//#1657 The $200M company behind device trade-in programs

#1657 The $200M company behind device trade-in programs

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Andrew: Hey, there freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses and hopefully, I introduce you to entrepreneurs whose businesses you never would have heard of, otherwise, and you get open to the types of ideas that you couldn’t discover in other places. And my goal is for you to hear how they built their businesses, and frankly, enjoy the story, but also learn from them so that you can go out there and build better companies based on what you’ve learned in these interviews. And after over 1,500 interviews and many of them now with people who’ve heard my interviews and come here to tell how they listened and built their businesses, I can tell this is working, and I’m looking forward to it working for you, my dear listener, as the radio broadcasters used to say.

All right. Get this. I used to think that if I went to an Apple store, Apple website, or Apple App, and bought a new phone and traded in my old phone, I used to think what happened was Apple took my old phone, refurbished it at their place, and then they would sell it maybe not in the U.S., but in another market in a store, that they would be handling the whole thing.

It turns out that is not at all true. It turns out that Apple and many other companies use a different company to handle all that. Why? I don’t know, but I’m hoping to figure out now. And it turns out that the man behind the business that handles all that has created a fantastic company with a lot of revenue, and I invited him here to talk about how he did it, where he came up with this idea, why it works, and why Apple and Verizon and others don’t do this for themselves.

All right, the company that these companies trust for their trade-in services and their communication tools, that company is called Phobio and the founder of that company is called Stephen Wakeling. I invited him here to talk about where he came up with this idea, how he built up this business, why it’s working. And we’re going to hear his story thanks to two great sponsors. The first will host your website right. It’s called HostGator. And the second will help you hire phenomenal developers. It’s called Toptal. Stephen, good to have you here.

Stephen: Thanks for having me.

Andrew: Let’s blow the audience away with how big this business is.

Stephen: Okay.

Andrew: First of all, you know what? How old is the business?

Stephen: So we started in 2010. There was probably some like kitchen table work that was happening before then, but, yeah, so I guess about eight years.

Andrew: About eight years, and the revenue?

Stephen: Last 2017 ending was kind of north of 100 and not quite 200. So, and that’s in that range.

Andrew: 2017 north of 126 million.

Stephen: 100 million.

Andrew: 126 million.

Stephen: 126 million. That’s right.

Andrew: And this year you’re saying you’re getting closer to 200 million?

Stephen: Oh, yeah. We’ve been on a pretty steady kind of growth pattern between, like, kind of 80, 120% year over year for quite a while, so yeah, we’re getting up there.

Andrew: And when we talk about revenue, it’s because you buy the phone and then you resell it, and the value of all these devices that you’ve resold and the software is 126 million last year, close to 200 million this year?

Stephen: It depends. So, it depends on who we’re working with. Sometimes that’s the case, like, where we would actually kind of get a device and we would resell it. But sometimes it’s just a kind of a software kind of subscription service where we may handle a device for a retailer or a carrier or an OEM, but we don’t actually own the device. So we’ll be integrated into the kind of point of sale experience. We kind of handle all of the ERP services, so making sure that the device gets back to a distribution center where it’s inspected or repaired and make sure that it goes off on to kind of wholesale secondary market and we don’t take. So it kind of depends.

Andrew: Okay. You know what? You’ve got to . . . I want to tell the story of how you did this, but you should describe for people why even if they used your service on, say, an Apple experience, they didn’t even know that they were using you. I think I did that. Well, because what is it like on the iPhone if I were to go through and say, “You know what? I want to buy the latest iPhone, whatever, Max. I want to sell my old one.”? What would I see as I went through that?

Stephen: Yeah. So we’re the guy behind the guy. So, you would either kind of interact with that in a retail environment or in an e-commerce environment. So, in retail, you’d walk into a store and you have your old phone or old computer, your tablet, mostly your old phone . . .

Andrew: Let’s talk about the iPhone experience just to give people an taste of how beautiful and integrate it can be, but we’ll extrapolate from that that it can happen in a store and other places too.

Stephen: Yeah. What we’re doing with . . . Man, I think like what you experienced today with Apple Give Back is like really interesting. You actually go to apple.com and you . . . I feel like that’s interesting. That’s an interesting question. I’m not sure how Apple . . . I know this is like totally destroying your interview here, potentially, but I’m not sure if Apple is cool with us kind of talking specifically about the Apple Give Back program [with 00:04:54] you.

Andrew: You know what? I was wondering, why is this guy hesitating? I’m giving him like a softball question to talk about it further. Essentially, what it is, is I see the product that I’ve had for Apple or I type it into the site and I say, “I’ll describe it as I understand it and you tell me if I’m crazy off or if I’m basically there.” I either pick it from a list or I put in my serial number and describe which type of phone I have. They give me a price for it. If I like the price, I give them the phone which I ship over to them, and then they give me the money which I can use to buy another phone from them or another device. Am I right?

Stephen: Yeah, yeah. So typically kind of like when you engage in any of these kinds of services. So you go and you basically assess what kind of device you have and then you’ll get some kind of instant credit. There’s a lot of different ways that that can happen. Either it’s like in a retail environment, but specifically what Apple is doing with Give Back is pretty fascinating. You actually go and there’s some integration even into your iTunes account. So you can select from a list of devices that are associated with your iTunes account and then basically, very quickly identify a value for that device without answering very many questions, and then you get that in kind of a refund. So if you buy $1,000 purchase and you have a $500 trade-in, you send in your device and you get a $500 refund on your device purchase within a couple of weeks of your purchase.

Andrew: Stephen, why? Why does Apple need you? Why does Verizon need you? These people have stores. They have the ability to sell. They have software. Why do they need you? Why do they need a guy like you to come in there and take over that part of their business instead of figuring out how to do it themselves?

Stephen: Yeah. So I think a lot of times it’s a difficult thing. I think, for some companies, it’s focus, right? So, I mean, certainly, like they . . . You can build a software service, be able to do this, and it takes time to do that and maybe that’s distracting from other . . .

Andrew: But they’re focused on selling product. They’re focused on [inaudible 00:06:42] products. It’s not like they’re suddenly going to be selling t-shirts after selling this or sandwiches. It’s still part of their focus. What’s the part that you bring in that other companies can’t do for themselves?

Stephen: It’s a weird kind of discipline that you need to be . . . There’s a bunch of different things that you need to be able to figure it out now. Not only there are the kind of like logistical aspects of it, like, being able to kind of take a physical device and kind of move it from one place to another and make sure that you’re kind of taking it from that customer to the kind of secondary marketplace effectively without, like, losing it, making sure that it’s data erased and it’s, like, been inspected correctly, and you’re following all the kind of rules that are associated with that. But also you have to be able to deliver a really good experience, right? So it’s difficult thing to be on both sides of that, being able to kind of deliver, like, the logistics and the experience.

So I think that’s what we’re a specialist in. Like, we kind of see ourselves as a software company that kind of has a bias toward really good customer experiences. And generally, if you’ve got a warehouse and you’re good at touching phones or you can take a bunch of computers and you can inspect them, it’s difficult to be able to do the experience side of it. And vice versa. If you’re really good at building experience, it’s really hard to integrate those with comprehensive kind of global 3PL services. So we’re kind of this . . . Our kind of specialty is being kind of right in the middle.

Andrew: The 3PL services of the companies that have the storage and the ability to connect in so you can see what inventory you’re storing with them in their warehouses. All right. I thought this was interesting. I was reading my producer’s notes on you, and essentially, what she’s saying is that from her conversation with you, she picked up that you worked for a company that did something like this and you said, “You know what? These guys are not doing it well. I think I could do it better.” And then you started Phobio.

Stephen: Yeah. So I did. I worked for a kind of a pioneer in the space many years ago. It was a company called Flipswap. And the . . .

Andrew: What did Flipswap do?

