007: How Noah Kagan Started AppSumo A 7 Figure Business Selling Digital Goods Online

Steve: You are listening to the mywifequitherjob.com podcast episode number seven. Now before we begin, I just want to remind you that my podcast contest is still going on. I’m giving away a life time membership to my course as well as free consulting. So for more information go to www. mywifequitherjob.com/podcast-launch. Now I also want to give a quick shout out to my buddy Jim Wang who runs the Microblogger podcast. It’s an awesome podcast that you guys should all go check out after you listen to this one. Now on to the show.

Welcome to the mywifequitherjob podcast. We will teach you how to create a business that suites your lifestyle so you can spend more time with your family and focus on doing the things that you love. Here is your host Steve Chou.

Steve: Welcome to the mywifequitherjob podcast. Today I’m really happy to have Noah Kagan on the show. Now if you don’t know who Noah Kagan is, he was one the early people at Face book. Then he was like number 3 at Mint.com, which later got acquired for hundreds of millions of dollars. But then he decided to quit the work force all together and started a company called AppSumo.com, which started out as a daily deal site for digital goods that has kind of evolved into more of a store front for some of their own digital products recently. Now, AppSumo has something like 700,000 email subscribers, which is just about the largest email list that I’ve ever heard of anyone having.

Anyway Noah is a very busy man and extremely hard to get a hold of and in fact he blew me off the first time when I emailed him with the excuse that he had nothing really new to say. Now if you’ve ever heard this guy speak before the guy never has nothing to say. And in fact the only way I managed to get him on my podcast was I had to lie. I told him that I was doing a podcast about dating Asian women, and he took the bait and then I had to offer a little tacos as well. Sorry Noah those females couldn’t be here today so we are going to have to talk about AppSumo but really glad to have you on the show and welcome.

Noah: Thanks Steve, I just want to say for your audience, I didn’t blow you off. I didn’t respond to your email because it came through a trusted source but I think there so much interesting things that people can learn and I feel like it is talked about and read about and no one ever takes the heart to really spend the time thinking about how to write a damn good email. And number one you, got intro to me from a friend so that was a plus but then you just kind of, hey you should do my podcast because people do my podcast, and I was like no not my thing.

And then you actually came back really strong and I just wanted to you know share with your audience about what made it really successful for me to want to be on your show. I think number one, you reduced the time pressure and you addressed my issues which are like how effective is it going to be for me in this podcast. You said hey we’ve got a large launch about it, it would be really fun with the topless and Asian women which is kind of a joke and then you really showed me that is it’s worth my time, not necessarily just about making– having you have more content for your blog or for podcast. So I really want to commend you on that and encourage your listeners that spending more than a minute crafting their emails if they want to get responses from anyone that they email.

Steve: Yes it’s funny because I had a lot of success so far. No one has denied me or even pushed back at all so far and you were the first person to do that and I had to kind of come up with something to actually convince you to come on the show, so thanks for challenging me there in that respect.

Noah: Yeah man you even– I think you read one of my blogs first on OkDork.com about cold emails. So you kind of hid things that matter from me, because I told you here I kind of, I don’t really have much new things that I want to talk about, and I’m trying to limit my interviews or podcasts interviews to people with decent size audiences, no offence. And you said actually I have the emails from 8o to 10,000 visitors a month, I’ve 25,000 on my email list and I’m going to get you 5 virgins, I mean you could say all– no you didn’t say anything about that.

Steve: We didn’t say anything about virgins.

Noah: No, no we didn’t. But it was just you know you crafted it to the audience which was me and that’s why you know I took the time to do this so and plus thank you for having me, it’s good that people want to hear my story.

Steve: Yeah, awesome. You know I actually looked around and you actually haven’t really gone into too much depth about your back story. I mean there is a couple of sentences and paragraphs here and there, but I don’t know if anyone really knows the deep depth of you know how you got started and that sort of thing, so hopefully we will cover that today.

Noah: Sure man. I’m happy to do that.

Steve: Yeah, let’s start with the quick back ground story in case you know there are some people out there who don’t know who you are, tell us you know your background story and how you make a living online today.

Noah: So, I graduated back in 04. I went to In hell or some people know it’s called Intel. I was the supply chain optimization, that’s what I managed so I basically calculated like how many parts we needed to make on excel, so pretty much I worked about an hour a day. And I just messed around the rest of the time. And I actually got you know I got raises and people thought I did a good job. And I was always kind of starting businesses on the side so one of the things I always encourage people do is, I’m not a risk taker and I never quit my job. People do this I’m like damn you are risky, you got balls, or if you are woman I guess you have breasts I don’t know whatever you want to say.

I don’t quit my jobs or move on to do my own things until I know it’s working, and that’s something I always encourage everyone. So when I was in Intel you know I have all this free time and also at night and weekends so I started creating my own side businesses. So I started creating conferences and events which was a great way to meet people. I created college up data which is a pre college Craig’s list, then I did a student discount card called ninjacard.com which was a discount card for college campuses. It went to about 5 campuses did about 50,000 bucks. And so the point is not what I have done. The point is I was actively trying to create my businesses while I had that consistent income, so that I could eventually do my own thing. I was about to quit Intel because some of the stuff was starting to show promise and I submitted my resume and run over to Facebook because there was a project I loved, and I was using a lot of time, I was trying to get laid. And you know in 20 years and my listeners are like God no you are such an ass.

Steve: That’s how I got you on the show man go on.

Noah: Yeah. Well hopefully for my mum I will meet a nice Jewish girl we’ll see. And so anyway I got the interview and I ended up getting there really early on when it was just kind of like the show. I think we had 110,000,000 people. And you know I worked directly with Zack and Dustin and Shawn Packers and all these people not as much as Shawn and all the other guys who now are freaking multi, multi billionaires, and it was one of the most fun and educational times of my life.

I learned to build a website, I learned really how get into some minds of people using websites because I really you know for the most I was just turning around my own projects. I didn’t really have any training or really good understanding and so Mark and these guys were all like exceptional. There was not, it’s not just locked it. They are you know $170 billion company, they are amazingly talented and other people there they were all. I was definitely the damnest around, and I think a lot of times I’ve people say that they’re actually damn. I’m like yeah you are definitely a damn it. I think I’m mildly smart but I’m a little more aggressive and, but still there I got to be still around such gifted people.

