Jon Carder is the founder of Mogl – a frictionless online to offline rewards program & Empyr – an online to offline ad platform. Mogl/Empyr has raised $50M from investors like Sigma Partners or Aequitas Capital. In college Jon Carder founded eHeaven, an online e-commerce superstore that was purchased by BabyUniverse in 2002. Jon Carder then founded Client Shop, a website dedicated to finding consumers the lowest rates on home loans. ClientShop was sold to Internet Brands in 2006. Prior to Mogl, Jon Carder founded MojoPages.com, an online local search engine which received $5M (series A) from Austin Ventures and operates out of La Jolla, CA.
In this episode you will learn from Jon Carder the following:
- Ramping up to millions in revenue with no financing
- The ups and downs of bootstrapping
- The M&A process and how to get the deal done
- Doing market research and understanding when is the right time to leave an idea
- The art of the pivot
- Raising capital from top tier VCs
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
About Jon Carder:
Jon Carder is a serial Internet entrepreneur, who by the age of 30 had started three multi-million dollar online businesses.
Jon Carder is currently the founder and CEO of Mogl, Web-based technology that helps restaurateurs attract more customers through a loyalty program that is part game and part discount—and partly out to change the world. Through Mogl’s “Meal for a Meal” program, Jon Carder has made it possible for users can donate up to 10 percent of the cost of their restaurant tab to help feed people in need. As a result, Mogl has donated over 700,000 meals through its partnership with local food banks.
More recently, Jon Carder has taken technology built for Mogl, and turned it into an “online-to-offline” commerce platform named Empyr, which has been working with some of the largest companies in the world, including Microsoft, Facebook, and Visa.
Jon Carder started his first online venture, called eHeaven.com, in 1999 at age 20. It was an e-commerce superstore where Jon Carder sold everything from baby products to big-screen TVs. After selling e-Heaven in 2002, Jon Carder created ClientShop.com, a service designed to help consumers obtain the lowest home loan rates by having multiple banks compete for their loans. In just 4 years ClientShop helped over 1 million consumers with their home loan and was named San Diego’s fastest-growing private company by the San Diego Business Journal. Internet Brands acquired ClientShop in 2006.
Jon Carder then founded MojoPages.com, a local search engine that ranks each business against local competitors from best to worst. Each business’ MOJO is based on an algorithm that analyzes the credibility of millions of online reviews.
Jon Carder lives in California.
Connect with Jon Carder:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello, everyone, and welcome to the Dealmakers Show. I’m really excited today about the guest that we have because I think that we’re going to be learning a lot from all the different experiences that he’s had as an entrepreneur. Without further ado, John Carder, welcome aboard today.
Jon Carder: Hey, Alejandro. Thanks for having me on. I appreciate it.
Alejandro: You have built multiple companies. How many of those have you really built and acquired? How many are there?
Jon Carder: There are four total companies, but I’m sure as we’ll get into later in the show, the latest one has pivoted. So, you can almost say five because the pivot is somewhat of a unique company. Yeah, four to five.
Alejandro: Got it. At what point in your life did the entrepreneurial bug start knocking on your door?
Jon Carder: Well, I have the entrepreneurial disease as us entrepreneurs know. As a young kid, I was doing wacky things. My parents used to buy massive boxes of hot dogs from Costco to save money. We were big into hot dogs, I guess. I had the idea I was going to sell hot dogs at the end of our driveway. Most kids do lemonade stands, but that was my deal. I didn’t know how to cook, so I just microwaved them until they would explode, and then put some cheese on them for maybe like a dollar more, and put up signs all over the neighborhood. Sure enough, we sold a bunch of hot dogs. We actually had a line of cars buying hot dogs. I was making money just running back and forth nuking these hot dogs. A cop car actually came at the end, toward the end of the day, and I thought I was going to sell a hot dog to the cop, but he wanted to see the food permit, which of course I didn’t have. He was pretty serious too. I think I was 10 or 12 at the time. My dad had to come out and rescue me. He didn’t take me to jail or anything. But there were always those kinds of things happening all through my childhood, freaking my mom out selling door-to-door magazine subscriptions for our school contest to win first prize, a really crappy $10 radio. I probably put 100 hours into winning that and staying out till 11:00 at night at a pretty young age. Those kinds of things were just in my blood. I think as an entrepreneur when it’s in your blood, you just kind of see the world a little differently. You want to hack things together to try to get, like in that case, enough money to buy baseball cards and whatever else you do at the time. The first real legitimate business started in college. I was selling baby products out of my dorm room: diapers to baby formula, and at random as well.
Alejandro: This was eHeaven at 19 years old. Is that right?
Jon Carder: Yeah. It started out as Baby’s Heaven. We started selling baby products, but we eventually got into other product lines, so we changed it to eHeaven.
Alejandro: How did you come up with this, because being a 19-year-old and probably at that time you were going out, hanging out with friends, but coming back home and dealing with diapers. It’s not the first thing that would come to mind for someone at that age.
