#1925 Etsy bought his marketplace for $275 million

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Andrew Warner 0: 04


Hey there freedom fighters. My name is Andrew Warner, I am reluctantly sadly, unfortunately, still recording from home with my home microphone, my home recording equipment and my home kids were running around outside my door. I don’t enjoy it, but it’s for the best that I can still do this and stay safe hopefully. Joining me is another entrepreneur who’s recording from home who’s a little bit happier about getting to do that. He is a guy, Yan Pritzker, who created a site to help musicians sell their equipment. And if you were to come to me and say musicians get to help sell their equipment back when he launched the company. I would have probably said, you know, there’s eBay already. What do we need another website for selling equipment, there’s Craigslist, there’s this there’s that but he got into it, and he got excited about it. And he built it up and eventually sold it to Etsy, another marketplace that also would have maybe seemed to not make sense in a world with all these other marketplaces but boy it’s done really well. I invited him here to talk about reverb the marketplace for new and use musical instruments that he helped grow and he profited from from a sale Can I say that a little bit? Sure. Yan for me to say that Oh, but he did he did do well with that company. I invited him here to talk about that and to find out why he’s getting into bitcoin next does the world need another Bitcoin website to help you buy and sell Bitcoin? He says yes, he created Swan Bitcoin and the thing that makes them interesting is Swan lets you connect your bank account to their to your account with Swan and then it automatically will let you buy bitcoin from what is it month to month, week to

Yan Pritzker 1: 44


week, week to week monthly paycheck, whatever you prefer.

Andrew Warner 1: 47


And it automatically does that. Alright, they sent everywhere we find out about how Yon keeps coming up with these companies that other people are already come up with ideas for and still manages to do well is sponsored by two phenomenal sponsors. The First, we’ll help you build landing pages and funnels and get more strangers to become your customers. It’s called ClickFunnels, check them out of clickfunnels comm slash mixergy. And the second if you’re finally building a website or deciding that you want to move your hosting company to a cheaper, people hate when I say cheaper, less expensive when they still really good hostgator.com slash mixergy. I’ll talk about those later on. How much did you guys sell reverb for

Yan Pritzker 2: 26


275 million. Although to be fair, I actually left the company about a year prior to the sale. So I’m not gonna take credit for the sale. I will however, take credit for building the company to where it was on the tech side and very excited about that and out of the team there

Andrew Warner 2: 41


to 75 to Etsy in cash. Correct. How much did you want at the end of that? Let’s be open. I’d rather not. I’d rather that ballpark over 10% a little bit less than that a little bit like

Yan Pritzker 2: 55


Yeah, yeah, when I left when I left reverb you The company was able to buy back some of my shares. So I ended up with a smaller chunk at the point of sale than I would have otherwise had if I had stayed on.

Andrew Warner 3: 07


Were you happy about them buying you out? Did you feel frustrated and acceptance or what?

Yan Pritzker 3: 12


You know, I was happy because it was immediate cash liquidity for me and you know, I’m not a greedy person. It wasn’t like an insignificant amount of money. It could have been more but you know, it was plenty of money for me to go ahead and start my own business and work on my own thing and that’s really what my my passion at the end of my reverb tenure started kind of drifting towards Bitcoin and I felt like I had to leave and work on that and I didn’t even you know, think about the buyout really, I was just going to do it anyway. But because the buyout happened and just made it so much easier for me to go ahead and do that,

Andrew Warner 3: 44


did you do anything for yourself any personal stuff? Did you take a trip before we all went into lockdown? Did you buy anything nice for yourself?

Yan Pritzker 3: 56


You know, we bought a house. So I guess that’s nice. Yeah, we were living in a relatively small house and, you know, was getting cramped with the two kids. So it’s able to buy a house actually, you know, probably wouldn’t have been able to get this house otherwise. Because it was such a it was a bidding war. It’s a neighborhood here in Chicago where there’s like five or six bids per house and anytime it goes on sale, so it was very tough to get this house, but I’m very happy in IT. And especially love about the house when you saw it. You said this is the place Ah, it’s just you know, I’m a huge fan of mid century modern architecture. And I love really open spaces, lots of glass, you can see behind me that whole glass wall behind me but that’s just a small piece of it. The whole house is like this. And I love I love living in a transparent house where you can see everything while my kids run in the yard and watch some from any point in the house. So that’s kind of my dream. And you

Andrew Warner 4: 45


do okay with your kids working with you working out of the house and your kids being in the house.

Yan Pritzker 4: 50


Well, they’re, you know, my grandparents are helping or my parents rather their grandparents are helping quite a bit. So they’re gone a large part of part of the day but I like spending time with my kids, you know, I try not to get frustrated with them. As they’re running around and making lots of noise while I’m trying to work. That’s obviously tough. But I also enjoy spending time with them and teaching them things. And no, we’re kind of homeschooling now with this whole new lockdown situation. So that’s new for us, and we’re learning what works and what doesn’t.

Andrew Warner 5: 18


I think I’m going to build a shed in the backyard or some quiet studio in the backyard, just just in case this goes on longer than I expected.

Yan Pritzker 5: 26


Yeah, we’re preparing. I mean, we’re actually building a playground on the back. We’ve got them. We built the geodesic dome and now we’re building or we just bought a inflatable swimming pool getting prepared for being able to go to the pool in the summer. So like, my parents have just created an amazing playground for my children is just you know, in the backyard or their backyard, they took out half of their backyard, covered it with you know, wood chips, and both like a legit playground with slides like swings everything. So

Andrew Warner 5: 53


you keep thinking about how they came from the Soviet Union, right? Yes, they did. was it like growing up in the Soviet Union?

Yan Pritzker 6: 01


You know, for me, I was seven years old when I left. So a lot of what I remember is kind of bits and pieces. And I didn’t really know how bad it was until we got here. You know, we had shortages of goods, we had to stand in line for things we lived in, essentially, a one or two bedroom apartment really was a one bedroom apartment for four of us. You know, our kitchen was like, I don’t know, five by five feet or something like that. So these kinds of conditions were normal in the Soviet Union. So it’s very hard to tell because you didn’t have any exposure to outside media, you know, information nobody knew with life outside was like, and so when immigrants came to America, a lot of times you hear the stories of what do you first remember about America, everybody remembers their first grocery store, they remember going into like an Aldi where, you know, it’s like very low level grocery store, but it’s 10 times the abundance of anything in Russia. So of course, it’s like completely mind blowing that there’s abundance in the world when you live in such messed up conditions. So we got to be careful with

Andrew Warner 6: 59


all that. Were you able to bring money into the US from Russia? Oh, and Soviet was

Yan Pritzker 7: 03


actually something I found out much later, when I got into bitcoin this year or last couple of years, I started asking my questions to my parents about that history. And it turns out that the government, let us keep $100 per person when we left, because there was essentially a ban on owning any US dollars. So you can own foreign currencies. And you have to have that and you’ll notice that in socialist regimes, they typically lock down their currency because otherwise, if there is a free float against another currency, then you know, money’s leaving the country. It’s it’s not a good situation for when you’re trying to control prices and things like that. And that’s what was going on Soviet Union as everything was under tight control. Wait, so understand this.

Andrew Warner 7: 39


Yeah. Why is it that if you took money out of the country, they would lose control?

Yan Pritzker 7: 45


Well, the issue is, yeah, so the issue is that like the US the the value of the ruble, Soviet ruble, which was the currency of the Soviet Union, was set by the government. There wasn’t a market rate like we have, you know, in the United States, we know a piece of bread costs $5 What tomorrow if you know, it’s like a loaf of bread as if there’s more money in the system and the price of bread will go up, which is, you know, what we’re seeing. In the Soviet Union though, they controlled the prices. So they said, okay, you know, we have this, we can print as many rubles as we want, but we’re still gonna charge you, you know, 1000 rubles a month for an apartment. And so that created this total disparity of pricing. So for example, like a pair of jeans from America with a costume on salary, okay, whereas an apartment would cost you almost nothing compared to your salary. So it was a very strange thing where some things were nearly free. Of course, there were shortages of things everywhere. And some things that were you know, difficult to get. We’re just through the roof expensive. So if you were able to have us dollars, you could buy these goods from other foreign countries sneak them in and people were doing that there was this huge black market around importing goods from the US and selling them under underground. And so you know, they wanted people to use a ruble because that’s how they were able to control the prices and prevents currency from leaking out.

Andrew Warner 9: 00


Okay, and so you’re there in the Soviet Union, your dad was doing what?

Yan Pritzker 9: 07


My dad was a civil engineer. But he was kind of like a, he was a civil engineer. He was building, you know, houses and bridges and things like that. But he was working with computers a lot. So he was kind of an early computer programmer, a very basic

Andrew Warner 9: 19


level future. He said, I see that this is going to be more powerful than this geeky little thing that people see it as. Oh, yeah.

