.” And they say, “Yes.” I’m like, “Jesus.” Like, I just basically signed up 20 clients with one price change.
Nathan: Yeah, wow. So when did you leave college? How did you start building this business? Because you went onto…did you go public with this business? Or you sold it and it was…yeah, tell us more.
Wil: Definitely grew. And so what happened was we’re trudging along, I’m racking up lots of personal debt. This was also back in an era when credit card companies would just give you as many credit cards as they possibly could. And so within the first couple of years, I’m already in almost $100,000 of personal debt, real personal debt, the kind that you actually owe, not like, “I owe money to investors” kind of thing. This is, like, American Express and Visa.
Wil: And so at 19, 20 years old, I mean, that’s a lot of money at any age, but that was a lot of money to me back then. But I almost looked at it, it was so much money that I couldn’t even comprehend it, so I didn’t spend too much time thinking about it, because I was so excited about what I was building. We get into it a few years, though, this is going into about 1997, so about three years into it, and the business is going well. We’re starting to pick up major clients. We had IBM, Intel, MasterCard, Chase Bank, and we’re starting to build a portfolio. Also, we’re building up a lot of debt. I’m paying people, I’m making payroll on my credit card, so needless to say, not a great way to exercise capital. And, obviously, the interest that compounds them, that gets crazy. And we’re just learning to charge enough to even make those types of payments.
Around that same time, I hear of a local agency in Columbus, Ohio, where we were based, who had been around for a really long time, for about 20 years. They were fairly small, I think they had 30 to 40 people. And it was run by a guy named Blain Walter who was also very young. He was about 26 years old, and they brought him in to kinda, like, you know, reenergize the agency. Blain and I sat down, and in a week, deal to merge the companies. I remember at the time sitting there thinking, “Man, we got 40 to 50 people. We’re one of the biggest agencies ever.”
A few months later, we get an opportunity to pitch a company called Eli Lilly, big pharmaceutical company. And we walk in there and we give the pitch of our lives. We’re 40 people, we brought everyone with us to the pitch. Even the receptionist came to the pitch just so we could look big. And we were going up against the biggest agencies in the world. And it was a huge piece of business. And I remember sitting up there, I’ll never forget this, I remember sitting up there on stage, I think I was 22 at the time, giving this pitch about the future of the internet and, you know, how this would change everything. And at the same time, thinking, “This account’s worth millions of dollars to us. A year ago, I was making websites for food.” And I remember specifically thinking that during my pitch, thinking, “How weird is the world?” Right? Like, how weird is life?
Also, I’m the same guy. I’m the same guy making what would wind up being their website for millions of dollars. That was the guy making a website for somebody in exchange for food. So we finished that pitch. A few weeks we get a call for me about Lilly, and they tell us, “We’ve got great news. You’ve won the business.” And we’re thinking, “Oh, that’s cool.” You know, maybe we got a little bit of a direct mail campaign or a small website or something like that. And we said, “What part of it?” And they said, “All of it, a quarter billion dollars a year worth of billings.”
Wil: Yeah, it was one of the most lob-sided agency wins in history. And needless to say, that changed our business dramatically. And from there, we grew that to about $700 million in billings over the next four years, and that’s when the agency got…Blain, the guy that I mentioned earlier, took that out as a public company thereafter. And it’s about a $2 billion company now with about 13,000 people.
Nathan: Wow. And when did you step down? Why did you decide to step down? Was it after you took the company public?
Wil: Oh, no. It was before then. So I was running the digital side, Blain was running the…I’ll it the off-liner print side in today’s terms. And he had a vision of what this thing would look like as a full-service agency particularly focused on the pharmaceutical industry, which was amazing. His dad had started a company called Cardinal Health, which was a $50 billion company. So it was something he was well-steeped in. Personally, I didn’t care about any of that. The other side is I also hated the agency business. And this was a real point of contention for me.
I would sit down with these clients and I would give them all these ideas that I had, because I’m a creative guy by nature. I’d give them all these ideas that I had and then tell them that I had the wherewithal to go build them. And they would pay us, I would go build them for them, and they would go on and make up a whole bunch of money. Which was supposed to be what we’re supposed to do as an agency, but I’m scratching my head saying, “Man, if I’ve got the ideas and I’ve got the wherewithal to build this stuff, what do I need you guys for?” And so I hated working with clients. I wanted to do right by them, but I really just wanted to build my own stuff.
