The Blog Of Matt Brezina

I originally published the following blog post on the Xobni company blog on September 18, 2006.

And now, that original blog post:

Startup Success Demands Close Collaboration (Sept 18, 2006)

People say that the most important decision you will make when starting a company is choosing a cofounder. It bears repeating. The commitment you should have to your cofounder is not unlike the commitment you make when you get married.

Today, while we were sitting at Arlington Diner eating our 3pm breakfast, we came up with five questions you should ask yourself before getting married. These questions are also relevant when starting a company with someone.

1. Are you great at things your cofounder isn’t?
It is important that cofounders exhibit complementary skills and common objectives. Identify your weaknesses and make sure those are your cofounder’s strengths. I want to spend most of our effort on perfecting the presentation layer of our first product, but Adam makes sure we invest in our backend code so it is easily expandable to future product lines. Adam is good at Adam stuff; I’m good at Matt stuff; together we are good at Xobni stuff.

2. Can you commit to a 2 year cell phone contract with a “family plan?”
Sorry Mom, but Adam and I just signed up for a family plan. There is something very permanent about signing a 2 year contract with someone you are not related to. The funny thing is Adam and I didn’t even hesitate because Xobni has many years ahead of it.

Side Note: We signed up for Sprint with the EVDO data plan. It is awesome. We each got a Treo 700wx which runs Windows Mobile. There were two motivations behind getting these smart phones. First, it is much more relaxing being away from your desk for an hour when you know you have access to all of your email anywhere you go. Second, many of our users are adopting these devices; it is important for us to understand this trend.

3. Can you share a bedroom?
If you can’t share a bedroom with your cofounder for a month, you probably aren’t right for each other.
Adam and I are currently sharing a room. Adam remarked the other day that it feels like summer camp. It reminds me of our first week back in the MIT dorms. This is not our permanent living situation and we appreciate that a degree of separation is healthy. However, we are temporarily living with our friends until we decide on a permanent location for our growing company. Sharing a bedroom is a temporary sacrifice for ultimately making the best decision for the company.

4. Do you trust them with a joint bank account?
Adam and I aren’t taking individual salaries. We put enough money into a joint personal account to pay for things like rent, food, and Adam’s voracious appetite for Edy’s ice cream and Chips Ahoy Chewy Chocolate Chip Cookies. My personal indulgence is the recently discovered bliss of Bustello coffee. If you can’t trust your cofounder with your opulent salary of $1,200 per month, you are going to have trouble when the company bank account has more than three zeros.

5. Will you make dinner AND clean up afterwards if your cofounder is drowning in serialization code?
I don’t plan on marrying someone that even knows what serialization code is, but the analogy is valid. You are both going to encounter difficult challenges and it helps to have someone to lean on when stressful times arise.

I can’t think of any point in my life that will be more conducive to this type of commitment than right now. Remember, you are not just getting married, you are raising a child. We called our baby Xobni. Next installment: Xobni learns to walk.

I recently spoke at the Freemium Summit in San Francisco.  The speaker line-up was full of great companies executing on freemium models in the consumer and enterprise space:  companies like Dropbox, Automattic,  and MailChimp.  I was asked to speak as part of the Freemium for Enterprise portion of the program.

Below are my slides from the presentation.  I split the presentation into three sections.

1. First, an exploration of the freemium business model currently being applied at 3 public companies: LogMeIn, eFax (j2 communications) and Skype.  In studying the public SEC documents for these companies we’ve found a consistant 10 to 1 ratio between free users and paid users. A goal we’re trying to achieve at Xobni.
2. Second, I show six business/market conditions that can suggest implementing a freemium model.   Many of these conditions are derived from discussions I’ve had with Sean Ellis, who blogs here and has had great freemium experience working with companies like Logmein, Xobni and Dropbox.
3. Finally, any time I give a talk at a conference I try to give concrete, actionable examples of lessons learned from my own experience in building Xobni’s business.  In this presentation I’ve dedicated the latter half of the content to specific successes we’ve had at Xobni. And this was all made under the warning derived from Paul Buchheit’s brilliant quote: advice=limited experience + overgeneralizations.  So be forewarned

And one clarification on a slide that will make no sense unless explained.

Slide 4  This is a shot of golden gate park

• My point is that golden gate park is actually a 120 year old freemium model.  90% of visitors don’t pay anything to enjoy the park.  10% pay for the premium services like the tea garden, conservatory and golf course.
• The foot traffic of free visitors leads to more sales and admissions for the premium services of the park.
• I looked at golden gate’s financial documents it appears that they still aren’t profitable.  Premium services only provide 40% of the budget.  So, like most things in government, it isn’t profitable (or even break even), but it is at least an attempt at a freemium business.