Yan Pritzker 9: 27


I mean, when I did I remember Actually, that’s one of the only memories I do have of my childhood was going into my dad’s computer lab and playing snake, you know that? Yeah, we’re around these. So they had that on the green. It was like a green terminal, a monochrome terminal. The computer itself, you know, it was a it was a mainframe. It was just this massive thing, taking up a whole floor. And that’s what they were doing and crunching numbers for engineering projects. And I went in there and I remember playing snake. I so it made a very vivid impression in my mind, but my dad definitely identified computing as a big deal because one of the very first things that he got from me when we met moved to America was a computer. It was only it was within our first year of moving here. And we were, you know, we were dirt poor, we were living, you know nothing and he kind of saved up money from doing odd side jobs, just to get me a computer. So he definitely saw that that was a future.

Andrew Warner 10: 14


We’re talking about a Commodore 64 he helped you also get onto the internet. How old? What year? Were you on the internet? 93 I was on the internet. So I was, I don’t know. 11 years old. This is before the Netscape browser. This is before way before everything.

Yan Pritzker 10: 28


Even. I mean, I bought I remember going to the store and buying the internet Yellow Pages. It was a book like two inches thick of all the websites on the internet, right? Like Google is yours. Because here’s all the places you can go. It’s completely absurd to talk about that to today’s like young people. Did you download porn from any websites back when you could do it from like the US nets or you know, like a one one line at a time, right? Yeah. It would come in like super slow. I mean, my early internet experiences were were very interesting. I basically grew up on BBs, as really before even The Internet was bulletin board systems were yeah lend to that. And like there was just random text files written by people it was completely mind blowing that you could interact with people all over the world.

Andrew Warner 11: 10


I feel like there are people right now who are doing things in virtual reality that’s totally geeky, makes no sense to the rest of us. It’s actually just impractical. Hmm. But it’s the future and they’re headed it their time. And once their time hits, they’ll they’ll be where you Oh, definitely,

Yan Pritzker 11: 25


I have actually look at this. I’ve got my Oculus right here. Oh, I can’t show it to you. It’s plugged in. But I’ve got my Oculus. I just got it a few weeks ago. And when the lockdown started happening, I realized like, things are gonna move to VR. And I think we are in

Andrew Warner 11: 37


VR. That’s that making you feel like we’re getting closer to virtual reality.

Yan Pritzker 11: 42


So I think what so virtual reality has been around for a long time I you know, I actually remember as a kid getting books on how to build VR, you know, things in code and basically like, create 3d objects and all that. So the idea of VR has been around for a long time. I think what’s been missing is the interactive component where you can actually go and talk to others. Other people. So for that what we needed was, you know, enough bandwidth on the internet, you know, people connected enough people with devices, and of course, the immersive nature of the new, you know, the Oculus and those kinds of devices that we didn’t have even 10 years ago. So what I’m seeing now, and this is actually was spurned by some of the Bitcoin communities that are involved in, they’re all in VR. Now they’re all going to, you know, we had a conference that was planned for, for the summer that was cancelled. And so what do we do? Well, we meet in VR, right, go into a VR chat room, in a chat room. Yeah, they have this app called alt space, where you can go in and basically you have an avatar, you can design for yourself. And people are hosting panels in there. They have an actual meeting room, and they’re sitting behind a desk, and the audience is sitting in chairs, and you can raise your hand if you want to talk. And it’s, you know, it’s like you can kind of interact, the avatar is sitting there.

Andrew Warner 12: 49


Yes. Yeah. I mean, do you hear them in audio form?

Yan Pritzker 12: 52


Mm hmm. Yep. Okay. situation where? Yeah, there’s a while so inside of the Oculus, there’s audio. You know, you can hear you You can hear with your foot in. And it’s proximity based. So if you’re physically close to somebody in that virtual space, you hear them. And if you’re really far away, you don’t. So there’s like ways that they do that kind of thing. You know, I’m just I’ve just, you know, started experimenting with it. But I think it’s very interesting. And I do think, especially with a lockdown that more and more conferences are going to start exploring that as a way of just, you know, maintaining that connection that was planned for, but now it’s what are you going to do? It’s either resume or VR. My,

Andrew Warner 13: 27


my experience with virtual reality was that I would experience these great things, but it kind of sucks to experience it by yourself. It’s almost like if you taste a good meal, you want the person sitting at a table with you to taste it, even if it’s bad, you want them to taste it and see how bad it is sometimes, right? Yeah. And the fact that I’m sitting there on a

Yan Pritzker 13: 43


on a Facebook developed virtual reality headset and I can say, hey, Olivia, this is incredible. Come see it kind of sucks without taking myself out of it. That was one of the frustrations that I had with it. I agree. I think a lot of it’s going to be something where it becomes less you know, in your face. So once it turns into Like glasses or contacts even or something that’s a little bit lighter weight will see a lot more adoption. I think right now you’re right walking around with this giant thing on your head. You look silly. People can’t talk to you in the real world. It’s not great. But if you’re looking to do a virtual conference, so it works very well,

Andrew Warner 14: 14


because one of the things that I’m excited about, I love for exercising at home, this app called Swift. Max Levchin is an investor in it, didn’t he? Did he invest in reverb, universal reverb, reverb. So he’s a founder of PayPal, and he invested in this thing that allows you to connect your iPad or computer phone to a stationary bike. And when you’re pedaling on your stationary bike, your character in a virtual world on your in my case on my iPad cycles, and so I get to go through virtual New York I get to go through virtual places that they invented. And I love it. They also have a virtual reality version of this that they haven’t released yet that you can just wear the the headset and then just go cycling and I love that. There’s Somebody who’s in like North, South Korea, not North Korea, South Korea, cycling, and I get to see them. And I was really, really enjoy being able to do that in virtual reality and also be able to talk to them right now you could just talk to them via text unless you use an outside app,

Yan Pritzker 15: 14


or any I think the interaction parts of the virtual reality is still very primitive. And even the games that are like multiplayer aren’t really great. I think we’re getting there. And that’ll be super interesting when that happens, right? I agree. I mean, I do all my exercise now. Like, I am stuck in the house, and I put on my VR headset on unboxing. Or I’m doing beat Sabre and I’m getting a good workout. It’s really, really good.

Andrew Warner 15: 33


All this stuff sounds super geeky. The Internet back in the 90s was even geeky or was so justified to anybody. Why would you want to go on your computer in order flowers when you could just pick up the phone and order flowers? Why would you want to look this stuff up? When it takes so long? Just go to the frickin library, right? And there’s so

Yan Pritzker 15: 49


many people who are just like this will never take off. You know, we had the famous Newsweek article 95 which is two years after I was on the internet like Cliff still say who was a very respected technology. I mean, I love his books, a cliff Stoll, saying like, you know, why would we ever shop? Right internet? That’s crazy. You know, my mall is selling more in a day than the internet does in a month. It’s like, yeah, I mean,

Andrew Warner 16: 12


are you are you got into the Bitcoin world at a time when to be honest right now it doesn’t seem to be making much sense, right? But you get into these geeky worlds, you listen to podcasts, you watch you read, you get obsessed, and then you launch something. By the way, I kind of feel like your turning point. was, was it pronounced you next? The online university like? Yes, university next year, next year, early 90s. And online university, what did you see and learn from working for them?

Yan Pritzker 16: 39


Yeah, so Unix was my first like, true startup. And, you know, I’d been working through for a bunch of startups kind of in college, they were on campus, companies or startups. But Unix was my first one where it was during the.com boom. So this is 1998 1999. And, you know, it was the stereotypical I mean, if you look at it in retrospect That sounds terrible. They raised like $200 million from people like Larry Ellison was involved. I mean, it was completely crazy, right build the next we’re going to revolutionize learning is going to be online. And the concept was okay, we’re going to take Harvard level material Stanford level materials built by Harvard, Stanford, like professors, and then charge $80,000 for a degree. And it’s like, okay, yes, we can definitely charge $80,000 for that. And it turns out, No, nobody wants to pay $80,000 what is done online, it’s a completely different thing. But nonetheless, I had a, you know, a very interesting experience, because you had people who are just so passionate about this, and this is what I loved about the startup world is like, people went to work. It wasn’t work. It was like, they were inventing the future. They were working on something exciting. I mean, there’s a guy with slept under his desk. Next. And when I came in, in the morning, I was like, wow, this guy is very dedicated. And, you know, it took me a while to shake off that idea that you shouldn’t probably spend 80 hours is a week at work. That’s kind of crazy. But when I was, you know, 18 1920 years old, it seemed totally rational and cool to do. And so I did it. But that’s really where I caught the startup bug and wanted to really feel like I was, you know, at the beginning of something helping build something that was important and useful for the world, even though it ended up being kind of a failure,

Andrew Warner 18: 19


that it failed it closed up and is that when you just when you and David connected soon after that,

