Noah Kagan – AppSumo 1 of 2

“Finding cofounders is a crux people make not to start; it’s much easier to find them when you have momentum.” AppSumo is a daily deal site for software apps.

Hi, this is Matthew Wise with FounderLY. We empower entrepreneurs to have a voice and share their story with the world, enabling others to learn about building products and starting companies. So I’m really excited today because I’m here with Noah Kagan. He is the founder and CEO of AppSumo. AppSumo, in the simplest sense, is happiness for entrepreneurs. At least that’s what Noah… that’s how he describes it. So, with that said, Noah, we would love for you to give our audience a brief bio.
Yeah, so I’m not a CEO, I’m a Chief Sumo. A CEO is so formal, it’s what big companies do, and if we ever become a billionaire company then I’ll be called a CEO Chief Sumo. And so a quick bio on me. I went to Berkeley and double majored because I couldn’t figure out the pure science side of business and economics. I wasted a year at Intel. I ended up being number 30 at Facebook, number four at Mint, and then I started a company called KickFlip, which became Gambit, which is one of the leading payment companies for social games. Grew that to about $30 million in revenue and I left there to… it was just a money-making business and I wanted to move to something that actually created value, so we started AppSumo to help great companies find great customers. And so we solved the number one problem of everyone that’s doing a business, which is finding customers.
What is AppSumo? Who is it for? And why are you so passionate about it?
That is a great question, so AppSumo is kind of a culmination of everything I’ve ever done. It’s taking the marketing idea of Mint; it’s taking the kind of advertising stuff I learned at Gambit and starting a business at Gambit; it’s the Facebook stuff of building a product and putting it all together. I love the fact that people love what we’re doing, that’s more important, that’s probably the most important thing to me, that I get emails daily, or maybe it’s a few times a week, where it’s like, “Thanks for making this,” or “Thanks for this deal,” or “Thanks for that,” and that alone is why I do this, why we do AppSumo.
What are some of the technology and market trends that currently exist, and where do you see things developing in the future for your space?
That’s a great question. So I think what will help is backtracking on why we did AppSumo as a startup, out of all the different ideas we could have done. So we looked at a few different key indicators. So one,, it is a (unintelligible – 0:02:20.7) business and it is a $10 billion business plus. OK, so they are one of the key (unintelligible – 0:02:26.1) businesses, Web-based software, are there’s going to be more of them? OK, so that’s one thing. Second things we looked at was MacHeist and (unintelligible – 00:02:32) we said, “All right, this is the distribution method that’s really successful,” I think MacHeist did a million dollars in a week profit. OK, so that’s the method, there’s the market, and then with Gambit we were doing payment solutions for social games. So we’d go to the guys, like 18-year-old kids and kiss their ass and, “Oh, please, please use us,” and I’m like, “Why am I kissing all this ass?” And everybody that we were working with was like, “We don’t need another payment solution, you know what we need? One thing: customers.” OK, so we took kind of those three things and that was the trend that we noticed was, how do we get higher up on the food chain, which is customers; what is the market that’s growing and going to be much, much bigger, which is Web-based software, and then what is the distribution method to help solve that problem, and that was the MacHeist kind of bundling software solution.
What’s the story behind AppSumo? I know that you explained kind of how you got to or discovered the opportunity, but what led you to actually launch AppSumo? Was there an aha! moment or… what’s the story behind that?
