Few are as well positioned to see the huge opportunities that exist for small and medium businesses in digital marketing as the founder of Constant Contact. In his new company, Brevi, Randy Parker is using software to allow mom & pop businesses to access those opportunities in ways that pay.
I had loads of fun talking to this most clever and affable guest; and I learned a lot.
Here’s what we touched on:
- Randy Parker Introduction
- How Randy Parker Discovered He Wanted to Build Software
- What Took Randy Parker from Florida to MIT
- “So, I was third generation entrepreneur. My kids now I say are fourth generation entrepreneurs when they're doing things.”
- “…in a consultant practice it's always, essentially, you're usually being hired to solve something that other people haven't figured it out.”
- “I grew up in a family thinking about A/B tests, and marketing…”
- Roving Software / Constant Contact Started as an Information Agent for Business
- Constant Contact Was Essentially a SaaS Business by Another Name
- Sal Daher Thanks Listener JaySingh1022 for an iTunes Review – Asks for Your Review
- What Brevi, Randy Parker’s Current Startup, Does
- “The way we can do that [allow the local coffee shop to compete with Starbucks] is, to actually tap into their data.”
- Brevi Ties into the Small Business’ Operating Software to Learn About Opportunities for Growth
- “…there is no substitute for the integrity and the commitment to the small business.”
- Intuit’s Scott Cook as the Model of Attention to All Customers
- For 2019, Randy Parker Hopes to Give Users a Tangible ROI on Their Ad Spend
- Thriving on the Abundance of Data, Machine Learning Can See Patterns Humans Can’t
- Randy Parker and the Proto-Kindle
- Alice’s Table
- “…startups are like a family. And so, like families, there are some great things about them and there may be more challenging things about them.”
Transcript of "Tenacity + Kindness"
Guest: Randy Parker, Founder of Constant Contact & Brevi
SAL DAHER: Welcome to the Angel Invest Boston podcast, conversations with Boston's most interesting angel investors and founders. I'm Sal Daher, and my goal for this podcast is to learn more about building successful new companies. Now, the best way I can think of doing this is by talking to people who have done it. People such as Constant Contact founder, Randy Parker. Randy, it's an honor to have you here. You made time from your busy schedule.
RANDY PARKER: Oh, it's a great pleasure to be here, Sal.
Randy Parker Introduction
SAL DAHER: I'm tickled pink. I love this. Few people can say they started a company that went public. Our guest today, Randy Parker, has those bragging rights. Yet as you'll discover in today's exciting interview, bragging is the last thing Randy Parker's likely to do. Randy studied computer science at MIT. After graduating, he spent four years as a software engineer, eventually heading up software development at a company building a proto kindle, which you can describe that to us later on, what it was like.
Randy then started his own business, a consulting practice working with Microsoft in its early efforts in mobile computing. In 1995, he founded a company called Roving Software. Remember that name, Roving Software. And at Walnut meetings, they’d say, "Oh, I invested in Constant Contact in the Roving Software days." That would eventually become Constant Contact, the publicly listed company, or rather I should say, a company that went public and which is now private, that helps small and medium businesses, SMBs, you'll hear that term, with their email marketing.
Since then, randy has been involved in several projects, the most interesting of which is a company named Brevi that I hope he'll tell us about today.
Randy as a service to people trying to discern what to do with their lives. It's a tradition in this podcast for me to ask how our massively successful guests, such as you, figured out what they wanted to do with their lives. What their path in life was gonna be. So, when did you discover that you wanted to build software?
How Randy Parker Discovered He Wanted to Build Software
RANDY PARKER: Yeah, it's really interesting. I sort of feel like I've only ever had one job. I've been software since I was 11 or 12. I was fortunate enough to have a school that had early computers and not like many of my colleagues, they'll say, "Oh, I started on punch cards." I got to start with a real keyboard, and at least to one-line screen. So, we were writing real programs.
SAL DAHER: You're too young for punch cards, by the time you were in high school punch cards were in museums.
RANDY PARKER: That is true. But you'd be surprised how many places still used them, and colleges and stuff. I just fell in love with the process of software as an invention. Software is a discovery, every single time you're trying to figure out what to do, and you're also creating something new.
And in the physical world, that takes a lot of time to do. You wanna go create a new widget or new golf club? It takes forever. Software, well, sometimes it happens quickly sometimes as you know from investments, sometimes it might take five years. I really loved that process of creation.
SAL DAHER: Yeah, it is under-observed aspect of software building, that it is a very creative enterprise. People think that people who go into that are very quantitative people; they have to be quantitative. They have to be very rational and understand rules, but they also have to have a creative side. Because you have to have imagination, to imagine that something that doesn't exist now, how it's gonna be.
