The Up-And-Down Struggle Of Starting 3 Companies: The Lessons Matt Ackerson Learned

31 Oct 2011 in Interviews

I never expected to find a mentor for my career when the cashier randomly included a magazine with my order of textbooks. It was September 2008, and I had just bought my textbooks for Clarkson University. It was in that very magazine that I first read about student entrepreneur Matt Ackerson. Digging around, I found him on Facebook and decided to reach out to him. Fast forward to today and Matt is a mentor and a good friend.

So, what’s his story? He is what some like to refer to as a ‘diehard entrepreneur’. From dealing with parents who constantly pressured him to quit and join the corporate world to the (warning: buzzword coming!gut-wrenching pivot he executed with one of his companies, this guy just doesn’t give up.

Matt started his first company while studying Industrial and Labor Relations at Cornell University. Since graduating in 2009, he has started two more companies. His current company crafted the redesign you see here on The X Factor. Today, he is going in depth about the specific steps he took to starting (and pivoting) his companies. And? He doesn’t sugarcoat the sheer difficulty of each separate experience.

Ladies and gentlemen, allow me to introduce Matt Ackerson.

1)   Before you started PetoVera, you created three other web businesses. Your first startup was Scrimple, which started as a class project at Cornell University almost 4 years ago. How did you come up with the idea for it and what was the turning point when you knew it could be a real business?

I didn’t know if it could be a real business or not at first. It started out as just a cool idea that we thought was exciting to build and work on, and maybe it could make money in the future. I was enamored with the idea of creating something that other people would use, find valuable, and that could stand on it’s own, separate from me.

I didn’t have any sales experience at the time so the idea of getting people to buy this advertising product I helped create was like a dream far off in the distance. Then when people actually started to pay after our free trial period was over (we made sure to tell everyone that we would charge for it in the future) it was like, “Oh… Ok, this is cool!”

2)   It seems as if you took your initial idea for Scrimple in college and gave it a ‘professional makeover’; stepping it up a notch to fit the restaurant market for your last startup, BlueSky Local. What was it that you learned from your first startup about the ‘coupon space’ and the process of building a new company that you were able to adapt to BlueSky?

There were 5 key lessons that I learned from Scrimple that I was able to apply to my next business (and even to my business today):

1 — Creating a consumer-facing or B2C business is tough. I learned that if you want to create a consumer-facing business you need to do a high volume of sales in order to make money. In the case of Scrimple, we needed a lot of people clicking the “Print” button since we charged on a pay-per-print basis.

Marketing to consumers (a.k.a. everyone under the sun) is pretty tough, even if you’re in a relatively small community and in college where word of mouth spreads fast.

2  Customers are risk averse, but many are willing to pay more than you might initially think. The second thing I learned was how easy it was for some of the businesses that we worked with to pre-pay for the online coupon ads and write us a check for $300… or even $600.

It wasn’t that big of a deal to them; as long as they saw that they were getting value. I thought that was an interesting observation: they preferred to pay a fixed amount rather than a variable amount based on the number of clicks they received. Looking back, this makes sense… it was less risky for them to pay once rather than pay a variable monthly amount.

3 — To get distribution, leverage that which already has distribution. I realized, when we changed Scrimple from online coupons to a discount card, that businesses had ‘pre-existing distribution’ that we could take advantage of. One of our best business customers said:

Hey, why don’t we partner? I’ll pre-pay you for these cards at a discount and then just resell them here for a profit at our cash register when our customers come in to buy food?

We did that and about 1 week after launching we were profitable.

4 — Hire slowly, fire quickly. I made a lot of mistakes in trying to build a team for the business. All of the people I worked with were good intentioned, but in several cases it was my fault for not recognizing sooner rather than later that they were not a good fit for the company. It ended up hurting the business and being a distraction for me personally. I let my emotions override what was often a clear and necessary judgement call.

Always evaluate people based on what they do, not on what they say. Set clear expectations about what needs to get done from the start and where the cut-off points are. This way there are no surprises and your decisions of whether or not to remove poor performing teammates are easier.

To give an example of a mistake on the hiring front, I had a business partner who I worked with for almost a year. When I removed him/her from the team, it had a terrible rippling effect since that person had a heavy influence on the other members. Shortly thereafter, my entire core team was completely gone… they all left. If I had stopped to think more about it all when it happened, I would have become utterly depressed. Luckily though, something pushed me forward and I ended up launching Blue Sky Local a few months later with an amazing co-founder and friend, Angel Villegas. That has been my most successful partnership to date.

5 — The last thing I would say I learned was that reoccurring revenue is awesome if you can build it into your business model. With the discount card business, we didn’t have that built in. We would have to get out there every year, sign up all the businesses again, and do a big marketing push to the college community (once again). It was a lot of work to put in for what ultimately was not a huge return (or at least one that we could live off of).

If we had built a subscription model of some sort, that would have provided much more predictability from month to month… making it easier for us to grow the business in the short and long run.

All of these lessons I applied to Blue Sky Local.

3)   Last year, the investor Mike Maples spoke to The Founder’s Institute about the gut-wrenching pivot that many entrepreneurs have to make in order to get their startups’ business model to a scalable level. Is there any particular time you can think back to while building BlueSky Local that you almost gave it all up or faced a gut-wrenching decision of fundamentally transforming your business model?

Yes, it was the point between quitting BlueSky Local and starting PetoVera (my current company which I look forward to working on for many years in to the future).

Towards the end of BlueSky Local, I was living at home with my parents again. I felt like a loser and I was told constantly that I needed to get a job and stop being lazy. I hated that.

Eventually I gave in and started looking for a job. I felt defeated. I went on three interviews. It was torture.