That’s a great question. So I was doing Gambit, and Gambit was built to make money, it wasn’t necessarily… it was more of an opportunity business, which I would never do again. I’ll never do it again and I discourage anyone from ever doing that. We did that and I realized that I was tired of wasting my time because I live once, I never get these days back and so I wanted to (unintelligible – 00:03:51) that I really enjoyed working on and that other people really valued, and so I was like all right, I want to do something that I would really use in life and this is something that I was like I love helping people get customers, I like marketing, and so AppSumo was that. And so it came about with the things I talked about earlier. We were at a bar just joking about names and I think we were going to call it either Software Taco or Butter Unicorn, and then one of the guys drinking said AppSumo, and we ended up just kind of building it and I’m a little digressing, but we ended up building it in about a week with me and a team in Pakistan for 60 bucks and so I was more kind of wanting to build products that people were really like, “Thank you for doing this,” and so that was really the goal of what we were trying to do. And so for the first six months to a year almost it was just kind of more of a hobby, you know, people really like what we’re doing, I’m not stressing out, I’m having fun. Right, I live the lifestyle I want to live and I get a build stuff that people are enjoying. Does that… I don’t know if that answers your question.
It does, thank you for sharing. Who are your cofounders? How did you meet and what skills were you looking for in a cofounder? How did you know they would be a good fit?
So I wasn’t even looking for cofounders, I kind of discourage that from a lot of people, I think it’s kind of a crutch and an excuse most people make. With Gambit, I liked as individuals the guys that I was working with are very good guys, as partners it was horrible for me and I’ll say that candidly. Mostly because I think we jumped into a marriage in a shotgun, Britney Spears relationship without really understanding each other and there’s these dichotomies in these partnerships where the business guy, the idea guy in marketing who is supposed to bring in customers, always feels like maybe he doesn’t have stuff to do or doesn’t create enough value and there is resentment in the technology guy who is doing all the work, maybe. And so with Gambit it was like a three-headed monster where like one guy partners this, I was there, and so I realized after that, I wanted to be accountable for the outcome of the business and I wanted to be kind of the… not dictator, and I’ve had to change a lot over the years, I used to want to be more of a dictator. Now I want everyone to be empowered.
So I wanted a business that I would start it, I’d create it initially, and then I would share it with other people to be all owners in that business. So I’ve brought on other partners in the business, and I try to give everyone in the business equity and let everyone be the CEO. And so in terms of cofounders, right now, I have Chad, and Chad is amazing, and Chad has actually been a (unintelligible 0:06:00.2) story. Where Chad was one of the … he was the first customer of Gambit so I worked with Chad for about a year and a half and when I’d have coding questions or I’d be like, Chad would actually do the coding, as a customer, for our business. And so I got to know him really well, and I liked him as a person, and we hung out and then I started doing AppSumo and I said, “Hey Chad, you know you’re not really doing much, why don’t you come do some stuff with us? I like working with you.” And so he did some stuff with us and it was just a horrible experience, and I didn’t like Chad, and we actually broke up.
And I talked to Andrew Chen our advisor, our super advisor, and he was like, “Basically it’s like micro versus macro.” He’s like, giving up Chad and finding someone new is a micro thing that in a macro picture you need to keep him. So it’s a micro decision versus a macro decision and in a macro we have higher level priorities than finding another developer and getting them in the culture and all that stuff.” He was like, save Chad. And so I went up to Chad and I was like, “Man you know, I like you as a person, why don’t we work out when we work together? What’s missing on this?” And we just talked about it, and I think I didn’t empower Chad enough so I said, you know, “I’m going to let you make more decisions, I’m going to try to stay away from you more, let’s communicate more often.”
That was one thing that we found, we were talking every Monday, we’d do a Monday check-in. And we’d come back the following Monday and shit wouldn’t be done and I’d go ballistic, I’m like, “You don’t follow through on things, you’re not reliable, you’re not all this stuff,” and so what we noticed is that Chad’s like, “Yeah but I’m doing all this other stuff that you don’t see and you’re asking me for other things,” or “It’s harder than you realize,” and I can understand coding enough that I know how long coding should take. So what we decided was we fix the problems in that relationship and it’s a marriage so we spent time working on it.