Nathan: I see. So what happened?
Wil: From there, so I exited out of the agency, and about a year and a half later, we went public. But at that point, I had nothing to do with it whatsoever, and I hadn’t been there in about 15 years. It’s been a super long time. And I also didn’t like working at a big company, even if I was the CEO. I walked in, it just felt like a big, kind of amorphous company. We had 700 people at the time. I honestly just wasn’t enjoying it. They’re great people, and nothing like that. I just prefer to work in very small, intimate environments. So from there, I ended up starting the incubator, which in today’s terms, we tend to think about it, like, YC or 500, what have you. It was nothing like that. It was really just me pulling together a team of people I really enjoyed working with and working on my own ideas.
So for a period of about 10 years, I worked on and funded a whole bunch of ideas and a whole bunch of spaces. We started off with a company called SwapALease.com, which became the largest automotive leasing marketplace. We started with some early products that would become Startups.co today. We built stuff that’s totally gone now, one called Unsubsribe.com, which we sold, which was a way to get you off all of your email 10 years ago. And so we had a handful of companies that went through that. I learned a lot in that process. And one thing I learned is it’s fun to do lots of things, but it’s productive to just do one thing. And I hear a million entrepreneurs say, “Hey, I have nine different ideas for different things,” or, “I’m working on, like, five different side projects,” I have yet to see that go well, myself included. If I had spent that same 10 years working on one thing and one thing only, I would have a lot more to show for those 10 years. Which is why when I got into Startups.co four years ago, that’s all I focused on.
Nathan: Yeah, I like that. So tell me about Startups.co, what you guys are working on. You know, we’ve had many conversations about where you guys are taking this, really exciting, and you’re an amazing visionary. I’m really curious, you know, how did that come about and what’s exciting to you? You guys have done a lot of acquisitions. Are there more coming? Tell us about that.
Wil: Yeah, so when we started Startups.co about four years ago, what I was really trying to solve for was the founder’s journey. In my eyes, similar to my own experiences that I shared with you, we’re in this tough spot, because as founders and in every industry all over the world, it’s a very lonely experience. We tend to go into it kinda naked in the woods and try to, like, figure our way around. And some of that’s okay, some of that is the process, but I felt like there just wasn’t enough support for founders and would-be founders at a global scale. And I wanted people who were thinking about starting something to have a repeatable path that they could go through so they could get the right education, they could find the right mentors, they could figure out how to test with early customers. And ultimately go onto things like getting funding, etc.
But I really wanted it to carry entrepreneurs through the entire journey. And the challenge with that, it’s a really big task. There’s no one side of it that completes the journey. In other words, if we just offer education, that’s cool, but people still need to get stuff done. If we just offer funding, that’s cool, but people still need to figure out how to write a business plan to begin with. So what this required was a really broad set of tools and education on a pretty massive play. So we knew that in order to do that, we’d have to either buy or build a couple of key services basically targeted where entrepreneurs get stuck along the way. So they get stuck early on with things like education, figuring out how to even start a business. Then they can get into things like business planning, finding mentors, finding early customers. And over time, you know, they get into a place where they need to raise funding and actually get the business out the door.
And we ended up acquiring five venture-backed companies that fit those different products, companies like Clarity, which helps people find mentors, or LaunchRock, which helps people aggregate early customers. Or most recently Zirtual, which helps get an extra pair of hands on the team to actually get a lot of this stuff done.
Nathan: I see. And I’m curious around those deals. I know you can’t talk about, I guess, the details of those deals, but you know, you strike me as someone that always does really good on the deal side. Can you tell us more about that?
Wil: The trick with any deal, our deals or others, is trying to find both people are gonna have some level of value. And here’s why I say that. Most people deals and they say, “How can I get as much out of this while leaving the other person with as little as possible?” And that hardly ever works. I mean, we see this all the time. Nathan, I’m sure you see this as well where somebody comes to you and says, “Hey, I would love to promote my product across your entire channel and in your publication.” And you’re like, “That sounds awesome for you, but how is that a good deal for me?” I think acquisitions work in the same way. If I can’t come and sit down with somebody and say, “Here’s why you’ll be better off teaming up with us,” it becomes a really crappy conversation.
Nathan: I see. And how did you find these companies?