Yan Pritzker 18: 24


no, no, I Unix was long time ago, that was my first You know, there are 2000. And then after that, and when you created plan posts, plan a post Yeah, so planet plus was a. So right after your next I work for a company called G to switch works where I wasn’t the co founder. I was one of the early engineers, probably within the first I want to say 10 engineers there. That was like an X orbits team. So a bunch of people for more bits left to start this airline reservation system. And I helped kind of build that up from the beginning, and later basically started my own startup called planet Earth. was a way to make plans with your friends. It was at the time it was early on was 2000 5006. I want to say it was around the time where he vite was kind of the the primary player in the space and a lot of people were getting frustrated. And so we started building this and like lo and behold, a year later, there was like 20 other competitors in the space. Everybody saw the same problem. Facebook events was just getting started. It was a very bad user experience. And we built our own way to make plans which I actually still think is the best out of all these guys. Why what was it that was so good about it? So it was very democratic. Instead of having this tab down most event planning platforms have this one person increased event and they’re like, you know, the event planner, right? for us. It was wiki style. So we had a, like a live chat interface where you could chat with people we which was very, very cool in 2005 was very early for that. We had a voting where you could vote on stuff that anybody could propose. And we had the plan itself being totally editable. So anybody could come in there, and it was actually a lot like Google Wave, if you remember that product. And Google Wave was exactly the same product just more genericized. It was like a thing. You could add it live and with other people, you can vote and you know, ask questions. So we had all this. And the technology was very cool and was working in my, you know, my friends loved that I had, like 100 people on there that were just hardcore, dedicated fans. But we found ourselves in the middle of the 2008 crisis. And our whole revenue model was built on selling this product to, to newspaper companies, to media companies, because we said, Look, media companies they have, you know, they have great event listings, but they’re completely static. There’s no interaction there. So how can we take an event listing at a newspaper and make it into something living so that people can actually go to that event? Better, get excited about it, invite their friends, so we had deals on the table with Chicago Tribune, we had a deal on the table with Cox networks, which huge media company, all of those deals completely died. 2008 as as, as these companies started, you know, hemorrhaging money, restructuring their online departments, a lot of them thought they could pay you karate. Yes. And we were just on the cusp of like we had started our, you know, our proof of concept with Chicago Tribune, we’re just on the cusp of closing costs. And all this hit and we’re like, we have zero customers now. I mean, we have our retail customers, which are just, you know, people doing plans, but we can’t really charge them for that we tried to pay model it was, you know, like a penny per invitation. It just, it just didn’t stick. And we decided to close up shop after six years on that startup. It was a very interesting learning experience, though.

Andrew Warner 21: 38


How much money do you lose on it?

Yan Pritzker 21: 40


You know, not too much. I mean, I think we took around 50 grand, the friends and family and a lot of us were working for equity, no salary, it was five people. A lot of us held other startup jobs at the same time. So that included myself, I was also the first engineer on a cloud startup at the same time as doing this thing. So I was Getting the bills paid with one startup and then doing another startup at night. And that was pretty taxing. But again, I was early 20s. So I could handle it. And you know, after six years of kind of like, of burning the midnight oil and whatever that expression is burning the candle at two ends, kind of just felt like we weren’t getting anywhere and it was time to close up so not money, but sweat was lost, blood was lost. Even I lost more I lost $300,000 creating an invitation sites similar, similar to you, I noticed that there was a problem with online invitations for me as a guy who was organizing events. I just wanted to know who was coming to the event to get a sense of who they were, maybe even talk to them before have a way of connecting with them afterwards. And there wasn’t a way to do that. And I built it and I just kept getting too deep involved in it before I finally closed it up. Yeah, I mean, I think knowing when to pivot or when to close is very tricky. And honestly looking at this in retrospect, I think we had a product market fit and we totally ignored it, because we had people using it for planning travel. And that was not our intention, our intent. was like to have quick events like a night out, you know, let’s go for drinks. But if you give people a wiki, like what do people do, they put in complex information in there. So they started putting in flights and travel arrangements. And it was like, great. So we should have pivoted to a travel site. And this is the whole reason why Google Wave died too, because they had no flagship use case, it was like this blank slate. So you get to a site where it’s like a wiki in front of you. Okay, well, what am I supposed to do with it? Yeah. If you tell them it’s for travel planning, okay. And then that people know what to do with it. And now in retrospect, with all the lessons I’ve learned later, I could say, Okay, I could probably turn that company around and turn it into a travel planning site, but, you know,

Andrew Warner 23: 36


it is what it is. Let me take a moment talk about my first sponsor, it’s a company called Click Funnels. I know you haven’t used them. And when we talked, you said, I actually don’t like creating lots of landing pages, right? Is it talk about that, and then I don’t want to like create this experience where I tell my audience Click Funnels is perfect for everyone. There’s a challenge that you have with creating landing pages or disagreement that you have With it talk about what that is. Do you feel comfortable talking about that? Yeah, I think I

Yan Pritzker 24: 06


just disagreements with it, I think Yeah, yeah, absolutely.

No, that’s great. I love I love it. I actually don’t disagree with landing pages. I like landing pages. I think there’s a culture of testing and a B testing and Silicon Valley, which I fully bought into. And actually, when it came to reverb, and I gave David the book, the lean startup, and I said, David, this is our Bible, we need to read the lean startup, and we’re going to measure everything. We’re going to AV test everything and so on. And David was actually very kind of pushed back on that and said, you know, you need to have a strong vision for your product. And sometimes your customers aren’t going to tell you what that thing is. And you’re not necessarily going to find out from a test what the best product looks like. You need to kind of have an opinion and stick with it and then make it happen. So we always had this kind of back and forth around me wanting to test stuff and him wanting to just move forward with some kind of product vision. And over time, I have to say that I absorbed A lot of his philosophy more so and decided that, you know, I agree we need to build a strong product and landing pages, you know, can be a part of that. And I think that’s a that can be an important part of that. But they need to be backed up with a vision, which is like, I believe this is what my customers want. I think a lot of people do landing pages in a more spray and pray kind of way, just create lots and lots of them, do lots and lots of testing, see what sticks. And that can be a valid strategy for a lot of businesses. But certain kinds of businesses where you’re building something that’s really, really different from what people have experienced. It’s not that easy, right? Like, I think if you’re building, you know, a new marketing business, then you could just use the same old marketing tricks. You know, here’s, let me sell you on 10 reasons why you should buy my product of how to make your products better, right. But if you’re doing something like marketplace for musicians or Bitcoin buying site, you can’t really rely on those typical, you know, kind of tested strategies, you have to kind of make an opinionated move and see what happens. So I’m with I’m into landing pages, I’m just saying, you know, I probably would use you know, two or three where somebody would use 100.

Andrew Warner 26: 02


So I just missed Click Funnels for a long time because I thought we could create these landing pages ourselves and like you, I’m not somebody who changes them up all the time. And I do love the Click Funnels gives me the ability to get numbers and a B test. What I discovered was clickfunnels was much more than landing pages, it was a way of saying after somebody signs up, what do you want to do with them. And in the past, what I would do is say, go check your email, or now that you’re done, go listen to the latest episode or whatever. What I discovered is you could be so much more involved in that you could say on to someone who just gave you their email address or signed up to your marketplace, say about buying this for a buck, buy this for $2 and see if they’re willing to buy it, or at the very least plant a seed in their head and let them know that you’re selling something and give them a sense of what your business model is so that they’re not surprised and feel like you suddenly sprung a price on them. What clickfunnels does allows you to sit down and say I think we need to do that and then create that like that. And then see whether you like it whether your audience likes it, see what the impact is. For me though, let me give you another example of how I use it. We had a sales process on mixergy that just work that I’m not looking to mess around with. And still, Michael, our developer who built it said, I’m going to switch you guys to Click Funnels. I’m going to redesign our wholesales flow and Click Funnels. I said Why? He said, occasionally, you guys have little additions to the text that you want. And you have to come back to me and ask me to go in as a developer and make the change for you. And then when you see that it doesn’t look quite right you come back to me and you say edited or we get on a call. It’s It’s It’s a waste of time, because I put in Click Funnels. Now you go into the Click Funnels back end, make a change yourself. See if you like it, see if there’s a typo and then change it yourself. And that ability was priceless for us because now we don’t hesitate to go to him and he doesn’t have to interrupt everything like I see right now. He just he’s telling us he’s working on the website. He says please don’t make any changes. I get it, I see that he sent the email a few minutes ago, that’s fine. But our sales pages can still be changed because they’re managed by Click Funnels.