Stephen: It did a very similar thing. They weren’t as well integrated because I don’t think that big brands and carriers, OEMs, and retailers were thinking about that back then. So they had very much like a website that you went to and you would trade in a device. And there were a couple of other like Gazelle kind of focus things. This was kind of pre-Gazelle. But I think their focus was like, “Let’s take this website and let’s give it to wireless retailers and let them use it.” And it was a very standalone service, and it was, like, difficult to kind of reconcile, like, what had been traded in with the credit that you were kind of paying out of your register.

Andrew: Because what would happen is, I would walk into a local store, I’d say, “I have this phone. I want to buy a new one.” They’d say, “All right, hang on. Let’s go over.” They went to a website, they did a search by putting my information into that site, they come up with a number, and they’d say, “Hey, Andrew, we can give you $75 for that phone.”

Stephen: That’s right.

Andrew: That’s the way it worked. And they would give this $75 or would I have to first give the phone and get the $75 later?

Stephen: So, in that in those days, like, the retailer was actually taking the risk and the retailer was giving that instant credit at the point of sale for that device, and it probably wasn’t very much. In those days, this was like pre-Motorola Razrs. So this was like . . . And $25 would have been a real win.

Andrew: And for people, you know what, a lot of them were just saying, “You know what? It’s going to sit in my drawer anyway. I’m not going to use it. Otherwise, I will get the $25.” We’re talking about . . . Actually, I think you worked at Flipswap 2006, 2010. That’s not . . .

Stephen: Yeah, yeah. So, this is like . . . In that Prime kind of like Razr time, but it was like the iPhone came out. I think I remember in my first year there, the iPhone was announced which was pretty revolutionary. There were kind of definitely smartphones that existed before them, but it was like primarily like BlackBerry and stuff like that. Every year BlackBerry would change the form factor, add a button or do something like that. And the old BlackBerry was like the value was significantly less. So I think the iPhone was really interesting for the whole kind of five back and trade-in marketplace because it tended to hold its value longer than one year or two years which would have been like the average kind of contract. So even at the end of a two-year contract in those days with the carrier, your phone probably still had some value, maybe $50, $80, $100, $150.

Andrew: I thought it was pretty interesting how you ended up at that company. You finished graduate school and you were looking for a place to live, and it was a friend who helped you out. What was going on there?

Stephen: Yeah, it was . . . I mean, I was pretty much just like willing to go anywhere and kind of looking for . . . And I didn’t have a particular plan. And a friend of mine, his dad had an apartment that he was vacating, and I can’t remember what the terms of it were but he had time left on a lease or there was something where he had like basically was leaving this apartment in Hermosa Beach and he had offered to a son, like, “Hey, if you want to stay there,” and of course, four of us went out there and like shared this one bedroom apartment. And, you know, I can’t remember. We were paying like $125 a month each or something crazy because I think it was only the maintenance fees that we were covering. It was some sweetheart of a sweetheart of a sweetheart deal and then we were dividing it in four. And they . . .

Andrew: You didn’t even have your own room. You’re a graduate student.

Stephen: I know.

Andrew: Really? You had to share room.

Stephen: Oh, yeah. I mean, actually, for quite a while for maybe more than a month and maybe two months, I actually like, lived on the back porch. I just set up a pup tent, and I had like air mattress.

Andrew: That’s something, man.

Stephen: Yeah, yeah.

Andrew: And meanwhile, as you drove out there to the West Coast, you were listening to podcasts. You were sucking in all this startup culture.

Stephen: Yeah.

Andrew: And as a result of it when you got to the West Coast, when you got to California, what did you decide you were going to do?

Stephen: Yeah, I was really fascinated by startup culture and that was kind of my only objective was I wanted to work at a startup that was operating, and I didn’t really care what they did, and I just wanted to see what was going on and kind of be part of it. And so I was obviously in Los Angeles, not, San Jose or in San Francisco, but I basically started doing Google searches, and I was interested in looking for something that I didn’t have to commute very far, and I found this weird company. I had no idea what they did. I went to their website and couldn’t even figure it out from the website and showed up.

I ended up talking with the receptionist. She asked me a couple of questions. I was basically like, “Look, I’ll do whatever it takes. Like, I’ll sweep the floors. I’ll write your press releases. I don’t care.” And she was like, “Well, tell me a little bit about yourself.” And for some reason, I was like, “Well, I was born in West Virginia,” which is a really weird place to start in that tell us about yourself. And she was like, “Really?” and turned out she was from West Virginia, and like, we were in and she’s like, “You got to meet the CEO.” She took me upstairs, met the CEO then, and we hit it off, and he was also from West Virginia . . .

Andrew: Wow.

Stephen: . . . and the receptionist was actually his mom. And we were kind of off to the races. I remember there was a conversation about getting started soon, but we don’t have a laptop or a phone for yet. And I was like, “Well, I have my own laptop and phone.” And he was like, “Oh, okay. Well, then that’s your desk where you sit.” And so I kind of started immediately.

Andrew: And your job was, you told our producer, to basically find problems and solve them. And I’m wondering what kind of problems they expected you to find and solve.

Stephen: I don’t know. So, I started there and after . . . It was kind of really . . . They basically just pointed me to a desk. So, it was, like, really unclear what I was supposed to be doing and what my value-add was. And so after a couple of days I had to kind of identify that they have some customer service issues that could be resolved. I worked on a little team to kind of help, I think, there was like image magnifying process like thing that they were having trouble with their website and so I worked as an engineer to solve that. And they basically were like, “This guy’s all over the place,” so they gave me the job title, the X-Factor, and my job description was to find problems and solve them by whatever means necessary, which was like . . . I would not have been able to define that that’s what I was looking for, but it’s exactly what I wanted.

Andrew: Why?

Stephen: But basically, I was . . .

Andrew: Most people would want one thing they can master. You wanted anything that maybe you could master, maybe you could fail at. Why?

Stephen: I don’t know. I just think the idea of the adventure and the kind of, like, random nature of it was, like, super appealing to me, and I think still would be as basically just kind of, like, here things are going on, looking at, like, “What’s going on? How are these phones coming in from the stores? What’s going out? Like, man, we got to do better. These boxes could be a lot better. Let’s figure out how to make better boxes. That’s got to move the needle, right?” And so it was just kind of like picking something that I thought could move the needle and then addressing it, however, I felt I could. And that turned into, like, setting up their cleaning operation and like the things that I was finding as problems and the things I was able to address just got bigger and bigger. And it was like, it was such a fantastic training ground for being a CEO, certainly, a startup CEO.

Andrew: You know what? Can you give me an example, again, with more depth of the project that you took on that then helps you become better at creating your idea for Phobio.

Stephen: So in those days they were selling a lot of their product that they were getting from these . . . So a lot of the phones that were being traded in, they were selling mostly on eBay, and they had like a terrible eBay feedback score. And I started looking at that, and I was like, “Let me see some of these emails. I want to see what the complaints are.” And they had, like, 10,000 unread emails, and no one was responding through the customer service. And so I was like, “Okay. Well, we need to get through all these emails.”

And so I set up some really basic stuff like shortcuts, and I moved everything into Gmail as a fairly new thing. I think they were in some kind of crazy hosting platforms, email service client at that time. So I moved everything to Gmail, and then I kind of set up a bunch of like hotkey things so that we could answer things really quickly and started measuring what the problems were. And then that was basically like, by day three, we’ve gotten through . . . Well, I’ve gotten through 10,000 just sitting there 12 hours a day reading these terrible emails. And I kind of figured out that there was like five things everyone was complaining about, which were, (a) they were getting stuff that they didn’t buy. So how do we solve that problem?

