How an Offer to Sell Wistia Inspired Us to Take On $17M in Debt – Chris Savage

0:00[Music] [Music] so today I'm gonna be telling you a little bit of a story about how we had an offer to sell Wistia and instead turn that down and took on seventeen million dollars in debt for people who don't know a whistie is the video platform that helps marketers customize the experience video on your website understand how people are watching and integrate onto your all your other marketing and we also have a product called soapbox that helps you make videos that look professional really easily so I think in our society there is this idea of this mythical founding path and when I think about this this is

0:42what when you tell someone you're starting a company it's usually the first thing they think they're like okay so you're gonna try to build a company that has a house a product that's a household name and then your goal is gonna be to sell it for hundreds of millions of dollars or billions of dollars and end up like Tony Stark you're gonna shape the world we're gonna change the world and that's this is just a path it's a it's a I call it a mythical one because I think that most companies don't fit on this path and today I'm gonna be telling you a little bit of about how we found a different

1:11path to go down I think it's a path that many of you can go down and why we actually raise seventeen million dollars of debt to buy our investors give our employees liquidity and set up Wistia for the long term so like most stories ours starts at the beginning this is my co-founder brendan and i we were very very excited to be starting a company and we were pretty sure we were gonna get rich in six months and so our goal was we want to start sell and retire by 23 we thought that we could be like Tony Stark and these are actual photos taken we're both at a wedding right before we

2:00started the company and we're like you know this thing is going to work so we should probably we should have some photos ready for entrepreneur magazine this is what you end up with and these guys are idiots so it turns out that six months went by we're still doing Wistia a year went by we're still do Wistia and actually we had not sold the company it was not glamorous we're working in a 10-person house in Cambridge Massachusetts where we still are today and this is our office which is Brendan's bedroom and we were you know traction was a lot slower than we thought but it was really fun they

2:44turned out it was fun every day to try to just solve problems creatively it was fun to try to get our first customers it was fun to do our first demos like everything was really hard but it was really fun and I didn't expect that Brendan didn't expect that but it led us keep working and so we worked in this house for two years got to having about ten paying customers and we felt like we were on to something because a lot of these customers were big names so PBS was a customer Cirque de Soleil was a customer nestle was a customer we were talking to HBO about using what we were

3:21building and we were really excited but we thought we needed more help so we decided we would try to raise some angel money and we thought if we raised a little bit of angel money then we can hire some more folks to join us and maybe we can take a little bit more advantage of the opportunity sitting in front of us so we did raise some angel money we raised $650,000 and we hired Ben and Adam and we did the things that you do when you get an angel round or what we thought you should do so we got an office we got brand-new computers we

3:56got a brand new monitor and we started paying ourselves and we started paying Ben and Adam and this was all really exciting and I would go to a meet-up and people would say how are things I'd say we just raised six or 50,000 super-awesome just got an office they would say congrats now a little bit behind the scenes it was challenging - but okay but right before we raised this money we were putting a thousand dollars into our background every month and once you get an office to start paying people you're not you're not making money anymore so we were losing $30,000 a month and that was stressful and so what

4:36we decided to do was keep this the team really small and just try to figure out the stuff you need to figure out so we stayed as four people we updated our website pretty cool website got an 800 number on there and we started experimenting with how to sell and how to market and what our business model should be and we finally started to gain some traction and so we had a moment where this is now like this is about three and a half years into building the business for context we went from 30 customers to 200 customers in two months and we were really pumped

5:12about that and that was really exciting but we were still losing money and so we're gonna run out of money literally we weren't gonna make payroll so we went back to our angel investors said we got good news and bad news bad news is we're gonna run out of money good news is we think we found traction and they for some reason believed us and we raised another seven hundred and seventy five thousand dollars kept the team at four people and worked to get back to cashflow positive and so it took a little patience but we were able to do it and we became profitable which was very exciting and thank you

5:53yes Ron applies for profitability right we're a micro comp so he became profitable and that felt really good and it felt different to be profitable we were paying ourselves versus being profitable while we were in our bedroom and looking back this was the beginning of a new moment for us so this is when we started taking more creative risks and I didn't really realize it at the time but it's very very very clear to me now looking back that it did change how we were thinking about the work so one of the first things we wanted to do was we started we wanted to invest in