Yan Pritzker 28: 07


So that is super important. I agree with that actually, as a developer myself, you know, that’s something I totally agree with shortening that cycle around. people being able to self service is totally huge. And I agree with that. Yeah,

Andrew Warner 28: 19


just little things that you wouldn’t think of shouldn’t go to it. But I’ll give you an example. I decided, you know what, I want to put a face mask on on the cover art for my podcast. So I went to Fiverr. I got one created, I’m going to upload it. It’s I don’t need to tell Michael, can you please make this adjustment for me, I could just go upload it. And then if I discover you know what, it’s a little bit over the top or it doesn’t feel right or whatever, I can go back in and change it myself. giving the user giving the marketer giving the person on the team who’s responsible for the result, the ability to make the changes that generate the result is really important, and that’s why I use clickfunnels. There’s so many other benefits using Click Funnels. If you want to go see them, you can go to Click Funnels comm slash mixergy. I would recommend that we’re all stuck at home. Use this as an opportunity to test to see if you could figure out why. Why you’re doing what you’re doing how to do things differently or just understand what clickfunnels is use it for free for two weeks, cancel it and move on if you’d like to. I’m hearing the frickin dog in the background. This is such an angel person that my kid walked in. I’m very loving, very playful with my kids. I’ll wrestle them to the ground. I do WWF not WWE WWF style wrestling with them. They still see that when I’m working. I get very anal. They opened the door they saw that I was working. They closed the door and left I don’t even know which kid it was.

Yan Pritzker 29: 29


Oh, you need to come over to my house and train my kids then. I don’t have an office door. My whole house is an open plan house. It’s terrible.

Andrew Warner 29: 36


me nuts. So Olivia opened the window to our bedroom and now I’m hearing the dog from next door. I cannot I need everything right. All right. Let me close this out by saying listen if you’re if you’re out there and you’re trying out clickfunnels or want to try it or think about experimenting or you’ve seen that I’ve done over a million dollars with a single funnel from clickfunnels you say what is Andrew doing? spend an hour go play with this while you’re at home, develop yourself develop your business and then cancel if it doesn’t work. keep building if it does, if you go to click funnels.com slash mixergy, you’ll get to use it for free. Click Funnels comm slash mixergy

Yan Pritzker 30: 09


Yana. That was a good ad. Man, I think you’ve convinced me I might actually give it a try.

Andrew Warner 30: 13


It’s a lot more fun than you expected. I really Yeah, no,

Yan Pritzker 30: 16


I love that you have self service. I think, you know, we’ve we’ve been using other products. And there’s also a challenge to train the non technical staff to actually use these products and not still come to you and say, Hey, you know, because you’re the tech guy, and you set this up, just do it. There’s definitely that. So I’d love to see how clickfunnels you know, if it’s easy enough that it is very, you know, self service. So that’s one of the advantages of using certain companies. Basecamp is really good at this. I know you like 37 signals. clickfunnels really good. I tell my people, if you have a question, go to the chat window and just ask them and they respond super fast. So now it’s not on me. It’s clickfunnels Go figure it out. And I get it. I get an email because it’s my email account that we use for Click Funnels and I get to see their interaction and I get to see. All right, let’s come back to reverb. Meanwhile, Your co founder and reverbs sold the company decided that he was going to buy a music store. Right? Why am I right? I’m looking at your face. It doesn’t look like I’ve got that right. What I get wrong? Well, he had the music store before the before river not Oh, right. Yeah, yeah. But actually, he had he sold the previous company, right? Yes. He saw his previous company, David. Yep.

Andrew Warner 31: 18


Okay, so the previous company says, I’m going to buy a music store. Yeah, dude, why would a guy who’s in the online space want to deal with opening up a store collecting cash, making sure he’s in there all day long? Well, you

Yan Pritzker 31: 30


know, I think my understanding of the story and maybe it’s better you have David on the toilet, but I think that he wanted to have after this. He had a pretty big exit with options expressed and I think he wanted to have a lifestyle business originally. But David being David, he’s not a lifestyle business kind of guy. So what happened is, he was into guitars, he was into collecting vintage instruments. And he saw this really great store in Chicago at the Chicago music exchange, which had an amazing inventory, but it was upside down. It was doing very poorly in sales. And you know what? He said, okay, you know, I know a little Something about selling stuff and we just buy this store and see if I can just you know make it a lifestyle business. Well Dave is not a lifestyle business guys so what he ended up doing was creating a whole online department for that store which, you know, the amazing content or lots of great videos and things like that which became viral in their own right I mean, they had videos that had like millions of views on YouTube for a retail store which is insane, right, like most especially back you know, this was 10 years ago, people weren’t doing that. So he built this whole online marketing departments he you know, he re aligned the stores philosophy because the previous owner was very sentimental here these guitars and understandably so, guitars are a sentimental thing you have this beautiful You know, 57 Les Paul hanging on your on your store, you want to just look at it all day, you never want to sell it right. And so this is the fundamental problem in the music music market is the sentimentality prevents people from selling at a lower price and you know, that they paid for the kind of treasure the thing and force that creates lock up in inventory inventory doesn’t move So David came in there and said, Guys, we got to move this inventory, okay? It’s okay. If we take a little bit of less than margin or even a loss, you gotta move stuff. And he was able to grow that store. I don’t remember the stats, but it was double digit growth year over year to a profitable business extremely profitably on

Andrew Warner 33: 15


the online component became big. And then it became obvious

Yan Pritzker 33: 18


that there was like, it was so frustrating, like he was selling on eBay. And, you know, Amazon was taking 10% he was taking 10% does that

Andrew Warner 33: 26


trying to go back and understand his mindset? 2012 I think is when when it launched, right. Yeah, yeah, I’m trying to understand his mindset. Why would he not be happy enough with selling on ebay and on his own website?

Yan Pritzker 33: 39


Well, first of all, is there anybody who’s happiest selling on ebay is no, I shouldn’t

Andrew Warner 33: 43


hate eBay. I don’t care. Boy, I like saving money. I like all that. I can’t freakin deal with eBay.

Yan Pritzker 33: 48


Right? So answer number one is the customer service is what defines Well, the user experience and customer service right defines these products and eBay’s you know, is horrible. That’s just that’s just the end of it. You know, when you’re calling up eBay support, you’re getting somebody offshore, God knows where they don’t know your process, they don’t know your product, they don’t know what you’re doing. And so like his insight was not just that the prices were too high, which they were 10% on a musical instrument is a big problem because that’s your entire margin. You can’t like if you have the 10% fee to eBay, then how you supposed to make any margin and selling these instruments, especially if they’re being resold on the US market and you really have very little margin to work with. So the insight was we need to lower fees make it much you know, close he always called it closing the bid ask spread, right. He was an options trader came from that world and said the bid ask on guitars is absurd. The spread is huge, right? What that really means for like late person is people are asking too much and people are wanting to pay too little. So the sale doesn’t happen, right. So how do we close the spread? Well, very simple. We make it cheaper to sell the guitar that allows the seller to come down in price and we make it easier, right? We make the customer service so good that people feel comfortable and knowing that if they buy an instrument they don’t like it. Something happened, the seller screwed them whatever, they can return it and reverb will always be there for you. And that was really the fundamental difference in how reverb approached customer service from an eBay. I mean eBay’s Customer service is really designed to solve technical issues first and foremost, they’re not really there to understand your product. With reverb when you called in about a guitar you got somebody who new guitars called it about a synth you got somebody who knew their product could have played with it. They sympathize with you having a broken key right

Andrew Warner 35: 28


so at first he was he was always going to make it easy for people because he knew was going to be a marketplace like eBay he knew was going to be for selling more than just his own musical instruments right he imagined that there were other stores like his who wanted to sell didn’t want to give money to eBay also wanted or didn’t want to give as much money like they did with eBay and also wanted to make a better experience

Yan Pritzker 35: 52


was also not just stores but also individuals. You know, people who had band equipment lying around for years which is any musician will tell you like they have a garage full junk I have thousands of dollars of junk laying around that I’m just you know, too lazy to sell. And that’s that’s the fundamental problem is people have all this, like liquidity locked up in their equipment, they won’t sell it. Because it’s hard. It’s a pain in the ass so it’ll just fly around. And that was, you know, the impetus for making reverb, you know, so easy to use that people wouldn’t think twice about selling the year.

Andrew Warner 36: 20


Okay, so I get now why he decided to do this. He thought he then said I can’t build it myself. He wasn’t a developer from what I understand. Right? Hmm. They’ll always teach

Yan Pritzker 36: 29


those. He was teaching himself which is really funny, because our very first interview when I flew in, and we were even talking about reverb, and he’s like, yeah, and I’m trying to learn Ruby on Rails helped me and I was like, Okay. And immediately it was like, This is great. This is a CEO who wants to understand how how the sausage is made, if you will, which is really good because it helps him sympathize with what the development team is dealing with when when he’s asking for features. So you know, I sat with him and like, I didn’t have an interview. I just kind of like sat with him all day. titled How to do rails.

Andrew Warner 37: 02


But it wasn’t it wasn’t a job interview it was he, when he was young helped me code this up.

Yan Pritzker 37: 06


It was a conversation. So I was living in San Francisco at the time I, the way that I had found David was he had a job posting online. I emailed him and I didn’t know who he was. I said, this sounds great. I want to build a marketplace marketplace for musicians. That sounds like the right thing to do. I want to do something positive for the world. music sounds great. Let me fly back to Chicago. I was living in SF at the time and flew back to Chicago just to have a conversation. Because I mean, at an early stage of startup, it’s not like, this is not necessarily your typical job interview. So I come into his office and he’s there coding and he’s like, Alright, show me what you’re doing here. And that’s how we did it. Right. We talked I mean, we obviously talked, you know, high level and strategic as well. But at the end of the day, we just spent like hours. He was trying to learn how to code and I was helping him. And I think from that he got the sense of who I was as a person and I got a sense of who he was as a person and that’s what made our partnership so good.