And I think one of the things I have noticed about myself, I think the people with age I remember being at face book and being 23 or 24 and seeing these 30 and 40 years-olds and I was like holy shit these people are very informative and leave at 7:00 o’clock, these people suck man I’m working till 11. And a civil [convalley??] mentality which is where I’m from was all about oh work all the time work, work and we worked and then partied a lot. What I realize is that age is– I really should have focused more now on doing less things and not working as much for getting more results, and getting better results. And so it is kind of like your podcast when we talked about in the beginning which I don’t want to do 100 podcast in the beginning for marketing mass I do all the podcast to get you know App.Sumo.com feature our new product just SumoMe.com. But now I’m like all right let me just do five podcasts, and maybe they take a little bit longer to set up but they will actually give me a much more significant reach. And that’s something that you know I’ve changed and evolved as a person.

Steve: You know that’s exactly been my philosophy with my sites and my businesses. For me it all happened when you know my wife became pregnant and we started these businesses so that we could actually hangout with our kids. So, kind of similar but a little bit different than in your case. Sorry go on.

Noah: No, I think one of the other key things that your listeners and readers should really think about is how can you– and I love this is how can you add on limitations to increase your creativity. And so how can you box yourself in because then you will actually solve that problem like if you give yourself less time or with your story it’s like all right we have less income and we want to spend more time with our child so how do we make that situation work. And I think those are the kind of things you should self impose and try out to see what will make you better or get the business or lifestyle you want. I think a lot of the excuses we have this course on Monthly1k.com, and I can talk about the evolution of how we got that.

But you know we’ve helped thousands literally over 4000 people start businesses so what’s been fascinating for me is just understanding the psychology of how people start, why they are not starting. And one of the things is like I have a job and I’m tired at night and on weekends. I’m like wow this is– that means it is not a priority for what you really want. You really don’t want to have another job. You don’t really want to have a job that you can control and you can create the lifestyle that you want with it. Because if you want it after work even though you are tired you’ll do in the morning you would do it, on the weekends you would do it, but people want that result without actually putting in the input.

Steve: Yeah, let’s go over some of the other excuses. I get these all the time. So one is like it costs you too much to start a business, you need a technical background.

Noah: Yeah I don’t have a technical funders, I don’t have too many ideas, I have too many ideas, I’ve already bugged my friends a lot, I don’t know how to do marketing. I mean the list goes on you know and one of the big ones is I’m afraid of what other people are going to be thinking of me. And you know when it all comes down to it, a lot of that is just practice, all right. It’s practice overcoming like doing smaller things to overcome fears and then eventually, you know how do you build the business one at a time. A lot of people are like how do I scale and make this a $10,000 business in a month. And you know one of the things that I haven’t shared publicly too much but because you know you went to Stanford and I like you so much, you know when I started AppSumo my first year I made $12000.

Steve: That’s better than I made with my blog. I think I made a fraction of that my first year so.

Noah: Well I didn’t have a baby and a wife. You know I’ve learned some more over time and now my salary is about 120 and that is a little over 3 years later and so and obviously we have more profit than that but I created the business and the lifestyle that I want. Not necessarily, how much do I just make as much money as possible, it’s like what do I want my life to look like and how do I create that. Yeah so you know at Facebook I ended up getting fired and there is a long post at OkDort.com about what happened if anyone is interested.

Steve: I will link up to that if you give me the link after the podcast.

Noah: Yeah, it’s OkDorkfacebookpatterns and then, you know I think one of the key things that I have been thinking of lately and is– I didn’t really do anything after Facebook. I kind of like taught business and career, I worked at a start up called Scanad, did some consulting there, I kind of put on these conferences and made good money from that. You could actually, if you are interested in putting on events or conferences I have an article on OkDort.com and how I made over $100000 doing conferences. And then I finally you know someone introduced me to Mint.com and I drew just like oh my God this is the greatest thing I’ve ever seen.

And so the take away that really dawned on me besides I didn’t get the job at first and I can share two stories that I think are really interesting. The first one I think about a lot now which is around six years later is that I really wanted to be a part of Mint.com. And what I think about today is when I’m doing a business, I make more money I get more satisfaction, I’m more willing to stick with it when times are tough, if it is something I really want to see exist in my world.

So I think most people are like why don’t I make a subscription business so that I’ve passive income, and how I do all these things, and ultimately I think that leaves you unsatisfied and more likely to quit or give up. But if you create a business you know selling baby related stuff because you have a baby or for me I’m selling a taco shop now as a funny kind of gag thing. And on tacos right, it’s on batter brand if anyone’s curious. And I think you know with Mint.com I was exactly that. I was like cool this business is going to change the world; I have to be a part of it. I think the more that people can kind of start looking and focusing on those kinds of things, they’ll probably going to get better results than if you are just going to look for an opportunity.

Steve: But here is the thing, you left Mint before it got acquired right?

Noah: Yeah I left Mint a little under a year before it got acquired.

Steve: Okay and so what was the reason, what was going through your head you know with that decision if you loved the product so much?

Noah: I loved Mint. I basically looked at it kind of analytically where– All right I met Mint and I loved Mint and I was kind of at a point which it was going to take off and go where I wanted to go but my ultimate goal is run my own business. And so that’s not what I did at Mint. So, a few things, one I was like I’d run my own business, two I looked at the math, and the math was well if Mint gets sold– this is my math I own 1%, Mint get sold for 200,000000 I make 2,000000 bucks, right? After taxes that is like a 1,000000. And then in San Francisco that gets you like half a toilet. Right, so you don’t get shit, then naturally I stay for years right, because you have to wait for the investing period.

Noah: Right.

Steve: So then I was like well if I want to start my own business which is like my number one goal and then looking at this math I basically ask myself could I make half a million to a million dollars post tax in that same time. And you know I kind of came to the conclusion that I could, and so with that being said I also had Facebook apps that I was building at night because I saw the Facebook platforms open up in those apps I think in the first two weeks had about two million installs.

Steve: Wow.

Noah: And so, I was kind of like all right and you know as I said earlier I’m risk averse, so I was like all right, this business is working, I can monetize it because I was doing apps related to sports and I did those apps because I could link, do up Amazon affiliate links, just you know sports things like sports jerseys and I did movies ones because I could sell the movies and I did TV shows ones so I could sell the TV shows. And that was working on, so I quit Mint said all right, let me see where I could take this.

Steve: Okay. And so how did that evolve into AppSumo then?