So with that, here are the slides:

To the outsider it may appear that 100% of Xobni’s engineering effort is focused on the development of our Outlook plugin. Surprisingly, this is far from true.  Anybody who has operated a software company will tell you there is a lot of engineering effort required to turn a product into a business: billing infrastructure, bug reporting, user tracking, etc.  I suspect over 20% of our engineering effort is focused on business engineering.

Behind Xobni the product is Xobni Corp. the metrics driven business – rich in engineering complexity.   I personally find this hidden Xobni almost as interesting as the core Xobni product – especially at this stage of the company, the stage I’ve previously called “engineered growth.”

One result of two engineers founding a company is that the engineering culture will bleed into every nook and cranny of the company’s culture.  Recently I was talking to Tristan Harris, the founder of Apture , about company culture.  He said the competitive advantage of the world’s greatest companies is a specific and overriding culture that is pervasive in everything they do.  Tristan previously worked at Apple and said their culture was design.  We decided Google’s is speed and Zappos is customer service.  He asked me what I thought Xobni’s culture was, and I said “measurement.”  This culture exists in everything we do, including the business aspects of building xobni – specifically driving user acquisition and generating revenue.

I want to share some glimpses into our user acquisition and monetization machine.  This is the stuff you’ll never read on our company blog or see in the press coverage.

4 Metrics Of User Acquisition

For any user acquisition channel – PR,virality, advertising, search engine marketing – we measure success on four key metrics:  engagement, virality, profitability & scalability. I visualize each customer acquisition channel as a dart on a dartboard.   Our goal is to optimize those channels so they each hit the bull’s eye.  We are also always searching for more channels to throw at our dart board.

We’ve made systems and dashboards to track and a/b test our user acquisition funnel.  We do this for each of our user acquisition channels.

For each channel we can A/B test over 50 landing pages.  Then for each channel and landing page combination we can see how many installs we got and what the conversion rate was to install (Scale), the percentage of users active in the last 7 and last 30 days (Engagement), how many new users these installs generated through our in-application invitation systems (Virality),  what percentage of these users converted to Xobni Plus and how much we paid for one of these users (Profitability), along with several other intermediary steps to each of these objectives.

We can take several groups of users (all from the same channel) and show them different messaging on a landing page, and see the resulting effects on scale, virality, engagement, and profitability.  Or, we can run one channel at a loss simply because those users are highly viral.  This reminds me of my optimal control research from grad school, except instead of optimizing on robot speed, accuracy and energy consumption, we are optimizing on scale, virality, engagement, and profitability.

1. Virality

We are adding more and more methods by which users are telling each other about Xobni through product interactions.  Right now we only track two.  The next generation of our tracking system will have over 10 viral inputs.

2. Engagement

We record other engagement metrics beyond the active user count – like clicks per user per day, searches per users per day, etc – however right now we review these metrics in one-off manner.  I’d love to add them to our dashboard.  It’d be fascinating (and useful) to know that a user acquired with a banner ad on Facebook make 5 times as many clicks/day on our premium upsells as a user acquired through twitter.  And, I’d love to know that I can increase the number of clicks to 7 if I send these users through a landing page that messages heavily on our premium product’s features.

3. Profitability

As previously discussed, Xobni Plus is just one of 5 revenue streams that will be driving our business by the end of 2010.  We’ve already announced Xobni with Salesforce and Xobni for Blackberry.  We’ll need to add these new revenue driving products to our dashboard and I’m excited to have the new ARPU (Average Revenue Per User) to play with.

4. Scale

This is where the creativity of an artist and the tenacity of a hunter intersect.  We are always searching for new darts to throw at our dartboard.

Sound Interesting?

If this work sounds interesting to you, you are in luck.  We are currently looking for a strong software engineer to own the fidelity, accuracy, display and availability of these dashboards and build the next generation of systems that will allow Xobni to make product/company strategy decisions based on data – our preferred method of making all decisions.  The ideal candidate should have a passion for customer development and the metrics of user acquisition and monetization.  The ideal candidate has probably read much of the writings of Eric Ries, Sean Ellis, Hiten Shah & others.  They should have a strong grasp of php, html & mysql – while these are the current technologies used in our internal dashboards we are always open to using the best technologies and platforms that will accelerate our steps toward making decisions faster.  If you are interested in this stuff and want to discuss opportunities for joining Xobni, check out this job description and email me at matt at xobni