Building a Web Business When You Are 15 Years Old

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  • Event rsvp person iconMatt Mickiewicz, Founder of 99designs

We hope to see you at the next Soapbox. We'll update this page soon with interesting tidbits about the event plus the podcast!

About Matt Mickiewicz

Matt's was one of the most sincere, fun, laid back and brutally honest soapbox discussions we've had to date! He shared the story of his entrepreneurial journey, starting from when he disrupted the world of web design education with Sitepoint, at 14 years old, to the present, 13 years later, where he is successfully running two new businesses in addition to Sitepoint and currently starting a fourth one.

As always, you can listen to or download the podcast below as you read through the highlights. Quick tip - don't miss the last 10 minutes of the talk; we had some very juicy questions from the audience.

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Taking $10K Advertising Deals During Recess Before Social Studies

So how did you start a business when you were 14 years old, we asked Matt. Here is what he had to say:

Well, back in 1998, when I was just 14 years old I was having a real rough time finding information about HTML editors, SEO, hosting, domain registrars, etc., so I decided to create a site to compile all this information in one place. I called it Web Master Resources. There was nothing like it at the time. Three weeks later, the USAToday, NYPost, and LATimes covered the website. Windows Magazine came knocking at the door: 'You seem to know quite a bit about this web design stuff, we'd like you to write a column for us.' They were offering him $1 a word. I signed the agreement stating that I was 19 years old and went to work. The traffic to the site grew exponentially in the following months.

So how did you manage to run a business as you went to school?

Well, I'd line up a number of ad sales calls for lunchtime in the morning before school. During recess I'd close a bunch of advertising deals. The ones I couldn't get to — I'd tell them I have a few other meetings coming up while I really had to run to social studies.

Spinoffs from Sitepoint: 99Designs, Flippa, Learnable

Matt mentioned to us that his other three businesses were spun off from forums on Sitepoint. In 2005 he noticed that designers were playing a game of "Photoshop Tennis" on the Sitepoint forums. They would continually try to outsmart each other and create the best design for a made up product or website. Pretty soon, many business owners were asking designers to create designs for their sites. The idea for a proper marketplace, 99Designs, was born. Flippa evolved exactly the same way — people were selling websites on Sitepoint forums so the Matt decided to create a proper marketplace for a site auction. His latest business follow the same pattern.

Get Feedback From Customers: Build a Minimum Viable Product and Iterate

"You've got to test things out early on, and keep testing them," Matt said. He used his own businesses as examples to share how Minimum Viable Product helps prove that a business idea will work before committing resources to it:

99Designs started as a free forum. People were asking others to design a website for them. We tagged on a $10 fee to list jobs. The response was good, most of the people paid the listing fee. We spent $15K-$20K to create some basic software for a proper payment system around the idea. Once we saw doggy day cares, yoga studios, and spas listing their jobs we knew we had something. We then pulled a few people and went to work on this full time, separating the brand into a new site.
One of the competitors to 99Designs raised $3M. They worked on the product in secret and launched once they were ready. They invested all that time and effort with no feedback from the customers until the launch.

Ever try something that failed? "Sure," Matt said.

Matt mentioned that building great product is all about failing quick. He brought up a number of examples:

He tried selling ebooks back in 2000-2001 — people were barely comfortable shopping for physical goods. Did not work.

He tried video education back in 2005 — people were not ready for it. It flopped. About a year ago he tried again with his new business, Learnable — people were ready for it this time.

He tried to launch a marketplace for crowdsource naming called namemythingie.com. It flopped. The problem was that people got back 50-100 name suggestions and were so overwhelmed that they couldn't pick a name for their product. As a result they would not recommend or use the service again.

3 Pieces of Advice for Entrepreneurs

Matt finished up the talk with some advice for entrepreneurs:

1. Sales and negotiation are the most important skills for someone starting a business.

2. Don't hide from customers — Matt mentioned he had his personal cell number on Sitepoint, he answered support calls even on holidays for years. "People that hide behind their websites are dodgy." Matt said.