Noah: That actually evolved to its own seven figure business that’s still going today. So, that was court kicked – it’s a crazy story, I don’t know, how long is your podcast long? Like 45 minutes?

Steve: Yeah, 45 minutes to an hour, but we could probably go the full hour, talk fast.

Noah: Yeah, well I have a hair cut at 3:30, [chuckles] And that’s actually something I think we can talk about at the end which is taking care of yourself, which is not something I normally – I just used to cut my own hair and wear hoodies and ugly jeans all the time at George’s.

Steve: I think I saw a picture of you with a beard too [chuckles].

Noah: Yeah, my end year I didn’t know who I was trip. Well, so anyway with that basically we built these apps, they grew, I got funded by [Inaudible] [00:14:58] of the angel list, hired people, we were doing around 50 to 60 k a month, and then you know, I kind of went on this thing while the whole point was, I really wanted to run my own my business and I also wanted to travel abroad. So I took the company to Argentina, and I kind of just got you know like I said before I didn’t really give a fuck about games, this was just a straight opportunity. And as the game started dying, I was just like, well, I don’t give a shit. I’m just going to have fun in Argentina drink wine, and tango and eat meat and just explore. And the guys in my team were like, dude you got to get back to work or we’re going to quit. And I wasn’t sure what else to do, so I went back to work. I’m going to abbreviate and kind of jump a little forward. So, going back to work, we ended up becoming a payment platform for games, that business ended up doing like about 20 or 30 million dollars top line. So bottom line I think we ended up making like 2 or 3 million dollars, then you split it 3 ways, then in California it get stayed in income tax, so at the end you know, I think I ended up making about a half a million dollars.

Steve: Okay.

Noah: When it was all done in about 2 years. So, that was fine but I was working like literally 18 hour day but it was fun at the time. But when I came down to it like 2 years or 3 years without the staff I was like, are you sure? The partners I was with I really liked as people, I didn’t like working with them and I had no interest in what we were creating every day. I had no interest waking up, working on how to you know, make people more money with their credit card payments. I didn’t care for them – there are people out there who do and that just wasn’t me so, you know, as I have said time and time again in this interview, someone asked me to do consulting at speeddate.com and they would pay me 150 an hour to do product consulting like, how does the products on the website work.

So I did have that blind doubt as you know, I kind of tell you guys and ended up doing speed date and then I was trying to you know, look for my next thing and so, one of the ideas was a [fish full??] sold in restaurants, small businesses – and I still think this is an interesting business, they suck at getting people’s information, and so what that means is that like, they have 100 people come to their restaurant, they don’t get any of their information and then how do you get those people back to your restaurant? Well, I guess you have to hope they think about eating there again. And so I was like, well what if I can help them collect email addresses to come back to the restaurant and I will take care of everything. And I just thought this was a really neat business and I think there’s a few people who’ve tried it. But I just kind of realized that like small businesses, a lot of them are old school and they kind of suck, so that wouldn’t be as much fun and it’s not necessarily a business I wanted myself or what I want to exist in my world.

Steve: Okay.

Noah: Am I rumbling? Am not rumbling, am I going to fast?

Steve: No, no, no worry, its interesting keep going.

Noah: All right. Yeah. You can tell me to shut the hell up or direct it in any way, you’re the leader, orchestrator.

Steve: Yeah, yeah. So I mean, eventually I want to steer towards AppSumo.

Noah: So, I had that idea then I basically, the way I try to do my businesses and the ones that I have been successful with, is I try to just like; I don’t look ahead two years or ten years. I’m not ill on months; it’s just not my thing. And most things that are scale are changing the world start with changing one person, and they evolve to bigger things and I think that’s what’s missed a lot. If Facebook didn’t set out to be this big ass mass of thing, it set out to like Mark to hook up with Rose at Harvard and then you know he stuck with it, which most people don’t do. I take persistence slash patience is a competitive damage and I think that is the thing people should think about.

But it became slim baked so, I kind of looked out about six months and I said all right, well, here’s three things that are looking really interesting; Job apps is growing like crazy, Markhaistenwho.com are growing like crazy in terms of distribution, they’re selling things at a discount for a limited time, that’s working really well, and I’m really good at marketing and I like marketing, but there’s no great way to find web tools. So I kind of triangulated those things to create bundles of web tools, and so that is what the original version of AppSumo was.

And so, I was like, well, let me see if I can test this idea, if people will pay me. So I tried to work backwards to say all right, where can I find a large group of customers, and I have written about this on AppSumo which is how I started it for 60 bucks. So, work backwards from your customers’ front. Most people – this is the common promise into this for entrepreneurs. They work forward and the like, and especially engineers because they are smart, they are really smart, they create something and they are like, well, where can I fit this into? It’s like, they create the circle and then try to figure out where can they put their circle in, verses like they have a square and now I have to find a piece that fits.

Steve: You know, as an engineer myself, I can kind of relate to that, and It’s been actually a struggle for me to kind of work backwards like that or forwards in your way of thinking so-

Noah: You know why? Because it’s easier Steve. I mean, you know I’m not some master guru, like that happens to me and it’s happened to me in times, I have wasted hundreds of– well not hundreds of thousands but at least a hundred thousand in about a year on projects that I built solutions to no one’s problem. And instead, I just started thinking all right, well, how do I just solve people’s problems and give them solutions that they actually want. So, I went on to Reddit and I found out that they love this photo, and I’m a Redditor, and I found out that they loved injure so I went to injure and said, hey, can you give me your product at a discount I’ll see if the people on Reddit will buy it.

And I ended up promoting on Reddit, I ended up buying the guys at Reddit, the founders, breakfast and they gave me free advertising. Kind of like, you e-mailed me and I just emailed them and I said, hey, can I have a thing at around four? And I said, I’ll take you out for breakfast, and then at breakfast I said, you know, I really like you guys, I’m doing this product for read it do you think you can give me some free ads? And they did, and the irony in that story, I was like joking is that, a month later I was tried to get more free ads and they were like oh yeah that’s 10,000 dollars now because I connect to the world.

That cost me I think $26 and a breakfast and I you know, I still appreciate it, I mean this Christopher Slone, good dude and I appreciate what he did for me. And so we ended up selling, you know, I think with businesses you validate, my validation method, what I encourage people to do is, three paying customers, 48 hours. And so what that means is, with your service, or product or idea, anything even an app I don’t give a shit what it is, you have to get three paying customers within 48 hours and it kind of comes back to, do I have easy access to these customers? And will people be willing to pay me for what I think will help them?

