Dan Martell – Flowtown 2 of 2

“A great product will always market itself.” Flowtown is a social marketing platform that empowers businesses to turn their best customers into their best marketers.

Matthew: We know that founders face unique challenges when they decide to start a company. What was the hardest part about starting Flowtown and how did you overcome this obstacle? 

Dan: I’ve been doing start-ups for 10 years now so “hard” is relative. Everybody talks about how emotional it is. I don’t think people realize if you’ve never done a start-up, where the highs are super high and you think you’re going to conquer the world (I call that the exclamation point moment), to the lows are super low, almost depressive lows and I call those the question mark moments. It’s like this big pendulum all the time between taking over the world to, “I don’t know how I’m going to make payroll tomorrow,” to, “Oh my gosh,” or the person just quit or whatever it is. 

The challenges are always there so I can’t really say one of them that’s . . . hiring is always a challenge as well as when we were doing our fundraising, even though we did it in a four-week period and it was really interesting. We raised about $750k in our seed round. There were moments, even along that process, where we thought, “This is going to happen,” and then we were like, “Okay. Maybe this won’t,” because we got new information or we heard about something. So no specific thing, but there’s always stuff. If today’s awesome, I just know in three or four days, I’m going to have to deal with something and I’m okay with that.

Matthew: Since you’ve been operational, what have you learned about your business and your users that you didn’t realize before you entered the space?

Dan: That’s a great question. Our space is very SMB, SMB being small business owners. There’s another segment that’s a VSB, which is a very small business owners. I call those the independents. What we learned in our first version of our product is most small business owners do not self-service. They’re not going to seek a solution. The early adopters will, definitely. I think what happens is most of our founders, especially if they’re going after the SMB space, they confuse who is the customer. 

What we’ve learned now, is our customer, our marketing advisors or marketing agencies, those companies charge you. The ones that are out there kind of on the floor level are saying, “Hey, do you want to do social? Do you want to do physical, Twitter? You want to run campaigns? You want to understand it? Let us help you.” They’re the ones that are using our tool in the backend to support their customers. 

That was a big lesson learned, like who is the person that gives you the dollar because if you focus your marketing on an independent consultant or whatever and you find out that that person actually outsources the tool that you’ve built to somebody else and you’re not talking to them, it could be detrimental to your start-up. Understanding who’s going to give you that dollar is probably the biggest lesson we’ve learned.

Matthew: Lots of people admire entrepreneurs because they appear to make it look easy to start companies. We know it can be very, very difficult. We want to dispel some myths here so my question to you, Dan, is what talent or skill comes easier intuitively to you? What’s been difficult managing that?

Dan: The stuff that I think that we make easy and is kind of like, just part of my DNA is the marketing side and the relationship side. I love people. I love meeting people. I love hearing about their passions. I love supporting and helping them. Approaching thought leaders, approaching customers, approaching investors has always been somewhat easy because I think they see that we have a passion for what we’re doing and we’re genuinely interested in what they’re doing and that’s easy. 

The part that I found really hard because I didn’t have to solve this problem at my last company or ever, was building great product. I spent a year learning marketing and if I had to go back and reset when I moved here two and a half years ago, I would say start with product. Understand how to build something that’s simple that people love, that the product itself has some kind of distribution aspect to it so that you can get new users from that one first sign up because that, to me, is the most important part. Marketing and press and relationships are definitely important but a great product will always market itself if you do it right. After the first year, from then to now, I surrounded myself with some of the smartest product people in the Valley.

Matthew: What bit of advice do you wish you would have known before starting Flowtown?

Dan: That’s a great question. I would say the best advice I wish I would have known would have been . . . I don’t know because there’s a lot of stuff. I would probably say on the funding level, I think a lot of people, especially when they move to the Valley and they want to do a start-up, their first thing is build a prototype, raise the money, scale, grow, exit. 

I really decided awhile ago that, Ethan and I, we want to build something that’s long-term, sustainable. It’s something that we’d be okay if we turned it in and that was the only thing that we did in our lives because we really want to build something meaningful in this world. That now being the case, I’m not sure if we would have been so quick to raise our round, although, no regrets. Our investors are amazing. 