6:25content marketing and we wanted to do bigger content marketing this is an example of one of the first things we did it was a video shot on an iPhone audio was recorded on an iPhone lit with an iPhone to prove that you could make a video with an iPhone and we're really excited about this and one of the reasons we're excited about it is because we're profitable we didn't have to justify it to anybody we didn't have to have any short-term justifications for why did this people would ask us these questions at meetups people would ask these questions in support we just thought will make this content

6:57even though it doesn't really have anything to do with our with our video platform so we started to invest in this and we kept investing and probably over a course of two years we spent over $100,000 well I know that we did this we spent over $100,000 in people time making content and we built a lot of content we built a library of content we started writing blog posts every week we started making videos every week and the funny thing was we could not track the conversion from people seeing content to people buying it was almost impossible to see but we had a lot of really good

7:32qualitative feedback so people were commenting on all the content they were sharing it on social they were mentioning it when they were running into support they were mentioning it when they were becoming a customer they're saying I really you know I loved that video you did about shooting for the edit that was super great now can I buy a plan we're like yeah that sounds great but it was always this qualitative feedback and we felt like they wanted more but we also started to feel confident like even though we can't see this connection we really think it's working and we started to build profitable confidence and we started to

8:07trust our instincts more on things that made sense over the long term that would be really hard to justify in the short term so one of the first things we started doing was doing company retreats so we take the whole company twice a year and we bring them to a place and we just spend time together no agenda and we're at this time completely in person company to company retreats so it seemed a little silly like people that seem to be like why are we going I mean I want to go skiing but why why are we doing this so like to create connections like that's craziness

8:38but I think it really worked we started going bigger in the content itself so we started hiring this is an example we brought in a confetti cannon just to add a little oomph to one of the the videos we're putting out there we booked out a roller rink begin trying to get like a seventy style themed video done like really on point and actually at one point we closed down a city street and put on a parade to launch new pricing plans okay so we've built up some confidence it felt good because in all of these cases we don't have to justify to anybody we were just doing it because we enjoyed it

9:16we thought people would like it we thought it would help our brands but it was always almost impossible to track it back and then we even built things in the product that we had a lot of confidence in this is an example of a feature that's core to Wistia called customized where you can change the look and feel the player you can add interactivity and when you change it in the product it changes every embed glow globally like wherever you put the video didn't used to work like that nobody asked for this but we really believe that this could be the foundation of our future and so we spent over a year doing

9:50this and it ended up working and it's foundational to what we do today and it was funny because at first it was nerve-racking to operate on our gut instincts but then we got more and more comfortable and more and more confident and that's actually what makes the next part of the story pretty embarrassing and that is when we started to over scale the business so I think there's the thing I'll call it growth FOMO and it can affect many of us and let me set a little context for where Wistia was when we really started to get growth FOMO so we're about 10 million in revenue we had a few million in profit

10:33and I was feeling pretty good pretty small team feeling pretty efficient but I would talk to people I would go to a startup event talk to people and they buy oh wow that's cool a few million profit 10 million you're growing pretty fast like what if you weren't profitable would you be growing faster would you be bigger would you be like Tony Stark like is this is this one of those examples where you actually you could build a unique business and you're gonna build billion-dollar company and it's funny how this was from everybody this was not just people in start-up land those are my parents like I talked to my dad who's

11:11an angel investor Wistia and I'm like dad we're doing really great we have 10 million in revenue who have a few million properties oh wow you think are gonna go to VCS now that would be cool that would be a sign of success basically and I think there's this societal thing that encouraged you to think like yeah maybe I should be like Tony Stark and I'm gonna get the Tony Stark house and I'm gonna get the Jarvis and goddamn and I'm gonna have the Iron Man suit at the end of this thing right I'm gonna build that unique business and eventually through enough social pressure and enough belief enough

11:45FOMO we actually decided we were gonna put revenue growth above profit and so we we started to change how we operated so we had been a really small team everything with scrappy there was not a lot of structure we had 25 people when we made this decision and we were able to afford by putting all of our profit back into growth we grew the business from 25 people to 50 people in one year and then the next year we grew from 50 people to 80 and we pushed the business really hard and we basically went to running at a loss and burning into all of our cash reserves in search of more

