David Hauser, is the co-founder of Grasshopper Group – a company that serves and empowers entrepreneurs via its powerful tools like Grasshopper and Chargify. Grasshopper Group was listed by Inc. Magazine among the 500 Fastest-Growing Private Companies in America; in fact there are many such accomplishments that it got.
David has had an inspirational journey with quite a few amazing recognitions such as Young People Who Rock by CNN, Among Top 5 Entrepreneurs Under 25 by BusinessWeek, and 40 Under 40 Business Leaders by Boston Business Journal and many more, under his belt. Working on his own company is not the only thing he does; his strong entrepreneurial spirit has allowed him to serve as a consultant for various companies as well as a mentor to emerging entrepreneurs. In other words he lives by his motto “Empowering Entrepreneurs to Succeed.”
Our thanks to Jonathan Kay, the ambassador of Buzz at Grasshopper Group, for arranging an interview of David with us on Foundora. In this interview, David speaks about his background and journey from GotVMail to Grasshopper Group, and speaks about the re-branding, his lessons learnt and much more.
Lots of entrepreneurs say they were always going to be an entrepreneur and were selling lemonade on the side of the road when they were 2 years old and while I knew from an early age I wanted to be an entrepreneur I was not selling lemonade growing up in Manhattan. Very early on I was more interested in creating and ultimately selling things than I was playing video games. My parents were very supportive of all the different things I tried, from selling stickers to other kids to starting a web design business. To this day I remember a lesson my Dad taught me when I wanted to start a web design business and needed an very expensive Dell computer (when Dell was just starting), he said told me he loved the idea of starting my own business and he would loan me the money for the computer but I must pay him back. It was not a gift or something that was my right, but the first investment in my business and it was not free.
From there I started all types of businesses but most had some technology component which interested me the most so I stuck with that. Prior to graduating high school I was involved in starting a company, Return Path, which is still very successful today. At Babson College my business partner and I met and GotVMail, now Grasshopper was born.
The concept for Grasshopper came from our own need for a service to sound more professional, stay connected and present that image we wanted. After being involved in many startups and our own ventures we were looking for a service like this and could not find something truly design and made for entrepreneurs, so we created it. The market said we were right and we created an industry around virtual phone systems and have since served hundreds of thousands of entrepreneurs.
When we started there was not even a name for what we were doing, so there was market confusion and a lot of talk about VoIP. It took a lot to stay away from that, make a clear message and help the market understand exactly what it was that we do.
We have grown tremendously from our original concept and product to fully realize our core purpose of empowering entrepreneurs to succeed. At Grasshopper Group we have launched Chargify and Spreadable as part of the beginning of a suite of products and services for entrepreneurs.
You have never raised any funds till date yet you have been profitable since the beginning. How did you manage to bootstrap so successfully? What practices in terms of development, marketing and hiring helped you to stay lean on costs?
Starting with almost nothing and no backing was challenging for sure and made us very good at selling our story. From day one we had to sell our story to vendors and partners to get the payment terms needed to allow us to conserve cash. Another important thing about not having funding was we only purchased what was required, hired for exactly what was needed and could be paid for and always made decisions that helped us grow organically. We did every job before we hired for it, so we had a great idea of what was needed for that job. Unlike today we had a huge challenge in infrastructure costs, we have real data centers, servers, and telecom equipment that today could be outsourced during the startup phase.
When bootstrapping a company there are no best practices for development or marketing to keep it “lean”, you just have to. What is more difficult is continuing those same actions that made you successful when you have more money to play with and are profitable, that is when you can make big mistakes.
Startups often opt for free and open-source software to cut down costs. But, you mentioned in some previous interviews that you incurred costs on the Oracle database when you started. What was the database choice based upon and why didn’t you go with an open-source, free alternative MySQL back then?
Having used MySQL for many projects in the past the decision to purchase Oracle for the database was a large one and continues to be expensive today. Operating in a 24/7 telephone environment is very different than a web environment and that is the reason we went the direction we did. A one or two second delay in some web application is nothing, that same delay on the phone is very noticeable and most people would say very bad, so speed was one factor. When your phone does not work that is different than a 15 minute downtime for your photo sharing application and could mean losing a big client or not getting the call you need, so reliability and uptime was another factor.
Looking at the available options Oracle was the most mature and proven database for very fast and reliable applications. Take for example that until recently MySQL could not handle multiple nodes very well or replication to a read only slave. Oracle had been running RAC or Real Application Clusters with cluster of 10+ nodes for many years and MySQL had just started to test this functionality at an enterprise level.
The question I would ask is, if we were starting today would we make the same decision? Since I have not had to do all the research based on current market conditions I cannot say 100% and I would need to take the time to review newer entries after MySQL, my hunch would be yes, we would purchase Oracle again for the database side of the business. When you have to run large clusters of highly available databases with small data sets it is still the best option.
You have rebranded GotVMail to Grasshopper and that was an innovative & exciting operation, can you tell our readers more about it? What do you think entrepreneurs should consider while naming a brand or a product?