Andrew Warner 37: 59


Why do you want a partner? Why didn’t he say, hey, john, I have experienced I sold a company. I want a CTO, I’ll hire you, I’ll pay you a salary. And I’ll give you some equity. But I don’t need a partner. Why did he want a co founder?

Yan Pritzker 38: 11


He was why, first of all, I think a lot. I think most businesses want to have a technical co founder, you want to have somebody that you can rely on for, you know, having real skin in the game. And, you know, especially when you’re talking to investors, and be able to say that you have somebody who really knows what they’re doing. But I think for him, it was, you know, he, he didn’t know who he was hiring he, but I had a job post for a developer. I came in and I said, David, you’re looking for a developer, but that’s not what you’re looking for. You’re looking for me. I am. I’m going to be your CTO. And it’s not going to be your typical, you know, you telling me what to do in a code stuff. This is a product that needs to be built. He actually had gone to a development shop at the time and built out a prototype, an early prototype of reverb. And I looked at it and I said, this is not we can’t like we can’t launch With this, it’s it’s not a product, it’s a list of features. And it’s not been thought of as a product. And I think that’s when I kind of convinced him that I want it to be more of that kind of co founder slash CTO, what was it? Exactly

Andrew Warner 39: 13


what what’s an example of a problem that you had with it?

Yan Pritzker 39: 16


Well, an example is the way that that he had kind of done it as he looked at eBay. And he ridden out all the features of eBay on a piece of paper and went to his development shop and said, Guys, I want to build eBay for musicians, like he had some good ideas about how to make it look nice and skin and all that. But it had every feature under the sun, including, for example, a support center, custom built from the ground support center. Now this is at a time where product like Zendesk exist and you know, are, are well thought through and work. And so his support center, you know, that the shop had built was obviously not Zendesk level, because, you know, they’d spent three months building this thing and they built out an entire eBay in three months. So what do you think you’re going to get in three months trying to build them into eBay? Well, you get a lot of features and they’re all I’m not finished. And, you know, I was very, you mentioned 37 signals. I was a huge fan of the 37 signals philosophy. And I love what they say I don’t remember the exact phrase, but it’s not like, it’s like don’t ship, you know, half completed products ship half a product. So cut out features, but make sure the ones you have are really good and they work. So what did I do I cut out, I cut out the the support system because we’re not going to we’re not going to build our own support system. That’s insane. And that was a very good system.

Andrew Warner 40: 25


You mean like the helmet scout.

Yan Pritzker 40: 29


Helps, helps. Yeah, like us Help Center where people submit tickets and we respond to tickets. You know, Zendesk has so much richness, right? There’s macros, there’s chat, there’s agencies

Andrew Warner 40: 39


use what’s already there.

Yan Pritzker 40: 41


Right? I mean, this is like, there’s hundreds of employees that’s working on this. We’re not gonna have hundreds of employees working on our on our support center product. And that’s where, you know, I came in with that strong philosophy of feature cutting and being really focused on our core competency. Another example is we cut out billing, we launched without billing because they’re billing Wasn’t complete. And I said, you know, we have 30 days before we’re going to we’re going to launch a promo we’re going to launch a 30 day Lister guitar for free. And we’ll figure out billing in 30 days again, a very Jason freed kind of philosophy. You know, do things when they need to be done don’t do them ahead of time and launch half a product and that’s what we did. We launched half a product and we got customers and they weren’t right. We could have waited another three months to make it perfect, but

Andrew Warner 41: 26


all right, last, I’m hearing the kids jump all over the place. Let me let me yell. Olivia. Olivia. Can you please ask them not to jump so much like I’m recording a very important interview on

Unknown Speaker 41: 42


your kids anyways, I can’t hear your kids so you can’t whatever his mic is

Andrew Warner 41: 46


not. I’m usually very proud to have a mic that allows me to listen in on my like what the mic and pick up your mic that I have at home. I realized the one problem that it has is it doesn’t let me hear what you hear. So I think I need to bring Oh, I see Office into the into the house. Yeah, I’m using this Yeti and it’s great Yeti Blue Yeti blue. And so when you talk into your mic, does it pick up what you’re what you’re saying?

Yan Pritzker 42: 09


Yeah, I can hear myself and I can hear you. I’m listening to the My monitoring off the mic.

Andrew Warner 42: 14


Yeah, I’m gonna need to do that. Alright, I could see why David would want you then as a co founder, you you have strong opinions and he wanted somebody with strong opinions.

Yan Pritzker 42: 24


You helped you because his opinions are very strong. He needed. He needed a nice, somebody who would push back on him once in a while.

Andrew Warner 42: 32


Yeah, I don’t think people understand how much good founders really want somebody who can argue for their point of view. They don’t want to keep coming up with everything themselves, right. We want somebody to say you’re wrong. All right. Tell me how you got your first customers.

Yan Pritzker 42: 49


So we obviously had a little bit of a hack because David had the store. And I say obviously because you know, why did reverb succeed where other marketplaces failed and there was a Hundreds of marketplaces built in that time, not just for music, but other things, too. A lot of them fail to bootstrap because of liquidity. And again, this is where I have to praise David for his insights because he coming from an options trading world, you know, he knew that liquidity is what creates a market. Okay? So if you What does that mean? That means if you come to a site and try to sell something, somebody is actually going to buy it. If you’re trying to buy something, there’s something for sale, right? If you come to a marketplace site, and there’s 10 items listed, you’re leaving right away doesn’t even matter if those items are what you want. So we needed a way to have liquidity, not just inventory, but liquidity, meaning somebody was actually going to buy and sell things. And that’s where having the guitar shop was a huge deal. So CME essentially acted almost like a market maker would in a traditional in a traditional Stock Exchange, there’s market makers who basically they help close those bid ask spreads by you know, buying a little bit you know, above the price selling a little bit under what people are asking. Closing a spread. So how We did. We did the same thing with guitars, right? So for example, you know, somebody would be selling $1,000 guitar while we would haggle it down to 950. You know, we would take it, we cleaned it up with a no, take pictures of it, make it nicer, sell it for 1050. Right? So we kind of help them bring the price down a little bit still make a profit. Even if somebody was selling on reverb, yes, if somebody was selling the the shop would would end up you know, buying it, right. And then if some if, if the shop also listed all their equipments on there and would make sales at a slightly lesser margin, probably than they would have otherwise in the store. So maybe they would take a 10% margin off. Maybe they take a 9% on reverb. But yeah, it would, it would create the sense that reverb had fair prices, which is very important and that set a benchmark for new sellers coming on board because they couldn’t just jack up their prices they would have to a fair pricing. And then buyers knew that if you know they would get a good price, and if they wanted to resell, they knew that they would have liquidity meaning as soon as they list their instrument we get bought quickly within that day, sometimes within the hour. Nowadays, I’ve listed pedals and reverb they sell within minutes when it’s that’s what we talk about when we say liquidity. It’s like you post a thing and it’s gone. You’re not sitting there waiting for 10 days on like eBay or something, you just it’s gone immediately. And y’all see me is Chicago music exchange. That’s the name of the store. The store really helped a lot in the beginning. But the store didn’t own reverb did it right? No, it did not. So the store, you know, David was very good with keeping a firewall between those businesses. The store was our customer. They were our first you know, major customer and like any major customer, we treated them somewhat special, we gave them you know, early features and things like that, and we had them test stuff for us before we would roll it out to others. But otherwise, they didn’t get special treatments in any sense. Like, you know, discounts or whatever they would just stay with pay the fees to reverse the money from the store to fund reverb. No, no, the money I mean, we had investors Yeah, we had we had investments actually had some of his own money. totally separate. Yeah. But the store was the store like I said, was essentially a partner like a sister company, partner. And talk about it. They weren’t a partner in the business in the sense they had equity. They just helped us, right? We help them they helped us, right. They helped us with with liquidity, and we help them by selling more of their gear, which is good for the store as well. So both businesses got a boost from that. And initially this, you know, optically was definitely an issue because other stores in the area, especially in Chicago, who knew who David was, knew the store, were like, Well, you know, see this is a CME reverb, a CMS platform, you know, why would we sell it to any platform, but pretty soon it became obvious to them that we were being very, very fair and very transparent. And we could let anybody compete with CME you want to compete, take better pictures, make better prices and compete.

Andrew Warner 46: 37


And so the way that you grew was you would go to stores first and then get them to list their products. But wait, how did you get users to come in? What will you do to get to get buyers?