3. Be very careful who you work with, whether it's a vendor or an employee. Make sure people are truly on you side.

The discussion continued as we asked Matt about the criticism of 99Designs he's received as well as why Flippa received an outraged response when it launched. We talked about the $35M of funding he raised from Acccel Partners and the challange of staffing his businesses.

We'd like to thank Matt Mickiewicz once again for such an interactive and fun discussion!

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Transcript

Moderator: Super excited to finally introduce — I've been trying to get him over here for such a long time — all the way from Canada, Matt Mickiewicz of 99Designs, of SitePoint, of Flippa, and of course the new company, Learnable.

He was closing advertising deals and earning more money than both of his parents combined when he was 14 years old, and since then, it has been a 12, 14 year journey in building three other companies. So with that, let's welcome Matt to ZURBsoapbox.

Matt: Thank you.

Moderator: Matt, awesome to have you. Pretty excited. We have about 20, 25 minutes, so I kind of want to just start in the beginning and work our way through all the companies you built. Let's start from the very beginning. You were about 14, 15 years old. You were out there. You were developing websites, and you were having a tough time finding resources of how to do HTML and SEO and all this stuff, right?

Matt: Exactly. So basically, I just started compiling everything I was learning into a webpage I put on online and shared with the world. Finding all the SEO tools, all the HTML editors, the hosting companies, the domain name registrars, et cetera. And it's getting really, really popular, because there was very, very little information on the web at the time. A lot of the information that was out there was completely outdated, so it was really perfect timing.

Moderator: Webmaster Resources was the name of the site, right?

Matt: That's right. Webmaster Resources launched April 1st, 1998.

Moderator: And that was a good time, right?

Matt: That was a good time, because that was the day that the price of a two-year domain name registration dropped from $100 for two years to $70 for two years. I didn't have the $30 difference. I had to wait until April 1st to buy the domain name.

Moderator: That's awesome. So you launched the site and . . .

Matt: And three weeks later, I'm in USA Today and then LA Times, Washington Post. They had no idea how old I was. No clue whatsoever. Windows Magazine came calling. They were like, "You seem to know a little bit about this web development stuff. How about you write a column for a magazine?" I'm like, "This is cool. They're paying me $1 a word." I had to sign a contract stating I'm 19 years old, so let's not tell them that.

Moderator: So, it just got picked up naturally, because there was nothing like that on the web at the time.

Matt: Exactly. We started building up a very huge community very early on. We installed vBulletin back when it was still in its infancy. Got tens of thousands of members talking to each other, both on an email list and email newsletters I wrote every week by myself for seven years running.

Moderator: Seven years, newsletter. Forums was a big thing, right?

Matt: Yeah, forums were huge. This was before Stack Overflow and before Quora, so people loved talking to each other online. Before Facebook.

Moderator: So you were going to school. We were just talking about it early. In the morning, you'd get some meetings going. Then you'd go to school and close some advertising deals.

Matt: Yeah, I tried to schedule all of my ad sales calls during my lunch hour, between noon and 1:00. I'd have to lie to the person on the other end of the line saying, "I have another meeting at 1:00. I have a hard stop." And really it was social studies class.

Moderator: That's pretty sweet. So you're driving a BMW to school. You've got your...

Matt: I got a lot of new girlfriends that week.

Moderator: Right. You've got a new girlfriend. How do you actually turn this into a sustainable business that's going to be earning a lot of money down the road?

Matt: Yeah. So basically I had an offer to sell the company for a couple hundred thousand dollars when I was 16, 17 years old. I was just having so much fun with it, and I'm like, let's see where we can take this. So, I had partnered up with Mark Harbottle, who's based in Melbourne, Australia. He was the marketing manager at one of the first Australian Internet companies to go public on the stock exchange.

They made an HTML editor called HotDog, and the company that made that HTML editor was called Sausage Software. So Sausage Software was making HotDog. He was doing marketing deals with me and what not. He was a little bit older than me. He was ready to leave his company and saw what I had built and saw it as a good jumping off point to build something bigger and better. So we sort of shook hands. My mom flew down with me to Melbourne, Australia. She was scared and was like, "Who is this weird guy you met over the Internet?"