They’re getting shipping information, and things aren’t being delivered when we say they are because there was just a random email going out and saying, “You should get it in two days,” but not everything is shipped in two days. So I was like, “We got to solve that, like, set the right expectation.” So it was kind of like on day three, we had, like, completely overhauled their customer service, like, non-existent customer service apparatus and solved some kind of basic logistical problems in their disposition services unit. And then it’s like, started looking at like, “Okay. Well, let’s see what the customer service problems that the users at the mobile phone stores are having and started kind of figuring out like very basic stuff.”

And it’s just like in a startup, I think. You try to get the flywheel turning, you want your service to work, and sometimes the details of like making it efficient or creating a really good experience can sometimes be really elusive. So I think it was good training ground for that, like, how to find . . . Because there’s no rule book. There’s nothing that says, “Okay. Well, if you’re starting a company, just make sure you do all of these things.” It’s easy to want to make your customer happy or deliver a high-quality product that solves a problem. Like, how do you know that you’re doing that? How do you find success? And so I think it was really great training ground for, like, how to just take random data or things that you see laying on the ground and assembling them into, “Okay. Well, how can we make this better?” And I think . . .

Andrew: And I can see how that would make it better and improve, like you said, the flywheel that if you’re make the customer experience better on eBay, the ratings go up. If the ratings go up, more people are willing to buy at a higher price. If more people willing to buy at higher price, the whole business grows because that’s what it’s all about there.

Stephen: Yeah, absolutely.

Andrew: And that’s the kind of thing you were looking for.

Stephen: Yeah. And I think like we kind of identified, like, when we went to start Phobio, there were still a lot of people in this space. Like, I had left and gone on to do another thing. My wife was going to graduate school in New Orleans.

Andrew: You know what? I’m sorry to pause there for a second. But before we get to why you left and what you did next, what was it about Flipswap that you saw that didn’t feel right to you that wasn’t working?

Stephen: Well, I think they had a very specific focus on exit, right? They were kind of like exit-oriented entrepreneurs. And so they had felt I think they had a good enough product that they needed to go out there and they needed to find somebody who was going to buy it, whether it be a strategic or some kind of private equity exit. And so I think I was kind of really focused on like, “Let’s make it better or let’s figure out how to do this better.” And so I think, like, as time went on, I felt like it was like a lack of alignment between the executive team and like the founders and like people like myself who were just trying to make it a little better every day so that there’s a better experience, because I think, like, at a certain point, it was clear that that wasn’t the primary focus of leadership team. And I think it’s . . . I don’t know that I would have been able to define that what was happening then, but I mean that was certainly like kind of what I was feeling.

Andrew: And while you were there, they did raise money. I think they raised $14 million in a series C from a couple of investment companies.

Stephen: That’s right.

Andrew: Then you were on that trajectory. Soon after you left they ended up getting into from what I could see here AT&T stores throughout the country, right? So they were making a lot of headway.

Stephen: Oh, yeah, for sure. They did. They became like a premium, like, a dealer kind of . . . Certainly got approved service for AT&T dealers. And that’s been still I think . . . They were acquired by a company that’s still . . .

Andrew: [inaudible 00:19:59] Corp.

Stephen: That’s right. That currently operates as HYLA and that relationship continued to grow. And I think certainly, like . . .

Andrew: The business was growing but you are sensing, it was growing despite the fact that they weren’t paying attention to it, not because of the attention they were paying.

Stephen: Yeah. I think there was probably a time there when the original management team was kind of struggling with continue to build a service and had kind of become focused on like, strategic alternatives and how do we sell this thing. But I do think like new management teams have come in and continued that growth, certainly, over the last seven or eight years.

Andrew: If you were honest with yourself, were you’re also saying, “Hey, if these guys can do this well, I think I could start something as well. I could do well enough without any outside funding.” Right? You were just seeing the opportunity?

Stephen: Well, I was very interested in being an entrepreneur. It was like something that had kind of . . . The reason that I was there is to experience the kind of entrepreneurial pursuit and kind of see what startups were like. And I remember I had a very specific conversation with the CTO at the time and he was like asking me like, “Hey, well, I just finished another kind of, like, more technical project.” And he was like, “What is it you want to do, man?” And I was like, “I just want to own and run my own business, and I want to start something.”

And I remember he said, “You know what, man? I’ll tell you what, no one’s going to give it to you. You just got to go out there and make it happen for yourself.” And I was like, “Oh, right.” And that’s kind of like was a real turning point I think and kind of my attitude. I think probably at the time I was like, “Well, I’m just going to be really helpful. I’m going to help the hell out of everybody.”

Andrew: Until I earn the next step.

Stephen: Yeah, yeah, yeah.

Andrew: Yeah.

Stephen: Yeah.

Andrew: Okay. All right. And you were there for four years, and then you ended up creating Phobio. Let me take a moment to talk about my first sponsor and then we’ll come back into it. My first sponsor is a company called HostGator. I actually keep talking, Stephen, about how HostGator is great for hosting WordPress. I looked at your site, you guys are on Drupal. Why are you on Drupal and not WordPress?

Stephen: Yeah. Wow. That is a good question. I think we are big fans of WordPress, and we have used WordPress for a lot of things, but I don’t know. That is a good question.

Andrew: That’s just not a decision that you make yourself.

Stephen: No, no, no. I leave that up to my much more capable CTO to do it.

Andrew: All right. I will say this then to the audience. Look, I’ve talked to you guys about how you can host your own WordPress site on HostGator, but guess what? You could do the same with Drupal and so many other open source platforms. All you have to do is just do one click Install and they will set you up with it. Now, I personally prefer WordPress, but I’ve had guests on here make a really good case for Drupal and other platforms is the right way to go, whichever one you go with. Here’s the thing about setting up on HostGator. You don’t like them? You take your business and you go away. Right now there are people who are hosting on Medium who don’t like the Medium. Do you ever use Medium, by the way, Stephen, to read articles?

Stephen: I do. Yeah, yeah. Occasionally, yeah, that’s some good stuff.

Andrew: You don’t publish, but you read, right?

Stephen: I do, yeah.

Andrew: You know what? As a reader, sometimes it can frustrating to me because they’ll do things like they’ll have the top bar that never goes away, the bottom button that says “Open in the app.” And in the past, I’ve clicked the “Open in the app,” it takes me to the app and for some reason the app kicks me back to the website. I don’t know why. But if you’re publishing on another person’s platform, you got to live by their rules and they decide what to do and they can change the rules without even explain to you why or what they’re doing.

That’s one of the benefits of hosting your own site on your own platform. And if you host with HostGator, you’re going to get a hosting company that’s been around for years that you can depend on and you get one-click install of Drupal, WordPress, etc. And frankly, I love them. I’m bringing more and more of my business to HostGator.

But if you don’t love them, first of all, they have a money back guarantee, that means instantly you don’t have to pay, but even two, five years from now, someone better comes along, take your business and go somewhere else. This isn’t like a marriage. All right. But many people will love them and want to stay with them for the whole life of their business.

If you want to get started with them, go to hostgator.com/mixergy where you will be doing Mr. Andrew a solid because you’re going to show them that you support Mixergy by using my URL, hostgator.com/mixergy, but they’re also going to do you a solid. They’ll give you up to 62% off their already low prices. HostGator.com/mixergy.

Stephen, I promised myself that I would start like setting a timer to see how long these ads go. I forgot to do it. Maybe I’ll do it for the second sponsor.

Stephen: Those are good ads, man.

Andrew: Yeah. If I like them, I just go on and on and on. But the only advantage that I have is because I’m recording with you I could look at your face and I could see, “All right. We’re good here.” And then Andrew look back.

Stephen: I was just letting you do your thing. I should have been more engaged, I apologize.

Andrew: No, no, no, you’re fine. You’re fine. I need to see when it’s not the most engaging thing. I just can’t get [inaudible 00:24:37]. Do you do a lot of presentations?

Stephen: How long have you been doing this podcast?

Andrew: About 10 years now.

Stephen: Yeah. Wow, man. Yeah, that’s awesome.