Steve: So, you did this whole thing on Reddit and Bing, did you even have a website or a way to get payment at that time?

Noah: In retrospect, I wouldn’t have done it, but I did build a website. It took me about a week, maybe even less and I paid a guy in Pakistan 50 bucks, to add in PayPal, and I Google searched for PHP membership code and I built a crappy little website and then, I manually sent each customer who bought the code. And in retrospect, I probably could have used like tumbler or Webplus or just send my hey, Paypal here and I’ll send you the injure code. So, I did that and then we started doing in bundles. And I was like, all right, well, people want to buy it, now let me keep working backwards to see how can I get more traffic and create a bundle. So, then I went to Lifehacker. I emailed one of the writers and I said, you know, I’m going to put together a of your bundles top rated and top commented on posts and products, do you think you’d write about it, he’s like I can’t promise it but that sounds really interesting.

So I went, got their top products they had written about and commented on Lifehacker which was Evernote and RescueTime and a few other tools you remember The Milk and you know, I put it all together and I said hey guys I told you I would do it and they wrote this huge article and I think that drove the first few hundred sales of that 150 bucks.

Steve: So, I just want to kind of emphasis the couple of things that you’re saying. So sounds like a lot of the stuff that you did earlier on was leg work and a lot of people that actually come on my blog, they just think that they can create a website and magically get to rank in Google and you know the customers will just come out running, but it always takes a whole of leg work earlier on and it is your hustle really that gets something started in the beginning.

Noah: Yeah man dude it pisses me off, I’ll tell you like one of the things that I hate more than anything is that people buy a– they do create a landing page and they do all the stuff that engineers do because it’s easier to build things than try to make money out of things. It’s way easier to create a landing page and buy an ad and be like hey! I got 30 emails and a 20% conversion rate. What can I try to sell these people, which is like all right, you could have done that without spending any money and seeing a lot easier but that part is more fun? Like my friends like to put it is playing business not actually doing business.

And so you know you from that point on I was like all right, do these bundles of different kinds of create categories since I try to work backwards to think that I work towards appeal and so some of the different marketing methods that worked really well for us to grow the business in the beginning was doing like free bundles. So I get people’s products and I try to give it away for free. Secondly Heaton Shaw one of my good friends– he was like do you collect emails. And this is a key thing that I would say is that when you start; get on your blogging business versus just kind of copying someone else.

And I think it’s good to copy and involve another business but as you evolve and learning the wise of business, so I used to never collect emails. My buddy he was like hey dude collect emails because it makes it a lot easier to tell them about the next deal. And in retrospect now I was like oh yeah that makes sense, but people will just like, of course he gets emails, that’s obvious but at the time I never thought I would do that. And I would never have thought that unless I started it myself to kind of understood how hard it was.

Steve: Let me ask you this, how did you get people to give you their products for free that you are actually making money on?

Noah: The ones– it varies, sometimes if it is free– if it is a paid product and it’s free, it’s just, it’s a digital product that they are getting distribution that maybe people will subscribe in the future, or it is a new email address for their other products.

Steve: Okay.

Noah: Or if it’s a– let’s say it’s a bundle and there is like three, like everyone knows it’s a huge product or fresh books from Mailchimp, but there is a fourth product that is like a kind of a no name I think it is a great product, then I’ll promote it online. I’m not going to pay you when we sell the bundles, but you get kind of distribution for it at no cost. And I mean that’s like a holy grail. And that’s one of things I learned about gambling that previous business with payments versus AppSumo which is you know and I call the totem pole, which is how valuable are you to customers? So, how viable was the payments company? Not viable I got treated like shit. How valuable was distribution? Really valuable, if you have the right audience.

And also depending on who wants the distribution. And so it was just kind of really interesting the first year, we kind of we wanted to design our bundles. Other marketing things that worked really well was we did like bundles for conferences and they were promoted out. I asked the companies that we were promoting to promote it out and I would give them templates. I think that’s one of the things that’s really helped me is how do you lubricate things. So, if I email Steve and I say, hey Steve I want you to introduce me to you know– let me give you a clear example. I’m trying to go to Napo and have a tour of the winery and a buddy of mine I ask; hey do you know anybody who does wine? And he’s like yeah, I got a buddy Steve who owns the Winers. I think his actual name is Steve. So I email him back and I’m like hey man, here is the template, but I literally wrote the email and I’m like can you forward this to Steve? And he is like hey, here is my buddy Noah and it makes it easier for him to just hit forward and send that email verses make him do work.

So, AppSumo– I just gave him the templates and said hey, can you send this out to customers who haven’t bought your product; this is a great way to convert them. And that worked really well. One of the key things that was going on in our business at that time was looking for an– I don’t know how to phrase it, if I made it up or how it goes but I look for anomalies in success. And basically what that means is kind of like just are your listeners male or female?

Steve: Mostly female actually.

Noah: Oh shit, damn it, I was going to– well we do it in a female perspective then.

Steve: Okay.

Noah: So, if you are female and you’re kind of making out with the guy or hanging out with the guy and you do something he likes, that’s the kind of thing I’m starting to be more aware of and trying to do more of. So if you are you know making out with the guy and you touch his earlobe, and you are like man this guy has an ear fetish, you probably should touch his ears more often. But you touch his toes and he giggles and you know he, he, he doesn’t like it, you probably shouldn’t do that. And so what I would– and that’s one of the things I think people kind of neglect in businesses is; one is reverse engineering which is all right as I’ve said before work backwards to what’s already working. Lifehacker has traffic that works. Let me figure out a product that will work with that.

The second thing is like do more of what’s already working, and look for those anomalies of success, which is kind of like the same exact thing, which is I noticed that these bundles were hard man. Like it was– it took me like three years five months to put a bundle together and I promote it, and I make like 5,000 but it would take me so much time. And I realized like working to just take the products because I could get those and put those out one at a time, instead of bundling it probably make more money, and have more frequency of things I can promote verses like these three months 5000 things, I could have one day 5000 things, $5000 promotions.

Steve: Yeah, because I notice that I haven’t been getting as many emails from AppSumo. Before it was all about packaged deals and now it seems like it’s more about individual products that you guys own. Is that correct?