Jon Carder: For sure. It’s kind of random. I think how I got into that, I’ll go back a little bit further. When I was 17, 18, I was getting ready to go out to college. This was my inspiration for becoming a true entrepreneur. When I was a kid, I didn’t really know even what that term meant. The motivation happened while I was surfing. I went out surfing just like any old day. I was at Newport Beach. My parents lived about 30 minutes inland from there in Placentia. I’m sitting there. There’s a lull, there’s no waves, and I just glance back at the shore. I don’t know why I didn’t notice before, but there are just million-dollar mansions as far as the eye can see in both directions. When I started thinking about it, pretty much any time I go surfing there are million-dollar mansions as far as the eye can see. That was the moment where I realized that there was just an abundance of wealth in the world. Look at how many people can afford a dream home where I could actually live on the beach and surf. That would be incredible. I started thinking, “What do these people do?” I didn’t really know, but I kind of assumed that they were probably building their own companies, and that’s where I was like, “I want to do this. I want to get that house on the beach.” That was my motivation. I learned later in life that that’s not the right motivation to start a company around. But it did get me started. At that point, I was looking for an idea. I went off to college, Point Loma Nazarene in San Diego. One of the jobs I got to help pay for college was at a hamburger joint. I was passing out flyers at a swap meet right across the street trying to get people to come in and buy hamburgers. It was there that the idea for my first business popped up, which was: there were all these pregnant women with babies going into the swap meet. I had made my rounds at the swap meet a couple of times. I noticed that nobody was selling any baby products. So, I thought, “This is it. I’m just going to sell baby products at the swap meet.” It was a horrible idea. I wouldn’t recommend anyone try that business model. It failed within two weeks. It was the shortest-lived business ever because I literally didn’t even sell enough to pay for my entrance fee, the first weekend. The second weekend, I tried to expand. I got my buddy to work for me for free, and we went to two swap meets, and we lost even more money. I was in college. I was out of money at that point because I wasn’t passing out flyers, and that business shut down. Very quickly, and luckily, another friend of mine was a web designer at the time. This is back in like 2000. He’s like, “Dude, you should sell this stuff on the internet.” I didn’t really know much about the internet. I should have because it was the hay day of the internet, but I went to college with a typewriter, with a little word processing screen on it. We were kind of lower-middle class. We couldn’t afford a full computer. There were computers in the library, but I’m not really a scholastic-type of person. I didn’t spend a lot of time in the library, so I just didn’t really know much about it. He was like, “Don’t worry about it. I’m going to build you an awesome baby website, and you’re going to be able to sell these online.” I’m like, “This sounds amazing.” I basically had paid for the baby products with a credit card that I’d gotten because at college, back in those days, you could just fill out a form and they would give you a credit card. I had like $300 left on that credit card. He is like, “That’s what I’m going to charge you for the website.” So, for 300 bucks, he spent a couple of weeks; he built this website. It was so funny. When I came in there to finally view the website, I’m like, “What does this thing look like?” I’m picturing this beautiful, family-oriented website, blues, pinks. It ends up he’s in a Hard Rock band, like Heavy Metal. He has long black hair, and he loves purple. So, I come in to see this Baby’s Heaven, and it’s literally all black. It’s got a gold gate, and then in Metallica lettering, in purple, it says, (in high rock voice) “Baby’s Heaven” across the top. It was the worst marketing and branding for what we were trying to sell that probably ever exists till today. That was how I got my first website and got started.
Alejandro: You obviously, sold this one for a bid. I mean, it was just the first rodeo, and you were still young. But at least from this time around, you were able to get your idea for your next business, which is Client Shop. Can you walk us through? What was the incubation process of Client Shop, and what was the business model behind it?
Jon Carder: Yeah, so, what happened was, at the baby company, we didn’t know how to get any customers at first. I remember somebody turned me onto the idea, “You just have to find other websites that you’re target demographic is going to and that you don’t compete with. For me, not knowing any better, I just went to Huggies.com because most of the stuff that we thought we’d sell would be diapers, and just said, “Hey, guys, can you link to us?” They don’t sell Huggies directly. They sell by the truckload. They said, “Yes.” And then they said, “Give us a banner.” Being kind of clueless, I didn’t know what a banner was. I ran back to my web designer, Dan. I said, “Dude, we need a banner. Huggies wants a banner.” So, he built one up, and we made this one pink, and blue, and cute with little babies on it and put it up on Huggies. That was literally how I got my very first sale on the internet. From that point on, we just kept adding more websites, and we learned about affiliate programs and paperclip marketing. It was all like just a self-education, just looking at—they didn’t have blogs back in those days, so it was like message boards and just anything I could do. I was soaking up information, just learning as fast as I could. We grew it to a couple of million in sales. We did sell it to one of our biggest competitors, but not for very much. That was a great learning lesson. Something I always tell entrepreneurs who are thinking about getting started is, you want to start with a great idea if you have one. But if you don’t. If you have an awful idea like selling baby products at a swap meet, which is one of the worst ideas, you will still learn a ton just by jumping into it. As long as you have that sort of education mindset like, “I’m going to learn as much as I can as quickly as I can.” It was so much fun just figuring all that out. Nowadays, things have changed for me and a little bit more stable environment financially, but it was just great. It was hustling and pulling that thing together from nothing. Literally, I gave my last 300 bucks to Dan and had to just hustle from then on out. We sold it, again, not for a game-changer, but a great lesson-learner. Then what happened was right before I sold it, there was this interview I was doing for a job. This person had mentioned that their company that they had worked for was doing insurance leads on the internet. Basically, what this means is you just, “Hey, are you looking for insurance? Fill out this form on the website. We’ll match you to four insurance brokers, and we’ll send your information to all four of them, and they’ll compete to give you the best rate on insurance.” What that company is doing is taking the form you fill out, and they’re selling it to the four insurance companies. I thought about that. I was like, “This is genius.” My idea on the baby products side, I had like literally a self-storage unit by my house where I had to go every day, tape up diapers and baby food inside of boxes and ship them out. Customer service—something would arrive damaged or broken. Believe me, you do not want to be in the customer service with women who are having a baby in a very short timeframe, and you just delivered a broken crib. They can go crazy, and they did. They were rightfully so. There were some mistakes that happened, and it was such a challenge. Then, all the sudden, I saw this business model that was selling information. I was like, “Wow! This is going to be a game-changer.” And it was. So, right after I sold that company, the baby company, I started working on this. Instead of doing insurance leads, I ended up doing mortgage leads because my buddy was a mortgage broker banker, and