Andrew: Yeah. You know, before I did this, I went and I gave a toast . . . I sign up for Toastmaster, and I remember you go to Toastmasters and everyone gets to give a presentation. I was giving the presentation once and I saw someone in the audience, they’re like . . . I forget what the look was, but it was something like, “Huh?” And I go, “Oh, man. I’m so bad at this.” And then that Friday night, Olivia and I went to see this play, and I was so mesmerized that I checked my face for a second, and I realized I also when I mesmerize I give this like weirdo face, so it wasn’t necessarily . . . I can’t like get in my head and go, “This person doesn’t like me. He doesn’t like what I’m saying.” Sometimes a frozen face means they’re engaged. It’s like taking it in. Sometimes a frozen face means, “Andrew, shut up.”

Stephen: I know. Yeah. I mean, really, I think I guess if some people are like giving you a lot of like, “Oh yeah, yeah,” maybe they’re just like not there.

Andrew: Right, right.

Stephen: Yeah.

Andrew: Yeah, yeah. So, you can’t get to in your head, but you do want to get a little bit of feedback. You’re a performance guy. You worked at Second . . . You worked there. You took lessons at Second City, right?

Stephen: I did. I took a couple of lessons there. I hung out there for a summer and some aspirations of . . .

Andrew: Why? Because you want to be a performer?

Stephen: Yeah, I was just fascinated by that kind of stuff. I was in like an improvisation troupe when I was in college, and there was definitely like a point in my life where I was like either I’m going to pursue comedy as like a full-time career or I’m not. And I have a lot of friends who were kind of doing the Second City thing and got an opportunity to hang out down there for a summer and just kind of be around the scene.

Andrew: So why did you stop?

Stephen: I mean, you’d sit and meet people who are just like so wildly talented that you realize like, okay. Well, this is going to be either or something that I’m always going to in the back of my head be like, “Well.” I mean, like, “I’m not like those guys.” And I remember he used to go to like Improve Olympic. I’m sure they still perform, but like the TJ Pasquale and David Pasquaze [SP], I think. I can’t [inaudible 00:26:41] not their names, but they’re fantastic improvisers. And they do like a two-hour show, like, every week where they just like, it’s just two of them on stage and you’re just like . . . I remember you sitting there and you’re think, “Well, man. I’m not . . . This is not for me. I’d love to do that, but I’m not on that level. But it’s fun. I really enjoy it.

Andrew: Do you feel that way about entrepreneurship? Do you feel like, “Yeah, I am one of those guys. I could get this to be 100 million . . . ” It’s already 100 million. “I could get it to be $1 billion business”? Do you feel like you’ve got that whatever it is that you earn off and other performance? Do you feel like you have it when it comes to business?

Stephen: Yeah.

Andrew: You do.

Stephen: It does feel . . . Well, I don’t know. It doesn’t feel like business to me. I feel like I really enjoy like the interpersonal kind of relationships and kind of like building teams, and kind of trying to solve problems. That part of it is really fun and we certainly have a lot of success. And you can just kind of feel when it’s right, and it feels right a lot of the time. And I think most of the time, it’s basically just being a good defender of like your customer and making sure that you’re advocating for what makes most sense for them. And I think oftentimes, in business, you kind of run across people who are advocating for themselves, and like they’re kind of negotiating for their own best interest. And I think, like, a lot of times if you let go of that a little bit and you focus on what’s best for your customer, like, your own best interest kind of gets taken care of.

Andrew: So I see that you are advocating for the customer at Fileswap [SP]. When you decide you were going to start your own business, I’m wondering what opportunity did you see? Because you mentioned Gazelle where anyone can go to their website, type in the serial number and get a price for their electronics and ship it out and they’ll send you the money. You were working at a company that did something similar. You saw that there were other players in the space. Why did you think that you can make money when there were so many people already doing it?

Stephen: Well, that’s a really good question because I think, like, certainly in the space that we’re in, there have been a lot of people who have lost a lot of money doing it and I think it’s . . . We felt very comfortable that we could do it in an efficient manner. And I mean, we didn’t come into this with like no understanding of how to do it. I certainly had had a lot of experience and seeing what Flipswap was doing and certainly like the things that were important, like how to move things really quickly. And I think that they were not the most efficient kind of operator, but it was like really easy to see where you could improve and make it happen. And I think when we started, we weren’t 100% sure that this was going to be either a runaway successful hit or that we were really going to be able to do it. I think, like, we had a pretty good idea that it should work. It was a hypothesis that was unproven.

Andrew: Because of what? Because what was missing from what already existed?

Stephen: Well, I think like, for us, we were kind of had a really basic set of rules around how we were going to do this. And so we went in with the understanding that we were going to build something like software tools needed to be kind of have an experience bias. They needed to be really good, they needed to be easy to use and we needed to be able to structure the service so it made sense not only for the retailers but also for the customer. There had been a lot . . .

Andrew: But, no. In the beginning, it doesn’t seem like you were thinking about the retailers. I’m on the early version of your website. At the very top it says “Phobio pays cash for your iPhone.” You were focused on iPhone.

Stephen: Oh, yeah. That was a long [inaudible 00:30:00]

Andrew: And you were focused on individuals. I could hit a button and sell my phone.

Stephen: Yeah, yeah, yeah. So that was basically, we did that as a proof of concept to just see if we could string together these outsourced like third-party logistics companies and these kind of third-party payment services just to see if it would all work. And so before we ever went out to kind of sell retailers on this idea that they could have this kind of bring one and one together and get three, you know, with trade-in, we did that. That was basically like our proof of concept. That was when we were still kind of working our day jobs and just seeing if . . . And this is the kind of thing we were doing on the weekend to see if it would even work. And it did. And when we got . . .

Andrew: So people were finding you, they were selling you phones, but you’re saying that wasn’t the part you needed to prove. You needed to prove, “Could you handle the phones after they sold it to you?”

Stephen: Yeah. We just wanted to make sure that that flywheel would turn. It was the smallest possible imagination of the complete service. And so all we needed . . . I think it was restricted even to just one model of iPhone and, like, we gave a really good price for that one model of iPhone, and it was consumers who were coming to us and then just making sure that we could complete the circuit, make sure that we were collecting the device, offering a good service or a good experience and then delivering it to the secondary market and making ends meet. And I think . . .

Andrew: What’s the secondary market that you sold it to?

Stephen: So it’s like, usually the kind of domestic auctions, like, there’s people who buy devices in the U.S. and like maybe it goes to insurance companies or it’s a refurbished and resold through retail channels or even on eBay or something like that.
Andrew: Insurance companies?

Stephen: Yeah. So a lot of times insurance companies or protection companies they’ll use our remanufactured or refurbished devices when somebody makes a claim. So if you have an insurance and you break your device, you may get remanufactured devices or . . .

Andrew: Oh, and they’re getting their phone from a company like yours.

Stephen: That’s right.

Andrew: And are they fixing it or are you guys refurbishing it before they get it?

Stephen: Well, that’s like one of the things that we kind of early started out saying we weren’t going to do, is like, we weren’t going to spend a lot of time trying to add a lot of value to the device. We were just going to move it through our system as quickly as possible. And there are other people who specialize in the remanufactured devices, and we wanted to limit the number of things that we had to be . . . world’s best in to make it work. So, yeah, we basically kind of created a set of rules that we were going to follow and then [inaudible 00:32:23]

Andrew: What were the rules?

Stephen: It was basically deliver a really great experience and then eventually, we actually were approached by retailers. We got a little write up in the New Orleans Business Journal based on that little service that you’ve seen that was just like, trade-in one iPhone at a time. We might get 100 in a month which we thought was ridiculous then because it was like a weekend project. And we were approached by some retailers who said that they want to do that service that they wanted integrated into their stores. And so we told them like, “Yeah, there were plenty of companies that do that. Have you looked at some of the other available companies in America, including Flipswap?” And they told us like, “Oh, yeah. We’ve used those guys but we lose so much money because they say they’re going to pay us $100,000, but then they only ever pay us seven.”