Wil: Part of it is I spend a tremendous amount of time in San Francisco where a lot of these companies are born, and the past three years as we’ve started kinda down this path of figuring out what companies that make sense for the platform, we’ve probably been in some level of serious talks with maybe 30 different companies. A lot of times, we’ll get them referred by venture firms who have put money into them. We’ve actually had quite a few referrals from the people we’ve bought the companies from themselves. So you get a guy like Dan Martell at Clarity, who we acquired a couple years ago. Dan sent us all kinds of leads where he’s saying, “Hey, I really enjoyed working with Wil on this deal. I think you should come on board too.” So we’ve had a lot of referral, which is a good sign.
Nathan: Yeah, I see. And how long does it usually take for these deals to come about in the sense of from, you know, starting the talks, doing the due diligence, coming up with terms? Generally, how long does that take?
Wil: I would say…I hate it when people say, “It depends,” so in this case, I’ll say it’s never less than 4 weeks, and it probably shouldn’t go more than 12. And the rate limiting factors are almost always the same. One is always will the investors get the money or return that they expected? And the answer is no, they never ever will. Unless you’re going public as Google, they never get as much money as they think they were gonna get. And that’s just the nature of investors. Another side of it is, as far as the founder, their team, their product, their customers, are they gonna get taken care of? And taken care of doesn’t necessarily just mean financially. It just means if they’re gonna hand their work off, is this a good place for them to transition? If they wanna stay on board, is this a good opportunity for them to carry forward?
So those are really personal decisions, that even if you have the price right and everything else like that, there’s a lot of people affected, and you spend a lot of time trying to figure out how to make it work for everybody.
Nathan: I see. And tell us, do you have any exciting acquisitions at play at the moment? Do you have any more that you guys are looking for?
Wil: Yeah, we’re always talking to folks. As I mentioned earlier, we’ve done 5 deals, but we’ve sat down at the table at various levels for about 40. Now some of those, we may find in a week that just, “Hey, they don’t make sense.” Some of those, we’ve had pretty advanced discussions on. I don’t think we’ve yet to make an offer, like a firm an offer by virtue of term sheet where things blew up at that level. I think by that point, we’re probably pretty agreed that we’re gonna get a deal done. But we’ve definitely looked at an awful lot of companies. And the truth is, a lot of things needs to sync up in order for a deal to make sense. At this point, we’ve acquired five companies. We had two products of our own. That’s a lot of stuff for us to manage. And so our dance card’s been pretty full.
Will we do some more deals? Probably. But mind you, too, you know, we’re not a private equity shop. We’re not looking to buy companies. We did these acquisitions because they fit a very specific thesis that we had around the founder’s journey and where we could be helpful. So if somebody comes to us and says, “Hey, I’ve got this great Wix competitor that allows you to build websites,” we look at that and say, “Okay, cool. One, is it unique enough that Wix can’t?” Probably not. The second one we look at is, “Is it part of the entrepreneur’s journey?” Is it a critical part? Yeah, it sort of is. Every entrepreneur needs to build a website. And the last part is, “Can we do something interesting given the million companies on our platform that that company couldn’t have done by itself?
Nathan: I see. So what’s next for you guys?
Wil: For us, a lot of our focus right now is trying to bring all the companies on our community together and start talking to each other. And so we’re doing that with some of our content now whereby we’re pulling content from the community and kinda sharing it within the community. That’s really important. But what we’re pretty strong in is that there’s so much domain knowledge and help and support within the platform at this point, within all of those founders, the more we can unlock that and allow people to talk to each other and help each other, the more aggregate value you get.
Nathan: Yeah, no that’s where the real gold is, the community, the network, the teaming people up, making that stuff happen. That’s the magical part.
Wil: Especially in this case, because as you know, being a founder is a very lonely journey, and whenever you can sit across from another founder and talk shop and kinda work through problems, etc, it’s amazing, right? It’s gold, as you described it. And if we can get more of those interactions happening at a global level, I can’t imagine how much that can accelerate entrepreneurship.
Nathan: So how do you plan to do that?
Wil: Well, we’re doing it in a few different ways now. One is capture some of the knowledge that’s being created amongst the founders and share it. So that’d be things like on Clarity, we have a forum on there that allows people to ask questions of the 5,000 experts and get answers, and that works really well. We think that we can also release new products that will allow for more open discussion around a litany of topics. Clarity tends to be very much, “Here’s a specific topic I have in building my business,” and that’s great. But we’d even be open to discussions forum-style where people say, “Here’s something happening in the news, what do you guys think about that?” Right? Like when we were talking about Uber not going public, I’d be really interested to hear thoughts and feelings of all the people across our network how they think about that, or if they even care.