RANDY PARKER: That's exactly right. And you'll see that on a lot of companies. The artists and the musicians are sometimes the best at doing the craft of software, because it is; it is a continuous imagining, what could this be? And riffing, right? Musicians, a lot of times we'll hear something else, and then change it slightly. And that's something that you see in software all the time. You say, "Oh, if we combine this software and this software, what do we get?" We get something amazingly different.
SAL DAHER: I think about my daughter Grace. She wanted to study philosophy in college, and I told her, "Oh, Grace, you can't get a job with that." She became a wet lab biologist, that's a tough slog, right? Yeah. So now she's retooling herself in software. and she says, "You know, I discovered that the same thrill that I got from philosophy, from doing something rational," and she's also a creative person. It's a lot like philosophy, very clear rules-
RANDY PARKER: And logic.
What Took Randy Parker from Florida to MIT
SAL DAHER: ... and logic and so forth. Uh, software is attractive to people in many, many ways. But anyway, so Randy, what took you from Florida to MIT?
RANDY PARKER: Yeah. Well, the short version of it is that Florida is sort of, not the best culture, certainly in the 80s for somebody who wanted intellectual pursuits. Uh, you know, you've got to remember that was the peak of the spring break era. I lived in Fort Lauderdale about a mile from spring break central.
SAL DAHER: And yet, your high school had computers?
RANDY PARKER: Yes. So, we had the resources to have computers at a time when that wasn't necessarily super common, but I just realized I wanted to be somewhere that was more intellectual. I also was, from a very early age, into artificial intelligence, so I was studying that probably since I was 12. And I said, "Okay, who studies AI?" And MIT was one of the places that came up.
SAL DAHER: Cool. Okay. Okay. So, you were thinking about AI already way back then.
RANDY PARKER: Definitely, I mean-
SAL DAHER: In the first era of this. Well, we'll get to this later.
RANDY PARKER: Yeah. But the creativity of the software, then married with the depths of the human mind. That potential there to me was just unfathomable.
SAL DAHER: Yeah. Yeah. So please tell us what drove you to give up receiving a regular paycheck in your last job, four years out of MIT, and to start a consulting business with some partners.
“So, I was third generation entrepreneur. My kids now I say are fourth generation entrepreneurs when they're doing things.”
RANDY PARKER: Sure. You know, I think this is common with many entrepreneurs. I know you've had other guests that discuss it, that I came from an entrepreneurial family. So, I was third generation entrepreneur. My kids now I say are fourth generation entrepreneurs when they're doing things.
SAL DAHER: Oh, they are?
RANDY PARKER: You get into a situation where you just don't have that same need for the comfort of a paycheck. You see the opportunities again to create something new, and if that's what you've grown up with, where essentially in entrepreneurial business and a small business, you eat what you kill.
So, if that's what you've grown up with, that mantra, you don't necessarily look at a company and say, "Oh great, my paycheck arrived in this little envelope dropped at my desk." That's not what you're living for each day. I saw an opportunity to go do something new in the field of mobile, back then.
SAL DAHER: Right.
RANDY PARKER: I said, "Great."
SAL DAHER: So, the calculus was a little bit like, "Wow, this company's doing really well, but I'm just an employee. I don't have any of the upside here and I'm working crazy hours and so forth. I might as well work crazy hours and have a bite of the upside."
RANDY PARKER: That's absolutely right. And you see that, and one of the things when you interview people for companies, you try and make sure that they've got that same passion for, "Am I gonna make a difference here?" Take an upside, or are they worried about that downside risk?
And the other thing with consulting is it gives you a chance to always be solving new problems. And I'm a problem solver at heart. That's what gets me excited. To sort of take something that's tough and figure it out. And in a company, many times you get into just sort of hitting the hammer over and over. Where-
SAL DAHER: Satisficing. It's not-
RANDY PARKER: That's right. That's what they do.
SAL DAHER: Yeah, that's what I call it. It's kind of like, put a patch on it and pass it on.
“…in a consultant practice it's always, essentially, you're usually being hired to solve something that other people haven't figured it out.”
RANDY PARKER: That's right. And in a consultant practice it's always, essentially, you're usually being hired to solve something that other people haven't figured it out.
SAL DAHER: Right, right. That's outstanding. This reminds me of something that Howard Stevenson, my guests a few episodes back, said. He is a professor at Harvard business school who gave up tenure, went out into the business world, who started businesses, got involved in businesses, invested in a bunch of businesses. Came back later on to Harvard Business School.
It's an exceptional thing, for someone to give up tenure. And he said most people stay at unpleasant jobs too long, because they don't appreciate the optionality that comes with change. They overestimate the risk of loss and they underestimate the upside.
RANDY PARKER: I think that's right. I think you see this in many experiments have been run, psychology experiments. A lot of people just have a risk aversion, that fundamentally affects their choices in life. And so, many times you'll find these entrepreneurial types are just people who just see that equation differently.