Noah: It’s been an interesting evolution man, and I think that’s the part that people miss in businesses. They are like give me the answers and give me a tactic which I’m a tactic guy, I love me. You know like I don’t want to hear your fluff, but there is some value to the fluff you know like in thinking about things differently in how people are running their businesses and stopping things. So like I think a lot of businesses will just keep doing bundles, and I think what we did really well was all like well these single deals are going to work or should work well. Let’s try it out. It worked really well for bundles and we just killed bundles completely, because it takes a lot of time and you don’t get as much of a return for the time that you’re using, for other time that it takes to put it together. And so for the first year I mean we did and then we turned everything into individual promotions. And then…

Steve: And so…

Noah: Excuse me?

Steve: No, I was just going to ask you, so each time you are getting more and more email subscribers based on the products that you are pushing is that correct?

Noah: Yeah, I mean one of– this is funny man. I swear to God like we had, we literally had a growth hacker, like I hired a guy three years ago just to do development around marketing and tactics and you know hacks and gimmicks. And I will say that the– I mean all of it because I spent a year with this guy developing stuff to get more emails. The number one thing that got us more emails, the number one thing was the best products. So when I promoted a product like sweetener which is last week, or picture chart which is in the past and other tools like that, we get a huge ton of emails, because it’s a great thing. People want to give you their email; they want to hear more about that.

When you try to just trick and be like hey give me your email because you should, or like share this for $10 referral like for us none of that really worked. Same thing with contests you know like I think people do shit contests like oh here is a giveaway, we– our first contest was drop box for life, which in the economics was great, because I only have to pay once a year 100 bucks and people want to live till 80, and you have to be 21, so it was only going to cost me 60 years times 100 so that’s $6,000. And so I was like well, if I could get more than 6000 that would be worth it. And our contest in the beginning you know work didn’t sync really well. Guess what, because people want drop box for life and we are still paying those people and it was very profitable and it worked out for everyone who is a part of it.

Steve: So, if we back up a little bit back when you didn’t have this gigantic list, how do you get these people to take part in your deals?

Noah: Well a lot of the times yeah. So with sales the number one thing that you’re trying to accomplish is the other person’s objectives and that’s what I really focused on. So let’s say I come to you Steve and you run a product, you know one of my key question is like what is your matrix of success for a promotion with us? And then if I– I make sure that, that’s what I say that I can I can do or not do. So I think when people are starting businesses, I’m an eagle scout and I relate it to starting a fire with taking a big log and trying to light it with a lighter. Right, obviously that’s not going to work. When you start a fire you start with kindle and then you build it up.

And that’s what I did, which was I started with you know smaller products that I knew I could promote, I didn’t have to have a major listing with so well. Then as I grew, then I would go out and try to get larger products that would, you know that those companies would require larger promotions for them to want to do it. Like same with your blog, like if you came to me and you said hi, I’ve 20 listeners, I would be like you know that’s awesome, kick my ass, I just don’t have time to do that with you right now, to do an interview. And so you know I go to the sites, I mean that’s what I didn’t say when you were trying to do guest postings. I know that’s a star, we can see you are such a diva, straighten your knee, build yourself up verses trying to– a lot of people just try to start with A’s who get all the attention. Go to the ugly guys, start with them and then eventually walk up to the hot guys.

Steve: Right on, that’s actually a pretty good analogy since we are talking about dating and that sort of thing.

Noah: Yeah man.

Steve: So you know I kind of want to talk a little bit about how you run the business too because I think very few people can appreciate some of the intricacies of kind of just maintaining such a large list and it’s huge distribution platforms, so what is the challenges of running a company like AppSumo?

Noah: Yeah man I mean it’s been such a relief every partner you know I feel for myself it has been such a crazy story like I was alone for the first 6 months a year and I did everything and I was talking to someone one of our customers on Monthly1k which is our how to start a business course and I love to share why we started that not only just sharing it you know how people buy it and that’s not what is important to me. It is important to me but it’s not like the most important. But he emailed me and was like hey man I want someone else to do all this work for me. And I was like I think that’s a huge mistake because I think understanding like how every piece of your business works in the beginning is critical.

So, I did the coding, I did the marketing, I did the sales, I did the support I did everything man. And then it was only over time that I realized I can’t grow this business and we are making money so I can’t grow the business if I’m getting all the deals. So I hired a versatile person and I can’t you know do all the customer support because like then I can’t do the market so I hired a customer support person.

Steve: We have the exact same philosophies, a lot of people sign up for my course and you know they immediately just want to start contracting staff out. So one of my point to emphasize is you have to learn how the website works and you know how everything is laid out so that you understand and when it comes time to outsource, you don’t get ripped off and you know exactly what you want in your product.

Noah: Exactly, and I think one of the key things as people are trying to start businesses and I would challenge everyone is not to spend any money. Like I’ve started– I showed examples of this. I did events business, then I put up soon AppSumo.com and I’ve done OkDork.com, and I started both of those businesses worth nearly over thousands of profits, thousands dollars of profits in 24 hours, and I think I spent less than a dollar.

Steve: Let’s talk about that now because that is actually a really interesting story.

Noah: You don’t want to hear more stuff or? I’m happy with whatever you think your listeners or readers will appreciate.

Steve: You know all of this stuff is interesting. I’m just worried that we are going to run out of time, so you know one thing that I really like about you Noah is that we kind of share the same philosophies and we are both trying to convince others that are making money doesn’t have to be hard and it doesn’t have to be risky. And so one of the stories that I read on your blog was that you’ve actually gone out and physically demonstrated how a little bit of hustle can earn you some money you know on the side, and starting small then just gradually building up. So one of the stories that stood out to me was your Sumo junky story, so let’s talk a little bit about that.

Noah: Sure, so we created this course on Monthly1k.com, and the reason I created it was– let me give quick step back, because I think it is going to be really interesting to your listeners. So, in AppSumo’s beginning we grew to like, maybe I think 100,000 dollars in our first year. Then the second year we took off I think it was like a million or two million. And I think we’re in our fourth year I don’t even know. I think last year we did– or two years ago we did about five million on max, four point eight, and we had to meet all these employees and meet all these staff and the reality of it was that I never– you know I don’t want to build a billion dollar company.

I want to build a company where you know I can work here in Vegas for a weekend or last in February I worked from Thailand for two weeks and I don’t naturally always have to go travelling, but I have a business that’s creating the lifestyle that I want. And that’s not what I wanted is to have to come to an office, and have to manage all these people and all that shit. And so we scaled the company back to six people. We stopped doing all over and we started to A/B test every single price form. We used to test literally hundreds, if not thousands of things within the website and try to maximize profit.