If we’re talking about a founder that’s having a really hard time getting his business going and he’s in some part of the world that doesn’t have a lot of connectivity and having him raise his hand and say, “Hey, anybody out here that can just help me out? Is there anybody in Estonia right now that can help me?” And having the folks that are local to the region say, “Yeah, give me a call. Let’s get this figured out.” I think that kind of connectivity could be really powerful.
Nathan: Yeah, I agree. And how are you guys, I guess, getting the community…because you have all these different tools that are helping founders and entrepreneurs, depending at certain stages. How are you getting them to move across, or moving through that product ascension model that you guys have?
Wil: We’re not doing a ton of it now. And when I say that, we have to be really careful in how we present ourselves to the startup community. In other words, if you join LaunchRock and it feels like we’re constantly pushing fundable on you, it starts to feel awkward. At some point, you start to get uncomfortable. So we have to figure out how to get people talking amongst each other without constantly down their throat. And that’s where the community starts to come in, that’s where our content starts to come in. It gives people a more communal water cooler to stand around and start to discover maybe some of our products or other products there versus us trying to force them into other products. We can do it, it just doesn’t feel great.
Nathan: Yeah, I see. And when it comes to, I guess, the different tools that you have, I’m really curious around when you acquire these companies, how do you manage them, and do you acquire the teams? And, like, how do you manage all that resourcing part? Because when you acquired Zirtual, that must have been an absolute, you know, like, really big operations task.
Wil: Yeah, that was enormous. I mean, Zirtual had 430 full-time people when we acquired them, and we ended up keeping about 120 of them. And in all fairness, you know, people hear that and say, “Oh my god, 300 people lost their jobs.” And the truth is, in that case, a large number of the people in that company never actually had a job. They had just gotten hired five minutes ago or they hadn’t been under an assignment, so the numbers didn’t really reflect how many people were really, truly full-time or engaged in the business. But that’s a people-intensive business, right? At Zirtual, people are hiring an assistant for, say, $400 a month. Gotta have the assistant, gotta have that person ready to be able to handle a multitude of tasks. And to be able to operationalize something like that, as you can appreciate, is dramatically different than, say, taking over Clarity, which is mostly a platform in a marketplace that kinda runs itself. So Zirtual was a big bite for us, but it turned out to be something, given our agency experience, that we understood really well as far as building a large professional service organization.
Nathan: I see. And how’s that going? Like, how many people do you have collectively across all the different platforms or under the Startups.co umbrella?
Wil: So right now, we’ve got 150 full-time people under the platform. We’ve got some number of contractors, I don’t know how many would be defined there. Most of that, of course, is working on Zirtual helping clients there. But within that, you know, within the umbrella, when we bring the products on board, like something like Clarity LaunchRock, the first thing we do is we just try to homogenize as many of the systems as possible, right? So as you can appreciate, a lot of the stuff that you do at Foundr, if you’re gonna bring on another similar company, it’d be a duplicative task. So there’s a ton of duplication, like, every company has their own reporting system, every company has their own HR system, every company…so on and so forth. First thing we do is homogenize all of that.
Turns out, when you make all the systems the same, your job starts to become pretty easy.
Nathan: Also, with the teams, like, do you get everyone…is it virtual, mainly? Or is the main, core bulk of the team in Ohio? Can you tell me about that piece? Because when you acquire these companies, it must be difficult if you have people in that team that might be, you know, all around the world.
Wil: Yeah, you know, as you can appreciate, most startup companies are actually really small these days. Zirtual was a total anomaly. Zirtual was actually a very big company. But most of them are teams of five or six people, you know, not huge teams. I think Dan Martell at Clarity had maybe six people on his team. And so depending on the business and where the folks are kinda in their expectations, careers, etc., A lot of people are looking for an opportunity to do something different. The founder is inclusive.
Whenever we have these discussions, I have a long chat with the founders, who are all I care about. I mean, those are my people. And I say, “What do you wanna do?” And I really don’t care what the answer is. Meaning, like, you’re saying, “Hey, I’m burnt out. I wanna take a year off, I don’t wanna have anything to do with this.” Cool. You’re saying, “Hey, I wanna double down and build this thing with you.” Also cool. But in most cases, as you can appreciate, founders get excited about doing something new. And so we just say, “Tell us what you wanna do and we’ll be supportive.”