I could sell my leads to him to start. Then I could bring on other mortgage lenders. It was really fascinating because I went from eating Top Ramen and being so broke. In fact, I was so broke on that first company that when we would sell product, we would get some revenue coming in, and then, of course, we would have to buy more product, and, of course, spend some money on marketing. My bank account was always hovering around zero. Sometimes, it would go below zero, and sometimes, it would go above. It would just do that constantly over that two-year period. We had so many overdraft charges from Wells Fargo. I owed when I sold the company, $12,000 in overdraft fees from dipping below zero that many times. Talk about a cashflow nightmare and just the challenge of trying to stay afloat. That’s just hardcore bootstrapping at its finest. Nobody would give me money. I was 19 years old. I didn’t know what I was doing. I was working out of college for about half the time until I dropped out. My parents didn’t have any money, so I couldn’t do the friends and family round. I just had to hustle. But I made it and survived. Then when I started the second company, the business model was dramatically better. The idea actually was pretty good. It wasn’t the first time anybody had ever done that on the internet, but it was a really good model. All those internet marketing tactics I learned at the first business, I was able to apply to that new model. Literally, the third month in business, we netted $100,000 in profit. It seems like an overnight success, but it was really the two, three years of just self-education and the eating Top Ramen that really made it all happen. But it was that quick. And it was just, again, taking all the learning and then applying it to a really good idea. It just shot up. That was a game-changer. A funny story around that, my tax advisor said, “Hey, you’ve got to buy one of these big, heavy cars because you’ll be able to write the thing off.” This was back in the days of the Hummers and the big giant trucks. Sure enough, I bought one of these, and I drive home to see my mom. They know I’ve been living off Top Ramen, and they’re just like, “Get a real job. I can’t believe you dropped out of college.” Typical parent things when they’re worried about their kid who’s not in college anymore, and barely making it. Then I pull up in a brand-new car, and she literally starts crying. She’s like, “I can’t believe you’re selling drugs.” She thought I had gone to the dark side because how else does a—I was probably 21 at the time or 22. Who at this age can afford that? I kept trying to convince her that I wasn’t selling drugs. She didn’t really buy it. My dad believed me a little bit more. It wasn’t until four years later that we sold that company. That was a good exit, a life-changing exit. We can talk about that if you want. The Fortune Small Business did an article on it. My mom’s a teacher. They did an article on selling your company. They interviewed like seven people. They just happened to throw me on the cover, and I didn’t even know at the time. Her school gets that magazine. It showed up in the teachers’ lounge. She’s walking around. Another teacher actually sees it because I went to school there. She said, “Jon Carder. Isn’t that your son?” She looks down, and she sees me on the cover, and “He sells his company for a million dollars.” She called me, again crying. But this time, proud and saying, “You’re not selling drugs. I’m so happy.”
Alejandro: Is that the cover where you’re like surfing? Is it on the beach?
Jon Carder: Totally. They took a picture at sunset in San Diego on the beach. So, I think the picture earned the cover, and they’re like, “Time to sell. Go surf.” That kind of stuff. Believe me, I wasn’t surfing. I was working really hard for the company that just bought us, but it looked cool and sounded cool. Yeah, so, that was great. Now, my mom’s very proud, and she loves following my endeavors.
Alejandro: That’s great. Client Shop was a bootstrap startup. So, no outside financing. What were some of the lessons that you learned?
Jon Carder: Well, for one, a good business model that doesn’t have high overhead. I was selling information, so I could literally work out of my house, generate leads for two or three dollars using the internet marketing tactics I had learned, and just being really innovative there, trying different things that the big companies just weren’t doing. I could generate a lead for two or three bucks, and then I could sell it digitally, meaning email it to a mortgage broker and charge him $20 or $30. So, it had cash flow right from the beginning. It was a good model. There wasn’t a lot of competition. So, that was the first lesson as well. With the same amount of education, I was living on Top Ramen with a bad model, or just a generic e-commerce model, which takes time to scale and requires funding typically versus this information selling model which just changed my life just by having a better model. So, models are important, obviously. The other thing I thought was really important. This was a very low barrier to entry. You could start a mortgage lead company in your boxers at home, which is what I did. I wasn’t the only one that became aware of this. I’ve never seen anything like it. We started having competitors come in. We literally would have five or ten new competitors a week. Same type of situation: guys in their house just creating a website that you could fill out a form on and then call up mortgage bankers and selling these leads. It became insanely competitive. What we had to do was we had to continually evolve our model to stay ahead of this pack of competitors that was growing, and growing, and growing. I knew that things like paperclip marketing, or SEM, and affiliate programs, that that was all going to become very saturated, monetized, and the margins. As more people come into the space, the margins just shrink, and shrink, and shrink. So, I’m willing to sell it for $20, and then somebody comes in and says, “I’ll undercut you, and I’ll sell it for $18.” Then the next one comes in at $16. The profit margins just shrink. What we decided to do was go completely outside of the internet, which is weird because the internet is how we got started and made all of our money in year one. How we ended up making our money at the later years right before we sold, was we actually went to India and set up a call center over there to actually get people on the phone. When we get them on the phone, we were doing what’s called live transfers. This was very innovative in those days. Now, it’s status quo, but we would have somebody call the person up. Get them on the phone and say, “Hey, we noticed you’re interested in refinancing or home purchase.” We would transfer them live, right to a rep, like a country-wide or something like that. The rep was literally buying somebody on the phone. That was a huge hit, and we could sell those for like $120 each. We had hundreds of people in India working on that. That helped us continue our growth, and we were growing like crazy. We were 2,050. We were San Diego’s fastest-growing private company with 2700% growth over three years. It was because we just never got fat and happy. I remember a lot of people did. Like, you were making so much money if you were in mortgage leads in 2002 and 2003. It was just so easy. So, a lot of people went to Hawaii, bought a mansion, sat on the beach, just kept doing the same thing. One person out of their room building these mortgage leads and making money. I took the opposite approach which was, “Okay. I’ve got a limited window here where I can make some money. Let’s take all that money and invest it in building an amazing team. Let’s innovate, and let’s build, and let’s grow this into a real business.” So, by the time we sold, we had over 100 employees, and we were doing really innovative stuff like live transfers, and that’s why the company that bought us wanted to buy us. It was a huge space, a lot of competition, but we had really made the right move there. So, a lot of those guys that were sitting happy on the beach are now—I don’t know where they are today. Right after we sold the company in 2006, the bottom of that entire market fell out if you remember the refi boom and then the bust.