And so we kind of identified really quickly that you’d have to be able to kind of make this low risk or even no risk for the retailer. So not only was there this experience for the customer delivering a great value and making sure that it was an easy experience in terms of the kind of mechanics of the trade-in at the point of sale or online, but also, like, you had to make it work for the retailer or whoever kind of you were working with in terms of service delivery.

Andrew: Where did you get the money to buy all these phones?

Stephen: Well, I think in the early days we had, like, payment terms that allowed us to kind of grow without taking investment. Basically, we would get a device, and we’d sell it really quickly, and we’d sell it in a week, and then we’d pay in two weeks kind of thing. So we’d have like one week of buffer there. So we were basically trying to be creative in whatever way we possibly could to make sure that we didn’t get stuck, or we didn’t have to have a lot of capital that was tied up in this. But yeah, and it was an easy way to get started. And we thought it was another kind of attractive part of this business is it seemed like the kind of thing you could do without raising venture capital, which we wanted to see how far we could get without having to kind of bring in that institutional capital partners.

Andrew: Okay. So the first few customers, friends and family finding you online, then it’s the New Orleans Business Journal wrote about you and send more people in. You’ve finally figured out, “I think I know what we’ve got here.” Then you went to a local AT&T store, they became your first B2B business who were using you guys? Am I right?

Stephen: Yeah. So, we did . . . There’s a handful of AT&T stores in New Orleans area who started using it just as like, and that was very much like a proof of concept as well. We kind of took down that website that you saw there, that trade-in your phone online. And we reoriented everything around this kind of web-based thing. And it actually looked very much like iTunes. It was kind of a list of devices and some kind of administrative management tools, and then they were paying . . . Somebody would come in with an old phone, and they would give them an instant credit when they bought a new one, and we would kind of reconcile at the end of the month to see, “Okay, you’ve traded in this number of phones, and we’re paying you this, and the credit is equal this, and so everything kind of balances.” So it was very rudimentary in terms of the integration.

And the reason that they wanted to try something new was because they had tried some of the other services and it hadn’t been financially successful and they felt like . . .

Andrew: I want to understand how you guys connected with them, where the name Phobio came from. I want to understand then how you expanded beyond them. But first, let me take a moment to talk about my second sponsor. This time I’m going to be really quick. Here’s the deal it’s called Toptal. One of my past guests, in fact, several of my past guests have called them up, but one of them is a guy named Justin Hartzman. He founded a cryptocurrency site. So you can buy cryptocurrency through his site CoinSmart in Canada. And he hired great developers because he’s got a good team, good financing from his previous company, a lot of good reputation, great reputation.

I said, “Dude, why are you hiring from Toptal? You already started with a great team.” And he said, “You know, I really like the way my team is thinking, but I called up Toptal. I want to talk to them about having somebody who’s super smart, give some oversight and insight that maybe my guys couldn’t come up with. And the beautiful thing about Toptal is you tell them exactly what you’re looking for. If they could find that person, they’ll say, “Great.” They’ll go find them and often you get to interview one or two people because they find the right one or two people for you, and if you like, you can hire them and get started with them within a day or two. That’s how great they are.

So whatever you need whether you’re like Justin, you already have a team and you just want some outside influence to help drive your team in a better way, or you’re looking to hire part-time person, full-time person, full team of people, whatever it is, when you go to Toptal, all you have to do is go hit that one beautiful button and as soon as you do, they’ll schedule a call for you at your convenience with one of their people so you could tell them your needs, and if you’re happy, you can get going. If you’re not, you got nothing to lose.

Faster, better than even working with a recruiter here. All you have to do is go to this special URL that I’m about to give you and you as a Mixergy listener are going to get 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period of up to two weeks. That is right. If at the end of the period you are not 100% satisfied, you will not be billed. Here’s the URL, top as in top of your head, tal as in talent, that’s toptal.com/mixergy and be sure to see that very beautiful model on the right side of the page, I guess if you’re on a desktop. I don’t know where it will be on the phone.

You know what? I keep looking at my guest when I say “very beautiful model” to see if they think, “Oh, what a sexist jerk he is. Not what you’re supposed to say.” And I’ve never . . . I don’t think I’ve ever said this before. It’s just me. It’s a photo of me on the site.

Stephen: Oh, really?

Andrew: [inaudible 00:37:55]. Go check it out. And I don’t know whether . . .

Stephen: Well, you are a very attractive man.

Andrew: . . . you got a good photo of me.

Stephen: Yeah.

Andrew: All right. The name, Phobio, what is it?

Stephen: Man, officially, it doesn’t really mean anything. It’s just kind of made up nonsense word. Drew, my co-founder, and I had worked in a lot in a . . . We’ve done a lot of marketing, freelance marketing and help people with branding and stuff. And we basically had this very cynical view of branding that it, like, totally doesn’t matter. And we’ve dealt with so many people that were like, “I need an awesome website and my business card needs to be like amazing. Like, as soon as you give it to people they need to be like shocked with how good it is.”

And we were like, “Okay, that’s awesome. What do you guys do?” And we’re like, “We haven’t figured out what we’re doing yet.” Okay. So we just like we resisted this idea that we needed to, like, have an awesome brand or whatever. So we waited as long as possible. I think it was like we had already kind of set up most of the kind of like 3PL stuff, and we had like arrangements in place to do pretty much everything, and it was the last possible minute, we needed to call this something.

And I think we had like 25 text messages going back and forth on like, “Okay. What are we going to do?” And we came up with this like method where we were going to just like, at a random time, one of us was going to assign the other to come up with a name. And so the next time I saw Drew, I was like, “Okay, dude, you have 30 seconds. Give me a name and then we’re never going to talk about it again.” And so he said . . . We gave him 30 seconds and he said, “How about Buzz Saw?” He was like, “You have 30 more seconds,” and like bunch of names came out, like Phone Heap and Phone Hole. And then one of us was like, “Well, why don’t we just make it like nothing? Let’s just call it like Phobio or something.” And like, I don’t even think we agreed on it. It’s just, like, somebody ran with it and, like, that’s just the way it.

Andrew: And the name was available. You didn’t even have to buy from a squatter or anything, right?

Stephen: No, we were . . .

Andrew: You did?

Stephen: No, no, not at all. We did have like a guy in Australia buy phobio.com.au and we had there was some, like, thing we had to figure that out there. But we’ve tried stuff internationally in various kind of stages of development. We actually incorporated in Australia and in Italy. The guys in Italy were like, “You know, there is a word in Latin that means like fear, it’s called phobia. Are you aware?” “We’re aware of that word. Yeah.” Yeah.

Andrew: Yeah, that actually is one of my problems with Google. When I’m counting down, sometimes Google will just suggest phobia.

Stephen: Yeah, yeah, yeah.

Andrew: Oh, it looks like you guys have phobio.com.au, so you were able to make that work. And Drew is Drew Yeaton. He’s the guy who used to be a designer for Gowalla which had beautiful design.

Stephen: Oh, yeah, yeah. He’s . . .

Andrew: How did you hook up with him?

Stephen: He and I actually were friends in high school. He’s a little bit younger than me. He was actually really close with my little brother, but he was web designer developer. And so he was a great guy to know, and I was always kind of finding ways to give him a call and say, “Hey, this company is interested in doing a website. You want to work together on it?” And I would do some of the kind of the sales part of it, and then I was a copywriter, so I would do a lot of content for the website, and then he would do all actually hard part of the design and development, and we would split the proceeds. So we did that quite a bit.

Andrew: I could see that he was a designer and developer who was proud of his work because he, on the early versions of the site that I saw, he would list the technology that he used to build it. Like, he’d link over to like “The made with Django” logo was on there and you could click over and see it.