SAL DAHER: Have a different risk perspective. The study you're referring to, I have my CFA charterholder perspective. Apparently, people valued a loss twice as much as a gain. So, losing $100 hurts twice as much as making $100. But anyway, please tell us how Roving Software came about. Roving software, eventually Constant Contact.
RANDY PARKER: Yeah. Roving was the company name, and then Constant Contact with our product. Then eventually the company got renamed. You know, it was quite a journey, and it's really the way I've been involved with a number of companies. Have just sort of this progressive iteration, this pivoting amongst different concepts. But the original idea was very broad, very generic. It was beginning of the web era. If you can even imagine back to a time when there was no web.
I had grown up on online services since '77, '78. So, I had seen for, by this point, 15 years of what using electronically delivered media, getting your newspaper online, getting all sorts of content, being able to run searches over massive databases. I lived in that information era pre-web. And as the web started to emerge, I said, “We're going to need information agents to start to harness this for us.”
There's no way that we can take this opening of the fire hose, right? This fire hose is gonna be hitting us in the face, full force. How do we break that down?
SAL DAHER: You have to have some valve, some intermediating mechanism, because we're just gonna be swamped with data, which is not necessarily information. We need to distill it down to stuff that is valuable to people.
RANDY PARKER: That's exactly it. It just would be beyond what we can handle as people. So, the original thesis was to, start to build a framework for those information agents. Now, as you know, and as many of your guests have talked about, that's not really a business. That's sort of a nice thought, but there's no product and customer in that. And so that was sort of my first learning was like, oh, you got to find somebody to pay for what you're trying to do.
So, we went and pivoted that into building agents that could harness information for companies. Let's say you wanted to track your competitor. So being able to harvest all that information about those competitors. That was a big enterprise sale, and that was not a space that I was particularly fond of.
And so we refined it again to looking at, where we could be in the information flow for a small business. Again, growing up an entrepreneur, knowing small businesses, I looked at that. We found that the best place to be, to sell to a small business, is to be between them and their customer. The unique thing about small businesses Sal, is that they're so busy. They don't have five people doing each departmental function. They're just shuffling-
“I grew up in a family thinking about A/B tests, and marketing…”
SAL DAHER: By the way, just a quick digression, what business was your family in, was your dad in?
RANDY PARKER: Publishing.
SAL DAHER: Publishing.
RANDY PARKER: Like a newsletter publishing in the financial space. So, it was a very much a direct mail-
SAL DAHER: So, very congenial to what you were trying to do at Roving /Constant Contact.
RANDY PARKER: Absolutely. It was very interesting because it was very much low end, direct mail business. So, I grew up in a family thinking about A/B tests, and marketing. The color of the envelope, does it get better response, things like that. And so, in many ways, what we all do now with digital marketing, is really just reinvent a lot of the same tests that analog marketers were doing 50 years ago or even-
SAL DAHER: So, direct mailing sort of synthesized.
RANDY PARKER: Yes.
SAL DAHER: Right, right.
RANDY PARKER: And in many ways, what we dialed in on was, we could replace that online. Instead of you mailing, let's say you're a local florist, and you're mailing out postcards to a thousand customers in your town every month. And that's got some real hard cost to it. We said, "Oh, what if you collect their email addresses? And you mail those to them electronically?"
So, now your cost goes from being $1,000 a month to being $20 or $50 a month, and it was a dramatic cost savings for the small business. That's what eventually we hit on as being a winning formula. Just sitting between them and their customers. Giving them that ability to kind of mediate that relationship.
SAL DAHER: Interesting. Interesting. Please give us a narrative the pivots that took Constantly Contact from the beginning, to basically where it is today.
Roving Software / Constant Contact Started as an Information Agent for Business
RANDY PARKER: Yeah. As we started that information agent business, we worked with, as I said, the bigger companies. That was a tough business, and so we went more to the small and midsize. And where we started.
SAL DAHER: So that was a pivot. So, you found that the bigger companies were a tough sell.
RANDY PARKER: A tough sell.
SAL DAHER: So, you pivoted to SMBs.
RANDY PARKER: Yeah. Actually, I can flip back, what we did even before that, was we actually built software that was pulling for consumers for the early mobile devices. Think of it like a Flipboard or an RSS reader, where we're pulling stories of interest to you. Into a mobile device. And actually, Gates, and the Microsoft team launching their original handheld, demoed our software at the launch. But that was gonna be a space that wasn't gonna be big for, you could argue, not for 20 years until Apple's App Store came out, so it was good we got out of that pretty quickly.
As we moved into looking at where these agents could instead, capture data and send email to the customers. The first place we looked at was eCommerce. You remember back then eCommerce was just emerging. There was this idea that you were gonna run stores on the web. And so, we helped those stores mail their customers. Maybe your store wanted to offer the ability to send out birthday reminders for customers, for gift giving occasions.