And I think when you’re starting your business, it’s really saying, what do I want out of this? How do I want it to be? And really sticking with that. And things get hard when times are crazy. You know, we started spending millions of dollars on advertising, which we didn’t, you know we didn’t– we evolved that. I didn’t do it right away, but I said, oh shit, the ads are working, let’s spend as much as we can. That’s one of the things that I really encourage people, if you find something working, take advantage of it.

But when it came down to it, it’s like now we are a team of about six people. Last year we did I think, you know half of that revenue if not less, but we were way more profitable, because of how we run the business. And the second piece of that is, you know, the first year and a half we promoted other people’s products. And what I realized is that, holy shit, like, our business is very [sequickle??] it’s fickle. Like, we have a product like two weeks so let me give an example. Two weeks so we did a seminar and that was a five figure promotion in profit for us. And then last week did Wp101.com which we still think, we love that product and we think it’s an amazing product, but I think we made $5,000 total and you have to realize like, I have to pay $70,000 dollars a month in over head no matter what, so you can do the math and be like, holy shit! And that was-fuck! [Chuckles].

We have all these other business; I said all right well, how do we reduce that dependency? And I think that’s what people have to look at. It’s like, what’s holding you back? And how do I remove that? So we were like, well shit, if we’re not getting products that are always going to be hits, we need to create our own. And so that’s how we started. We tested it, that way we made like an email templates product and we made a– had a higher interest product and we just made a really get our own. We saw people would buy them, and then once we saw they would buy them, we‘re like holy shit, and I wasn’t actually spending money in making this better. And most people what they do is they spend tons of time and money making it great and then seeing if actually people will buy it. And so when we were bored we created that Monthly1k.com product, which shows people exactly– and I created it because I was tired of answering people‘s questions on how I’ve done that. I didn’t want to help people anymore; I wanted to put it all on this product so that it would just do the work for me.

Steve: Dude we have like parallel lives here. That’s exactly why I created my course as well [chuckles].

Noah: Come on, you just get– people kept on asking you?

Steve: People just kept asking the same questions, so I decided to just sit down, put it down on paper and then create a little video course teaching other people how to create e-commerce stores, you know go on, I’m sorry I didn’t mean to-

Noah: No, no, no do that together. You’re right, and I think one of the things that people should look at is like, what do I keep getting asked? And this is how people can– the easiest way to start a business and most people be like; oh I don’t want to turn my hobby in to money. It’s like, if you enjoy it, then keep enjoying it and make it fun for yourself. So like it could be cooking, it could be like one of the things that I love doing, is bringing people together and that’s what I’ve always done.

And I love showing off things that I love. What do you think AppSumo is? I show off things that I love; like find the products that I really love and I send it out to people. Our intern because he does things similar now, who does all that work – and so kind of reflecting on like what have you loved and done really well and doing more of that. And so, anyways we kind of started creating more of our own products and you know then we created the Monthly1k.com product, which is a whole year frankly, of hardship and of crying and it was successful for our customers and successful for us and that now provides a foundation so that we can experiment with crazier things which is like SumoMe.com, which is our latest product.

Steve: And what is SumoMe.com?

Noah: SumoMe.com is basically we’ve– I mean the guys in our team Chad, Eric and Damian are all insanely good developers, and so we built all these products and we showed people. So, we promote products with AppSumo, we built you know courses through all that. We started a business now it’s like, how do you grow your business? And so we are taking all the tools that we build over the past three years internally and making them public and most of them free. So it’s all the tools that we’ve used to grow [Inaudible] [00:37:51] to 700,000 and become a seven figure business.

Steve: Okay, I noticed this is part of the word press plugin right? You have a word press plugin?

Noah: Yes, SumoMe it’s just one line a job or if you have a word press plugin and sort of plug in like 30 seconds. It’s really quick to start getting more traffic and you know getting more emails or getting more shares on your blog.

Steve: Okay, and this make 1000 a month course – that’s what you were talking about, the make 1000 a month course?

Noah: Yeah.

Steve: So what are some of the principles that you teach in that class?

Noah: You know it’s funny actually. My instant thought is to start talking about how we developed it, because I think that is interesting as well for your listeners but, I think the co-principles that I focused on only from my own experiences of creating seven figure businesses, working at Facebook, working at Mint and putting it all together and what stuff that hasn’t worked. I mean I told you before I created onelevel.com and better arcade which both cost me about over 100,000 and over a year of time wasted. So I brought, I’ve done a success and I’ve done a failure stuff.

My core tenance is that we focus on our program; it’s probably about six things. So number one is fear. Most people have a lot of just different irrational fears and you know I’ve been afraid too about starting businesses like you know I was trying to start that jerky thing I was like, holy shit, this is going to definitely work and I only have 24 hours. And I woke up at midnight and I was like, I can’t go to sleep, I have to go work, because I was afraid of failing. And so when we work with people, we make them do different challenges and you can’t move forward in the course without doing it.

Number two is idea generation, so just different ways to get people’s idea brand just juicy then and going. Number two is then validation, so, how do you take any idea and see if people actually pay for it? So we get people sharpen that, so once they can validate anything they ever think of in the future, they can see if people will pay them for it.

Then third is how do you grow up? So, how do you take it from, all right, I have one or two customers to make 1000 dollars a month? And then, we don’t really focus on beyond. So, people are already making money online we can’t help them. That’s what SumoMe is doing is Sumo.Me.com is where you’re making money online, how do I take it to the next level. And then the two other kind of key tenents that we focus on and really helped us, I would say is accountability. So we have a coach who checks in with people so if you are struggling. That is one other thing that we are noticing is people just drop off because they have had one hick up and we’ll say yeah. And so the accountability couch was really critical for that.

And then number two was a live community. And so we have thousands of people and then we realized like at first man I’ll be real like at first there was only like let’s say a hundred and I was like oh my God, this is like stupid people helping other stupid people, I’m really worried about this. They are giving really bad advice and I was spending my whole time just helping each individual person and this is kind of I would say reflects how businesses evolve. And so I did it all in the beginning. I was– every single person I’ll respond to and as we grew you know we got more people so the crowd started helping, and then I actually hired people to then eventually do it, once we got large enough. But that group is in one– I would say probably the number one most valuable, because the live group– people buy from each other, people support each other, people get questions answered from each other. So I’d say those six things have kind of been the key things in what makes our course unique as well as made it successful for the people taking it.