Moderator: You guys got a deal going, and how did he help you? What happened next?

Matt: We basically started immediately working on our rebranding project. Webmaster Resources was a really long and awkward domain, and we picked SitePoint as the new brand. Mark actually is the one that came up with the name. He was driving down the highway in Melbourne, Australia, and he saw a billboard ad for a website called CarPoint. I don't know if anyone remembers CarPoint, but it was basically Microsoft's car website, like Edmunds.com or whatever. He was like, "CarPoint, SitePoint." He went home, checked it, and it had just expired that very same day. It was awesome timing.

Moderator: So you got the URL. So you guys did the redesign?

Matt: Yeah. We did a rebrand, a redesign. We launched in March of 2000. Then in the summer of 2000, I flew down to Melbourne, Australia by myself. My mom let me go this time. I spent two and a half months living in Melbourne, Australia. We opened our office. I was doing job interviews and hiring our first couple of employees. My friends were off at the beach drinking and smoking pot. Very different contrast.

Moderator: So, you guys know that it's about education. This site is about education. You guys notice that people are printing out some of the tutorials.

Matt: Exactly. The most popular link on any given page back in 2000, 2001 was the "print this article" link, which actually makes a lot of sense. Back then, no one had two monitors on their desktop, so when they were learning to program and code, they didn't want to switch back and forth between windows. So it was a lot easier to print out our tutorial and have it sitting next to the keyboard so they could follow along.

Some of these tutorials were now running 200, 300 pages. So we came up with this thesis that people would pay us for printing out the content on their behalf and shipping it to them. We found this really shitty "print on demand" company called Digits.net, and we sent them one of our tutorials. They made a book out of it, started accepting credit cards on their website, and sure enough, even though the content was available entirely for free online, people were more than willing to pay $35 to have a hard copy shipped to their door, because they're saving money on inkjet cartridges or something.

Moderator: And back then, did people have two screens back then?

Matt: No, no.

strong>Moderator: Not really. I guess [inaudible @ 06:51] printed materials there. So SitePoint is doing well. The forums are exploding. Tell me about how 99Designs was conceived.

Matt: So around 2005, 2006, we had hit this critical mass in the designer community, and one of the really interesting trends that emerged in the forums was this game called "Photoshop Tennis." Basically, we had a lot of designers who were very passionate about graphic design but who had a lot of spare time on their hands.

So what they were doing is they were creating these made-up fictional projects and competing against each other to see who could do the best job, and they called this "Photoshop Tennis," because you're going back and forth with designers all around the world.

I think it's so similar to open source programmers, people who participate in open source projects. They may have a day job during the day during which they get paid, but at home, they still go on and contribute to Linux or whatever project they're passionate about. In the same way, we have all these graphic designers who are willing to work for free essentially.

So, as part of that, one of the things that happened is some of the bloggers and webmasters in our community saw all this fantastic design talent going to waste. They started posting discussion threads saying, "Create a new design for my blog, and I'll pay $500 to the design I like the best … Create a new design for my logo, and I'll pay $100 to the designer I like the best."

Designers really jumped on top of this opportunity. They were like, "Wow. A real paying client. Free money." So typically, the client would typically get back 20, 30, 40 different designs to choose from, and they'd pay the designer, the one who won at the end of the project. That was sort of the basic model.

The problem is not everyone is trustworthy. So people would post their request for design work. Then they'd save the image to their hard drive and disappear without paying the designer. Or the designer lived overseas or didn't accept credit card payments. So then it was really painful, because you had to go to Western Union or go to a bank and do a wire transfer. All this other stuff.

So we decided to basically start charging a $10 listing fee for projects to kind of try to weed out the crap and all the scammers and make sure the clients were a little more serious about paying a designer at the end of the process. And to our surprise, people were more than happy to pay a $10 listing fee, and we started making $5,000 and $10,000 a month. We were like, "This is really interesting. Let's invest a little bit more time and effort into this."