So we meet Monday, Wednesday, Friday, actually before coming into this interview I was talking to Chad. Every 11 a.m. Monday, Wednesday, and Friday we talk. We have a shared goal list, so he sees what I’m working on, because that was actually a problem I noticed is that I’m like, “What are you doing Chad?” but it’s something where he should be able to make me accountable and say, ‘What are you doing?” And so it is shared accountability. We have group chat live all day, so, “Hey Chad what’s going on?” and basically we looked through the issues that both of us were having and we resolved them with specific changes that now Chad is… I couldn’t live without Chad, like I just texted him yesterday, I said, what did I say, I said, “You are my secret weapon,” … not secret weapon, “You are the greatest thing ever.” Right, because he’s at a point now where, Chad is not like next to me, Chad is evolving the business and adding so much more value he’s like a plus one. And so that in terms of a cofounder is amazing.
So I would say as a suggestion for and a takeaway is, spend a lot more time working with someone before you commit to being a real partner and a cofounder, and don’t let that be a bottleneck in what you’re doing in your business. A lot of people make the excuse, “I need a cofounder, I’m not technical,” you don’t need to build anything to validate a business idea, one. Two, you can use, oDesk, Guru, any of these to prototype. It’s much easier to convince a partner, a cofounder, when you have momentum. Chad came on to the business when we had a proven model, we had growth, we had like some strategy and it’s working. That is much easier to do versus like, “Hey Chad I have this idea, you build it for me.” And so I would say build something or show that it works and then try to recruit a partner that complements you well. So Chad is more technical, like he drives it, he’s going to lead the technical team.
I have Andrew Chen on the advisor side because I’m very tactical and I’m trying to be better at strategy and so Andrew brings the complementary to me of strategy. So he comes on the high-level framework strategy and I come and help… you know, I could help with that but I come and help implement what we talk about as a strategy. So I think it’s finding people that are complementary to you as well.
From idea to product launch how long did it take and when did you actually launch?
It took total about a month. The product was built in a week and it could have been done sooner. So what initially happened was I was trying to build two products. I wanted to build a (unintelligible – 00:09:44) model around software and I wanted to build like a Yelp-like directory for software. And I was like there’s no… if you’re looking for (unintelligible – 0:09:52.6) software you type Google but they’re all shitty and there’s no great reviews. So I’m building them in parallel and I talked with… what the hell is his name from (unintelligible – 00:10:00) the guy from (unintelligible – 00:10:04) I can’t think of his name, um, he’s… God damn it. Anyways, so he was like, “Dude, you’ve got the product, it’s done, just focus on one thing and put it out,” and I was like, “Yeah, OK.”
So we built the product in a week, I basically, I could have used WordPress but I have to go to PHP, like I went and searched like user registration PHP code, and then I got a team in Pakistan to build a backend with PayPal. And then with the business to validate it very quickly I said, “All right, where is traffic and where is customers?” And so I looked on Reddit and I knew that Reddit I could buy ads and you know it’s relatively… it’s not as great, but it was OK, and I know the guys at Reddit so maybe they’ll give me some free ads. And I was like all right, well what is something that they’ll buy? And I looked at (unintelligible – 00:10:40) which is the photo hosting that everybody on Reddit uses. So I went to the (unintelligible – 00:10:44) like, “Hey I’m trying something new, I’ll pay you $7 for every one I sell, does that sound OK?” And he was like, “Sure, I don’t care, whatever,” and Alan was great. So I basically had guaranteed traffic, had a guaranteed customer base, and I built the thing in about a week and I put it together to see if people would actually buy it. And I kind of made a mental note that if we sold about 100 then we would go forward and continue the business.
And I wanted to just do something I enjoyed. I wanted to do something I’m like I’m excited to wake up and work on, and there’s a purpose to it which is helping people get customers and helping customers find cool stuff. And put it together and we sold about 200 and I decided to keep doing it as a hobby and keep moving forward with that business. So, total, about a month, a week to actually build it.

  • Nev

    This guy is awesome possum

    I <3 AppSumo!


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