Stephen: Yeah, yeah, yeah. Yeah, I know. He’s a really good . . . I think it’s a big part of our DNA. I think he’s a really talented like architect of technology. I think he has, like, a specific skill where he can kind of architect while he’s building and then he is a very thoughtful designer as well. So he’s a fantastic partner because he’s always building really user-friendly and kind of elegant software solutions that also look great. And so, I mean, that’s like what more can you ask.

Andrew: We were talking about how you partnered up with AT&T. Did the local AT&T stores make up their own decisions on partnerships like this, or are they independently owned? How did you do that?

Stephen: In those days, they did. It was a very much a wild west. They had a lot of autonomy to select their own services and sign some products and stuff like that. So, yeah, they were very much able to do that. And it was very fantastic. And I think that’s changed. Now, a lot of this stuff is the carrier’s kind of make a directive from the top-down, they want there to be brand continuity and make sure people are experiencing AT&T the same in all places and I think it’s great, but yeah. [inaudible 00:42:34]

Andrew: For backend, a few people could experiment with you. You saw, “All right, you know what? This makes sense.” You took down the website that I saw. You decided, “We’re going to go B2B. The whole website needs to express that. You told our producer, the first version of the site had an iTunes like look to it. And the thing that I don’t even see it here in my notes, but I remember hearing this about you, that you finally found one customer and you kept going back to that customer and essentially saying, “Do we suck? Where do we suck?” and keep improving. Am I am I right or am I imagining it?

Stephen: I think, yeah, that’s about right. That’s why it’s simple result . . .

Andrew: And it was, like, pick one and then . . . Oh, there it is. It’s, “Every week I would go to him, buy him a beer and ask “What sucks? What doesn’t suck?” And at the end of the month and 20 beers, you guys ended up with a list of things that were just really small that you can do. And that’s when you Drew recognized that you had a product, you had something that could scale. What are some of the things that sucked that you guys had to fix to improve the product?

Stephen: Well, I don’t know. It was just kind of like usability stuff or . . . At the time, it wasn’t a very complicated piece of software, but a lot of it was around like, how do you figure out how you’re delivering . . . The big thing was like integrating it with the POS, like making sure that you’re offering a $25 credit and then a $25 credit is being paid out, and then how do you prove that that actually happened and reconcile it for the end of the month? So it was just a lot of like . . .

Andrew: They were managing their own point of sale device? They were managing that?

Stephen: Yeah. I mean, in those days, there was no integration, so it was just like, it was a web page, basically, and then they have their POS system. And in kind of making everything fit together, making sure that we had all of the right information at the end of the month that you could make it work in this trial period. Later, we developed really great relationships with like IQ Metrics and some of the big POS systems in the space where all that stuff kind of happened automatically, and it was very easy for them.

Andrew: You guys, in the beginning, you guys were integrating into their essentially cash register?

Stephen: Yeah, that’s right. Yeah.

Andrew: One on one. And it’s amazing that the local guy who is running the local store could make a decision about what integrates into a cash register. Is that true?

Stephen: Yeah. He wasn’t very well integrated, but he could . . . They had some leverage that they could pull, like, there were kind of, like, specific things that they had control over where they could create a skew and they could kind of identify, like, a specific number that could be inserted in a sale. So it was a lot of stuff just like leaving breadcrumbs. So at the end of the month, they could figure out that we are paying them X number of dollars and then that was . . . Yeah, it was a lot of stuff like that.

And for us, we’d never really worked in kind of like a retail environment or kind of operated in kind of, like, a retail operations. So, for us, we were just like, basically, learning how retailers worked and, like, what was important to them. And we had kind of gone into it, and I think a lot of entrepreneurs kind of develop products that they think are really cool, but it’s like, really difficult to understand, like, how your market or your customer is going to react to it or what’s important to them. So, it was . . .

Andrew: What was important to them that you wouldn’t have anticipated with all your experience?

Stephen: Well, I think the security around like who has access to make changes and like, we got to understand kind of, like, what the relationship is between like the retail sales rep is and like the corporation, what’s important to them in terms of like, “Are they motivated by top-line revenue or selling a number of devices or activations or attaching accessories?” And we were kind of . . .

Andrew: Were they or was each one different?

Stephen: Each one was a little different. So, like, we found that most of the wireless retailers that we worked with were really kind of hanging success on a gross profit per location. But some of them were very different, you know, it was like, how many boxes were being sold, which is like, they’re kind of term for number of like phones that were being activated. And so we kind of had to be able to understand, like, how to move the needle for each one of them.

And we thought it was great. I think it’s interesting kind of in an environment where everyone is selling essentially the same products, how they distinguish themselves. And it was a real lesson and kind of like retail management and kind of like retail sales strategy. Like, when everybody’s got essentially the same product, you can only distinguish yourself from the experience and the people and where you are. So we felt like, “Well, we don’t want to be in this business of selling everybody the same thing. We want to be able to have a multi-tenant platform that allows them to make changes that feel like a personalization to their way of doing business instead of just saying, ‘Hey, everybody eats the same bag for a few and get used to it now.’”

So we wanted to build this kind of flexibility for them into the product, and we identified that like as out of the gate. It was the first four stores. Even like, the different store managers had different ways of running their stores. And we didn’t want to kind of dictate to them how it should be done. We wanted to adopt what was working for them.

Andrew: And you wanted to go big quickly, you found a Verizon reseller who had what? Five hundred retail stores.

Stephen: Yeah.

Andrew: And you said, “You know what? I’m going to try to sell to them.” It turns out you got their phone number, the CEO’s phone number. How?

Stephen: I mean, strangely it was on a website.

Andrew: Just on their website. And again, this is a guy who owns or a CEO who owns 500 retail stores that happens to sell Verizon or was it Verizon exclusive?

Stephen: No, it was Verizon inclusive. It was the largest at the time. Verizon retailer, they’re still around.

Andrew: And I always thought they were all company-owned, but they weren’t. So, one . . .

Stephen: No, no, no. Most of them are not. Most are these kind of authorized retailers.

Andrew: How?

Stephen: So I got his contact information on the website, and I reached out to him, and he basically said, like, “This is the thing that you should be . . . ” It was right before Verizon actually got the iPhone. So I was like, “Look, this is going to happen.” We all know the Verizon iPhone is coming and like, you should be engaging in this. If you’re not, I’m happy to explain to you how this all works.

And so he emailed me right back and was like, “Can you come to Knoxville?” So I went to Knoxville, and they had just hired their Chief Operating Officer. He was new on staff, and I sat down with him. And basically, like, I had no idea. I had no idea how to sell anything. It was pretty basic. I just walked in and told them everything that I knew. They had a lot of questions, and they asked me like, who your competitors are, and I was like, “Well, I guess this company Flipswap and let me give you the email of their sales guy.” So,, it was super transparent and basically like they started following him. And they reached out to actually Flipswap, but I don’t know that they ever heard any feedback. So,, a couple of weeks later, we got an email saying, “Let’s do this.” And . . .

Andrew: And the reason that there was an urgency is, look, if the iPhone is coming out and at the time people would have had only AT&T iPhones, I think Verizon was the second carrier in the U.S. to have it. So it’s like, make it easier for people who have those at AT&T phones would rather go to Verizon which had a better network at the time by far to take their phones into you and replace them with Verizon phones.

Stephen: Yeah. It made a ton of sense. And I think . . . And we launched with them, and we have super successful relationship with them for many years.

Andrew: I’ve just been reading lately about the iPhone rollout and what happened in those early days. I had no idea how much AT&T was taken aback by the internet usage. I didn’t even know . . . I read this great BlackBerry book. What is it called? I forget. The story of BlackBerry, it was so fascinating. They didn’t believe that people would want to use the mobile web as much as much as people ended up using it, but also the carriers wouldn’t let them use the mobile web. The only reason that Apple was able to get people to use it is because AT&T was desperate, and AT&T had space, and also they didn’t think that enough people would be using it. It’s just fascinating.