We spent six weeks with one programmer and one designer building a minimum viable product, some very basic software to formalize this process of design contest. So it wasn't just a forum thread of vBulletin. It was actually something slightly more substantial. At the same time, we doubled the listing price from $10 to $20 and rolled it out across all of SitePoint.

Then a really interesting thing started to happen. All of a sudden, it wasn't just webmasters and bloggers and IT people getting graphic designs done. We started seeing more mainstream businesses, like coffee shop owners, spas, doggie daycares. We were like, "How the fuck are these people finding us?"

If you come to SitePoint.com, the first thing you're going to see is an article on jQuery or Ruby on Rails. All these small read world businesses were somehow managing to get past all this crap and find this design contest thing and posting their project there. That was entirely through word of mouth. That was just hearing about it from their friends and relatives and what not. So, this is really cool.

In 2007, we were like, "We need a separate brand for this. We need a separate brand for this." My business partner read a book called "The 22 Immutable Laws of Branding" by Al Ries and Laura Ries. One of the quotes in that book says that, "The quickest way to destroy a brand is to try and make it stand for everything." SitePoint stood for education. It did not stand for outsourced graphic design services or crowd sourcing. So we decided to rebrand and relaunch as 99Designs, which happened in February of 2008. And once we did that, the word of mouth just accelerated.

Moderator: So, you guys got pretty good response from people. People loved 99Designs?

Matt: Except the American Industry of Graphic Artists.

Moderator: Right, so a lot of criticism.

Matt: Yeah, then AIGA sent us a letter like three or four months after we started saying, "You're hurting the industry. You're disruptive. We don't like spec work. Please shut down and fire all your employees."

I still have that letter somewhere. So we very politely put the letter to the side and kept going with it, but there are definitely quite a lot of negative blog posts around the web dissing us for promoting spec work and devaluing the graphic design industry. But on a net basis, it's really positive.

Moderator: What do you say to people like that?

Matt: I think many industries have been disrupted. eTrade came along. A lot of people traded stocks for $9 online rather than calling up a stock broker and paying $99. There are a lot fewer people now employed as stock brokers taking orders over the phone. Expedia came along, and a lot of people can book their own travel without having to use a travel agency. iStockphoto came and disrupted getting images and the stock photography industry. A lot of people could buy images for $1. The funny thing is that many of the designers who complain about us disrupting the graphic industry are more than happy to pay $1 for stock images on iStockphoto, but really they're putting out of work many professional photographers.

Moderator: Right. So you're disrupting graphic design with 99Designs. You're sort of disrupting the web design education with SitePoint. Now you turn to Flippa. Flippa was the next business that was about auction and marketplace of selling websites.

Matt: Exactly. And this was also incubated within the SitePoint forums, within vBulletin.

Moderator: Same way.

Matt: Same way. We were charging people $10 to post a website for sale. They'd post all their key stats, their page views, unique visitors, their traffic sources, their sources of revenue, and people would basically bid by replying to this forum thread. It was a really small, minimum viable product.

Moderator: And people hated Flippa, right, once it first launched?

Matt: Yeah.

Moderator: They did not like it at all. What happened there? 99Designs, people seemed to be cool with. Flippa, not so much.

Matt: People thought we were greedy. So initially on SitePoint, while it was part of SitePoint, we were charging a $10 listing fee. People were selling their websites for 10 … 20 … 30 … $50,000. One guy sold a website for $900,000, and all we got was this shitty $10 listing fee.

I'm like, "This isn't going to pay for all of the expenses that we have." So we were like, we need to be more of a traditional auction model and have a 5% success fee. We thought there wouldn't be a lot of backlash against it, because really, we were just aligning our interests with the interests of the sellers. We don't get our 5% commission unless your sale is successful. People had been selling websites for so long and making so much money and paying us for so little.