Nathan: I see. And I’m curious also, with the Zirtual piece, I know you told me this story, don’t know if you can share it on the call, but how did that come around? I’m sure people will find that really interesting, and why you decided to acquire that company. Because it wasn’t really one that you were kinda…did you guys have your sights set on?
Wil: We didn’t have our sights set on Zirtual proper. We did have our sights set on adding, essentially, a virtual assistant service. And the way we thought about it was…and I’ll get to all of what you just asked. The way we thought about it prior to Zirtual was we were getting a tremendous amount of demand from our clients that say, “Hey, it’s just two of us in a room. We have a ton of things we needs to get done, whether it’s updating our social or our blog, scheduling meetings, doing some research, etc. We just don’t have time.” We kept hearing that over and over again, because starting a company is a massively parallel task where you have to do all of these things all at the same time, all at once. And it’s just you, right? And so there wasn’t a good way to multiply yourself cost-effectively.
And some people started to take the things like Fiverr, and they’re saying, “I’ll hire,” you know, “people to do.” But there’s a lot of overhead to that as well, trying to manage, you know, all of those people on all of those tasks. So we wanted somebody that could parachute into the team that had already been working on startup-like stuff, so they already kinda knew the routine, but in some cases, could also bring some new ideas and domain knowledge and best practices to a startup. So we had this idea of kind of, like, you know, rent a team kinda deal. And so with this Zirtual deal, that came through…one of the VC investors that was in the deal had reached out to me, told me about what the circumstances were with the company, and they basically just mismanaged their capacity utilization, saying, “We have 400 people, but they’re operating with only 300 people billable.” It’s easy for me to summarize now, but at the time, it was far more complicated.
And initially just called me in to say, “Hey, is there anything you could do to be helpful up here, given…they knew my background in running large professional services organizations. And I looked at the business and I said, “You know, this is a very fixable problem, but it’ll be a pretty expensive fixable problem. And I’m more than willing to be a good guy and help you out. And they said, “Well, would you be willing to take it further and actually make it your problem?” Which is to say, “Will you buy the company?” And, you know, I looked at it and I said, “It’s so similar to what we’re already looking to get into.” You know, it was a bit more than what we were looking to get into. You know, we were probably gonna hire 10 to 20 people and start to build that way. This is starting with 400 and paring back. And I said, “You know, actually, we would be interested in it. It’d be a huge swing for us, but I think our team can handle it. And turns out, we did.
Nathan: And what was the problem? Can you share? Like, how did something like that happen? Because, you know, Zirtual, it seemed like in the press, in the media that they were crushing it and they were growing really fast and they raised all this funding. Like, can you talk to us about that?
Wil: Yeah, and you know what? All those things you just said were entirely true. Zirtual was an amazing business. The people that worked there loved it, the people that were the clients loved it, and it was growing faster than I’ve seen most startups grow. So all those signs sound really positive. The problem was the team didn’t have any operational plans in place to manage the utilization. It’s kind of this simple. You’ve got 400 people on staff, and these are all W-2 folks, meaning they were full-time salary folks, which didn’t matter. People thought it was W-2 versus 10-99, which in the states means, you know, contractor versus full-time employee. That had nothing to do with it.
The problem was if you have 400 people that are billing at 75% utilization, that’s the equivalent of 100 people billing at 0% utilization. And 100 people doing no work and having no contribution in any company will sink that company, especially a startup. And that’s essentially what was happening. But it was hard to see, because everybody looked and acted really busy, because they felt they were busy. And they were growing so fast that their biggest issue was trying to get enough people to staff all the work. So it felt like they were doing all the right things, but when you really peeled back the onion and looked at the numbers, they were losing money.
Nathan: I see. And how come they didn’t pick that up?
Wil: They didn’t have strong financial controls in place. The company, frankly, just grew too fast. It grew beyond what the founders and the team could handle. And we always think about that as a nice problem to have, but there are consequences to that problem. And having mounting losses without shoring them up is definitely one of them. Now typically what happens is when a company grows as fast as they were…and I can’t disclose the actual numbers, but they were in eight figures as far as their annual revenues, and they were probably gonna double it over the next year. And the company was probably on track to go public within three years. So this wasn’t an insignificant company.