So, we did that. We plugged our software into each of those stores, but it was very much of an integration. We had to work with you to plug it in, and that's not a scalable business.
SAL DAHER: No, that's trying to do ... in the beginning of the industrial revolution, when they're just beginning to have steam engines. They used to configure the factories as if they were still in the water power days with watermills and so forth, instead of steam engines, you can have a little bit more flexibility. Then when the electric motors came in, the factories had to be reconfigured, and yet you were sort of doing it in the old style, because of the way that SMBs are set up. So, it's not scalable. It's a tough business to scale.
Constant Contact Was Essentially a SaaS Business by Another Name
RANDY PARKER: That's exactly it. And there wasn't any existing model for that. You know, it's funny because I've had investors that I've talked to a subsequently that said, particularly if they didn't invest in us back then they'd say, "Well, you couldn't have been pitching us SaaS back then." And I'd say, "Well yeah, it wasn't called SaaS, and there weren't any examples of it." But what we were figuring out was, exactly what you described, Sal. So how do we get software in a central hosted place that can serve, you know, millions of them.
SAL DAHER: Before SaaS existed, you could be providing SaaS-like services, which would be an extremely valuable.
RANDY PARKER: Right.
SAL DAHER: That's the whole thing. So, what does Constant Contact do today? And what challenges does it confront?
RANDY PARKER: Yeah, it's really doing very much the sorts of things that we ended up diving deep into at that point, which is be a great hosted email marketing service for small businesses. Something where you can just go to the site in a few minutes, bang out a great looking message that goes out to your customers. You don't have to worry about any of the particulars, how to send and get that delivered.
That's really the same business it's in today. It's interesting. A lot of times we think that companies have to be so nimble, and change is so rapid and immense in this industry. But in the small business space, the needs are pretty fundamental. And so, if you look at the Constant Contact homepage today, compare it to what we had -
SAL DAHER: It's pretty much-
RANDY PARKER: ... 15, 20 years ago, it's-
SAL DAHER: ... little tweaks and knobs here and there, but it's basically the same still.
RANDY PARKER: Makes sense to the customer of yesteryear as it does today.
SAL DAHER: Excellent.
Sal Daher Thanks Listener JaySingh1022 for an iTunes Review – Asks for Your Review
Coming up next, I'll ask Constant Contact founder Randy Parker about the exciting company he's building now, but first I wish to thank listener JaySingh1022 for this review on iTunes.
"Sal is a key investor and advisor in the Boston technology community. His podcast has key interviews with very bright people. I'm very fortunate to have worked with Sal. Thanks, JaySingh1022."
See, the Angel Invest Boston podcast has outstanding guests, such as Randy Parker, is professionally produced, has no commercials. The only thing we ask in return, is that you help get the word out. Please tell a potential angel or founder about us. Take a minute to review our podcast on iTunes. Sign up at AngelInvestBoston.com to be notified of new episodes and of upcoming in person free events. So now the pièce de résistance, Randy, please tell us about Brevi and what problems it's seeking to solve.
RANDY PARKER: Sure. The problems with Brevi, are very much the same problems we were solving 20 years ago.
SAL DAHER: So the problems remain.
What Brevi, Randy Parker’s Current Startup, Does
RANDY PARKER: The problems remain, and you know in some ways you could say, well, we haven't done very much in our industry in solving them in 20 years. But the fact of the matter is, the world we had 20 years ago was very linear. It was pretty simple. As I said, you'd send out postcards. You weren't even really setting up much more than a rudimentary website at that point.
Now folks have to maintain their social media presence. They've got to have a dynamic eCommerce enabled website. They've got to be doing things on mobile. The marketing challenge for the small business is a pretty complex one, and we found that they are just still mostly treading water with respect to marketing. Now you've got to remember the real problem for small business in this country is, they're competing against big businesses, and big businesses get digital marketing at scale.
And because digital marketing is fairly frictionless and costless, those economies of scale are even greater.
SAL DAHER: Enormous, yes.
RANDY PARKER: Your local coffee shop now trying to compete with the digital marketing arm of Starbucks, who can amortize that over tens of thousands of locations. It's almost a losing battle. And so, we see just a wide variety of needs that, that small business has. The thesis for Brevi was that, we need to understand more about their business in order to help them be great marketers.
“The way we can do that [allow the local coffee shop to compete with Starbucks] is, to actually tap into their data.”
The way we can do that is, to actually tap into their data.
SAL DAHER: Ah, okay.
RANDY PARKER: So, we are actually, now that their business data is in the cloud, we're sort of using the cloud to help the cloud. We're using their cloud data, so their customer information, their transactions, their accounting information, using that data to understand and help them market better.
SAL DAHER: So how are you accessing that data?
RANDY PARKER: The great thing about our modern era is that we've got APIs, right? So, all of these cloud services open up their data, and we've built an architecture where we can pull that data out.