When you start thinking about the equity that you give up and the opportunity and I had some success at my previous company, I could have self-funded it to the point of break-even. We did get to break-even. I guess just the financial understanding, like really understanding, “What does that mean? What does it mean for your investors?” because as soon as you raise capital, there’s an expectation that they want a return and how do they get those returns? Well, there’s an exit liquidity event usually within a certain time horizon. 

I just think now, especially with SaaS products and subscription-based text companies and microtransaction, once you get to a certain level of traction, you can potentially just finance that off of normal debt like most small businesses it do everyday. They open up new companies up. So I just think that the financial aspect, I wish I would have spent more time learning and I would suggest that to any other founder. Don’t be too quick to go raise when there’s just so many other options to get your idea to a certain level where maybe you don’t ever have to go raise again. That would be a really great outcome if you own 100% of your company and have a meaningful exit.

Matthew: What mentor has played a significant impact in your professional development?

Dan: So the number one mentor in my life is probably a guy named Ken Nickerson. Ken worked at Microsoft and was involved in the Hotmail acquisition. He’s just an amazing guy and Ken’s the reason that I’m in San Francisco. I remember when I was sitting in New Brunswick, up in Canada, I had just sold my company and I was thinking of moving here. People were essentially accusing me of turning my back on the profits and being very patriotic, it really hurt my feelings. I remember talking to Ken on the phone and I don’t even think Ken probably knows this, but I asked him, I said, “You know, I’m really torn. I want to go to see if I can do this, if I can go down there, build a company and be around some of the smartest people in the world.” He said, “The best thing you could ever do for the profits is go to San Francisco.”

As a mentor, he’s definitely been somebody that’s been, for those really big, key decisions in life I turn to. One a more local, regional level, everybody from Eric Ries to Steve Blank, to [Heaten] Shaw to Dave McClure, to Shawn Ellis, all the people that responded to my calls and e-mails. Because I showed up and didn’t know one person in the city. All those guys that gave me a 30 minute coffee and now have become really good friends, I look to them as people I turn to and consider mentors for sure.

Matthew: What advice would you like to share with our audience about launching a start-up? If you have to distill it, what are the key elements?

Dan: Key element is nail a very specific, simple use case that people find unique. I think unique is that part that people forget. You can be this or that or x or y or whatever, but unless within that first 30 seconds of your product there’s something that unique that you do to get somebody to stop and go, “Okay. This is interesting,” you’re going to have a hard time getting through all the clutter of all the apps in today’s ecosystem.” So I would say focus on that. Don’t necessarily launch but do get something out in front of real people. 

The two metrics that I look for are activation, which is how many people signed up and did something meaningful, and their retention, how many people in a week of activating came back and used your product. If you can get your activation to 60% and your retention to about 20% on a weekly basis, then I think you’re ready to launch because you only get that one chance to pour that fuel on the fire, which is a launch, to get that all those users to sign up and if you’re product’s not there yet, there’s just no point. Get something early out there that’s unique and then once you’ve got some metrics that look like they’ve got traction, then maybe it’s time for more public kind of a push.

Matthew: Before we close, I would love for you to give our audience your vision for Flowtown and how you hope it will change the world.

Dan: Yeah. So I guess since we’re not really talking about the features, per se, at a macro level, I want to build a tool or solution, a platform, whatever you want to call it, that allows great companies to do better. That’s the most exciting part of my day is that I know that the people that are using our tool today, they’re great companies because we enable companies that have promoters, advocates, fans, champions, whatever you want to call, you can’t have those people unless you’re a great company. 

We’re enabling great companies to grow faster, bigger. I think that, to me, would be, at the end of the day, if we’re known for that, if we know that we’ve had a tangible impact to a company that started today to get to a billion dollars in revenue in 10 years . . . I would have loved to have been a part of the Zappos story etc. I just think that if we can enable the next version of Zappos or Virgin America or all these great brands to kind of scale that, I’d love to leave my imprint on the world. 

Matthew: Excellent. Well, Dan, it’s been a great pleasure having you as a guest on FounderLY. We’re rooting for your success at Flowtown. For those in our audience who’d like to learn more, you can visit their website at www.flowtown.com and register to become a user. This is Matthew Wise at FounderLY. Thanks so much, Dan.

Dan: Thanks.


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