Stephen: Yeah, I know. It’s bizarre. I think, like, given how . . . I mean . . . I know. It’s shocking because they got . . . I think that was something that Apple really forced was this idea of the unlimited internet, and like, you need to have unlimited data for every iPhone user. And I think like, probably a lot of this was like Apple’s risk. Like, they didn’t know if the iPhone would be like a world-changing device and they wanted to make sure that anybody who bought this really expensive internet communicator phone, a touchscreen tablet thing was going to have really feel good about it well into the future.

Andrew: Right, right.

Stephen: And [inaudible 00:50:55]

Andrew: The book I just found, it’s called “Losing the Signal”. Such a great story of the rise from nothing after so many years of failure, the rise from nothing for “Research In Motion” to become the company that created the BlackBerry and then what happened that made them lose it. It was just fantastic. And it’s not little things like lawsuits or the whole options issue that they had that even Steve Jobs had that helped wear them out. There were patent issues, all those things. And then also they didn’t have the foresight.

Stephen: Well, I mean, before the iPhone, I was a huge fan of BlackBerry. I thought they had . . . It was a fantastic product. I mean, but the whole touchscreen devices, man, it kind of changed everything.

Andrew: Yeah. All right. And I could see how then that big shift helped you guys get going. You said you didn’t have experience with meetings, which, to me is fascinating, really, to have been at the age that you were when you started this business to been as far along and still not have had sales meetings, what you mean, right, where you walk into a company and officially go and present.

Stephen: Yeah.

Andrew: And you actually told our producer, “Look, I didn’t have a lot of skills. I finally reached out to someone and I said, ‘Look, how do I get a mentor?’” Right? And you went to the mentor. Who was the mentor that you got?

Stephen: Man, I’ve had so many mentors in time, but primarily this guy named Terry House and in Michigan, and he was a kind of a friend of a friend. And I started telling him kind of, like . . . Oh, actually, I think I know the one you’re talking about. It was a meeting I was actually going to see one of our customers and he had arranged to kind of . . . He’s like, “Hey, there’s a guy that you should meet. He’s looking to buy devices.”

I can’t remember what the company did. I’d never met this guy walked into a restaurant, this sushi restaurant. I saw him at a table and he started asking me a bunch of questions about like, “Can you get the devices like this and like that?” and he was 10 years older than I was at the time. And I don’t even remember his name. I don’t know if he was a mentor. He probably didn’t even realize that he kind of like gave me this like really amazing advice over the course of like 45 minutes drink at a sushi bar.
But I was like, “Look, man, I’m like a total fraud. I just started this company like a couple years ago. I’m still trying to figure it out, man. Like, I don’t want to represent myself as like a peer because like . . . ” And he was like, “Oh, my God. I wish you told me. Okay. So what are you guys dealing with right now?” And I was like, “I’m trying to hire like a VP of sales position,” and he was like, “Oh, he’s the hardest. Oh, here’s what you do.” And he gave me this like some fantastic advice . . .

Andrew: What do you do? Because one of the problems with them is that all they want to do is line their pockets . . .

Stephen: That’s right.

Andrew: . . . better to you. Line their pockets and then they want to move on to somewhere else. And so what advice did he gave you that help you do it?

Stephen: He was like, “You really need to find somebody who you can genuinely connect with and that you can trust has like a focus on what’s best for the company.” And he’s like, “The problem is people who are like that oftentimes aren’t good salespeople.” He’s like, “So, be relentless. Make sure that you’re finding somebody who not only has like this kind of genuine trustability, and you know that they have like this kind of what’s best in the best interest of the company in mind, but they also are a good salesperson.”

He’s like, “They are very difficult to find,” but he says, “You should not stop until you find him.” He’s like, “You probably go through dozens of people of trying to like . . . It seems like it’s really difficult.” He’s like, “Don’t get discouraged if you can’t figure out either.” He’s like, “[inaudible 00:54:31]

Andrew: Did you say that you thought of yourself as a fraud even though you already accomplished so much? I wonder if that’s why you’re going . . . You’re going at a Harvard Business School, aren’t you, to take one of their management training programs?
Stephen: Yeah, yeah. I’m currently enrolled in the OPM program, yeah.

Andrew: What’s the OPM Program?

Stephen: Oh. [inaudible 00:54:44]

Andrew: That’s like Operations Manager, Owner, President, but it’s for somebody who is already in business.

Stephen: Yeah, yeah, yeah. So, I think it’s like you have to have, like, an equity stake in your company and you have to be executive kind of level and has to be . . . I can’t remember what the . . .

Andrew: It’s because you feel like . . . You’re still feeling like there’s something missing in you?

Stephen: No. I don’t think there’s something missing. I think, like, I’m very open to the idea that like as, you know, certainly, in a high growth trajectory company, the challenge of . . . the title doesn’t change, but the responsibility and like the marketplace are constantly changing, and so, like, you need to always be picking up new skill sets. And it’s very difficult to start a company and then continue running it for a very long time, 10 years or more. So I am like really open to the challenge of continually upgrading my skill set and making sure that it is not just as easy as going and taking some accounting classes or kind of learning a little bit about strategy or reading in a marketing book every once in a while. I think you really have to embrace that, like, sometimes you have to actually grow as a person to be able to do that. And so like . . .

Andrew: Are you growing as a person? I see this is on campus on the Harvard campus.

Stephen: Yeah.

Andrew: You’ve been in it for about a year now. I’ve gone to their website. It’s interesting that the first thing you see on their website is the title. It’s “Owner President Management.” That’s what it’s called OPM.

Stephen: That’s right. Mm-hmm.

Andrew: And then they say, “$44,000 per unit.” That’s the next thing that you see on their site, like, here is the cost. And then finally, “Show up on campus.” Have you gotten . . . What have you gotten that’s been that useful so far?

Stephen: Man, it has been like . . . It’s been really interesting kind of being around a bunch of people who are . . .

Andrew: You know what? I knew you were going to say that.

Stephen: Yeah.

Andrew: I said, “You know what? This guy is going to tell me it’s the people that he . . . ” And I realize . . .

Stephen: There are kind of three pillars. First, the faculty is amazing. It is like a very like, a TED talk level blow your mind, three times a day for 90 minutes. And, like, there is just . . . I was kind of wondering what this would be like, and I had it kind of went into it with a little bit of skepticism, and I was willing to try it. But I was blown away in the first couple of days. So the faculty is amazing and they come in and it’s just . . . I think it’s the pleasure watching anybody do something at the very top of their craft no matter what it is. So I feel like that is huge.

Secondly, I think the people that . . . And obviously, they’re presenting these kinds of Harvard Business School cases that are super, like, well-considered and other business schools use them to teach this and like . . . So there’s the kind of case materials, there’s the faculty, and then there are the people that you’re around. So, everybody who is there is successful beyond question, right? And being able to kind of talk with them about their kind of business experience and what they’re challenged with and like, certainly, there’s all, we’re living in essentially, like a dorm environment. So we’re all together, there’s a lot of this kind of, like, tribal . . .

Andrew: For how long? What is it? A weekend or a week a year?

Stephen: No, no, no. It’s a three solid weeks a year. So, it’s like a three-year program. So, I’ll be going back, I think, next March. I was there February last week.

Andrew: And you basically disconnect from work.

Stephen: That’s right, yeah. You try. Not everybody does, but I turn off Slack. I check my email like once a day. Every couple of days I would check in with my chief of staff just to see what was going on. But yeah, pretty much disconnect from the day to day for sure. And that is in itself, kind of like, it gives you space to really kind of considering you’re being bombarded with these different ideas and like, in every lecture you’re taking notes about how you need to, like, make all of these changes, like, think about things differently, and then you kind of have a couple of days on the weekend. You have classes on Saturday, but they have Sunday to really kind of reflect on.