Yan Pritzker 46: 48


Yeah, it was a two prong strategy. One is to get the sellers we did a lot of door to door like we had no sales guy calling up stores. We had david calling up stores and he had relationships with a lot of the people in the area as well. So we kind of covered Chicago first and started expanding after that. But to get buyers It was a marketing effort. So again, with CME the store being there, we were able to put stickers like reverb stickers into every instrument that went out. We were also able to use reverb itself as a, essentially like we ran our own shop. So there’s a shop on reverb called reverb merge, where we would sell our own merchandise. We also had a shop that would, you know, buy and sell pedals. So that was good for our users. So like somebody listed a pedal and wasn’t selling reverb, reverb store would pick it up and you know, clean it up, fix it, take better pictures, we sell it. And that created this churn or liquidity on the site. Like as we come back to it, like liquidity is the most important thing. So reverb was creating that notion that people could really buy and sell stuff and have with every purchase that went out we put in stickers and promotional materials and coupons. Were in sales, you know, all the typical stuff that you would do as a retail store we did by partnering with other stores. So we go to one of our sellers Doesn’t say we’ll do a nice video for you. We’ll profile your shop we’ll give we’ll put your gear on sale. And you go out to your customers and tell them to come reverb and buy that stuff. And why would they say no to reverb instead of to their own store to their own website? Because we have so first of all, a lot of shops are not equipped for, you know, high volume online sales, like their website is not great. It’s not tracking visitors properly. They’re using you know, 1990s antiquated systems, websites that were built, God knows one. So giving their users an experience that was better for shopping meant they sold more gear. So yes, they could have taken a bigger margin by having them come to their own website. But if your website was converting 1% of users, then that was useless. And you know, for us, the conversion rates were much higher. And we were able to get people in the door and out the door quickly. We also provided all the customer service, right so it wasn’t like we were just, you know, taking their margin for nothing. we handled all the sales we made sure people were happy, right like

Andrew Warner 48: 54


we’re doing well also potentially losing customers by sending them to reverb

Yan Pritzker 48: 58


and not really it’s Cuz we had branded, we created branded home pages for shops on reverb. So we go to like reverb comm slash some shop, they had their logo, it had their information about their shop, I had their phone number, somebody could call them directly. We were very careful about making sure that shops felt like they still had a home and we weren’t just stealing their business, because they always Sorry, I always think everyone else is a developer or techie like me, because I always do some hunting on the URL to see what else is there. I’m always constantly, for sure. And we were you know, we were like, we were making sure that people had good home pages, because a lot of shops, they have really bad home pages. And honestly, there’s a lot of stuff. That’s awful. Like, I don’t know, who does hand it, right. They were proud of the river home features and they would share them because you know, at the end of the day, we did so much for them that we just created all this volume for them. And so what if the margin was less the volume was so much more that it made up for it.

Andrew Warner 49: 50


All right, let me take a moment. I want to come back to what the sales reached at the end. I’ve got it here on paper, but I think if you told our producer and private that you should say it or or not. If you change I mean, these numbers are all public. So I don’t think I’m seeing really how much what was the sales at that not the sale price, but the revenue at the end?

Yan Pritzker 50: 08


Oh, well, so I don’t know if that’s public, I can tell you what was I mean, I know that in 2018, they published an article and they were saying that they were at 500 600 million annual sales. So that much is public. I don’t know.

Andrew Warner 50: 20


Sales on the platform. That’s not their cup of sales. Right. Okay. Let me take a moment talk about my second sponsor. I’m gonna tell you actually about my one of my ugly websites. In this ad for Hostgator which is a hosting platform. It’s Andrew and Olivia calm, hesitating, should I say it or not? If you go to Andrew and Olivia calm what you’ll see is a WordPress website with a photo of me and Olivia holding up a sign of what we love. We had this like thing on a Sunday where we say Oh, you’re going to a right now aren’t you? You tell me what you were living in DC and we we were in love and so we said let’s go and ask people what they love. And I love DC I love living there. And so we had we went to the stores like a fun afternoon project. We got a bunch of See if you see it, we got a bunch of like giant paper, got some markers, and we asked strangers, what do you love, write it down. And then let us take a picture, we’ll put it on on our website. And we got like 30 different people that tell us the stuff that they loved. It was so fascinating what they were excited about. And unfortunately, well, what I did was I took a picture and I posted it. And my plan was to put one a day up on the site. And then we kind of forgot about the site and never published more than just a few days. And I don’t even know what happened to those old photos, but the website is up. The reason I’m telling you about that is because it was such a like fun idea for an afternoon and then it died within a couple of days after that. And it seems like what a waste what an embarrassment. But I’ll tell you something, building little projects like that is what gave me the confidence to create mixergy what gave me the confidence when I finally did have a good idea to say oh, I could just put that up in a day and we’ll see what happens with it. And that’s what I’m going to urge everyone in this ad for Hostgator to do. go sign up for hosting By using hostgator.com slash mixergy, use that baby plan as they call it to have and limited domain hosting. And every time you come up with a crazy idea, just go and launch it and see what happens. Allow it to shut down, get yourself comfortable creating these things creating these businesses playing around, especially in a world. Look at this. JOHN is nodding so much I love it. This is

Yan Pritzker 52: 21


startups you have to create and fail, create and fail crazy, right? That’s that’s the formula.

Andrew Warner 52: 26


Do with yourself, do it with your kids. And then when you finally hit on that idea, boom, it could take off and the thing that I love about Hostgator is yes, using that baby plan. You have unlimited domains. But they also have inexpensive pricing for really dependable service that’s been around for years. And at this point, when you sign up for a hosting company, you don’t want them to keep billing you a lot of money month after month for something that you’re going to keep forever. Go to hostgator.com slash mixergy. They’ll take their already low prices to lower it even further. And they’ll make sure that you you’re happy with it, giving your tech support on unlimited email addresses for your business. unmetered This now I’m actually reading features What the hell? Let me tell you guys something, the one feature you should care about is two features. One, it freakin works. And number two, they have a 45 day money back guarantee. So if you’re not happy with the already low prices, they’ll give you back your money, go to hostgator.com slash mixergy. go create your own ugly site, and then keep building from there. All right.

reverb, why did you leave?

Unknown Speaker 53: 23


So

Yan Pritzker 53: 25


it’s a complicated story. Why I left so I you know, I’m a startup entrepreneur for a long time. I’ve been very comfortable in you know, teams of 510 1525 2018 River was 150 employees. I grown this thing you know, for me and David, the two of us to 200 250 people 500 million in sales. And I had started kind of looking at Bitcoin in 2016 and researching it and a lot of people will tell you that there’s a certain rabbit hole effect that happens where once you start learning about Bitcoin, you either fall down the rabbit hole or you don’t But if you fall down the rabbit hole, there’s no end to it. And I started reading everything from economics to finance to understanding how markets work to the technology and the distributed systems, the power and the game theory. And I just like became enamored with the idea of Bitcoin. And this was in 2016. So by the time 2018 rolled around, I was at a point where I was listening to Bitcoin related podcasts or videos or reading books three to four hours a day, it was essentially a second job. And at the point where reverb was 150 employees, you know, I felt like my job had been done, you know, I got the thing started, I bootstrapped it, I got it working, and was doing great, you know, hundreds of millions of dollars of sales per year. And I felt like I my skills are in that early stage startup, I wanted to do something else. I didn’t know what it was going to be. But I wanted to do some kind of startup and so in 2018, I mean, I knew it was going to be Bitcoin related. I left reverb and decided I was going to kind of explore the space Learn more, see what the projects look like see where the money is going, where it’s not going. Where are the developers like what are people working on? And you know, I pretty quickly fell into consulting gigs because it’s, I think two weeks after I left reverb a buddy of mine called me up and said, hey, I’ve got a friend He’s working at something Bitcoin related, like can you talk to them? And I said, Okay, I want to talk to the guy turns out they’re doing a startup in the blockchain, you know, space, if you will. And I basically started consulting for Bitcoin and blockchain related companies for you know, from 2018, probably for about a year. And at the end of that year, I felt very comfortable. I understood what was going on. I understood the space I decided that Bitcoin was the only thing that mattered in the whole quote unquote, cryptocurrency space and wrote a book, I decided that I didn’t know I still didn’t know what I was going to do as a startup. I felt like a lot of ideas in Bitcoin were too early. And this is, you know, part of the problem is that the hype in the media is so vastly So vastly bigger than the actual reality of like, who has any Bitcoin, because by our estimates is about half a percent of the world, we’re basically at the point where in 1995, we’re close to all rights that the internet’s not going to go anywhere, while the penetration of the internet is point 5% of the world. So yeah, it looks like it’s dead on arrival. Just like Bitcoin looks like quote unquote, dead on arrival. half a percent of the world has any, but the price is, you know, 10,000 x what it was a few years ago. So, long story short, a lot of noise in the space, I write a book called inventing Bitcoin. And that gets me into a lot of the coin circles. I started talking to folks who have been around for longer trying to understand where the opportunities are. And again, it comes back to nobody has any Bitcoin and so I say, Okay, well, if nobody has any Bitcoin, what we need to be building is a Bitcoin on ramp. And you brought up the question earlier in the interview, do we need another place to buy

Andrew Warner 56: 54


feels like everyone knows that the cash app now right is yes, the cash app is wonderful. Let you buy bitcoin a bunch of different companies Robin

Yan Pritzker 57: 02


Hood lets you buy bitcoin okay chap lets you buy bitcoin pretty soon he trade will let you buy bitcoin Schwab ameritrade and then you name it, and everybody can let you buy

Unknown Speaker 57: 10


money to you.