SAL DAHER: So, basically, let's give a concrete example of one of your customers here.
RANDY PARKER: Yeah. So, a great example. Let's say you're in the fitness space. Maybe you're running, Sal's Gym.
SAL DAHER: He's pointing up me saying, more fitness is needed in this fat man. Yes.
RANDY PARKER: So, Sal's running a gym here, and we've got lots of-
SAL DAHER: A gym of fatties.
RANDY PARKER: ... happy customers on ellipticals and, and you say, "You know, I need more customers." Right?
SAL DAHER: Right.
RANDY PARKER: It's a very heavy churn kind of business. What we do is we actually tap into your data, so we see all your customer data, your transaction data and you don't have to do anything except one click to authorize that to us. And now we've got the ability to say, "Oh Sal, looks like your customers are 35 to 60-year-old men."
SAL DAHER: So you're taking advantage of the fact that your local gym, has something on its side, which is, it has a system that it buys from a vendor. In the case of the gyms, what is it called?
Brevi Ties into the Small Business’ Operating Software to Learn About Opportunities for Growth
RANDY PARKER: There's MINDBODY, there's Pike 13, there's a couple other vendors, and we plug into those to pull that data out of their cloud system, their system of record, that they run their business on day in and day out.
SAL DAHER: So, what you're doing is a lot of these businesses have a goldmine of data about their business, which they cannot currently tap into, because they're just too busy running their business. And so you kind of say, "Okay, we have a way with software to get into these API, which you know, data that you have already. You don't have to create new data, or fill out forms, or anything like that." Just basically they allow you to tap into the API of the system that they're running on. And then, you can make the thing home. You can have like a dollar printing machine that just throws dollars at them.
RANDY PARKER: That's right. Well hopefully we'll make it that easy, that we can just print dollars. But it's the right idea that we've got the ability now to really know what's going on in their business. So for instance, we can see if their flow of new customers, or new prospects is dropping. And automatically begin to run, for instance, Facebook ads targeted at a certain market, or targeted at their local trading area, to bring them more customers.
SAL DAHER: Right.
RANDY PARKER: The other thing about the small business space, I just wanted to add Sal, is that you've got an ability to help the small businesses, that I said are so under challenge in this environment. I mean, it's interesting to think that they're largely under challenge today, if you're a small retailer, against Amazon in many cases.
And our original business plan for Constant Contact, we talked about small businesses getting challenged by amazon.com. So that shows you, the more things change, the more they stay the same.
SAL DAHER: No, it is a constant. It's always been a constant. The threat of Amazon for small companies. The threat of Starbucks, Amazon or these big players who can use the information that's available. So, it is even more important for these businesses to be able to use the data that they have, to become more savvy. I understand that.
RANDY PARKER: That's right. Even if you look at a 50 person or 100-person company, still a small business by many standards. They'll have a team of people that are dedicated to marketing. There's somebody who is mining that data. There's somebody who's figuring out those insights. When you get down to a very small business, sort of owner-operated, zero to five employees, zero to 10 employees, there's no one looking at that data.
SAL DAHER: Yeah, they're running all the time everyday trying to satisfy what their customers need and so forth. That's an important part of how they stay in business, is because they give personalized service. But that doesn't allow them to think strategically, and also to have more insight of what's happening with the market.
So, Randy, what lessons did your experience with Constant Contact provide you, that are proving valuable in Brevi?
“…there is no substitute for the integrity and the commitment to the small business.”
RANDY PARKER: Certainly, I'd say the first one is that there is no substitute for the integrity and the commitment to the small business. That has been Constant Contact’s sort of hallmark since day one, that no one cared about the small business as much as we did. And again, some of that came from those of us on the early team, our personal experiences.
But it really was something that we found and hired for, that we had people in the early days who went, we'd screw up and mess up a small business’ mailing. They would be almost in tears, because they understood that we didn't just mess up an email, and big deal, an email didn't go out. That email about this weekend sale at the jewelry shop, meant that somebody's kid wasn't going to summer camp.
They understand that, in small business, mistakes can be very painful, and that's something that we learned really, just by looking at other companies we emulated. I learned it firsthand, this is an interesting story, from Scott Cook who founded Intuit. Really impressive, impressive.
SAL DAHER: Tremendous. You're not the first one to mention him, because he's just very- [crosstalk 00:25:01]
RANDY PARKER: He's stunning. I know Paul English, spent a lot of time working under him, and will mention him in many of his interviews. The way I learned what that commitment meant was, we were actually QuickBooks users in the early days, -
SAL DAHER: Oh, Okay. Okay.
RANDY PARKER: Probably had six or seven employees, and I was doing the payroll late one night and it-
SAL DAHER: I confess to using QuickBooks myself.