Jon Carder: So, we got very lucky getting out at the time, but also, we had that kind of mindset that this wasn’t going to be around forever, and let’s make hay while the sun is shining. That really paid off. Changed my life, actually.
Alejandro: Got it. I heard that you were eluding now to the selling of 2006. I heard as well that there were fair amounts of ups and downs. A very interesting story behind the acquisition process. How did this acquisition come about?
Jon Carder: As I mentioned before, we kind of thought the end of the refinance boom was going to happen probably around 2004, 2005. So, we started looking to potential acquirers early and started talking to various people. There was one company, in particular, that was very interested. They were rolling up different companies on the internet. Years to get the entire sale done from the time that we started talking to them to the time that we actually sold, which was interesting because I think it’s good for companies if they’re thinking they’re in a boom to start two years early because it can take that long. I’ve also had exits that happened much sooner, but in that case scenario, they wanted to get to know us. They liked everything that was going on. They wanted to see continued growth. They also saw that the margins were shrinking with online marketing and wanted to see what we could do with this call center and if it would actually work. So, there was a lot of relationship building and following our progress. That led them to eventually want to buy us. In the buy process, there was a ton of drama. I think the biggest thing was—what happens to entrepreneurs is they start talking numbers with like an LoI or term sheet, and you start to see like, “Wow! This is going to change my life. This is a lot of money.” You start running the numbers. You start thinking about what’s going to happen and what you’re going to do with that. Remember I always had that dream to have that house on the beach? Now, that dream was within reach. All I had to do was close this deal. That’s incredibly distracting because you really need to keep your eye on the ball and get back into the grind of your day-to-day work because you just never know if that’s going to come through. So, that was a tough one to learn. I think I surrounded myself with some really good advisors. I got two advisors that had sold their companies already that I could call on a daily basis as we’re going through this negotiation to get advice. That was one of the obvious and early advices was “Do not think about the money. Put that out of your head. It’s not going to happen. Get back to the grind, and grow your business. Pretend like this should just be your weekends and evenings, sort of side job. Your core job is to keep the business growing.” Through that whole time period when we were trying to sell it, I think they point to something, and they want to get a better deal. We definitely had that happen, and I think the way we negotiated our way through that and ended up with a pretty good deal at the end of the day was: a) we weren’t married to the outcome. I had changed my mind and said, “That money’s not there. I’m not getting that house on the beach yet.” This is just an exercise in—if it does happen, great. But I wasn’t planning on it. So, we could walk away. The other thing was, I had a couple of really good advisors that I was able to ping. Now, we had a banker as well. The banker, though, is motivated to get their fees. Right?
Jon Carder: I actually remember I called our banker right when we got this 12th-hour renegotiation, which again, that happens quite a bit. I was like, “What do we do? This is a massive haircut on the deal.” The banker was like, “Take it.” I was like, “What?” We just halved our evaluation. Why would we possibly do that? Again, the bankers are incentivized to get their fees. They were going to get paid very handsomely for that. Then I called my entrepreneur advisors who had been there, done that, and their advice was “negotiate.” So, we did. We spent hours and hours and hours negotiating. I actually sent my CFO who was with me. We first started to negotiate it with all of us in the room. We kind of got stuck. Then we played a little good cop, bad cop. I stayed down in the car. I sent my CFO up to negotiate with their CFO. They both got along really well. You know, you take the two CEOs out of the room, it helps. He would come down and say, “Here. We’ve made some progress.” Then I would go, “Okay. Here’s our next tactic.” I was getting these tactics from either my advisor, or—a really funny story. I actually got a gift from my girlfriend at the time, which was a negotiating CD that had advice on it of how to negotiate. I kid you not. I put the CD into my car and would listen to the chapters while my CFO was up there negotiating. That would develop my strategy for the next round—either that or talking to an advisor. I did that so much. Actually, we were negotiating for so long that my car battery died. This is kind of interesting, almost like the universe intervening. Car battery dies. I freak out. I called AAA, “Get over here. We need your help. I’ve got to get my battery backup. I’m in the middle of the negotiation of my life right now.” Sure enough, the tow truck driver comes over. He’s a really nice guy, and he says, “Jon.” He saw that new truck that my mom thought I was selling drugs to buy. He’s like, “Oh, this beautiful car you have, and you’re so young. Ah, you must be so happy?” And I was like, “No, not happy. I’m freaking out right now. Just get the battery juice charged. I am like freaking out.” I was just like super stressed. He was doing that, and he was like, “I want to show you something. Come here and look at this.” In his car, he had this janky little black and white TV. He was like, “I saved up my money to buy this, and I’m so happy that I could finally afford it. It just brings me so much happiness.” He was such a happy guy. He was exuding happiness. Here I had this nice fancy car with like a huge screen TV in it and all this stuff, and I wasn’t happy at all. I was so focused on the money, and getting the best outcome, and I just really was not seeing the forest for the trees. That was a wake-up call. I sat there for a second. I said, “Wow! Look at this. I am super fortunate. I am super blessed. This is incredible.” At this point, we had been negotiating for like four or five hours, maybe longer. Frank comes back down. He was my CFO at the time. He is so stressed out. He literally has a vein on the side of his head that looks like it’s going to pop. It was swollen. He’s got dark circles under his eyes like this guy’s been through the battle. I said, “Frank, look at how fortunate we are. Look at all this we have. Look at this amount of money we’ve now negotiated to sell this company. This is going to change our lives. This is amazing.” He’s like, “What?” He was expecting another negotiating tactic. At this point, we were pretty close to the original deal, original price and stuff. I said, “Dude, we’re going to take it. We’re going to take it, and we’re so fortunate to have this.” He was like, “Oh, you’re right. This is awesome. This is going to be great.” We called them up, and they’re like, “Yeah, you guys are going to take it. Great.” Everybody’s happy, and everybody’s cheering. It was like one of the coolest nights. Who knows what would have happened if the tow truck driver didn’t show up when he did to charge my battery? That taught me a really important lesson to stay present and be aware of how fortunate you are sometimes as an entrepreneur. Especially, when you start hitting certain levels of success it’s so easy to get sucked into the drama and all the things that are going wrong because there are always so many things that are going wrong. But a lot of times, we don’t even see how far we’ve come and where we are today is a pretty incredible thing. If we were able to tell ourselves 10 years ago or 20 years ago, “Hey, you’re going to be at this level, we probably wouldn’t have even believed it. We would have been like, “That’s got to be amazing. We’re probably so happy at that point.” In reality, there’s just more stress and more complication. You know, the bigger the businesses get, the more money that’s on the table. It was important, and I got lucky that the universe kind of reminded me of that at a very important time.