Yan Pritzker 57: 12


So who needs us? Well, there’s a couple answers to that question. One is, how many places sell stocks? How many places sell gold, right? There are literally thousands, if not 10s of thousands of businesses that do both of those things. And the reason is because people have a very personal relationship with those kinds of places, and they buy gold from their local gold dealer, or they buy a gold ETF from Schwab, right, they buy different kinds of products in different places. With with what we’re doing, we feel like a lot of the early businesses that were built in the Bitcoin space, circa 2013, and so on, have kind of lost their way an example would be Coinbase. So Coinbase was an early on ramp to Bitcoin. today. Coinbase is more of a trading platform. So that means if I want my mom to buy some Bitcoin, I send her there she’s hit with 30 other coins, most of them have zero fundamental value. They’re used by professional traders to fleece retail investors. And now I’m sending my people and my friends and my family to places that are essentially going to get them wrecked. As we say, they’re going to lose their money because they’re going to buy some random thing that they’re not supposed to be buying, they’re going to try to trade it. We don’t want that. We don’t believe that’s what bitcoins for. We believe Bitcoin is a freedom money. It’s a way to save money in a way that is, you know, inflation proof, it is proof, it is seizure proof if you need to leave your country, like I did with the Soviet Union. That’s what the coin is for. And so we want everybody to have a little bit and we make it very easy to save a little bit at a time with the simplest possible user experience. I mean, you will not find any site that is simpler than us for buying Bitcoin, and even cash app. I love cash app, but you buy stocks on cash. If you have a cash card, there’s 5000 other things to cash back now to the hell they’re doing stocks that you can buy a fraction of a stock now in cash app free

Andrew Warner 58: 54


cash, you’re saying as I said, Look, there are lots of different places people can buy. But The problem is that it’s still too difficult because each one of these different platforms has a different interest a different thing that they do to actually make money in Bitcoin. I feel like Bitcoin is almost the way that they bring people in the door.

Yan Pritzker 59: 13


Yes, that’s exactly right. They actually make a lot of money on trading. And they encourage trading, right? They encourage people to trade Bitcoin against other cryptocurrencies. And look, if you’re not a day trader of stocks, if you don’t know how to how stock options work, you 100% certainly should not be in the cryptocurrency trading space. You have no business there. It is so much more vicious because the people there are professional traders, and they’re and the vast majority of people trading crypto are not professionals, and they’re just getting ripped off. So that’s what we wanted. How did you and we also couple that with a nice, sorry, I wanted to say we Yeah, they’re part of the businesses that we’ve brought in a lot of the podcasters and authors of the space. I mean, obviously myself, I’m an author, but our head of education, Brady Swanson, he’s the host of the citizen Bitcoin podcast, a bunch of people like that who have experienced educating people because we don’t think it’s enough to just throw somebody into the deep end and say, hey, go buy this number it’s going up, or it’s going down. But actually educate them on what they bought, why they bought it and what why you mean an individual level? Or are you saying content production is?

Unknown Speaker 1: 00: 14


So you go ahead.

Yan Pritzker 1: 00: 15


Yeah, we produce a lot of content. written content. We have a weekly show called Swan signal live, where we record interviews with prominent people in Bitcoin, which we also turn into a podcast. So it’s written content. It’s it’s video content, it’s it’s podcasts. It’s also individual attention. So if somebody emails us or has a support question, we have a chat. We’ll give them that hands on treatment and walk them through any issues they might have.

Andrew Warner 1: 00: 40


Last year, you guys started, operations, right, what month 2018

Yan Pritzker 1: 00: 44


I want I mean, officially, we launched in March. We’ve been around for a bit longer, as so the company kind of pivoted, we were originally called give Bitcoin, which was a gifting product, and we still have that product, but we decided that much bigger play here. Really to go after on ramping? In other words, getting people onto Bitcoin themselves rather than being gifted Bitcoin? And that’s what Swan is about. It’s about you know, getting yourself to a recurring purchasing plan. Say for Bitcoin just like you say for your house or your car.

Andrew Warner 1: 01: 14


Do you think you made a mistake by adding Bitcoin to the name? because now you’re locked into bitcoin? You could decide in the future that you need to make it a little easier for people do some other part of cryptocurrency

Yan Pritzker 1: 01: 25


some other I don’t believe that and

Andrew Warner 1: 01: 27


just I believe in Bitcoin that much.

Yan Pritzker 1: 01: 29


Yes. And here’s the reason the reason is I’ve spent four years studying and Okay, now somebody who is new to Bitcoin, the first thing they’ll say is why wouldn’t I buy some other coin? It’s faster, it’s cheaper, whatever. After four years of studying, you know, all of the subject matter that is required to understand Bitcoin, which does include things as esoteric as like Austrian economics, and you know, how power works and how energy and if it didn’t work

Andrew Warner 1: 01: 52


out things are really important. What about something that no you don’t matter in the Bitcoin world? Did you lose a lot of money all right coin the reason Because that’s not how money I’m sorry go ahead Did you lose a lot of money on Bitcoin?

Yan Pritzker 1: 02: 03


You did, didn’t you? No, not really. I mean what do you mean by lose? I haven’t sold it yeah but you lost value the time that you got into it Bitcoin was higher than it is now. That’s actually that’s not true. I actually started buying Bitcoin in 2016 at a price of you know, 600 bucks, but even before that, I bought some in 2011 which at 30, which I sold that too, so I have made my mistakes for sure. Okay. But I no longer I don’t want to trade Bitcoin anymore. I’ve realized that it’s more about long term savings.

Andrew Warner 1: 02: 30


So that’s the whole idea behind Swan Swan Bitcoin is long term. Buy a few, a few bucks every like we said earlier every week, every month, every week. Forget it.

Yan Pritzker 1: 02: 42


Yeah, most of our Pete most of our users are buying $50 $200 a week. That’s kind of the common amount.

Andrew Warner 1: 02: 48


March 2020 is when the world got hit by Coronavirus. It was obviously there before but that’s when we

Yan Pritzker 1: 02: 53


launched really the eve of Coronavirus. Yeah,

Andrew Warner 1: 02: 56


it was crazy. We launched last year,

Yan Pritzker 1: 02: 58


no Swan was launched officially March 23, I want to say,

Andrew Warner 1: 03: 02


Oh, that was 20. How did Corona influence your sales? Bitcoin?

Yan Pritzker 1: 03: 06


I mean, we’re a new company in general. So it’s hard to say what our sales would have been like if Corona wasn’t here. It’s very tough. I mean, it’s obviously early days. But we’re very, you know, our initial numbers look very good. We were expecting that people are going to save about 100 bucks a month. And they’re really more than $200 a month on average. So people are buying way more than we thought, how many people bought? We have just a couple hundred users right now. But we’re closing. So remember, this is an annual plan. So we’re already at about a million bucks annually of Bitcoin that we’re selling,

Andrew Warner 1: 03: 36


because somebody does. When somebody buys with you, they’re not just buying one time they’re committing, right? They’re

Yan Pritzker 1: 03: 41


signing up for essentially in a recurring purchase plan and we expect most people to finish out a year if not more, most people coming into bitcoin that are properly educated are here for the next 25 years. subscription. I can’t just buy once. It is all subscription. That was one that was actually a product decision that I pushed for, with my with co founder eclipsed and was a great guy also and I said, we have to have recurring out the door, because that’s what we’re selling. We’re selling the idea that Bitcoin is a savings vehicle. So you don’t buy savings one time you don’t put away savings one time you do them you know, every week, every month every paycheck. That’s what we’re selling people we’re selling a new behavior and that’s a big challenge for us.

Andrew Warner 1: 04: 21


What else was I gonna say? Why should I trust you with my with my bank account information?

Yan Pritzker 1: 04: 26


Well, I mean, bank accounts have a lot of protection for you at the end of the day, it’s a CH you have 60 days to clawback Sherry ch if you really want to call, call your bank and

Andrew Warner 1: 04: 33


tell me I could buy bitcoin from you. And then if the price goes down, I clawed back because cch

Yan Pritzker 1: 04: 38


well, so we do have protections against that we do usually hold it, you know, for 10 to 15 days. And if you know if that’s for smaller amounts, if you’re buying more than 2500 bucks a month, then you actually get into a 60 day lockup window, which we require you to hold that 2500 with us, you know, for the full HGH clearance window. So you’re on the front us here, we’re taking a little bit of risk on the smaller accounts, but in order to buy With us, you’re giving us your ID you know, you have to you’re opening a trust account essentially. So you’re uploading your ID, your full credentials, everything, we’re gonna know who you are, I’m gonna hunt you down. Don’t rip us off.