But with growth comes bigger cost if you get things wrong, right? Nathan, if you and I start a business and we’re doing $10,000 a month in revenue, and let’s say we have $8,000 a month in cost, and we get a couple things wrong, we’re talking about ones of thousands of dollars. But if we start billing over $1 million a month and we get a couple things wrong, we have the opportunity to lose millions of dollars within months. And that’s not easy to recover from.
Nathan: So what kinda things can people look for if their company is growing really fast, it all looks good, you know, having growth pains around staffing, operational, you know, just keeping up with demand and iterating product or service or whatever? What kind of things can we learn from your experience?
Wil: Well, a couple things. First is blowing off operational metrics to be able to say, “Ah, we’re losing money now. But that’s okay, because we’re growing.” That’s a weak answer, right? You should never be at a point where you’re blowing off hard decisions or hard questions, right? So in their case, the moment their operational numbers started to go into the negative, saying, “That’s okay, we’re growing so fast that it’ll figure itself out…” and I’m not putting words in their mouth. They may have never said that, by the way. I’m just paraphrasing. That’s not an okay answer, right? And frankly, I see it a lot, you know, among startups now where they’ll say things like, “Oh, we’re not making any money now, but you know, we’ll turn on revenue later.” Maybe you will, right? Or maybe you’ll just poorly manage the company into bankruptcy. And I think people need to be rigid with their financial controls. I think they should care about every dollar, both dollars in and dollars out.
I can’t begin to tell you how many CEOs and founders I talked to that don’t even understand how much money is in their bank. Those aren’t incidental questions. Those are the fundamentals of business.
Nathan: Yeah, I see. And what are your thoughts on, you know, raising funding for growth, sacrificing profit for growth? How do you know when, you know, you should stop? How do you know when to turn on the switch? Because this is a common thing in, you know, the times that we live in, right?
Wil: Yeah, and I gotta tell you, I think people often think about it the wrong way. And let me build on this just a little bit. I think people think in terms of, “My company needs to grow. I need money that I don’t have, and therefore, I should raise it.” And so, like, that makes sense. I’ve seen companies raise money. They seem like respectable companies. I read about companies raising money. So I guess raising money equals good, right? What they miss in that thought process is, “What am I actually trying to achieve?” And here’s where people start to shortcut that answer to their own detriment. They say, “Well, I wanna build a big, amazing company that succeeds and does X, Y, Z well.” “Do you? Have you thought about what that actually gets you, and have you thought about what the cost of doing that might be?” For example, if I said, “Hey Nathan, I wanna weigh 300 pounds and be pure muscle and look like The Rock, so I’m gonna take steroids.” You might say to me, “You know, Wil, Yeah, maybe you’re gonna look like that. Do you want to? Is there any cost to doing that? Because I’ve heard steroids are kind of bad, right?”
Think of where that analogy plays in. Raising lots of money isn’t necessarily a cure-all. It does guarantee a few things, however. It guarantees that you’re gonna be forever indebted to somebody else. It guarantees that if you ever wanna try to become liquid in this business, ergo sell it, that your barters become pretty high and most likely to a point where you’ll never get your money back out. It also guarantees that if you ever build an amazing business that does $3 million with $1 million of net income, that you’ll ever be able to take that money back out. It actually has far more negatives than positives, except in the media, we’ve really hyped up what the positives are that not enough people are talking about where it goes wrong. And I think that the myth of raising funding and the benefits compared to the costs and the downsides are dramatically misrepresented.
Nathan: Yeah, I agree. You know, we’ve never raised venture funding for Foundr. And to be honest, I find that process quite intimidating. But one thing that I play in my mind, Wil, is I think eventually, you have to, if you want to build a big enough company, right? Like, with Foundr, we’re nowhere near this. But for example, you know, $100 million-plus companies generally have to raise capital of some sort. Would you agree?
Wil: Yeah. Oh, sure. But this is where everything starts to fall apart in that thought process. People start to assume, “Well, if those companies got that big and they raised money, then in order to be that big, I need to raise money.” And some day that might be true, but it doesn’t necessarily mean that’s true for you right now. What I like to see companies and entrepreneurs focus on is I like to see them focus on, “How do I get to $500,000 revenue? How do I get to a $1 million revenue?” And so on and so forth. You know, I like to see them progressively work toward those goals versus assumptively saying, “Well, this is gonna be a $100 million-plus business, so I should raise money on day one.”