When we started charging, people were really upset. So we had this huge backlash from our community. There were discussion threads running 20 pages long. 300, 400 people saying, "Roll back the changes. We hate Flippa. You're greedy. I'm never going to use you guys again. I'm starting a competitor." Blah, blah, blah. I spent like three months basically reading all these posts trying to reply and holding back the tears, thinking, "Did I just make the biggest mistake building up Flippa?"

Moderator: But it worked out, right?

Matt: We kind of got through the dip. After three or four months, people started forgetting about it, and no one else really emerged as a viable competitor. Today, we've sold, now, $55 million worth of websites, and we're still the only real player in this space. An analogy I always like to use is domain names are like the vacant land. Vacant land is really hard to value and really hard to sell, which is why when you grow Moniker.com or GreatDomains.com, you see 10 million listings. Most of those are things will never ever sell.

But if you put something on that vacant land and start collecting a paycheck from tenets every month, all of a sudden, boom. You can apply valuation metrics and get liquidity that much easier. So on Flippa now, about 55% of all websites end with a bid above the reserve price. So it's really, really successful.

Moderator: What are some of the biggest sites that you guys sold?

Matt: One really cool one that we had was Facesmash.com, which was actually Mark Zuckerberg's original domain name, and it was featured in the movie "The Social Network."

Moderator: That's right.

Matt: That was the original version of Facebook basically, and someone bought that domain name because it dropped, and then they auctioned it off for $30,000 the week the movie came out. We got massive, massive publicity off of it. Even Perez Hilton, the blogger, wrote about it and linked to Flippa.

Moderator: Awesome.

Matt: Good for SEO.

Moderator: Definitely. So Flippa disrupting the marketplace for websites. 99Designs disrupting graphic design.

[phone ringing]

Moderator: Somebody really wants to get a hold of us. And the next business right now you're working on is Learnable, right?

Matt: That's right.

Moderator: And that's about disrupting the educators' market?

Matt: Education. Basically, Learnable is a marketplace that allows anyone to create and sell access to an online course. So really, we're turning consumers into merchants by allowing anyone to become a published educator. So whether you're passionate about dog training, yoga, fitness, Microsoft Excel, or, in one case, worm farming. You can create an online course and sell access to it through our online platform.

Moderator: Is that also SitePoint forums? Is that how it was born, the idea for it?

Matt: We basically started doing visual education through SitePoint as a way of getting past the decline in online book sales. So video was hot. Books and print media were sort of dying a slow death, as we saw with the bankruptcy of Borders recently. So, we were looking for the next big thing. We started doing video education and video training with fantastic response rates. So we decided, let's see what we can do with this.

Moderator: So you had a lot of companies, right? How do you find talent for all these companies? And then the second question, you also have branding. How do you keep these separate brands and keep it all going? People kind of refer to you as SitePoint guy, and here are all these other businesses.

Matt: Yeah. They're all separately incorporated companies. So they each have their own P&L. They each have their own management team, general manager, CEO, et cetera. So it's really quite separate, so we can have really good visibility into what each business is doing. So one good business isn't subsidizing one bad business, which is really important. And then we have a group function that sits above all the companies. Finance, accounting and legal, and those costs are shared across the board.

Moderator: And talent. Finding talent for all these businesses.

Matt: Very, very, very hard. In Melbourne, we're using 16 recruiters right now to try and hire developers and still coming up shorthanded.

Moderator: And you guys raised some funding, right?

Matt: Yeah, a little bit.

Moderator: Tiny bit. And you did that to . . . did you need money?

Matt: We didn't need the money, no.

Moderator: Just for fun? Just to help you kind of get visibility …

Matt: We had proven out the model very well. We had product market fits. We had very high net promoter scores, so it's time to scale up the business and take it to the next level. And certainly Excel has been the one [inaudible @18:10] who's been very successful at scaling companies up very fast. Groupon going from zero to a couple billion and an IPO within three years. They're one of the early investors. Facebook and AdMob and Etsy. They were a really good fit.

Moderator:So helping you kind of get the best of the talent and getting a business cranking all the way.