Andrew Warner 1: 05: 12


Why should I trust you to not lose my Bitcoin? We keep seeing examples of companies that have security vulnerability. In fact, forget about big companies, even on a private level. I’ve heard from people who have Bitcoin in their LinkedIn profile. Yes, this was a couple of years ago, they would have their bitcoins stolen, because people would start to hack into their Gmail account in one case. Yeah,

Yan Pritzker 1: 05: 32


right. And so with Bitcoin, there is a certain level of, of, you know, danger from theft, obviously, because there’s no recourse from a theft. They just like cash, right? If somebody breaks into your house and steals $100 they’re gone. So same thing with Bitcoin, however, so there’s two things that we would say on that one is we do use a regulated and licensed Nevada chartered Trust Company. They’re called prime trust. They custody billions of dollars for bigger companies, besides ourselves and all of their business. stored in what is called cold storage, which means it’s not actually online. It’s not like nobody can hack into it and find it. It’s very, very secure. But you shouldn’t trust that you should always withdraw your Bitcoin, right? So that’s what you know, as bitcoiners are, our educational agenda is to teach people about how to withdraw their Bitcoin to their own wallet. And we’re going to be partnering with other companies that do a great job of providing wallets that are actually in your control where nobody else is in charge. And so we have an auto withdrawal feature. So let’s say you buy you know, 50 bucks of Bitcoin, you can withdraw every time you reach a certain threshold. So $100 link to your wallet. You can do that now. Got it? All right, withdrawals are live now the auto withdrawals are going to be live probably in a few days. For Okay, and you want me to do that? Yes, we absolutely want you to do that. Because again, with Bitcoin are the whole point is for you to have full sovereignty over the money. It’s not anybody’s control. We do recognize that for a lot of new users. It’s tough to do that. And that’s why we do store that for them until the time that they’re ready to take charge. But that’s always the intention is to look teach them about how to do that and and have them take it off the platform. I got to make money on the storage of you know, we don’t like lend it out. We don’t do any of that stuff.

Andrew Warner 1: 07: 09


I had a five year old and a three year old when I interviewed the founder of stash, which lets you buy partial shares of major companies. I said, Can I just set this up for my kids? And he said, Yeah, so one day at dinner I said to my kids, I interviewed this guy I’m gonna just buy you shares What do you want to buy shares of? Well, they love beyond meat. So okay, on meat I fortunately, they got hammered on that from it was spent 20 bucks on that it’s now 11.

Yan Pritzker 1: 07: 36


But the top Well, we, you know, everything’s hammered. So everything got him for the most part,

Andrew Warner 1: 07: 40


except for Amazon. But at least in the mornings, when they say What are you looking at? And I say, I’m just checking out how the markets doing Why is it doing this way when the world seems to be going that way? At least then they can ask me so how is Amazon doing for us? And if I give them a share price for Amazon, it’s too confusing. If I tell them you You put $20 in as of this morning, it’s worth $20 $24 in like 48 cents or something and they understand right? And they also can connect the fact that we’re getting more stuff delivered from Amazon. Everyone’s getting more stuff delivered from Amazon. Right? I’m gonna do that with my kids. I love that idea. It’s such an easy thing to do. So, with Swan, how many hundreds of dollars Do I need to actually know the answer?

Yan Pritzker 1: 08: 21


Okay, it seems like I could do this with one how much money what’s the minimum that I could set it up? I mean, five $5 a week or five $5 for anything so you want to do $5 a month if you really just want to do five bucks you know, go for it.

Andrew Warner 1: 08: 32


And so we just said wire the money in actually you don’t worry about is automatically out on any issues with you guys. And I I could just tell my bank, I disputed these guys off. It’s fake. Right. And I also have a couple of bank accounts. I could use a bank account that I comfortable. Doing

Yan Pritzker 1: 08: 54


Yeah, totally. You can you can connect any account you want and you know, put a small amount of money but see the whole point of the legacy bank system is that it’s actually very good for protection for consumer protection. Which Bitcoin isn’t it’s not designed for that it’s very important to understand that Bitcoin is actually the money it’s not like it’s not really a banking system so you can build stuff on top of it to do those things where somebody will hold the funds for you and escrow and you know, do all that. But just like gold or cash that’s that’s what Bitcoin is that we’re not expecting. If somebody steals a bar of gold, you can’t hunt them down in any fashion, right? Same thing here.

Andrew Warner 1: 09: 27


All right, I do love your frickin design, I think is now the stylist of my iPad, this Apple Pencil dropped down on something. And it just brought up this beautiful page. It says save, I guess in this case, $50 worth of Bitcoin every week using my account. Just so beautifully designed, I know, drop down on drop down on the image of the iPhone on the screen. Nice. Yeah.

Yan Pritzker 1: 09: 49


So it’s actually a German designer. We’re fully distributed team which is also another interesting thing for you know, being Corona proof is we’ve, we were already all working from home. We’re already all fully God. distributed we have got people here we got the co founder in California and rotor my right yarn rotor from Germany was a you know contacted us that I love what you guys are doing I want to be your designer. I said great you know we now we have a German designer we’ve got Brady without believing Kansas. You know, we have people all over the world. And people really love our business. I mean, it’s very early obviously but as far as the Bitcoin in crowd which you know, there’s really probably a couple hundred people if you look on Twitter who are really really the Bitcoin influencers, and they all have their own followings and they love our business because what we’re doing is it’s good for business good for Bitcoin. We’re not even letting people sell it. It’s literally like a way to convert US dollars which are being inflated at an insane rate and oh my god, do not let them go. Don’t do the government tell you supercenters definitely not 2% but

Andrew Warner 1: 10: 50


look at me inflation more than 2%

Yan Pritzker 1: 10: 51


Can I can I sell Bitcoin through swan. You cannot, you cannot. If you want to sell it, I really want to sell it. You can find an exchange and do that. But most of our users are not there to sell there. to accumulate for the long term. I mean, we’re talking about children and grandchildren here. We’re talking about multi generational accumulation of freedom manipulated on this. I like that very opinionated. All right, the website is Swan bitcoin.com. For anyone who wants to go check it out. They’re very good with communication. Like you can Yes, you can sign up to their podcasts and all that. But I mean, like, I think I sent a couple of customer support messages just to see what would happen. Oh, yeah.

Andrew Warner 1: 11: 27


Not today. Not today, but I definitely try to do that from time to time. I also wanted to see like how active your people were like Brady Swenson is on there online a bunch. Talking sometimes about stuff that nobody responds to, but he doesn’t care. He’s out there. Yeah, he’s your head of education. Yeah. So

Yan Pritzker 1: 11: 45


you don’t call it marketing? Really. It’s marketing but we don’t call it marketing because we really do think it’s its education. And we found that when people learn more about Bitcoin, they tend to buy more of It’s that simple. Listen to a very good podcast explain something really well to you. You’re like, Oh, that makes sense. Let me I need to buy more Bitcoin because Obviously, the price is way too low. It’s $6,000 This is way too low. So, you know, it’s that simple educate people they buy more. All right,

Andrew Warner 1: 12: 07


well thank you so much for doing this interview. I want to thank the two sponsors who made this interview happen the first if you are building a landing page or any kind of funnel that takes a stranger and turns them into a customer, go check out Click Funnels comm slash mixergy play with it. Really this is your opportunity at night when I don’t know what when you have some quiet time to just sit and say let me see if I can figure this out. You will see why this leads to more sales. I did not want to use them I railed against them. And then somebody on our team Sign me up and before I knew it, I ended up doing over a million dollars with one funnel. I didn’t even think that was true but someone on my team said Andrew you definitely would have with one funnel. They submitted my my story to Click Funnels and Click Funnels sent me this big gold record with two commas on it. I got into two comma club get two commas in in a number of million because I did a million dollars with one funnel It is that easy. No, it’s not that easy. Obviously took us somewhere but it’s he probably have

Yan Pritzker 1: 13: 02


to have a good product too and not just the funnel. Yes, it helps to have a product.

Andrew Warner 1: 13: 07


So take it over to Click Funnels comm slash mixergy. And if you want to build a website for anything like I did to just Putz around the internet, go to hostgator.com slash mixergy that way when you’re right idea comes to you, you will be able to launch it as fast as you can launch a Google Doc. It’s Hostgator comm slash mixergy. And finally, since this podcast is over, this interview is over if you’re looking for something with a little bit more tactical information in it, I’ve got a podcast to recommend to you. It’s by the founder of Click Funnels, and it’s called Marketing Secrets that I love the word secrets, Marketing Secrets, check it in whatever podcast app you’re listening to me on. Alright, john, thank you so much for being here. Bye Bye. Thanks for having me, Andrew. Bye bye. Thank you.

Transcribed by https://otter.ai

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