Alejandro: I believe that the terms of this transaction, they’re not public? Right?
Jon Carder: Yeah. No, we’re not allowed to say.
Alejandro: No worries. Basically, how old were you?
Jon Carder: I was 27 at the time.
Alejandro: At this point, you decide to pack up your luggage, and you go to Indonesia with ten friends to go surfing, and you want to attempt at retiring. Is that right?
Jon Carder: Yeah. If you remember how I started was the motivation to get that house on the beach. So, that was really my mindset is how do I get the house on the beach, and basically, not work. I was working to not work. That was my motivation. Here it is. I made enough to travel and retire as a surf bum. My first destination was Indonesia. There was this transition period. So, for about six months, I was working for the company that bought us. They already had a CEO of their mortgage-lead division, so they didn’t need me to run the show. They just needed me to transition everything and help them absorb our business into theirs because they were doing roll-up strategy. There was like six months of not full-time work, and much less stressful work because I didn’t have all the pressure of the company could fail at any time as bootstrappers do. So, I was able to decompress quite a bit for that six months. Then I went to Indonesia, and then I was kind of starting my retirement. When I went there, I brought all my friends first, and we do this amazing two-week surf trip. It was one of the best two weeks of my life. I was so happy. I’m lucky to have friends that were happy for me. We were all celebrating. “This is amazing.” Then all of them being in their ’20s, they had to go back to normal jobs. The boat captain told me, “Do you want to stay on the island for a couple of days? I’m going to go pick up the next crew. I’ll be back in three days. I’ve got this resort I’m building right now. It’s only half built, so there’s no electricity. There’s really nothing. The pool’s empty. There are no guests there. But I’ll feed you fish and rice every day, and you’ll have water. There’s a great surf spot right out front. So, if you just hang out for three days, I’ll be back.” I was like, “Yeah, this sounds amazing. I’m just going to surf and relax.” He takes off, and the surf goes flat. There’s nobody that speaks English. There’s nobody even around, really. Just the person that brings me the fish and rice for breakfast, lunch, and dinner. So, this was the first time in my life that I had gone completely off the grid. My cellphone didn’t work. There was no power. There was no TV. There was nothing to do except sit in nature, and there wasn’t even surfing. It’s a really incredible experience to go off the grid like that. Now, I do it on a regular basis, but that was kind of an accidental thing. It just really forced me to think about life, and go deep on reflecting on do I really want to retire? It was beautiful because by the second day, I realized, “Wow!” When I really look back at it, I’ve always been an entrepreneur. Now, having some money in the bank, that didn’t really change anything. I’m not that much happier, although it is a lot less stressful. But in terms of fulfillment, that was actually lacking. I missed some of those things that I got in the thick of things as an entrepreneur. The more I thought about it, the more I realized, “You know what actually makes me happy and fulfilled as an entrepreneur is actually the process of building something. Building something new and exciting that’s never existed anymore. All the learning and growth that comes from that. Then the icing on the cake is the impact. The impact that I make in my employees’ lives, the impact that I make in the customers’ lives, the impact that I make on the world, hopefully, make in the world a slightly better place. That is so fulfilling, and that is such an intrinsically fulfilling purpose. That just changed me on the spot. I, basically, from that point on said I’m not going to build companies for the money. I’m going to build it because that’s what I’m supposed to be doing. That’s clearly who I am, and that’s the talent I’ve been given. Let’s grow that talent. Let’s continue to evolve it, and let’s see how crazy-big a big, positive impact on the world can be by really continuing to learn and develop my skills. From that moment on, I’ll never work for money only. Money’s an important part of running a business. Without it, you die. So, cash still is king, but ultimately the types of companies I work on and the types of people I strap myself with, and what my life goals are, have completely shifted to one of more about learning, growing, and impact rather than material things.
Alejandro: I hear you. I’ve also heard you talk about how when this transaction happened and you were in Indonesia, you would take a look at your bank account. Definitely, at the beginning, that feeling of happiness or seeing all these zeros in your bank account was really nice. But I agree with you that happiness, at the end of the day, is just a feeling. It’s an emotion. It’s instant. The real, I think, ultimate is joy. The joy is a state of mind that I guess you would receive when, for example, what you’re talking about now, the real process of building and doing something that has an impact. So, I wanted to ask you. In Indonesia, you come up as well with your next attempt, I would say. That was MojoPages. What happened here because it was short lived until you realized what was going on with Yelp.