Matt: Exactly.

Moderator: That's cool. So you talked about minimum viable product and the idea of kind of testing things early on to see if there was any traction there with the idea. Talk a little bit more about how you deploy something like that. Do you put up a little website with a few things on it and see what people click without backend functionality. How do you go about doing that?

Matt: Well, in the case of book publishing, we basically chose to use a print on demand company, so we had no inventory risk, no upfront expenditures to start publishing and selling content in printed format. We also decided to use an existing piece of content and repurpose it into a book. So we didn't have to invest in any content upfront. It was really, really quick and easy. We wanted to see whether or not people were willing to hand over their credit card. 99Designs and Flippa went through several different stages.

99Designs started off as a free forum within vBulletin. We tagged on a $10 listing fee to prove that there's money there. It was successful. We built some basic software around this idea in six weeks, which cost us $620,000. That was just out of cash flow essentially, so we didn't have to dig deep into our pockets to make that happen.

Then once we saw all the mainstream businesses start using us, we were able to invest a little bit more and go out and build a separate brand and start using Amazon web services. We were one of the very first Amazon web services customers back in 2007, 2008. They didn't even have a service level guarantee or anything.

Moderator: It's more of kind of seeing if people were actually going to use this thing, and then invest a little more time, a little more resources, a little more resources.

Matt: Exactly. Trying to see how quickly you can fail.

Moderator: Do you have a fifth business in mind? Are you working on anything new?

Matt: Nothing right now. We're going to turn Learnable into a subscription business. That's going to take a little bit of work. Rather than trying to sell off courses one-off. Following the Ottawa model basically.

Moderator: Okay. So people can subscribe and access any courses that they want in different subjects.

Matt:Yep.

Moderator: So at this point, you just kind of scale the number of classes on there, right?

Matt: Exactly.

Moderator: So it's a chicken and egg again, because people don't want to see people coming to the site, because they want to be sure that people are going be buying their classes. So, you're just kind of juggling.

Matt: Yeah, exactly.

Moderator: It seems that the audience from SitePoint helped a lot with 99Designs, helped a lot with Flippa, because they're very related websites, development, website design. How much of that is spilling over into Learnable?

Matt: A little bit. I think SitePoint was really born for 99Designs. The biggest reason most companies fail, I think, is not because they built a shitty product, but because they lack the distribution and they run out of cash before they figure out a repeatable sales channel and a repeatable way to market and gain customers. So with SitePoint, we basically have a free playground to test and play with 2.5 million unique visitors per month, 1.5 million email addresses.

We can make a lot of mistakes without spending any money on marketing essentially and figure out what works and what doesn't. That's incredibly valuable. One of the competitors to 99Designs raised $3 million early on back in 2008, a few months after we launched, and they're still like one-tenth of our size. So, they had $3 million and we had $300,000 to start off with, and we were able to outgrow them simply because we were able to leverage the SitePoint distribution channel.

Moderator: That's a good model. I think Jason Fried and Tim Ferriss and a lot of people just talk about the fact that you've got to have a community of people. Then after that, you can figure out a product. Once you have a community of folks following you, you can use that community to test . . .

Matt: Ideas and see what sticks.

Moderator: Exactly. Put some web pages up. There was a post I just read the other week. The guy just put up a signup screen with three lines of what the product would do.

Matt: That's LaunchRock.com, right? It allows you to create these beta signup pages.

Moderator: Yeah, I think so. The guy doesn't even have anything for the product. He just wants to see how many people are going to sign up on it. He put two prices on there. People click over, and they sign up.

Matt: So it doesn't exist. Moderator: Nothing else exists. It's just three lines of description of what the product is. He got like 200 signups, so he was like, "Okay, maybe I should actually implement something. Maybe I'll have another signup form."

Matt: That's a lot better than spending six or nine months building something and then finding out that no one gives a shit, and no one will give you their money.

Moderator: Totally true. Along the same lines of testing it one step at a time. So, I wanted to open the questions up to you guys. You guys listening to the discussion. Let's have some questions there.