12:27revenue growth right and if you're not really sure what you want to be when you grow up this is one of those options you think maybe it is about revenue growth maybe it is about valuation maybe that's what I should optimize for and that's we were thinking when we were making these decisions and you want to guess what happened it all broke everything broke so the one of the things that was we first started doing is like all right we should start spending more money on advertising we should hire faster we have more projects we want to do because there's more people we fired so someone new would say I have an idea

13:02for a new project I think it's gonna be really great you hear the idea sounds pretty great what do you need to do it three people cool great hire them we're hiring a lot of people so they hire three people and they go start to work on a new project which might be a good idea but you're not when you're doing that you're not actually asking like is this new project better than a current one is there something we should stop doing to start doing this new thing or is there something that we're doing that's way better that we should do more of and we the new thing none of these questions

13:33were being asked we started operating in a loss and first it was losing $50,000 a month and then it was losing $100,000 a bud and then it we got up to a peak of losing $300,000 a month now we were very fortunate because we had the cash reserves and we had we were able to fund this ourselves but it was scary and one of the things that happens when you do that is every project you have doesn't matter how long-term focus it is it all becomes about the short term so we had projects and people would say alright look we've got this idea for new product

14:08it's really exciting or we could put our effort into conversion optimization what do you think would win every time conversion optimization every time because you would think like new projects are risk but if we get a little bit more out of what's of what people are signing up for today that's gonna be way better for the business and it creates this stress because what starts happening is when you're losing that much money even if you do green light a long-term project you launch it and then instantly everyone's thinking I really hope this pays off by next month we're gonna lose more in the next month we

14:44started to have key employees get really stressed and then leave not great and as they left that compounded the stress that the company was feeling and so we couldn't take creative risks anymore we're not long-term focused we're short-term focused and try as we might even though we knew we had been profitable and we had had this like profitable confidence we couldn't get ourselves to make those calls that we wanted to make and so we had over scaled that's why I would determine this and this counterintuitive thing was happening which was we're taking more financial risk but it actually meant we're taking shorter term risks and we

15:28couldn't take the same creative risks we used to take it's not to say we weren't doing creative things like I'm someone who's incredibly motivated by creativity and finding creative solutions to problems we're just channeling all of our creative energy into things were designed explicitly for financial gain as opposed to things were designed explicitly for customer delight or for product experiences or for marketing experiences and so throughout all of this our revenue growth did not increase just stayed the same it stayed the same that's kind of crazy and so we lost confidence we lost the profitable confidence but we started to lose confidence in ourselves at the same time so at this moment let

16:16me set the scene Brenda and I not really talking about the locket lack of confidence trying our might to put on a happy face for the team saying all this like growth at any cost stuff it's gonna work it's gonna pay off and we got an offer to sell the company and I'm sure many of you have gotten offers and if not you'll get them but over the years people had often approached us about buying Wistia or investing in Wistia or an investor was gonna take the whole thing and flip it or private equity deal or something and all every time those offers had come in we'd say thanks for

16:51no thanks like we're having fun we love what we're doing we don't want to sell but this offer was different and it was from a company it was a few companies at once actually but the one that we got the farthest with was a company I really like the people that are they're really smart business they're gonna give us like all this opportunity they sold this great story and we were so stressed that we felt like ah maybe this is our get out of jail free card maybe we can sell the business and then we won't have to worry about all these problems that we've created for ourselves and all this

17:22stress that we've created for ourselves and Brent and I were going back and forth on this so I would wake up one day and we meet up and I'm like all right man let's just sell it we'll do our time then we're gonna start an incubator and we'll start some angel fund and we'll do this other thing and he'd be like no what about the team what about the work wanna do wah wah wah and then the next day we'd get up and he'd be like you convinced me we should sell I bet you convinced me we shouldn't sell so it was just absolutely constant back

17:51and forth and then we had a realization and the realization was if we sold the business that would kind of be like maybe we're you know we could go get a house and maybe we could go get a little AI system and maybe we could go get the [ __ ] Iron Man suit and we realized this was the end of the path this was the end of that like mythical past that we thought in the first place that this idiot thought he we were gonna get on in the first place right like the path looks like you sell your company for hundreds of millions of dollars and