Intuit’s Scott Cook as the Model of Attention to All Customers
RANDY PARKER: Yeah, I mean it dominated the market, and it was great software. And we ran into a problem, and it sort of like locked me out. It's like midnight, I've got to get the payroll done. So, I'm just pissed off. So, I'm like, well, I'm gonna send an email to Mr. Small Business, says he cares about the customer, always listens to his customers. Scott Dot cook, at S Cook, you know, send all the email addresses, and bcc the thing to like five different addresses. Give him a piece of my mind.
I think I avoided using any four-letter words, but I was pretty, pretty hot. Come in the next morning. There's a response from Scott, "I can't believe the software did that. That's really a pretty big screw up.” He CCs his senior VP of customer service, and says "Larry, will you get on the phone with Randy today, and figure out what happened here?"
And sure enough, they got this resolved and I said, that is commitment to the small business. Intuit was already a multibillion dollar company at this point. Thousands of employees, and he's responding to me, and what were we? We were a $300 a year customer. To him, that's the level of commitment you need. And everybody who succeeds in small business, sees them as one at a time. And the people that fail and small business say, oh, it doesn't matter, there's 400,000 more fish in the sea, there's 10 million more fish in the sea. That's the biggest lesson that we learned.
SAL DAHER: That is extremely valuable. So, Randy, what's your vision for Brevi at the end of 2019, what do you expect Brevi to be doing at that time?
RANDY PARKER: We feel that the opportunities to help the small business really understand this marketing landscape are immense. And the big difference here is, we've got access to their data now. So, by being in that data, we feel there's no limit to what we can unlock in terms of insights there.
So, for instance, most companies, most tech companies in this area, think a lot about cost of acquisition, lifetime of customer, you sort of understand your customer economics. But when you talk to a lot of small business owners, they get that at a very gut level, but they don't really know which customers are providing which part of their sort of profit picture.
We've got the data, we would spend time asking them these questions, and we had this revelation last year when we realized, why are we asking them a question that they don't have the equipment to calculate? We can do that for them. So now we start to tell them, "Hey, you know why it makes sense to go run a $100 Facebook ad, because every time you get a new lead, it's worth $172 or $280. That's what every new lead in your system has proven to be worth to you." Beyond even marketing, just to understand that business.
For 2019, Randy Parker Hopes to Give Users a Tangible ROI on Their Ad Spend
SAL DAHER: So, you'd be able to give a very tangible ROI, for the spend on ads.
RANDY PARKER: That's right.
SAL DAHER: And you will eliminate the old saw about, 50% of your publicity works, but you don't know which 50%
RANDY PARKER: You don't know which half.
SAL DAHER: Yeah, which half.
RANDY PARKER: That's right. And we get that ROI. So, for instance, in that fitness case, we get down to saying, "Oh, we brought you these eight new customers. They're named, you know, Bob and Mary and Joan and they've now spent $1,242 with you. So off of a $100 ad, you've already got $1,200 revenue." By the way, that keeps growing in a recurring business. So, by next month it might be, you know, $1,600. That's a huge ROI, and they've never had the ability to look at marketing and say, what is the precise return that I got from that spend?
SAL DAHER: That's exciting. That's very exciting. Now let's get a little bit more general now, Randy, you worked in AI and you lived through the first AI bubble, so give us a comparison and contrast of what was happening then and what's happening now in AI. Is it really a bubble? What's going on?
RANDY PARKER: Yeah, it certainly seems like it just from the level of-
SAL DAHER: AI, artificial intelligence, I should say.
RANDY PARKER: Artificial intelligence. Yeah. We had the early days right over in Kendall Square. They called it AI Alley. It was very much the first bubble before the web bubble. We had companies throwing tons of money into companies. We had a company that put $30, $35 million into back then, so that would be what, you know, $80 or $100 million around now.
Heady times, but it was a different approach. We were taking a very rule-based approach with AI. Say, okay, we can take an expert and figure out, by talking to them, distilling what makes their expertise. What are the salient points of their expertise. Now you've got an opportunity to do that with data. So, that's really the biggest change now is, we live in a world that has so much data. We can collect that data, and then pump that into learning algorithms, and begin to understand what makes this happen, what makes this tick, as opposed to just distilling.
The interesting thing with the rule-based approach was, sometimes it was actually rudimentary, what made something tick. So, there's a great example of an old guy who repaired the big soup boilers at Campbell Soup. So, a team went in there to distill what, I think his name was Aldo, and he was the guy who knew how to keep all those huge industrial soup boilers going.
SAL DAHER: I couldn't imagine.
RANDY PARKER: Who knows how big these things were, right? Hundreds of thousands of gallons. I don't know how big they were. But you know, these things, they make big industrial soup in. They said Aldo's getting old, you know, he's been doing this for 60 years. We need to figure out how to replace him. So, they would just figure out what were the rules, what did he do?
