Sramana Mitra: You basically would do whatever it is the client was asking you to do, I imagine, at the beginning. As time progressed, what became your core competency even in the mode of delivering consulting or solutions? Where did you find your sweet spot?
Vlad Friedman: I had a couple of stages along my evolution. Obviously, consulting was the first piece of it where I cut my teeth and started my career. The first place where I really started to make an impact was when I started to get a reputation for pulling off projects that most other companies just considered impossible.
Sramana Mitra: Can you give me an example?
Vlad Friedman: One of my big-break projects was when the city of Baltimore had won the contract for all the Mitsubishi cars coming into the US. I had already built up this reputation for pulling off the impossible. They came to me and said, “We’ve got a ship of several thousand cars in four months. We’re going to handle this on paper, but we’d love to do this in a technological way.” My answer was, “Of course, I can.”
I actually worked 1,600 hours in four months. The day that the ship arrived, we launched the software. Pulling off things like that and putting that level of passion, energy, and dedication and if I really look at what I made on that first project, there was no way that it made financial sense. After that, this software that I had written was running probably close to 20% of the auto inventory of the United States for all the exports and imports. It would handle the whole logistics process from the time the car left the manufacturing plant to the time that it actually arrives at the dealer.
Sramana Mitra: What did the software do?
Vlad Friedman: It just handled the entire logistical process from the transportation of the ships, the arrival, storage, and the installation of all the accessories. There was a huge number of vendors involved. The manufacturing system has changed, so it’s not as relevant anymore. What used to happen back then is when you order a car, it actually didn’t come from the manufacturing plant, it was stored in a port.
The port would go in and install the accessories that you wanted on your car. Then they would actually manage the delivery of that car to the dealership. I would work with the auto manufacturers. The software was an ERP that ran all these port facilities around the country. Then it would manage the logistics of the delivery of those vehicles to the dealership. Every other company that came said, “This is an impossible project. We can’t pull it off.”
Sramana Mitra: How did you price this? Were you pricing each of these automobile companies as consulting contracts or, by this time, were you in the mode of actually selling products?
Vlad Friedman: Initially, it was a consulting engagement. By the time I got rolling, I actually started building by the unit because I found that to me a much more effective model. For each car, I got paid a fee. Plus, there was an on-boarding and implementation fee to cover the setup.
Sramana Mitra: That must have been a huge amount of money.
Vlad Friedman: I did pretty well in my 20’s. That was when I started to understand the beauty of a recurring revenue business. A lot of folks get stuck in this mode of selling products. It’s very difficult to create predictability in a business. That turned me on to the magic of recurring services billing model where, if you could figure out a way to add value over the course of the long term and make it consumable, you can have customers that will continue to pay for years. They will also stay for years because as long as that value is there, they will continue to pay. That helped me create a business, which is Edge Hosting.