18:26everyone says it's a success but for us this did not feel like success it felt like failure it felt like the opposite of what we wanted to do and we started realizing okay if we don't sell what can we do we're like well if we don't sell could we go back and fix Wistia could we go back and get ourselves back to being profitable and maybe we never want to sell maybe we just love that doing this too much like maybe we love the journey we love taking creative risks we love working with people that inspire us every day we love building things for our customers and we realize that and I

19:03feel very fortunate we realized that and so we decided to Double Down we decided to double down on the business and taking the risk to start the company in the first place one of the greatest decisions we've ever made and we thought you know what let's just do it again let's just go back and fix this thing and now we made this decision and at this point up until this moment there's been a ton of stress years of stress and the funny thing was we had gone from sleepless nights about what to do with the company to instantly even though we were still at this exact moment losing money hiring

19:40quickly doing conversion opposition doing all these other things we instantly just started sleeping super well I was like oh yeah I got this is what we need to do this is where we're going but saying no meant there was instant misalignment with most of the other stakeholders and Wistia so if we weren't going to sell the business we'd have to provide a return to our investors like those angel investors that took a bet on us who really did help us but they want us to sell we're one of the best investments they've done like why wouldn't you want to sell you invest in something get money back we wanted to provide a return

20:16for employees we've been giving everybody in the company options and especially early employees we've given them a lot of options and we told them we're gonna pay you less cash we're may give you options and if we're not gonna sell the business what are those options worth and then we felt like we needed to find a replacement for stock options so we want to find a new incentive structure that we could give current employees and future employees that would be to have them be aligned with the business so what we settled on doing was a stock buyback funded with debt so what this means is it would pick a valuation of

20:53the business we give every single shareholder the same offer so all of our investors and all of the current employees who have options and the former employees to exercise their options and we said this the valuation these are the terms they're same for everybody you can sell if you want but you don't have to sell and then we were going to fund it with debt because we didn't have the cash because we've been running at a loss so we'd eaten up our cash reserves and with this plan like Myra ship and Brenda's ownership would go way up in the business we'd end up with total control and then another

21:27piece of it was that we wanted to do one deal and be done so we wanted to totally realign with our angel investors so our angel investors had something that's called preferred shares which means that outside of their actual ownership in the company like their percentage ownership the end of their rights so they had the right to block a sale they had to write to block us raising money they had a bunch of other rights and we felt like if we're not going to sell the business we're we're doing this for the long term they should know what they're signing up for and so as a part of the deal we

21:58actually told them if you want to participate we're gonna take your preferred shares and you have to vote to convert to common same types of shares as Brendan and I and if you stay in you'll be aligned with us and we'll you'll make money in the same way as us and if you sell totally fine so we gave everybody that offer you like 30 days I couldn't say anything like hiding from the office was the advice I got because you can't influence anyone's decision and then we ended up raising seventeen point three million dollars in debt in November 2017 to do this deal and got back to work of making the company more

22:32profitable taking the risks we want to take and getting the business more aligned and I'm proud to say it's working it was a big risk but it is it is working I want to tell you how it's working didn't expect this one ah so we we you know we just when we pulled back and we said all right let's look at all the projects we're doing let's make sure that we have the right people here who want to be here we're focused everything is about like top goal is profitability we have to get profitable so we can service the debt that's gonna force the right constraints for us so we can make

23:12the right decisions we want to make and what it also does it forced us to focus and so as a company we got really laser focused on the things we're really good at doing great irony of ironies without trying to grow revenue faster we grew revenue faster which was a kind of mind-boggling back to where we were in the early days and then we started to do more creative things in our marketing product so this is a small example probably none of you have seen I'm really proud of it if you see a Wistia video and you right click on it it says about Wistia you go

23:43to this page and we have an album called songs about Wistia that you can buy on cassette and CD and it's like one of those little silly moments that we made thinking that like we'll never really be able to measure the brand touch of this but we believed in it and someone's had the idea maybe we should make a video thumbnail so that people really don't miss that the cassettes are in this thing so we end up doing that with now a feature in Wistia which is amazing also we recently launched a product called channels as a part of Wistia where you can make a Netflix like experience of