Remember, if the business is going well, you can raise money wherever the hell you want. The other side of it is look at how many company do decide to go down that path and fail. This is the part of the equation nobody talks about. Everyone talks about, “Hey, that company raised a ton of money and they’re big.” But no one stops and says, “Wait a minute, the 19 other companies in that venture firms portfolio all failed, so how am I so convinced that taking money is equal to success?” On the flipside, I actually have a pretty good rolodex of founders, you know, having been in this business for a really long time, and I know a fair amount of guys who have kinda gone down that path and they’ve made the big money. But do you know that I know 50 times more people that raised no money, built a $3 million business throwing off $1 million a year? And their lives are fantastic. I have yet to meet someone who’s done that and see how unhappy they are about it.
I think people are trying to calibrate to this lottery ticket mentality of building a business, which is unrealistic. Frankly, it fails far more than it succeeds. And again, nobody really talks about it.
Nathan: Yeah. Well, tell us, like, what else aren’t people talking about?
Wil: People aren’t talking about what they actually want their goals to be. I’ll give you two points of clarification there. One is, take “Foundr Magazine,” if you’re saying, “Hey, Wil, no matter how big this thing is, what I really want it to do is to educate young founders and kind of teach them that entrepreneurship is a true path that they grow on and become successful with. But your mission and your goal remains the same, right? So I like it when people decouple their goals from the size of the company, because they’re often not quite the same thing. Does that make sense?
Nathan: Kind of. Can you explain that in a different way?
Wil: Yeah, sure. So if your goal, which happens to be the same as my goal around helping entrepreneurs grow, the size of the company that we build to do that may be irrelevant, right? If Startups.co is a $1 million company, a $10 million company, or a $1 billion company, no matter what, we’re still gonna be helping startups grow. And as the founder, that’s what’s most important to me. So if I’m taking on money in order to, like, get to a huge size, because I’m saying that’s how I accomplish my goal, it’s not. I’m gonna accomplish my goal no matter what size I’m at. I may affect less people, but my goal will still be accomplished. And I think people keep assuming that the only way to achieve their goal is to be a $100 million company. Most companies aren’t $100 million companies, and yet those founders achieve their goals just fine.
Nathan: Yeah. I was going to say you like to shine, and you like to talk about the non-big startups and the everyday, you know, business owners. And you have a lot of appreciation for them too, right?
Wil: I do, and it’s not because I don’t appreciate that the big venture-funded outcomes, it’s just that I’m just not myopic about it. You know, there’s nothing in my mind that says, “Oh. Well, those are the only ones that matter, and nobody else does.” In my mind, what I get excited about is the founder’s journey. So if I sit across from a founder and she’s saying, “Hey, I’m opening up this cool restaurant. It’s all I’ve ever wanted to do. It’s gonna be pure vegan, and I’m gonna create the best food ever, and I can’t believe I get up every day, interact with customers. And I’m like, “You won. That’s what this life is all about, is about finding that one thing that you’re super passionate about and building your whole career and your life around it. Like, that’s amazing.” And if she says, “Okay, in best case, we’ll do $1 million a year in sales.” Who cares? I’m like, “Awesome,” right? Conversely, if I’m talking to a founder who says, “Hey, I just raised $100 million. I’m gonna build a $1 billion company and sell it,” that’s awesome too. If it aligns with what your goals are, I don’t really care what the size of the company is. I don’t think that drives relevancy. I care about whether the company’s meaningful to you.
Nathan: Yeah, that’s where it’s at. Well look, we have to work towards wrapping up, Wil. I’m really enjoying this conversation. Couple of things I wrote down is, you said that you’re quite a creative guy, but also, you’re a numbers guy too.
Wil: Yeah, it’s very unusual. I actually get highly involved in every single part of our business. I haven’t met many other entrepreneurs that are this way, but I spend just as much time going through…I am our CFO. So I’d spend just as much time going through our numbers and our balance sheets and thinking about how we’re gonna prep for taxes as I do doing design work, writing copy, as I do working with the sales team, as I do doing business development, looking for more deals. I literally touch every aspect of the business. If you’re on Startups.co, on the site, chances are I wrote the headline. If you click on the Terms of Service, chances are I reviewed the legal. If you get a newsletter from us, chances are I’ve got a sketch of where I sketched out what that newsletter template looks like. Pretty much everything.
Wil: I love it. I absolutely love it. And we’ve got a huge staff here, so it’s not like I do it all by myself. But I actually get just as excited about every aspect of the business. I don’t even have a favorite. I’m just as excited about our editorial as I am about how we’re structuring new legal agreements. I know it sounds bizarre, but I really am.