Audience Question: What's the key to building a community, and how do you see things changing from, let's say, 5, 10 years ago to now and in the future?

Matt: It's a lot more crowded now. Back in 1999, 2000, 2001, it was a lot easier, because there were a lot less nodes on the Internet. Now you have all these companies, like Demand Media just churning out junk content for SEO purposes. eHow.com churning out junk content for SEO purposes. It really crowds the space. We were able to attract our community by publishing great content and engaging with those people. Now everyone is hiring all these writers in India and Pakistan for one penny a word and spamming the web, which kind of sucks. I don't think it's sustainable in the long-term. I wouldn't be buying Demand Media shares.

Audience Question: I admit, these are awesome, because you can [inaudible @24:15]. Is there any ideas that you tried and it did not work out?

Matt: Lots of ideas, yeah. We tried selling eBooks back in 2000, 2001. People were barely comfortable shopping online for physical products. Paying money for a digital goods was just a total nonstarter. We tried video education back in 2005, 2006 the first time around. Completely flopped. We went back and tried it five years later. We had a lot more general mainstream acceptance. The other thing that we tried was a marketplace for crowd sourcing naming called NameMyThingy.com.

Basically, what was happening with that was people got 50 or 100 different name suggestions for their brand or their company, and they would just be so indecisive that they wouldn't pick any winner. Eventually, all the people that were suggesting names just got really discouraged, and it all fell apart. Maybe the branding was a little bit off.

Moderator: Name my thingy. Is it still up?

Matt: I think it is. I'll give you an example with Flippa. When it was part of SitePoint, we were just charging this $10 listing fee. It was like a six-figure-a-year business, and it was always going to be a six figure a year business, because we weren't capturing enough of the value that we were creating. That's why we decided to rebrand as Flippa and start charging the commission fee. We were basically willing to lose this small business that was making $200,000 or $300,000 a year over to build something that's worth $2 or $3 million a year.

Even though we had all this negative feedback and all this outcry from the community about us being greedy bastards, we were saying, "Okay, yes we are," number one. And number two, we were willing to risk it all in order to build a multimillion dollar business rather than just forever having something ticking over at 2 or $300,000 a year.

Moderator:When do you know you kind of have to, like NameYourThingy, you've just got to give up and go on? When do you actually determine that though? Sometimes, you want to push it. You're passionate about the idea. Do you make the decision? Is it the team? How does it happen?

Matt: If it doesn't get traction or positive feedback at all in the early days, then I give it up or radically change it I think. I think with Flippa, 99Designs and video learning, we had engaged customers who were saying good things about us even though it was a less than perfect product. NameMyThingy, no one ever said anything good.

Moderator: Okay. As long as you've got good reviews, good feedback.

Matt:Yeah. There's always going to be a group of early adopters who are willing to put up with partial feature sets and bugs and what not. They're still getting value out of your product and giving you feedback and sending you emails and bugging you at all hours of the night. That's a good sign. If no one emails you at all, that's a bad sign.

Audience Question: Real quick about team building, having done it a few times now, what patterns work for you in terms of how you build your team over time for these things as they grow? What does your starting team look like, and then what does it look like as you begin to scale?

Matt: Generally, with both 99Designs and Flippa, the initial teams were like four or five people. I think that's sort of the magic number. After that, the added benefit starts to decrease, because you start having to do more documentation and more meetings, and people are just not working as much. Of course, if you have two developers, a designer and a product manager and maybe someone doing marketing, that's the ideal mix to get something off the ground. Everyone knows what everyone else is doing. You're not spending all this time in meetings. You're not spending hours documenting code. You're just getting shit out there and seeing what works. That's the magic formula, I think.

Whenever we wanted to test a new idea, what we always do is we grab people from our main businesses, and we lock them in a conference room for six weeks and just tell everyone else, "You have to pick up the slack." Otherwise, if you say, "We have this great idea for X, Y, Z. Can you please do this in addition to your main job?" it'll just never happen. You really have to make it a priority and be willing to make some small sacrifices. Your main business might suffer for a couple of weeks while you're building something radically different out.