24:18videos on your website we did this to scratch on each we thought it'd be a great idea we focused all on user experience and usability try to make something really delightful try to take risks in that way I'm super proud of that and then last year we did a huge project called 110 100 and this is something we never could have done ever ever ever when we were running at a loss but basically we made a documentary four-part documentary series so we gave one hundred eleven thousand dollars to a production company in LA called sandwich video and we had them make three different ads for us for our product

24:56soapbox one with a thousand dollar budget one with the ten thousand dollar budget and one with a hundred thousand dollar budget and then we actually went and documented the behind the scenes of how they work and so how they make creative decisions and how budgets affect creativity the relationship between money and creativity and we ended up with something that's an hour and 42 minutes long you can watch all four parts on our site or you can watch on Amazon Prime and as a part of this campaign people kept telling me like how do you know if this is gonna work like how will you measure this and I said I

25:31don't I don't know I don't know but it's okay we're profitable and we have our profitable confidence back so if it doesn't work that's fine and if it works that's amazing and if it works in the long term which we really thought it would that would be fantastic and this has been one of the greatest marketing things we've ever done because I think we actually delivered a ton of value to customers people spend an enormous amount of time at the brand I'm super proud of this project I don't think we ever could have done it otherwise and then profit is way up so in 2017 we had negative a beta of

26:07half a million we started to turn things around in 2017 and then last year it'd be beta of 6 million so huge shift and I'm something I'm really proud of it means that the debt is not that risky anymore because there's all these covenants that you have to manage with debt and we were so became so profitable that we were able to like put ourselves far away from those covenants and we actually got so far away from those covenants so quickly by just focusing on profitable confidence that we were actually able to refinance our debt and so we dropped the interest rate in half paying less a month than we were last

26:43year and paying it off way faster and so it's now it's just like a normal financial instrument sitting there that's encouraged us to be really profitable so I think my my message here it is you know we had we had some instincts around being profitable and but they were to turn to conviction through failure and it was hard it was not fun to lose key people it was not fun to see projects that we were not proud of and if we found this other path which is just this idea of like you try to build a lasting company and in my case I optimized for letting me do creative work working with

27:30people I care about and by being like focused on a long-term we get to put our customer experience ahead of revenue growth we get to put our employee experience ahead of revenue growth we get to put our culture ahead of revenue growth we get to put our community ahead of revenue growth and those are often the things that you need to do to actually grow a company so my parting message is my story is my story some people are going to want to try to do that mythical founding thing you all are gonna have a different story and we're here at this conference to get advice

28:03just try to figure out what suit you actually want to wear like do you want to wear the Ironman suit you want to wear this suit do you want to your own suit just just please please please pay attention to that I think building a company is a very we're all fortunate that we get to do this and privilege that we get to do this and you can you can create freedom through building a company if it's if you can if I think if you can optimize for the things that you really care about and the people that you care about working with and that's it thanks everyone

28:36thanks for a great talk Chris I was wondering whether you could talk a little bit more about your experience of dealing with potential creditors right the debt Bester's from especially given that your seat was as a money-losing company yep yep so I've learned a lot more about death than I would have ever expected to and I would say there's a there's a wide range of options for people who will give you debt based on how much risk is in the business so when we did the first round we end up working with a firm called Excel KKR they were really great with us they really got our

29:10business and their interest rates a lot higher because they're taking a lot more risk so they treated our but they want to know like the unit economics of the business and they dug into it the way like a growth investor would and so most of our conversations with them was love like where is our strategy going how does it how do why is expansion happening at this rate versus that rate and and why is churn this first of that and then when we refinance we end up refinancing with the traditional bank and they just looked at our fundamental numbers and that's all they care about they don't care at all about what we're

29:41doing they really don't care what business were in at all and there's just a pretty wide spectrum now of options and there's also early-stage options and like lighter capital does some stuff here rev up does some stuff here and in each of those cases you're usually signing up for with debt there's like you're guaranteeing the pay back they're gonna get right so if you're if you're not about performing the company ends up capturing the value but if you underperform you're in trouble and just for the context of max I didn't say it like we realize Brenda and I we wanted to take care of the other stakeholders