I’m like, “How do you take all this information and synthesize it in a way that makes the most sense not only for your own kind of professional growth but also what can you take back to your business?” And I think it would be like a real difficult thing to go back in, like, in day one be like, “We’re changing everything.” But you certainly can pick up some kind of, like, really interesting strategies on how to grow. And I think that’s . . .

Andrew: Is there one big one that you’ve been able to implement? You’ve been in there already.

Stephen: Yeah. I think like, for me, I’m kind of very kind of solution-oriented, like, I really like individual projects and I don’t think I’ve changed much since I was at Flipswap in terms of my desire to kind of like random problems that I’m kind of solving by whatever means necessary and that certainly is an opportunity that you get as a startup CEO. But as the scale gets bigger and the complexity grows, those are the things that kind of compound on each other and you have to really delegate a lot of this stuff to various teams. And, like, operating a company is a lot different than building a product or solving a problem.

So I’ve learned a lot of like, really specific kind of skill sets around how to manage a team and like, how to run toward a plan and like . . . And we had a great experience talking to a Dutch CEO, actually, in this latest round. And I was telling him like, “What’s your Monday meeting look like? Like, when you start . . . Like, what’s the staff meeting look like for you?” and he’s like, “It’s very simple, you have your plan, and then you have your actual, and you ask your team, like, tell me only like, what . . . Like, how far are you from plan? What are the big things that make up the difference between actual and plan? What are the things you have already done to close the gap? What are the things that you’re going to do to close the gap and when will the gap close?” He’s like, “Don’t ask any question. You don’t need any backstory and that is just a waste of time.”

So you realize like really practical ways to address it that you kind of you have to find your own way and like something that fits you. But it’s kind of interesting to kind of pick up what works for other people and make it work for you.

Andrew: You have no funding into this, no investment, right?

Stephen: No, no. No capital . . .

Andrew: No capital.

Stephen: . . . investment because it’s mine.

Andrew: Wow wee. And Matt is your brother who is also on the business?

Stephen: That’s right, yeah. He’s our partner. I think he lives in Shanghai, and he’s not engaged day to day, but he was a real help in the early days.

Andrew: But he’s still like an employee of the business?

Stephen: Yeah. He’s not employed but he’s still a partner.

Andrew: Okay. Wow. All right. Do you remember the day . . . Let’s close it out with this. Do you remember the day that you saw yourselves hit 100 million in sales? Was there a celebration or any recognition that you crossed the milestone?

Stephen: No. I don’t know. There wasn’t really.

Andrew: Wow.

Stephen: It was like, one day we realized it was like, “Oh, wow, that was pretty cool.” But there’s always something we’re kind of always are looking down the pipe. I think that’s probably if I have a flaw, it’s that I fail to celebrate that stuff because it’s always like, “Well, that was cool, but now we’re over that. So now we got to look what’s next.” So it’s really easy to kind of have this fixation on the transition where you’re like, “Well, I mean, that wasn’t that big a deal, right? I mean, it happened, we barely even knew, and then now look.”

Andrew: So was there a bottle of champagne or shaved your head or something. Ceremony? Nothing.

Stephen: I get in a lot of trouble for my resistance to the cork popping champagne celebration just because like, I’m like, “Look, we got a lot of things going on that we need to make happen. Let’s just make those things happen.” And then by the time we’ve made those things happen and we’re ready to celebrate, we got other things that we need to do. So, it’s just kind of like tripping from the next challenge line of like, it’s hard to take that time. And it’s certainly a failing of my own. I don’t take the time to kind of celebrate that stuff. And I think it’s sometimes can be difficult for teams because, like, you really do need to stop and kind of reflect and see where you’ve been and where you are and where you’re going. And it’s hard for me to take the time to do that.

Andrew: Because you think it’s bad luck or because you think only weak people celebrate instead of working?

Stephen: No. I don’t know. I think it’s just basically like, an attention deficit thing where I’m like, “Well, that book was great but I already started this other book, so let’s do it.”

Andrew: All right, fair enough. Congratulations on how far you’ve come. Wow. It’s incredible you are continuing to grow. Once you get to 130 some odd mill . . . What is it? 126 last year to continue at that pace of growth for this year is shocking.

Stephen: Yeah. I know it’s fun. I think the challenges are the same as they always were and we’re looking forward to many more years of this fast growth.

Andrew: Why are you even on here? You know what? It’s not like someone’s going to listen to this interview and go, “You know what? I never thought to sell my phone. I saw the guy. I like it. I’m going to go sell my phone with him. We’re going to move it.” It sounds like they’re at AT&T resellers who are listening. There’s a reason why you’re here. I’m trying to pick up on what that is.

Stephen: Yeah, we are for sure. I think like . . .

Andrew: What is it?

Stephen: I have, like, a desire to make sure that I’m kind of like broadcasting to entrepreneurs out there who are thinking about doing something. Like, I was on that road trip driving through the Mojave Desert, listening to podcasts in my 1996 Toyota four runner and being totally inspired by the opportunity that was out there. And I didn’t even know . . . I mean, it’s like there’s no rule book. Like, certainly back then, there was even less about how . . . Everybody knows kind of Bill Gates and Steve Wozniak and Steve Jobs and stories like that, but I think like, certainly, podcasts specifically have created such a rich tome of information so that you can really kind of, like, hear hundreds, if not thousands of stories about how entrepreneurs got started and how they survived.

And I just want to kind of participate in that and in my own small way, encourage other people. And I think like, it seems like entrepreneurism is just like every third person is an entrepreneur. There’s so many podcasts that make it seem like anyone can do it and anyone can, but the reality is that starting your own business and being an entrepreneur, it’s really like an endangered animal. There’s way fewer entrepreneurs today than there would have been in 1960 or 1980. So, I want to make sure that we’re kind of reversing that trend and we’re encouraging everybody, and not everybody has to have this brilliant idea where they’re going to change the way people park their cars or store their files or make their . . . Like, it doesn’t have to be an earth-changing kind of idea for all of humanity. And those are fantastic too. Don’t get me wrong. But I think you can do something super small that in your own town like open up a hot dog stand or something. Like, entrepreneur . . .

Andrew: Whether it’s a hotdog stand or $100 plus million a year business . . .

Stephen: That’s right.

Andrew: . . . you want to encourage whoever’s listening to do it and to learn from you the way that you learned when you’re driving in your car.

Stephen: Absolutely. And I think, like, you can do it on your own, and you don’t need a lot of resources. If you’re savvy and you work hard at it is crazy to say that, but like, pretty much anybody can do it. And I think like . . . I think people should take the risk and be smart, but it’s pretty easy to do. And I mean, I feel like I’d do it again 100 times now.

Andrew: Yeah. It looks like you do a little bit of this from time to time, like, you’re helping Michigan entrepreneurs by mentoring them. I see that from time to time you’re open to it. And I got to say, anyone who’s listening to me, yeah, I’m going to end this by saying you guys should go check out phobio.com, but the truth is, there’s not that much you’re going to see on phobio.com. If you have an opportunity to see Stephen in person whether it’s in Michigan because he’s doing some kind of inspiring event for entrepreneurs or at some point, I got a feeling you’re going to write a book. I think whoever’s listening to me should look at those opportunities and jump on them to see him in person.

I’ve really enjoyed getting to know you before the interview and now here on the interview. I like the rapport we’ve had. And I want to thank you for doing this, and I want to thank the two sponsors who made this interview happen. The first is the company that will host your website right even if it’s Drupal.

Stephen: Even. Even if it is.

Andrew: HostGator.com/mixergy. And the second is a company that will help you hire phenomenal developers. It’s called toptal.com/mixergy. Stephen, thanks so much.

Stephen: Thank you so much for having me.

Andrew: I bet. Bye-bye. Bye, everyone.