SM: The two of you worked on the project and did creative financing deals to get started. What time was this?
ST: We got started in January 2003. At that time we set aside six months to focus on the technology and work with various vendors creatively. We did that from January to June and then launched in June. While David focused on the technology aspects from January to June, I worked on the marketing and promotion aspects ready so that when we turned on the service everything would be ready to go. As a result we got sales from day one.
SM: Were you still in school while you did this?
ST: I had just graduated and David was at the very end.
SM: During the six-month build-up, how much of the $500,000 did you receive from your family?
ST: We received all of it.
SM: What did you spend that money on?
ST: Almost all of it went towards the technology that we had to spend technology for. There was certain equipment and infrastructure that we had to spend money on. Very little was spent on marketing and sales because Overture and Google AdWords had very little competition. I was able to get 15 clicks with high-traffic keywords which today are $30 per keyword. There was very little spend on marketing.
SM: Was keyword marketing your primary customer acquisition strategy?
ST: Primarily, yes. We did some small ads in certain magazines such as Entrepreneur, Business 2.0, and Inc. We did a little bit of radio advertising as well.
SM: How much traffic were you able to generate with that marketing strategy and how did that relate to ramp?
ST: We were getting one to two dozen signups daily from day one. The cost of service was about the same as it is now. The base plan was $9.95 a month. I looked at the site on a daily basis and maintained it to see where traffic was coming from. I was getting a 1.5% to 2.5% conversion rate even back then. Orders were coming in at a low cost.
SM: What was your first year revenue?
ST: We had a little less than $500,000.
SM: That is a great ramp!
ST: That was just six months. We did all of that by bootstrapping. It was your typical ‘two guys in a small office’ story. We did not want to waste any cash at all. We could have easily raised $10 million, but I think if we had done that we would have very easily wasted it. I have no idea where we would be today if we had done that. We had to be frugal and have well-planned strategies because we were bootstrapping. That made all the difference.
SM: At the end of your first year you had $500,000 in revenue. Was it still just the two of you working?
DH: By the end of the first year we had two employees. I was still in school. We hired our first employee because we were still answering customer service calls ourselves. Every employee we have hired from that point on has been a similar scenario where we wanted them to take over a role that we were doing.