Nathan: Yeah, okay. Do you find that because you switch focus on many different parts, you don’t get as much leverage or you lose time?
Wil: Yeah, I’m militant about my time, which is tricky, because that essentially means you need to be sometimes short with people. And I like to think of myself as a nice guy. Like, you know, I don’t wanna be rude to people or anything else like that. But I often kinda need to get to the point quickly, and so if you’re a creative director and you’re sitting down and say, “Hey. Well, I’ve got some new designs for Startups.co,” I need to jump quickly to “What’s the point, and what’s the critical decision we need to make right now?” And again, I try to do it in as friendly a way as possible, but I don’t have a lot of cycles to kind of just sit and think about things for a long time or ponder. I kinda need to go to decision mode in everything, which is frankly what I enjoy more anyway, so that works out.
Nathan: Gotcha, okay. Couple last questions. You’ve been building and growing startups for 20-plus years now, is it?
Nathan: What does it take to build a successful company? You talked about goals, but you know, you’ve built big businesses, and I think probably that’s what excites people the most that are listening. What does that take? Can you give us, you know, three key things that you’ve seen that’s, I guess, you know, besides technology advancements and the time’s always changing? What does that take?
Wil: The first thing it takes is a tough question. The most important is somebody to be really passionate about what they’re trying to accomplish. And I kind of split this in two directions, because this gets, I think, messed up a lot. One type of passion is, Nathan, probably what you and I have about how we’re so passionate about startups and founders, right? Like, we do this stuff on nights and weekends, not because we’re getting paid for it, but because we’re just so nerdy about it, right? That’s the passion that I love moreso than anything. And when I see folks that align what they’re doing with that kind of personal passion, their chance for success is always higher because they’re less worked up about how complicated this whole business is, because they’re so damn excited about what they’re actually doing.
The other side of it are folks that are really excited about the idea of success but not necessarily the idea that they’re working on, right? You see this all the time at, like, pitch competitions, etc., where a team got together and they say, “Hey, here’s this app we’re working on.” And you ask him, you say, “Do any of you personally have a connection back to why you’re even building this?” And they don’t. They liked it because nobody else had built it, and it’s novel, right? And that’s okay. Not every business is a passion play. But I tend to see those fail more often because there’s not that extra gear that’s built into wanting to see that business succeed at any cost. It’s more like, “We wanna see this business succeed if everything goes well. But if it doesn’t, you know, this isn’t really what we’re tied to for life.”
So the level of passion connectivity is definitely important. I have yet to see any combination of if you went to this school, if you have this IQ, if you have this background, if you worked at this company before…I’ve seen every possible combination of an entrepreneur, and they all seem to work. There is no silver bullet among backgrounds. I mean, I gave you my background. No one could be less qualified to start a company than I was and yet still somehow made it work.
Nathan: I see. And anything else?
Wil: No, I mean, again, people talk about passion drive, and those things are fairly kind of amorphous, but what I tend to look for in the entrepreneur early on is are they asking the right questions or are they engaged in the right way? The right questions are, “Hey, I’ve been trying to find as many early customers as possible to test my idea, to test my widget, etc. Is there anybody else you could put me in front of that could tell me whether or not they would buy this product?” What I hear a lot of is, “Hey. Well, you work with lots of startups, what do you think of this idea? Will it be successful?” I have no idea. Unless I’m actually your customer, like, my opinion means nothing. But the folks who are already trying to get their idea, their concept, their product into the hands of actual customers, time and time again, even if the product is ridiculous, that level of focus and that kind of drive always seems to work out.
Nathan: Love it, awesome. Well look, we will wrap there. Just final question, Wil, is where’s the best place people can find you?
Wil: You know, I’m super accessible, among other things, and nobody ever believes this, but my email, [email protected], which is…you can use one “L” or two, actually does go to me, and I actually do respond to all my email. We’ve got a million people on the platform. They get emails all week long from [email protected] And believe it or not, enough people actually hit the reply button, and I do reply to all of them. So if you’ve got an idea, if you’ve got something you wanna share, whatever, feel free to email me. I actually do spend time with as many people as possible.
Nathan: Yeah, wow. Okay. Well look, thank you so much for doing that and sharing your details, awesome.
Wil: Happy to.
Nathan: Awesome. Well look, thank you so much for your time, Wil. It was an absolute pleasure.
Wil: Yeah, thanks for having me.