He'd come over, he'd look at gauge A, he'd tap on pipe B, he'd fiddle with knob C. And they'd put that into software. And we did something very similar with a big aluminum mill. You can imagine these Alcoa mills that are producing, God knows how much, aluminum a day. And it turned out that, I worked on that project. It was like 20 rules really, were the guts of how you kept an aluminum mill running. But until you sat down and distilled those, it seemed like magic.
So, AI then was a very person-intensive process and what's different now is we've got this sea of data. Everything's seems kind of dramatic.
Thriving on the Abundance of Data, Machine Learning Can See Patterns Humans Can’t
SAL DAHER: Instead of following Aldo around, they can track where Aldo has been from the MAC address on his phone, and then you can crunch those numbers.
RANDY PARKER: That's right. And you'd be harvesting every valve and pipe in the whole building now, would probably be instrumented. So, you'd say, "Oh, you know what, it turns out before this boiler goes out, the routines would see that there's this drop in these pressures in this unrelated, or seemingly unrelated tank."
And that's how machine learning works. It finds patterns that actually the human might not even know, that Aldo himself might not have known. He might have intuited. He might've, just through his vast experience, figured that out. But now the machine algorithms will just figure that out from the data.
SAL DAHER: It's sort of like now the kind of commodity IoT thing for measuring, if a motor is gonna fail, it's just vibration. Basically, the bearings are gonna go. So, you can measure when the vibration goes beyond a certain level, the motor is gonna have problems with the bearings, and it's gonna fail. That's the typical mode of failure there.
RANDY PARKER: That's right. And so that's it. So today you'd have a system that would detect, there's some motor opening the noodle flow valve into the chicken noodle soup. It would start to vibrate, and now you'd have a ... today the Aldo would detect that, the automated Aldo I should say, would detect that, two days before the soup line gets shut down.
Randy Parker and the Proto-Kindle
SAL DAHER: Excellent. Excellent. Go back and tell me now about the proto-Kindles. You said it was like three times the weight, 10 times the cost or something.
RANDY PARKER: Yeah, it's funny, we really were building and electronic book. I had a co-founder who was very passionate about the great works of literature, had grown up a humanities major. Married that with some software and hardware types, and we took early Japanese kanji LCDs. So, these super high res LCDs, put them in with an early processor, CD-ROM drive, and you had an electronic book.
But as you said, it was something that weighed a, you know, 10 pounds and costs $6,000. So really wasn't quite ready to be something you would lug around to the vacation home.
SAL DAHER: No, no, no.
RANDY PARKER: We had to pivot there and find a way to use it for industrial reference applications. So, back then say a telephone company switch when that would fail-- you know, those big switch buildings, right? --somebody would drive out from the telephone company and they'd have an entire van of manuals. So, you imagine they're running back and forth. I've got to go check on 19.3.4 in Book Six.
SAL DAHER: A $6,000 device there would be valuable.
RANDY PARKER: Exactly. But it was an interesting opportunity to just get a great look at what the capabilities of things like touch. Right. We had a touchscreen, we actually had a three-dimensional touchscreen. Now you've got the force touch iPhones. We had one of the early screens that could detect the deflection of the wave.
So you started to play with ideas of, what's it mean to flick things around on a screen? What's it mean to have the access to search a million volumes of something, right from a portable device?
SAL DAHER: But the pricing was not for the broad market. It was just for-
RANDY PARKER: That.
SAL DAHER: ... the enterprise market.
RANDY PARKER: Every piece of the device was way too expensive. It taught me I never wanted to be involved with the hardware business. Software, you can get the price down. But hardware, things just start expensive and often stay there.
SAL DAHER: Yeah, so you just wanted to abstract away from the hardware. Are there any other startups that you admire other than Brevi, that you'd like to talk about?
RANDY PARKER: Well, one that comes to mind, certainly I've been impressed, I've met with them a couple of times. I know that you know them well, it's Alice's Table. Actually, just saw her on-
SAL DAHER: Shark tank.
RANDY PARKER: ... Shark Tank last night. Very impressive job she did, with a difficult set of sharks.
SAL DAHER: Alice Lewis. She was a star before she went on Shark Tank.
RANDY PARKER: That's right. She is a local hero that we can look to, and I think they'll do very well there. Another company I'm quite fond of-
SAL DAHER: Tell a little more about what Alice's Table's doing.
RANDY PARKER: Yeah. What they're doing is they've got, very near and dear to my heart, in terms of working with entrepreneurs-
SAL DAHER: SMBs.
RANDY PARKER: ... and SMBs. They essentially provide a service, a package of materials and a kind of a wrap around, so that anyone can become an entrepreneur, and particularly for women. It's the capability, you can buy this kit and then begin running flower arranging parties in your city. And you go out and recruit people to attend those parties. You find a location to host it at, but basically, you've got business in a box.