30:18like we want to take care of the investors they had bet on us we wanna take care of the employees and we felt like if things really go sour and we end up hitting our covenants and we're in bad shape we're have to sell the business and that's what we said no to in the first place and if we sell the business it'll probably be the business being kind of distressed but if the company was big enough that we felt like you know what's probably gonna be life-changing for us anyway so it's not a we're not just like maximizing dollars is the only metric and to that so what

30:47made us comfortable taking the risk and yeah there's I can follow up with more stuff but there's there's a lot of options down there's more coming yeah all right so when you guys are going to sell the company like did you guys valuate your company because one of the things that I hear is like if you're not profitable like the red the conversion metric is off of how profitable when you are at the time but you guys are not profitable at that moment it depends on the company honestly I mean valuation is negotiation so I think and some some parties would look at it and BIC they

31:24would look at a multiple of EBIT uh like how much profit you have and some were looking at just a multiple of revenue and we we got some really good advice when we were trying to throw out what to do which was we happen to have these these three offers come in to sell the business at once so we talked to all of them to try to understand what they were saying and then we also had growth investors trying to invest in the company so we gave them some of our data and we saw what they thought it was worth to so we kind of like triangulated

31:52from a bunch of different perspectives to come up with a number and one of the things I was nervous about was we didn't actually negotiate the number with any of the investors we didn't say like and I was worried we'd have to negotiate with each one and we did instead this tender offer which is same terms everybody everybody it's exactly the same thing and you could sell as much or as little as you want like I had one investor who is been mostly silent over the years nice guy and he's like I don't like these valuations I was like okay don't sell anything like all right he sold like 50

32:24percent of a stake so it just it's you let people make their own decision and that's part of what ended up working like really really well over here you almost just went there can you give us the next level of detail just in general terms of how many people opted to take the offer versus stay in yeah and both investors and especially employees yeah buddy yeah I did to stay as investors yes so 90% of the investors took the offer to some degree we took some people out completely and I think the least an investor sold was like 20% of their stake and so all those people knew we

33:03said we're building a lasting company we're doing this to long term if you're still in it you're gonna be in it with Brenda and I and however we make money now the funny thing is of course that you learn with angel investors they don't need the money so I had people complaining being like I want to return I was like how much you're gonna saw they're like 20 percent it's like okay great so it's more about talking to others that you did sell okay and then with the employees we we told them basically like alright you have stock options we forward vested people based on tenure so longer you've been

33:40with us the more we forward vested you if we'd given people new grants and then we told them though if you have auction options or stock you're not going to participate in in profit sharing and that was by design remember we weren't profitable and we're gonna try to become profitable so the main metric for the business is trying to get to profitability and we took a percentage of EBIT uh that was just gonna be for the team divided up based on people's salaries because we try to pay people fairly and equitably but nobody knew if that was gonna happen so what ended up happening is most people

34:09did sell their options few people left like we had people leave because they didn't they didn't want to they want to be at the company that's trying to do the Tony Stark thing and we had people leave because they were confused like if you look at our Glassdoor reviews but at that moment in time there's like one review that I always think about just like Wistia is a sinking ship you should jump it's like oh [ __ ] now of course at that's the moment that for us we're sleeping amazing like I'm so proud of the work we're doing we got profitable way faster than we

34:44expected so in that particular view came out we're already like something like a hundred fifty thousand even a month so I'm thinking are you kidding me this is the this is the most stable we've been this super super stable we've been in three years but people just responded differently to it because I think it was confusing and it's I mean even right now there's a lot to talk about debt because if you haven't you don't have a mortgage you haven't thought a lot about it it's like if you have a mortgage you can make your monthly payments it's fine it if you don't you're in trouble and so it's

35:09thinking through that is tough so I think a lot of us when it comes to employee compensation think of it like the stock you hear about a big companies but if we're never planning going public they're not a great deal for your staff yeah you talk a little bit more about this this profit sharing structure that you've come up with yeah it's really interesting so what we do is we take 10% of evita and everyone participates in it based off of their salary so we have a lot of systems in place to make sure we're paying people fairly and equitably that correct for things like tenure and