The GotVMail to Grasshopper rebranding or relaunch was a very exciting time as well as a lot of fun. For years we knew the name did not work, from spelling it on the phone to radio ads it was clear. What became even more clear is it would never be a true brand, just a product name. The goal of the rebrand had two core goals, first relate entrepreneurship to Grasshopper and second get some buzz around it. Interestingly the fact that our old brand was something else was a message only current customers saw and was not a focus.
After we decided we were changing the brand, picked Grasshopper and got the domain name grasshopper.com we decided we needed to do something a bit different. For us that meant a multi channel message that included physical mail, an item, social media and a video. What we came out with was sending 5000 bags of chocolate covered grasshoppers in FedEx envelopes to influencers all over the country with no information other than a URL to a video. This generated a huge amount of buzz and most importantly met our main goal of relating the word entrepreneur with the brand of Grasshopper. A month after this launch we published a case study that showed the actual cost of everything we did, the results, metrics, and anything else we thought would be helpful for other entrepreneurs to learn from.
My advice to other entrepreneurs when naming a product or brand is make it easy to spell, easy to remember and stop with the silly domain names. This will make it easier in the long run from radio ads or just telling someone your email address but the most important factor is when it is easy to say and type you will get more word of mouth referrals.
Grasshopper seems to have an amazing work culture. Tell us how you built it and more importantly, maintain it. Also, what do you think is necessary for startups to do in order to create a work culture that drives both productivity and innovation?
Culture really comes from the entrepreneur articulating and promoting their core purpose and core values and then hiring, training, and firing around them. The process can sound very daunting but the value that you see after it is done is beyond amazing. Core purpose answers the question of why your employees work for you (and it is not money), why your customers buy from you, and helps to answer the difficult questions. Core values are the how, how you treat employees, customers, vendors, how you do your job everyday and are much more powerful than policies or rules.
The key to making core values work is you must live them every day and use them in everything you do. These values cannot just be written on a card or website and forgotten, put them all over the office, use them in praise as well as coaching, and talk about them all the time.
You have a complete different approach to PR with a dedicated ambassador of buzz to nurture and build an army of brand loyalist as you say, please tell us more about it and what exactly do you mean by brand loyalist? What’s the day-to-day role of the ambassador of buzz?
From the day we started it we clear the power of PR and we wanted more of it, over the years we tried everything from in house traditional PR to the best agencies in the world and finally found what worked best. That was doing it ourselves in a very different way, where we turned it into a sales function compared with a writing and press release function. Gone are the days of press releases and trying to get the editors attention for carp they do not care about. We started calling, emailing and ultimately building relationships with reporters, bloggers, photographers and those that had a job to do with our core purpose of helping them do their job better. When we hired Jonathan, our Ambassador of Buzz, he had no PR experience at all and was just good at listening and sales, which was key to making this all work.
In the past year or more we have built up the position beyond just listening and pitching to really build brand loyalists across many channels. If it is helping a customer or just an entrepreneur we meet get the press that will help their business or going to a bar camp and participating. Our theory is very simple, be a human that cares about entrepreneurs and good things will happen.
The issue with Chargify was a very interesting one and something that helped us learn a ton about our customers, the community and what freemium really does to a company. After replying to hundreds of customers on every imaginable channel I wrote about the lessons learned on my blog. One thing we heard loud and clear was people cared about what we were doing and providing and us taking that away did not make them happy. Maybe it was our mistake for even offering a freemium option and I doubt we will ever do that again until a company is profitable, maybe it was how we communicated, but really our biggest failure was not understanding the community and making assumptions. When running a portfolio of companies you gain a tremendous amount of experience, knowledge and scale that you can apply across those companies but you need to be careful. Just because our Grasshopper voice product community responded a certain way to a price change does not mean the same will happen with Chargify.
There are many things we could have done better or differently but I have no idea how any of those would have turned out, so I cannot spend more than a few seconds thinking about that compared with moving on and making the business successful. The funny thing in it all was, TechCrunch covered us when they would not before, we were #1 on Hacker News for two days in a row, Inc Magazine wrote about us and we had a week of very high order numbers. Some people have said we did it all on purpose, I wish I was that smart and could do that, but it was not on purpose.
Now that you realize your mistake while changing the Chargify’s pricing model, what do you believe now would have been a better way to move from Freemium to Premium or to change pricing?
Never launch a freemium pricing model until a company is profitable and it can become a paid advertising channel, Mail Chimp wrote a great post about that. However if I had to do it again, it would be communicate early and often, get more buy-in ahead of time for key influencers by keeping them more involved and provide a longer and more clean transition period for current users to the new pricing.
I know it sounds silly but my advice is just go out there and do something. Build what you can, buy what you can, and just make it happen and worry about the rest later. You can spend years thinking about the market opportunity and business plans but today you might as well build a MVP and get some customers to tell you what they really want. The most important thing to remember is find what you are passionate about and do that, don’t build a business just cause there is an opportunity as someone with more passion will beat you.