With this move to entrepreneurship in our society, talking about earlier about the leaving the comfort of a nine to five job, well many people don't have that comfort right now. Or they want a part time opportunity. It's a very flexible “business in a box” model that she's built.
SAL DAHER: Yeah, Alice did that. She was extremely talented, young woman who could do anything, and she went out and she started working. She started doing this work on her own, and got to the point where she was making $100,000 a year. And I think at that point she says, what if I recreate this for thousands or tens of thousands of women across the country? I made an investment in the company, and I'm very excited about her prospects going forward.
RANDY PARKER: Yeah, she's very impressive. And I'd say the other company that I like that is just emerging, is a company called Outseta.
SAL DAHER: Outseta, I haven't heard that.
RANDY PARKER: O-U-T-S-E-T-A. And that's started by a couple of the people out of Buildium, which is in the property management.
SAL DAHER: Mm. Yes, yes.
RANDY PARKER: SaaS for property management. Very impressive company that has done quite well here in Boston.
SAL DAHER: What is Outseta doing?
RANDY PARKER: What Outseta is doing - the name hints at it with outset - they're building a software platform for founders that are starting a new SaaS business. So the great thing about the SaaS world then we've created now, is that there's tons of tools out there. So, you start a business and you can get a database here, and do billing here. You know, all these things were very tough to do.
In the early days, before there were SaaS at Constant Contact, we had to spend a quarter of a million dollars on our billing system. Because we had to buy a carrier-grade billing system, because that was who did subscription billing online back then. Now you drop in a payment and billing product and you're paying 49 bucks a month.
The problem though is now there's so many of these. You've got a customer management product, you've got a billing product, you've got an email management product, you've got a website tracking and analytics product.
SAL DAHER: Right. Right.
RANDY PARKER: So, you might end up with five, 10, 15 products, the founder-
SAL DAHER: That you can't contend with, because you're a small business and so forth.
RANDY PARKER: Exactly. So, the first thing you do not want to do in your company, when you've got a limited runway, you're trying to get to your proof of your own business, is to be sitting there worrying about how to integrate 10 products. So, they said, what if we put together one package that is the launch platform for any new SaaS business. Just everything you need, right? We've done it. We know what is required, where the connections need to be, and we just put it all into one package. You press a button, sign up with us, you're ready to launch a company.
SAL DAHER: I can see how that's valuable. And it's taking advantage of a trend, of becoming easier, and easier and easier to do software businesses. You know the trend’s your friend in that situation.
RANDY PARKER: That's exactly right. I mean, what many of us now as we launch these companies is, you end up spending a lot of time not just building your own software, but you're building other people's software.
SAL DAHER: So, Randy, what would you like our audience to know that we haven't touched on?
“…startups are like a family. And so, like families, there are some great things about them and there may be more challenging things about them.”
RANDY PARKER: I think the interesting thing I've learned through various companies is that startups are like a family. And so, like families, there are some great things about them and there may be more challenging things about them. But it's interesting to see that many of the personality dynamics you get into with challenging families, the way the patriarch of a family, sometimes their beliefs in their system or their culture-
SAL DAHER: Or the matriarch.
RANDY PARKER: Or the matriarch. The way those things then permeate through other generations. Many of these rules sort of apply to startups as well, so it's just interesting to see the things that happen. Particularly in small companies, small startups where you're working together so intensely, that it's very important to look at the people you're working with.
SAL DAHER: To observe those family dynamics.
RANDY PARKER: Absolutely.
SAL DAHER: Family-like dynamics.
RANDY PARKER: Absolutely.
SAL DAHER: That develop.
RANDY PARKER: You know, in big companies you get to a different set of problems. It's much more structured, hierarchical, but in a small company it's a lot about the personalities. And what you love about your wife, cousin, brother-in-law, you know the same things apply with your co-founder.
SAL DAHER: You have to learn to live with family.
RANDY PARKER: That's right.
SAL DAHER: Which is kind of like, it's the family you have, make it work.
RANDY PARKER: Exactly, exactly. So it's a great way to look at things in a startup.
SAL DAHER: That is awesome. Randy Parker. I feel confident in speaking on behalf of my audience to say that is a delight to chat with you. We're grateful you took the time to be here and to talk to us.
RANDY PARKER: It's really been fun to talk with you, Sal. I always appreciate and learn from you.
SAL DAHER: Thank you. It's delightful.
I'd like to invite our listeners, who enjoyed this really wonderful podcast, to review it on iTunes. Now, repeat this, review it on iTunes, review it on iTunes. If you have any comments or suggestions, please send them to me at Sal@AngelInvestBoston.com. At AngelInvestBoston.com You can also sign up to be told about upcoming in person events and new releases.
This is Angel Invest Boston, conversations with Boston's most interesting Angels and founders. I'm Sal Daher.
I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman-Maynard. Our host is coached by Grace Daher.