Jon Carder: Yeah, basically, this is sort of Yelp kicked our ass. There was a really good learning lesson in that one for me. I came off the sale of my company, and I was feeling like “I’m unstoppable.” I know how to build companies, and I know how to market companies, and I had a million mortgage leads. I can go build a bunch of other companies. What happened, there was an idea I had. I had this idea for like, I want to say three or four years, which is basically ratings and reviews on local businesses so you would know which ones to go to and which ones to avoid. I had been ripped off by a moving company—really spurred me to feel like “We need more transparency around local businesses.” I kind of put that idea on hold because I was working on building the ClientShop. So, that was definitely full time. It took all my attention. When I sold it, I was like—and then I had that epiphany on the beach. It was like, “This would be a great time to build that.” I literally ran to a 14.4K modem internet café in the middle of Indonesia, and registered the name and started working on that company. What I didn’t know is that Yelp had basically launched I think like 1 1/2 years or 2 years earlier. They were just getting ready to raise a big round of funding. By the time I got back to the States and was ready to launch, pretty much right around the same time I was building up the company to get ready to launch, they had just raised a 10-million-dollar round. What had happened is they had gotten their model perfect. They had refined it in San Francisco. They had gone through an early pivot themselves and really gotten the model dialed, and were starting to expand to other cities. It was working in other cities. That 10 million was their expansion around a scale-up. Here I was just getting started. That valuable lesson I learned: when people get the product market fit dialed, especially when it’s a two-sided network, so it has network effects that drive the growth, they’re starting to enter that hockey-stick growth phase. If you’re just starting when they’re hitting the hockey-stick growth, you’ll never catch them because their rate of acceleration is accelerating, and it’s already ahead of yours. And you’re down here getting started. It’s very rare for you to come and beat somebody. What you need to have happen if you’re going to win in a situation like that is the company has to screw up. Like Myspace to Facebook. It was just a bunch of poor-execution and decisions made on Myspace which made room for Facebook’s model. Yelp, on the other hand, they just executed exceptionally well. There wasn’t a lot of room left for a competitor. They just did a really good job. What I took away from that is: I want to be Yelp next time. I want to get out to the marketplace first. I want to dial in the product/market fit as quickly as possible; pivot as quickly as possible if you need to and get to that exponential growth curve because once you’re there—I joke around. Once you get to that spot, you could replace the CEO with a monkey, and it would probably still grow tremendously fast, and do extremely well. When you have a great CEO running it, it just accelerates that growth. But once you’ve hit that growth curve and those network effects are kicking in, it’s really hard to not grow because it’s just feeding off itself at that point.
Alejandro: I hear you, and we’ve seen that lately with companies. For example, like Uber where they have some internal issues, and obviously, that contaminates a little bit the culture, but to your point where you have those networking effects going in the right direction, it just makes it unstoppable. I’m right there, and “the winners take all” is something to really keep in mind. So, in 2010, you launch Mogl. How did you come up with this? I believe that you co-founded this with Jarrod and Jeff. How did that relationship happen, and what was the incubation process behind this?
Jon Carder: Jarrod and Jeff were team members that I brought on to MogoPages. Jarrod ran our technology. Jeff was our COO. Here we are at MogoPages realizing that Yelp is very difficult if not impossible to catch. So, what do we do? We pivoted our model to be a private-label platform for media companies, TV, radio, and newspapers that wanted to have their own Yelp-like directory. That worked, and the company became profitable. That was all great. So, MogoPages was saved. We didn’t die, thankfully. The pivot got us to a good spot. But the problem was that that wasn’t true to my purpose. That was just a survival move that we did, but I really wanted to have this impact in all of these people’s lives; just positive impact. That was really what Yelp was doing. They had solved a problem that was near and dear to my heart. I was sort of solving it for other people, but just not really at that level that got me super excited. So, we were kind of thinking about other things we could do that could have a big impact. That was when the idea for Mogl came around. That concept was, “Hey, everybody’s got cell phones and smartphones.” It was like 2010. Gamification was really hot. Four Square had just launched and crushed it. Everybody was like, “Oh, what if we could gamify different things, and what would be the impact there? So, we were like, “Let’s build a restaurant-rewards app.” There wasn’t really a great one out there. “Let’s build the best one. Let’s add gamification to it to help make it really sticky. Let’s have like a change-the-world component too.” What we did was: if you used Mogl, you would go out to eat at restaurants, and we would give you cash back for eating at particular restaurants. We would also donate a meal for every meal you ate; we would donate one meal to a local food bank. That way, somebody who couldn’t afford a meal would get access to one as well. It had this cash-back component. The center of feel good, and there was also a gamification component where you would be ranked against others that ate at that restaurant. Whoever spent the most money there in a month would be the Mogl, and would get an additional cash reward. That was the concept. When we launched it, it was growing like a weed. We launched it, and I think for the entire first year, it grew something like 30 to 60% every month. It was just phenomenal. Then that helped us. We raised VC to get that deal done and to get that launched. Then we raised the second round nine months after launch because it was growing so fast. I thought we were sitting pretty and in sort of the promised land because of all this growth. But I learned another incredibly valuable lesson which is, there’s a big difference between the early adopters who pick up your product and love to use it and tell all their friends. You have this viral coefficient that’s really strong. You have this usage pattern that’s really strong. This goes to that old theory about crossing the chasm. Once I used up most of those users, and we were launching city-by-city. So, like, San Diego, I had already gotten all the early adopters on. Once we started getting more into the general users who weren’t nearly as passionate and didn’t think it was nearly as cool, their viral coefficient wasn’t even close to what the early adopters were, and their user behaviors weren’t nearly as good either. So, we entered this really challenging time. We just raised a bunch of money. We were going all in on getting this launched into many more cities. We’d gone to LA, and we’d gone to San Francisco. Then we got outside of the early adopter curve, and we could see what the behavior usage was for everybody else. It wasn’t sustainable. Well, it was if we would raise hundreds of millions of dollars. We had raised 15 million so far. Just incredibly expensive to sign up all of those users, to sign up all of those restaurants, and build both sides of the network with the kind of user behaviors we were seeing in terms of spend, and lifetime value, attrition, and all of that. That was a dark period.