Steve: Yeah, so it’s funny I actually asked you that question for selfish reasons because it sounds like we have kind of parallel tracks you know I have a forum as well where people support each other, and I was just curious how you’ve evolved the support and how you keep people motivated so.

Noah: I think, I mean you know it’s funny, one week we spent like literally 300,000 developing software, so it is all custom based software so no one can copy that. Well, what I think about because I mean dude, how many books in colleges and other products are there online teaching business? Like I don’t know tens of thousands? And there is always going to be someone else making something similar and you know it sounds like me and you have very similar ideas. And with that being the case so it’s like hosting similar restaurant. Like how many Japanese, like what’s your favorite food?

Steve: Yeah, it’s Japanese food.

Noah: Dude I love Japanese food and where are you based lastly?

Steve: I’m in Silicon Valley.

Noah: You actually grew up there?

Steve: No, no I’m actually from the East Coast.

Noah: Oh, cool.

Steve: But I came out to school at Stanford and then I stayed.

Noah: Nice man, so– Where were we? What I was trying to kind of say is like there is a ton of Japanese restaurants in the Bay area, right. There is one for every one and to think if customers had different preferences like you may go to one and think it’s awesome, I may think it’s bad and vice versa. So I just try to discourage people from sweating that there’re other competitors out there and they are like, oh Steve has it. I want more from me and I’m like it’s a large pie don’t sweat it.

Steve: I completely agree, I mean there is just so many excuses that I’ve heard over the years and so many people that are really excited when they start and then they kind of hit their first little obstacle and then they want to give up.

Noah: One thing for you is like what do you think and people ask me this and I’ve thought it’s a good question is like what do you think for you with your business was really part of the turning point in accelerating that growth to however much its making? So I would say for AppSumo advertising was our big kind of probably besides getting great products to promote. Once we started spending money on ads that kind of just really changed the trajectory of our business.

Steve: Yeah, so for our e-commerce store, so the blog came after the e-commerce store, but for our store at least the initial thing that kind of made us realize that we could make some money was; one we did adwords which kicked butt in the beginning, and then we started contacting people who could buy our products in bulk and once we found that you know, we could get these huge bulk purchases, we realized that you know, that was how we were going to make money as well.

Noah: That’s cool man! I like the stuff like that.

Steve: Yeah, that’s from my point of view. At least from my class you know I have tried to– I always look at things in a long time frame, like a five years out. I don’t know– I think you mentioned your time frame was like two or three years or something like that. I like taking a five year time frame, but it’s kind of hard to instill that in certain people who just want to make money really quickly. So, just wondering where your thoughts were on that.

Noah: You’re good for some luck. Seriously, like you know good luck. I don’t think– I think it’s possible go sell the credit cards, go to the mall and the airport and convince people to sign for credit cards. One of the things that I think about is like the destination verses the journey. So like a lot of people, oh man I hate my job, and you know one of the thing that’s always funny is that people hate their jobs but what do they want to do? Travel, I want to travel, and then after travelling is eventually over you’re like you want to go travel and work because you are like, what the hell I’m I going to do just sitting around all day, even if I’m super rich or super poor. And so I try to encourage people like you know, instead of just worrying about how to get so much money, you know, how do you work on something because you spend a lot of your life working on something, why not work on something you are interested in?

Steve: Yeah, I totally agree. I mean, people just have this misconception that, they just want to sit and have you know money will just kind of possibly come in, but then you get bored. That’s actually one of the reasons why I haven’t quit my job. I’m a little bit worried since my businesses don’t take that many hours to maintain, that I’m going to be just sitting around at home, and I’m going to lose my tech background, and I won’t have anything really interesting to propel me forward.

Noah: How did you– does your boss know about your stuff?

Steve: Yeah, he does actually. And I’ve told them upfront actually relatively recently. I’m like, you know, this job is actually the least income earner in my household now. I really like the people and everything so, I’m here because I want to be here, is basically what I told them.

Noah: I was just going to ask you, why don’t you quit?

Steve: Yeah, because so that’s a different story all in itself. So I design micro processors for a living, you worked at Intel so you know what those are at least. I feel like [over talks] [0:45:13] that if I give that up and you know, tech moves really quickly so, if I give it up I may not be able to ever go back into it, that’s my fear. I actually enjoy the tech stuff. I actually like my job which is unlike some of the people that I encounter you know that I talk to on the blog.

Noah: I mean, and I think that’s what– you are the person I love and I respect and you know I want more people to be like, which is like it’s not that– I don’t think everyone being not like a substitute, like those days when like I’m not paying bills like Steve and I’m like, oh I’m kicking ass today, because there was someone like last week someone quit. And its not– I don’t think, it’s like people are spineless to be entrepreneurs. I just think people want to like the work they do and feel focused. And so it’s so cool, and you’re like yeah, I like a lot of what I’m doing, I enjoy my work and I want to stay relevant and educating and just chill, that’s cool.

Steve: Yeah, the thing is also, you know there is also this time aspect that you mentioned before, like I want to spend more time with my family as well so at some point I think something is going to have to give.

Noah: I don’t know if you’re going to have to put it on record, but yeah, eventually I assume it would.

Steve: [chuckles] Yeah, I don’t mind putting anything on record actually, everyone knows, everyone at work knows at least what I’m up to and that sort of thing so it’s all good. So you know– sorry?

Noah: What made you start sharing the revenue number?

Steve: Revenue number for the e-commerce store?

Noah: Yeah.

Steve: So, I actually started the blog as my retirement plan. And I felt like every sort of business or blog, whatever, kind of needs some kind of back story. And the fact that we were able to essentially supply my wife’s income in a year, just sounded like a really good back story to start the foundation for a blog.

Noah: So the blog was like your kind of like your 401k?

Steve: It was my retirement plan meaning my avenue in case I ever wanted to quit my job. It took a long time to get to the point where I was today.

Noah: How long did it take?

Steve: It took four years.

Noah: Only four years? That’s it man!

Steve: That’s a long time man.

Noah: That’s a hell of a long time. I was talking to this guy– this was really awesome. His name is Taylor, he runs sched.org. And two things were really, really fascinating about him. I met this kid on yeah I am, remember that shit?