Moderator: But then you separate it out, like you were saying.

Matt: Is it's successful, yeah.

Moderator: Every business has its own people in it.

Matt: So I'd be cofounder and a member of the board of directors, and whenever I'm interested, I jump in. So the last year and a half, I've been playing the role of PR spokesperson for 99Designs. I was VP of Marketing. I've had less involvement, for example, with Flippa. I take on whatever is interesting.

Moderator: It's an interesting process. You have an idea. What do you do? You sketch it, you show it to three or four people, they get excited. What happens next? What do you guys do? What's the process?

Matt: Try and see whether we can fit it in, how much work is going to be involved in creating the idea, and then kind of go from there. It bubbles up naturally. It's a very natural process. We don't sit in a conference room and say, "We have to come up with a new idea for a company this week." It just organically bubbles up from the team.

Moderator: Is it ever that you have an idea and nobody else sees your vision? They say, "I don't know what you're talking about, man. Crazy."

Matt: They usually come around to it eventually. You've got to be persistent sometimes selling an idea. There are a lot of people who are just very naturally resistant to change. We have some employees like that. Like when I mentioned Amazon web services and cloud computing, they're like, "Oh my god. We have to build out code with the fact that any server could die at any instant, any moment in time." The entire architecting of the software had to be completely changed and done differently if you're doing cloud computing as opposed to using a traditional data center or rack space or whatever.

But ultimately, that proves to be the right decision, because if we had gone the traditional route of leasing servers or buying servers and collocating them, we wouldn't have been able to keep pace with the growth of 99Designs, and that cost would have been through the roof. It would have been bleeding money left and right.

Right now, we're sitting on about 2.5 terabytes of images. There's a new image being uploaded every five seconds 24 hours of day, 7 days a week, 365 days a year. Just trying to plan for that using traditional hosting environments wouldn't have worked. So I was very glad I was able to convince our CTO to do it, and now he's like the biggest fan.

Audience Question: Most people ask us specifically, "What do I need to do to create something special [inaudible @31:19]." I don't really know the answer, but [inaudible @31:22]. If you had to give people advice, what would be the top three things you would say [inaudible @31:28] things that aren't very successful [inaudible @31:37]?

Matt: Don't hide from customers or be like number one. I had my personal cell phone number in SitePoint.com for 10 years running. I had customer calls at 2 a.m., 6 a.m. On Christmas Day, I answered 30 calls from customers. I was very accessible, and whenever people had a problem, they knew they could reach me, and I'd try and solve their problems, and people were very happy with that.

People who hide behind anonymous domain name registrations and contact forms and don't put their full name on their website are a little bit dodgy. Number two, be very careful in choosing who you work with, whether they're a vendor or an employee. Particularly with vendors, try and never prepay for anything. Sometimes vendors go bankrupt. That just happened to us. Sometimes they just turn out to be scam artists. And number three, I don't know.

Audience Question: Number one seems very important.

Matt: Ideas are worthless. Ideas are absolutely worthless. If you want proof, just try selling an idea. No one will pay you for it. I think sales and negotiation and probably the two most important topics for entrepreneurs to learn about. Early on, when we were starting SitePoint, I didn't pay for posting. I didn't pay for email distribution.

All the moderators in our community were unpaid. All the people who wrote content for the site were unpaid. Basically, that's only because I was, number one, negotiating really hard doing deals. Give me free hosting in exchange for advertising. Or I basically sold people on greater vision.

Audience Question: [inaudible @33:13]?

Matt: Yes. Using Microsoft FrontPage 98, which I pirated.

Audience Question: At what point did you realize that you had gotten the website as far enough along that you shouldn't be [inaudible @33:30].

Matt: Somewhere around 2000, 2001. And then eventually, some of the development team figure it out as well, and they just cut me off. I no longer have FTP access.

Moderator: All right. Well, I'd like to thank Matt for coming out.

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