35:41then we set a goal at the beginning of the year of what we think that should be and everyone knows that and understands basically on from their perspective what percentage bonus is this for them and then if we outperform it affects them directly and if we underperform it affects them directly one cool thing that happened again that I didn't expect is we introduced the profit sharing and in q1 of last year our infrastructure team came back and they're like hey we think we can we think we can improve some of our our server costs and we think we can improve our gross margin it's only going to take like three weeks

36:16of work what okay cool so they go off and they do that and then they get up in an all-hands being there like hey everyone we just improved our infrastructure and we're getting three points of gross margin and everyone's like yes yes like what's happening this is completely different than it was before so it I think it's forced it's almost forced like if you work at Wistia you got to understand how the business works and we're open books like every month we talk about how we're performing and people raise their hands they ask questions and when we were talking about like multiple revenue multiples to get

36:50to evaluation no people weren't asking questions because it's just so hard to know it felt like this like mystical thing yeah so when you after over scaling you were standing up hello after over scaling when you were scaling back you just answered a high-level some people left because they didn't like the deal and stuff did you have to have some difficult conversations was there other stuff you had to do to bring that bring down the headcount yeah so we didn't we didn't really have to bring down headcount to get to profitability we had a few different things that helped us get there faster so one was that

37:29infrastructure thing that I mentioned which again we weren't expecting we ended up like hiring was behind because we had some people leave and then we had some people who had been amazing at the company that helped us grow but they were always wondering like it's hard to meet people who are amazing in the beginning and they're doing everything they were wearing a million hats and then they're doing something and they're doing a great job actually but they don't love it as much because they like wearing a million hats that I want to wear one hat so there was people who definitely left the company faster than

37:59would have left otherwise and then we just got more focused and so we launched product it was more impactful our marketing was much more impactful we started taking if you were to go back and look at our blog from like 2015 to now you'd see a pretty big change start to happen at the end of 2017 in the types of risks that we were taking so we did one time one hundred last year which is a good example that was the most effective market we've ever done we did two online virtual conferences that they were both huge and we did that instead of doing our in-person conference and so

38:32instead of having four people four hundred people in person we had like 15,000 people that came to the online ones we just kind of like evaluated things to that lens and it all it compounded basically yes great talk I have a corollary question to the kind of profit-sharing for the custom for the employees which is how do you manage the profit sharing with the minority shareholders and how that's you know when you made the agreement did you have to say okay we're gonna dedicate a certain amount of money to dividends or yeah so every question yeah what we said is every year Brian and I will evaluate

39:07like how much more we should put back into the company for growth and if we don't see things that we should do then we might do a dividends and you will have the same class of shares as Brenda and I so we're operating we have we have the perspective an opinion on like which things we thinks are good and which things we think are not good so if we're gonna make more money you're gonna make more money that makes sense and that's how a lot of organizations work so no promise about it which has been really good so far alright I think we have we have time for

39:39one more question over here Chris as you've gone through all of these ups and downs as you look back on your mindset your the way that you were relating to your co-founder do you think it would have been possible to not lose profitable confidence in the first place yes how would you do that like what what would you sort of reverse engineer I would have forced like when the moment that we started to hire really aggressively and we were had I would have changed how we evaluate projects so we have like a pretty rigid structure now for how we set goals and how we evaluate projects and it functions like

40:18really really well and knowing what I know now I would have just done that earlier and I would have set the guidelines of the business much more strongly so I would have said yes you can spend as much as you want but we're always optimizing for this amount of profitability and that will force hard conversations that will force people to say no and we were at a size when we did this a lot of things were dreaming up we could just do which was the problem I mean honestly like my goal and giving this talk today is hope is to give people some other example of this like I

40:47wish I had had more examples like the Basecamp guys are really inspirational to us there's been very few other companies that I can point to MailChimp that like if you understand how that business is doing you see the behind the scenes you're like wow you don't have to put all your gonna your money into growth you could be crazy profitable but those stories are just not told as much and so I think I would hope that I would kind of see a story like this and I would have tried to set clear goals in the first place about what I what I love to do thanks again Chris thank you

41:16you