Steve: Yeah.

Noah: Like six, seven years ago and he was just like you know a little runt just like me, and we are still runts. And I remember he did events websites and I was like that’s cute, that’s not– I don’t think that’ll be business or whatever and you know we’ve been in touch and we are friends, and I saw him a week ago in Austin. And he was like yeah I’m still doing it, I was like holy shit, man, that’s impressive! I was like, tell me what do you think is making you the most successful or why do you think why this is working? And he was like do you know my number one secret? I mentioned it earlier in the podcast interview, and he said, the number one reason why I’ve been successful is patience, is that everyone else who was doing it gave up.

And it was really respectful, I really appreciated that like he stuck with it, it took four years for him to get to that level or same with AppSumo. You know, I made $12000 personally the first year, and now I’m able to pay myself a good six figures. And you know that was his competitive advantage.

Steve: I completely agree with that. It’s all about being slow and steady for me at least, and you know now my blog makes more than my day job and it took a long time to get to that point. But it was just a very gradual, slow and steady pace that allowed me to do that.

Noah: And I think that’s a really interesting point, I’m just going to repeat it because I think what people expect is that, oh these blogs have gotten these email lists over night, and there is revenue overnight and you know, it is a progression not necessarily just a destination. It’s the whole process that’s the interesting and challenging part. And I think the fact that if you know it takes time, it makes it a lot easier to say all right, it’s not making me millions today, it’s making a 1000 or 500 but as long as I stick with it, you know I should be able to get to that point.

Steve: Yeah, absolutely and the best thing about like a blog or a web property is that really, there’s only one direction to go and that is kind of up if you continue to put out good content. That’s my opinion.

Noah: Yeah, that’s pretty– I mean I can talk about that actually. I don’t know how many of your listeners are blog owners or bloggers?

Steve: Not too many. Most people are aspiring e-commerce store owners I believe.

Noah: Oh, so let’s not talk about that then.

Steve: You know we’re actually, I have actually taken up a lot of your time already, I don’t know how much time you have but-

Noah: I’ve got two minutes to my hair cut.

Steve: Two minutes to your– all right, let’s sum it up so, advice, if you were to give one piece of advice to people who want to start their own business, what would it be?

Noah: Besides joining on Monthly1k.com…

Steve: We’ll plug it in the show notes.

Noah: I know. I don’t think, I don’t know. It’s hard sometimes I think to consolidate things to one piece of advice. I would say that the number one thing that I’ve always encouraged people is, what can you do today. And a lot of people starting businesses make excuses about more money or more time or more people. But I think if you truly want– if you have a problem that you want to solve or other people have problems you want to solve, what can you do today, tonight, right now stop the podcast. I know we’re at the end, but stop it and go do something about it versus– and this is the super common thing which is, I need one more thing, I need that next blog post, I need that other book, I need that other course to learn that one secret answer, and it doesn’t exist, it exists in yourself and that’s work. And so I want anyone who is listening to go– and this is where my satisfaction comes which is, go do some work and you can tweet me what your result is. I’d love to hear about it from just taking that action now. You don’t need to spend any money, you don’t need to spend more time, but when you get up, take out those ear plugs or put in some rap music and in ear plugs, get some hustle on and go try you know, solve some people problem, make the world better.

Steve: That’s great advice Noah. So, where can we find you? If people like reach out and contact you?

Noah: Don’t find me at all unless you are Steve.

Steve: Asian dating guys, that’s easy Asian dating.

Noah: Don’t make me seem like I’m that weird, creepy dude. You know so, I’m online, you know AppSumo.com is a free newsletter to help entrepreneurs kick ass. We have SumoMe.com which is a free tool if you want to learn the things that we do for marketing that’s helped us grow, totally free. My personal blog where I share you know all the marketing secrets and tactics that I use is OkDork.com and personally on twitter I post interesting links and quotes at Noah Kagan.com and then on twitter@ Noahkagan.

Steve: Okay and once again, I’ll put all that on the notes, so you guys don’t have to remember what he said, but you know, thanks a lot Noah for coming on the show, really appreciate it man.

Noah: Yeah man, for sure.

Steve: All right, take care.

Noah: You too brother.

Steve: Isn’t Noah great? Now, the guy talks really fast and he brought a lot of great points in the podcast so, I thought I would just take the time to summarize some of the key points that he brought up. So number one, you always want to work backwards from your problems. Don’t create a product or website first and then look for customers. Instead what you want to do is you want to find the customers first and then build the site or product, because if you do things that way your products are guaranteed to sell. So, to test your idea Noah brought up that you should always try to get at least three paying customers within 48 hours.

Now, in my course I follow the exact same philosophy as Noah. In addition, to the key word research things that I teach in my class, you should always try to throw up a website and just sell things even though you might not even have inventory. So, sell on eBay, sell on Amazon if you have to, to first test your idea and if you even have to you can even fulfill your products from your competitors if you have to. So, in other words, if you have a store up and you get an order and you don’t actually have the inventory in hand, just go ahead and buy that same product from a competitor to ship.

What you are looking for in the beginning is information on what sells and what does not. Okay, Noah also brought up the issue of always be collecting emails. E-mails is the best way to keep in touch and to gather a following for your blog or your business. Another important thing that Noah brought up was lubricating the relationship. So if you want people to help you, then it really helps to have all the materials written ahead of time.

And Noah used the example where he pre-wrote emails that his affiliates could use to help promote his product so that they don’t actually have to even use their brain. They can just simply cut and paste what he already wrote and send that out as is. Okay, and most importantly, Noah also said that you should do more of what is already working and don’t spread yourself too thin.

Often times as a business owner, it’s really easy to get caught up in expansion when sometimes all it takes is to improve your existing products, okay? And one other last point that Noah and I completely agree on, is this issue of outsourcing work from your business. In the beginning when your business just starts out, you should try to do everything yourself so that you have a full understanding of what is involved in running your business. And only with that knowledge can you eventually outsource your company effectively.

Okay, so a lot of great points in that podcast. I just want to remind you guys that my podcast contest is still going on and once again I’m giving away a free copy of my course and free consulting. For more information go to www.mywifequitherjob.com/podcast-launch, that’s mywifequitherjob.com/podcast-launch. Thanks for listening.

Thanks for listening to the mywifequitherjob podcast, where we are giving the courage where people need to start their own online business. For more information visit Steve’s blog at www. mywifequitherjob.com.