For other people who have “normal” jobs, you might think that’s a ridiculous statement… but it was torture for me. You see, doing only what you’re good at and what you love to do is a matter of integrity for me. I remember walking into my first interview at this aerospace engineering firm wondering:

Is a little piece inside of me dying right now? It definitely feels like it.

Luckily I had the good fortune of running into a friend, Dan Cohen, after my third interview. We had coffee across the street from the office where my interview had taken place. He asked me why I was looking at getting a job since he knew all I wanted was to do was start and grow a successful business.

I fumbled my words and gave him some made up reasons… the reasons everyone who compromises on what’s really important to them answers with.

He looked at me when I was done, and said:

Matt. That’s a lot of bullsh*t.

I was surprised, but I knew it was true. That night I went home and focused on figuring some stuff out.

I started to make progress with BlueSky Local, but it wasn’t enough. I realized that I hated selling door-to-door. I was alright at it, but ‘alright’ wasn’t good enough for me. Plus, why do work that you hate? That’s no way to live life.

So one night in May around 2:00AM I came to the realization that what I loved to do was create things. Yet, how could I start something that made money right off the bat and at the same time, could provide work for me that was enjoyable? The answer: web design. It’s one of the easier business models to start up.

That’s what I did. Less than 2 weeks later, I landed my first client. Two weeks after that I moved out of my parents’ house and rented my own apartment.

It was a great feeling, but there was a period there where things looked pretty bleak and uncertain.

5) What were the first 2 or 3 things you did once you had the idea to build a web design company after leaving BlueSky Local? For example, did you think of a name, register a domain, start designing mock-ups, write a business plan, or did you do something different?

After starting 3 businesses, I had realized that none of those things were critical to getting a business off the ground.

The only thing you actually need to start a business is a paying customer, that’s it. All the rest can be taken care of at some other point… but if you don’t have customers, you don’t have a business. Period.

With that in mind (though I was unconscious of it at the time), the first thing I did was to send out an email announcement to all my friends and contacts who I’d met in recent years explaining what I was doing and asking if they or anyone they knew was interested. I got our first customer from that.

6) Lastly, you have confided to me that although your parents let you work on your company out of their house after you graduated, they were not 100% accepting of your career choice to start a startup. What was that like? Would you recommend most young entrepreneurs to overlook the savings of building a startup while living at home with their parents and to instead get an apartment to avoid potential conflicts?

My parents are realists, and I’m sure I might respond similarly if I were in their shoes. In general though, don’t start a “startup” (in the hyped sense of the word) – instead, start a company that has customers, makes money, and can at least take care of your basic living expenses early on.

Who wants to live at home anyway? I care about my family but it’s easy to get sick of anyone if you live with them long enough.

BONUS: What one skill would you advise aspiring entrepreneurs to work obsessively hard at refining before they take the jump into the startup world?

Solving problems.

I recommend that you try to solve your own problems rather than other people’s since yours will be easier for you to understand. Plus, there is 10x less ‘guess work’. However, for the sake of practice, focus on solving problems in general. Even if it’s not something you can make a business out of, try to solve it. Learn to ask questions when people complain about something. And, listen. Learn to listen to yourself, as well, when you complain.

There’s a solution to every problem. In many cases that solution can be a product or a service.

If you get good at coming up with and developing solutions to people’s problems, two things are going to happen:

(1) Others will know to look to you as a resource for ideas, help, and information when they face challenges. This is a great benefit if you plan to start a business in the future, because you will already have people who are “in your debt” or at least receptive to any for-profit solution you might be selling.

(2) Your outlook will become more positive. You’ll start to see everything – even problems that once intimidated you before – as obstacles that can be overcome. Instead of accepting a situation and complaining about it, you’ll get into the habit of figuring out how you can make it better.

***********

Many thanks to Matt for all that he has done for me. He mentored me while I was President of Clarkson’s chapter of the Collegiate Entrepreneurs’ Organization and has been a good friend ever since. If you have any questions for Matt, drop one in the comments below! 

  • http://www.alearningaday.com Rohan

    Nice interview, John. :)  
    I really like his point about people being willing to pay much more than you expect if they see value. That’s very true as long as you’re selling to the right kind of consumer base. 

    In fact, when you have such customers, it often works well to have them pay you as much as they like. :)

  • http://www.johnexleyonline.com/ JohnExley

    LOOK AT THIS HUSTLE! A 4:43am EST (or my bad if you are west coast bro!), my man takes the time to hop over to my blog and check out a pretty long post and drop a comment. 

    As you noted in your interview with Joanne Wilson (http://www.alearningaday.com/2011/11/joanne-wilson-interview-iv-realacad.html), comments mean so much to the writer. It’s the same for me man… appreciate you taking the time to share your insight here. 

    As you point out, it’s a good lesson to learn. I haven’t started my own company yet, but one day I hope to. Holla soon Rohan, I’m gonna have to chase you down every time I publish a new blog post haha! Goodnight – john X

  • http://www.alearningaday.com Rohan

    Haha. I’m actually based in London. :) So, the day has well and truly begun. :)  

    Holla soon indeed. You won’t have to chase me down. I’ll be here by then. :)

  • http://www.johnexleyonline.com/ JohnExley

    No kidding bro, did you read about General Assembly coming to London? You should see their space in NY man, it is such a chill space. They are killing it. 

    Dude, mark my words – we gotta hustle together in London one day. By the way, any chance you are planning to attend LeWeb? I’ve got a buddy in Paris so I can stay for free, am a senior at Clarkson University so I can get the student discount, and within the next 10 days or so I will know if I can afford it… would be so sick to meet up in person there man. 

    It feels good to know you’ll find your way back to my blog sometime soon Rohan, thanks for the support and everything. Your reciprocity is really great dude. Have a great night in London mate, john X

  • http://www.alearningaday.com Rohan

    You too :) (No Le Web plans)