Alejandro: I hear you. At what point, let’s say, Empyr came into place?
Jon Carder: Once we realized that model was tough, we spent all of our time—this is going back to the ClientShop days. We spent all of our time trying to figure out how do we lower the cost of acquisition for the consumer side of the business as well as for the merchant side of the business? We were signing up restaurants. We had a feet-on-the-street sales team at first. We optimized that, I think it was $2,000 to acquire a restaurant we started, which was really bad. Got it all the way down to something like $1,200. That’s all-in sales commission, sales salaries, etc. Like how do we get it even lower? Move to an inside sales team, back all the way down to sort of like $800 acquisition cost. We hit a wall there. It stopped improving no matter how good we got the script, and our lead source, and our marketing, and all of that. That was the best we got to. For local businesses like restaurants are really hard to sell to. I have a lot of entrepreneurs that come to me for advice on that. Usually, the advice is: figure out a way to automate that and good luck figuring that out because that’s like the Holy grail that everybody’s been trying to figure out. I’m not sure if anybody’s really nailed it yet because the sales force is just so expensive. You don’t make enough money off the merchants to cover your sales costs, typically. That’s why a lot of companies like Belly and others have not succeeded. And guys like LevelUp pivoted to a totally different model. It’s just really challenging getting those guys to work. And we pivoted too. In fact, Belly, LevelUp, and Mogl were heavy competitors back when we first launched. We all launched around the same time. We all raised a similar amount of money. Belly died. We pivoted, and LevelUp pivoted. That entire loyalty market is just incredibly challenging. Also, very tempting. I see a lot of people still jumping into it, but very challenging to get it to work properly. So, what do you do? We’re trying to get the price down. We kind of hit a wall on the merchant side; same thing on the consumer side. We got pretty good with marketing. We could acquire a user for $5 or $6. That was a user that would actually link up their credit card to our app. That’s how it all worked. It all worked by you just paying with any credit or debit card that you had linked to the app. It was all tracked through VISA card and AMEX. Pretty cool backend technology. But that was it. So, when we looked at the numbers at $800 in that, we couldn’t make it work. We kept trying things. We did Kiosks inside restaurants to lower the cost. We brought the sales team inside. We did probably about four or five different ideas. They all dropped the price, but they didn’t drop it low enough. That’s when the aha moment happened. Why don’t we just become a platform? Why don’t we just open up our APIs, let other people run their own card-linked program like, say, Yelp, who was one of our biggest clients and one of the earlier adopters of the program? They can get all of the users to sign up for free because they already have access to all of the users. They’ll just add this as a function on there, and we’re in business. That’s what we did. We turned it into a platform. We got approval from VISA, MasterCard, and AMEX to share that data, and get that whole network thing set up, which took years. That just changed the business completely. Now we have literally a zero-customer acquisition cost. We don’t pay for the consumers. Our partners, like Yelp, RetailMeNot, Acorns, Stash, these guys have the users already. So, they’re offering us this as an enhanced product. It increases their stickiness. It earns them revenue. More revenue per user, and it makes their users happier. It’s cash by eating at restaurants and buying coffee at Starbucks, and just going to all these brick-and-mortar businesses that we now have. It makes a lot of sense for them. It makes a lot of sense for us. It’s a much better model. Now, we’re in a much better place. But that was a tricky pivot.
Alejandro: I hear you. Especially, at that point, you had very sophisticated VCs. You had people like Sigma Partners, Correlation Ventures, Jackson Square Ventures, just to name a few. Out of curiosity, how did you meet these guys?
Jon Carder: Avalon Ventures was one of those stories like how to raise money in the way that it’s just really easier. We got fortunate. Steve and I were at the same event. I was donating some time to one of the local startup community things. I think it was Founders Institute. It was a talk on game mechanics. I had just started really getting to know that industry, and gave a talk on it, and was inspiring all these entrepreneurs. “Maybe you can use this in your app. Steve was in the audience. He said, “This looks really interesting. Let’s talk.” We met for lunch or dinner at a restaurant. I said, “Look, I think game mechanics applied to restaurant rewards could be really interesting.” He did too. We both liked it. It was totally aligned. He was like, “This is really interesting. We might lead you’re A.” And a few months later, they did. That made that VC process pretty quick and painless. Steve has remained to be an incredible partner, very aligned, and just really has operational chops, and VC experience. That was just awesome. The second time around for the Series B, that was nine months after launch. We had good growth, as I say in 30-60% a month. Really exciting, but also kind of unproven. A lot of VCs were hesitant. I ended up meeting with a dozen VCs. It was a very challenging process. We got a lot of noes along the way. We ended up meeting Sigma Partners, which is now Jackson Square Ventures, Pete Solvik. He really got the model. He put us through some pretty intense due diligence, meeting with all the restaurant owners personally to make sure that they were happy with the product, which was really cool. He came out to San Diego. We literally drove around and met with a half dozen or dozen. Outside of all, of course, the financial due diligence. Everything else. These guys really do their homework. At the end of the day, this is a really good business. The customer’s super happy. The growth rates are phenomenal. He put in money, but we were really at a very critical point because we were burning money, also, so fast. That was one of those scary moments we raised just in time. I think the thing that I pulled out of that experience was my pitch got better and better as I went through the process. I’d done a bunch of pre-learning and warming up. In fact, back up five years. At MojoPages, we had raised a bunch of money, primarily from the Angel circuit. I got to practice pitching. I would highly recommend entrepreneurs do this. A lot of people jump right into the VC circuits, and their pitching probably isn’t as good as it could be with some practice. So, I went and pitched I want to say hundreds of angels in the MojoPages days to raise some money because we needed capital to get that business going. That was incredibly helpful when it came to meeting with Steve at the diner. You know, my pitch was pretty refined, and same thing nine months later. But even after it was refined, I still learned that I just got just better and better. These VCs are typically pretty smart; they’re pretty good at pattern recognition. They always seem to pull some nugget out that I’m like, “Ah, that’s a really good point. I hadn’t thought about that.” Or, I thought about that, but I need to go deeper on that. I need to have a better understanding of that because this is a sticking point for this VCM. My current answer is not sufficient to get them comfortable that I know the right thing to do in this situation. Better pitch. Closer and closer to a “Yes.” Then by the 12th VC, I had the “Yes” we were looking for. I’ve heard this advice, I think on your show before. I listen to it. I think it’s a great show. I’ve gotten a lot of good tips. One of those is work on the not ideal VC, not your perfect match first. I think that absolutely is played true in my life for sure, and I highly recommend you do that because there’s no question about it. As long as you’re listening, and you’re taking that feedback, you’re going to learn a lot through the process, and you’re going to get better, and better, and better. And, by the way, not only on your pitch, but I love pitching VCs. Some entrepreneurs hate the process. I love the process because I learn so much. I love meeting with really smart people, and they’re dissecting my business. Think of it like they’re giving you an hour of their time. And their time’s very valuable. These guys, to get to some of the top VCs is not trivial. It’s very challenging, and they have earned that spot.
