Verbatim, Part 3 – John Jonelis
I’m continuing a conversation with Michael Pollack, CEO of Rocket Fuel Labs at the huge 1871 space here in Chicago. We’ve covered a lot of ground and I think it’s time to get down to the business itself.
John—How do you find customers?
Mike—Entrepreneurs come to us. The most common thing we hear is, “Hey, would you be
my interim CEO?” or, “Could you be a consultative CEO?” Our long-term goal is to be able to help incubate those startups ourselves. As we build our brand, that’s something we think is a tremendous opportunity. But that’s long term. I’m a big believer that focus is not about saying, “Yes,” it’s about saying, “No.”
John—Are your transactions cash or equity?
Mike—Right now, our clients are paying cash. In the future, we may shift that to equity but I’d much rather own 50% of my business than 25% of someone else’s business. Even if the idea’s great, in the startup space, it comes down to execution. There were fifty face books before there was Facebook and they were all good ideas, but Mark Zuckerburg out-executed them all.
When we look at that and think about it, we say, man, you can be an entrepreneur and have this brilliant idea, but if you can’t execute it, what does it matter? So as the chief fiduciary officer of this business, I’d love to play a role in helping some of these awesome ideas execute effectively.
John—In private capital, you need one winner out of ten just to break even. The best investors may get three out of ten.
Mike—Exactly. There are a couple legs to this business. We’re a service provider, and our margins as a service provider are good.
John—So you’ve found a way to close transactions with startups?
Mike—We’ve found a way with startups and more so with established businesses. We think there’s an opportunity with established businesses that need innovation. We enjoy creating products, which are really just solutions to problems that people haven’t identified yet. And we think we can productize that. We think we can work with established businesses, startups, and a full range of people to give them the technology they need to visualize their solution.
Startups are interesting. But to take money from entrepreneurs, particularly starving ones is a gut-wrenching thing because I’ve been there. It’s always hard to part with that cash. And when we look at them we say, “How can I be a better partner? Is it to offer a lower price? Is it to take equity in exchange?” I don’t necessarily know the answer to that question.
Having been in the vortex. Having had twelve million dollars in venture capital. I was there on day one when we were four guys in a room with a white board. And I was there on the last day when we were forty-five people and we signed the papers. And our baby was being handed to somebody else. And I’m thinking, these elephants are going to trample our baby. It’s an amazing experience. I wouldn’t trade it for the world. I would do it again in a heartbeat.
And what we’re saying now is, hey look—how can we do that at higher velocity? How can we see more startups? Touch more startups? And we want to be engaged even deeper with this community. Because there’s upside. We want to be a partner that helps startups succeed.
We see models out there and our opinion is—never knock the competition because I’m sure they’re doing a great job—I just think that competition helps and I see a market and I see some inefficiency and I’d love to challenge it and see if we can do it better.
John—Sounds like you’re a natural arbitrager.
Mike—I can’t help it. I love a good deal. I want to find markets that are inefficient and I want to share it. My career has really been about finding large markets, identifying inefficiency, fragmentation, then disrupting it and driving value for all the stakeholders at the table. And that’s what I enjoy doing and that’s what we’re trying to do here.
John—Okay, let’s make this more concrete. Let’s say I walk in the door. I’m your model customer. Describe me.
Mike—Sure. Right now our model customer is somebody who says, “I’ve got an online presence. I’ve got an existing business. I’m revenue positive. I have a problem and a budget that I’m prepared to allocate to solve it.”
I learned in management consulting that people have a hard time separating cause and effect. You can’t fix effects. You can treat causes. You have to parse them out.
We would come to you and say, “Where’s the pain in your business? Is revenue not growing? Are you not getting enough customers, or is web traffic down?” Once we do the whole inventory, we say, “Let’s go through those pieces.” And then it’s just like taking something apart. What’s working and what’s not working?
So my model customer? Somewhere past the seed round, looking for a technology project—they may not know exactly what it is. What you see in this board behind us is the group thinking through a problem. We take you through the discovery phase, the development phase, the website management, offering the design piece, thinking through the online marketing—but basically making sure your technological infrastructure works and thrives.
[I tell Mike a story about the Levi Mastermind Group here in Chicago and that moves us down another path.]
Mike—My favorite thing about Open Mile—the last startup I was at was this: In every meeting I was the dumbest person in the room. Any time I found that I was the smartest person in the room I knew I was in the wrong place. Real smart customers force us to get better. If you’re the dumbest person in the room, you work harder, you have to think harder, you need to be prepared for every question. And you have to do your homework even deeper before going to that meeting, so you can over-deliver.
John—It takes a special kind of CEO to seek out people who are more expert or intelligent than himself.
Mike—I think you have to. If I knew all the answers to everything, we might not be having this meeting—I don’t know what would be happening—and the world would be a pretty boring place. I like going into things and not understanding. I’ve been fortunate to have worked with really smart people and I listened to them and I questioned them and they questioned me. And where we ended at was far superior to where we started. And the process of getting there added value along the way.
John—You get really jazzed up about brainstorming and product development.
Mike—I’d love to say, long term, we want to be a startup on demand. ‘Cause that’s the kind of people we want to work with—really smart people who get excited looking at a problem and say, “Let’s come up with a different way to solve this that we never thought of.” We are building a product organization that can think outside the box and an engineering organization that can deliver on it.
Thinking long term, I’d like to work with medium and large corporations. At a big company it’s hard to maintain those pockets of innovation.
.Photo credits – Rocket Fuel Labs, LinkedIn
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