Jon Carder: Their feedback can be super valuable. You can learn a ton from the process, and you can make some great relationships too. I try to enjoy the process because there is quite a process.
Alejandro: I hear you. It’s definitely a process, and I always tell founders that they need to embrace it. I guess talking about the pitch and the vision, and the future. Where do you see Empyr in the future?
Jon Carder: We have completed our pivot. It is working. We’re now starting to see some of the network effects kick in, which is super cool. On the publisher’s side, specifically, I would say we are definitely seeing network effects kick in. We’re at the point now we’re maybe 50 companies a quarter come to us to launch a card-linked offers program. At this point, we’re still building those up one at a time, so we have to be picky on that. We’re bringing on great brands like, as I was mentioning, Acorns and Stash. Some of these Fintech guys are launching programs. We love working with them. That’s one of the cool things. We get to work with great people on that side. So, we’re hitting critical mass there. Our core focus is to try to get now the other side of the network, which is all the merchants to hit the critical mass. We’re talking to national merchants that can get exposure too what—we now have 320 million consumers across all of our publishers in terms of running card-linked offer networks. Now, we’re trying to get great brands like Starbucks as a customer, Under Armour, Sephora. We need to get that too. We’ve got maybe a couple dozen of those brands. We need to get that to hundreds of brands, and we need to get that to the same growth pattern that’s happening on the publisher’s side, which is inbound interest. That’s starting to happen. You can kind of see it. Once that clicks over, this company’s going to hit this even more exponential growth than we already are seeing. I think it’s going to be a game-changer for the industry. One of the things I’m excited about, by building this card-link industry is: one of the coolest things we can do is work with nonprofits. To go back to that impact in how you make a difference. I think it’s important to have that in your business. It helps with the fulfillment you get from running a business. In our case, we can help nonprofits raise money for any costs that they have by launching their own card-linked offers program. Instead of giving cash back to their users, when they go out and buy a coffee at Starbucks or a meal at a restaurant, that cash back gets donated to the cause. We’ve been waiting to launch that until we have critical mass of the merchants, which we’re getting close to. But once we have that, we can launch that program. I think we’re going to be able to raise hundreds of millions of dollars for nonprofits across the world. That’s been a patient game, just waiting until we get to the point, but we’re getting close. I’m excited about that. That’s definitely a big piece of our future.
Alejandro: Really cool. If you could go back to the past, Jon, and give yourself advice before launching a business, what would that be?
Jon Carder: I think the best advice would be—and there’s a lot of them. Just recently, this has kind of rung true for me, which is don’t get caught up in the outcome. You really never know what’s good and what’s bad long-term. I remember my first company, that sale was a small amount. Some would consider that a failure. Thank goodness that that happened. I could still be selling baby products today. Instead, I’m working on things that I’m super passionate about. Ultimately, I’m just in a really incredible place, but along the way, there were so many of those things where I wanted a specific outcome, and that outcome didn’t happen. Something different happened. But that, what was different, ended up being better for me in the long-term. Tons of examples of employees is—you know, one of the toughest things for an entrepreneur is when an employee quits. You never know what’s going to happen. I can point to time and time again where I found somebody else; ended up being an even better fit. Was better for the new person that came on in the company, but also better for the person that left because they went on to do great things in a different environment. I’ve seen so many examples of outcomes in the short-term that I was so married to, and I was so disappointed when they didn’t go my way that ended up being the best thing for me. Now, I take a very open-minded approach. I don’t get married to the outcomes. It allows me to be less stressed. It allows me to be more mindful when I’m working on it because I just trust that whatever the outcome is. I’m not sure if it’s good or bad, so let’s just give it our best shot and roll with how it goes, and not stress too much on it that it has to go exactly the way I want it to go. Sometimes the way I don’t want it to go is actually the best way for me to go.
Alejandro: Got it. I love it. Jon, what is the best way for folks that are listening to reach out and say, “Hi”?
Jon Carder: Twitter’s probably a good one. Just joncarder. Pretty straightforward. Spelled a little funky. It’s j-o-n and then it’s carder, c-a-r-d-e-r. Also, email me: email@example.com. That’s firstname.lastname@example.org
Alejandro: Amazing. Well, Jon, it has been a pleasure to have you on the show. Thank you, so, so much.
Jon Carder: Alejandro, the pleasure was all mine. Thanks. That was a lot of fun. I appreciate you bringing me on.