Thursday, August 4, 2011
Interview with Jeff Zwelling, Convertro
Story by Benjamin F. Kuo
Every so often--particularly in Southern California--you run into a serial entrepreneur, with multiple successes and great track record-- yet, who very few people are aware of. Jeff Zwelling is one of those. Jeff Zwelling is the co-founder of Convertro (www.convertro.com), a Los Angeles company focused on helping companies track how their marketing efforts are leading to sales conversions. However, his story is much more than Convertro; he founded EchoSign (just acquired by Adobe earlier this month) in his garage, and he was the founder of YLighting, a hugely successful online seller of designer lighting--which he built with his partner, David Feldman, to multi million dollars in sales and no employees---and then sold it to private equity; and has other successes beyond that. We sat down with Jeff to learn more about his background, his new startup, Convertro, and how Facebook's once offered more for his office lease than his startup was worth.
First off, tell us what Convertro is all about?
Jeff Zwelling: Convertro allows marketers to know all of the marketing that led to a conversion. That's really useful, because it enables marketers to spend money on things that work, and stop spending money on those that don't work. To do that, it's solved the significant technical challenges going on in marketing and analytics, primarily about how you track the marketing that occurred before a cookie got deleted. We've developed technology that enables us to understand that if a customer comes to a website via marketing, and a cookie was deleted, then subsequently comes back and converts, we know what marketing happened before that cookie deletion. That's important, because it allows marketers to re-invest and give credit to that marketing event, so they can buy more of it and get more customers. It's a significant problem in online marketing today. Right now, marketers tend to give credit to the things they know about, but don't give credit to those they don't know about. However, there are lots of things that look like they're not performing, but they really are. Suddenly, we've created transparency to how things are really working, so that you can start spending money on those things and get customers others haven't gotten.
What kind of customers are using the tool?
Jeff Zwelling: Today, we have lots of e-commerce and online subscription customers. Locally, those are companies like LegalZoom, GameFly, TrueCar, and ShoeDazzle. In the Bay Area, we have TinyPrints, Beau-coup Favors, PetCareRX, and others. There are lots of e-commerce companies. And now, we're actually moving upscale, and starting to get Fortune 200 brands that have online conversion. We've signed big brands but can't yet talk about them.
Tell us a little bit about how Convertro came about?
Jeff Zwelling: Convertro came out of YLighting, a company that we grew and grew, with very few employees. We had relied mostly on technology building YLighting. The reason was, we had built YLighting on the side, so we had to create something that was essentially running itself. Because of that, we overinvested in technology. One of the core pieces of that technology was around marketing and customer acquisition. It was rudimentary, but it worked really, really well. It worked so well, in fact, that venture capitalists actually came to visit us, looked at what we had, and wanted to invest because of that technology. However, we had enough money--we were very profitable--so never took the money. Instead, after a private equity firm offered to buy YLighting, we decided to accept and focus our efforts on developing marketing and acquisition technology. One of the venture capitalists we had met along the way, hearing that we had sold YLighting,, asked us what we were doing next, and, because he liked the software so much, told us to count him in and wrote us a check.
Speaking of YLighting, we had heard that you managed to build YLighting with just two guys, and to millions and millions in revenue with no employees?
Jeff Zwelling. Um... Yes. We sold it to a private equity group. Unfortunately, with the last couple of companies I've sold I've never gotten the right to publicize what we sold for, but that last one was a home run. The other one was pretty good too. David and I (Editor's note: David Feldman, Jeff's co-founder) and I were the only owner operators at YLighting, and we had no full time employees. Everyone else was an independent contractor working from home.
And, you just sold EchoSign this month, too, didn't you? You started that in your garage?
Jeff Zwelling: I was broken hearted when I saw the confidentially agreements for the sale. I founded EchoSign in my garage in Palo Alto. At the time, I was living in Palo Alto, around the corner from where Hewlett Packard was founded, and I figured, if I was living in Palo Alto, why not start my company in my garage too. For the first six months, I had Ethernet running into the garage, and my wife was making chicken noodle soup every day for lunch, and bringing it out to the garage for everyone. Eventually we worked into an office space in Palo Alto, and at one point, our subtenant was Meebo. I think our best asset was our lease. At one point, Facebook offered as much for our lease as we thought we could get for our company. That was actually a humbling moment. When Mark Zuckerberg approached us, and just wanted our building--for more than our company was worth--it was just humbling. Though the company moved well beyond those days, it's essentially the software I had designed, the same product.
So how did you end up here in the Los Angeles area?
Jeff Zwelling: It's actually a sad story, but it's also about family. I grew up here. In 2001, I got a phone call, and learned my dad was diagnosed with pancreatic cancer. I decided to move down here to spend time with him. He passed away, and then I moved back up north. That was during the time I founded EchoSign and YLighting. Then, of all things, my mother was diagnosed with brain cancer. My dad was 58 when he was diagnosed, and my mom was 64, which isn't all that old. So, I moved back down here. This time, I had kids, and while I was down here I sold YLighting, and started Convertro. We opened up some offices, and started hiring locally. And, now I'm local.
I actually missed one thing, which is between EchoSign and Ylighting, we worked on the sale of Columbia House Records. I was actually running YLighting while I was inside Columbia House. At one point at Columbia House, I was taking customer service calls for YLighting--I kid you not. I remember having Scott Flanders walk in, and I was on a phone call asking a YLighting customer if they needed lightbulbs -- I had to tell them wait for one second so I could talk to Flanders. It was actually lots worse than I just described. Anyway, even while working on that acquisition we were running and trying to automate YLighting.
While we were running YLighting, because we were always trying to automate the company, we had come up with the rudimentary version of EchoSign. The other thing we had done, is a friend of mine, an EIR at a venture firm, Storm Ventures and I, started doing lunches together to come up with ideas. One thing we did at YLighting, was we'd send out these emails, saying "hello customer, we just want to make sure you're happy and that we resolved your customer query" -- if they were happy, we told them to click here, if they were not happy, to click over here. Essentially, if they clicked that they were happy, we resolved the issue and got rid of it out of the database. If you were unhappy, we'd escalate it. If you did nothing, you'd just site in the unhappy state -- you basically had to say you were unhappy to get taken care of. It turned out to be really effective. As part of that, we figured out EchoSign. So, my long time business partner, David and I, decided to start EchoSign out of that experience. We ended up deciding that I'd do the EchoSign thing, and he'd run YLighting, and we agreed to split 50/50 of both of them. We agreed okay, we'll do that, so I started EchoSign. At some point, I realized that EchoSign needed some money, so we took some venture capital, and then I decided I'd rather focus more on YLighting, so we hired some folks to run EchoSign, so that I could extract myself day to day from EchoSign, which we just sold to Adobe. I haven't missed yet. All five of my companies have returned a lot of capital.
It sounds like you have a great partnership with David -- is that part of why you've been successful?
Jeff Zwelling: A lot of people are constantly saying to me that I'm lucky to have that kind of partnership. The interesting thing is, we are not alike. I think that's probably what's interesting for your readers. One of our rules, is we don't make any decisions unless we both agree. If I want to do it, and he doesn't, we maintain the status quo. I have a high tolerance for risk, and he has low tolerance for risk on most things. I'm constantly coming up with crazy ideas, and if he's comfortable with them, they usually end up being good ideas. Some people say good entrepreneurship is taking huge risk, but I think there's also a lot of risk mitigation. I think our partnership is one where I establish the risk, and he mitigates it. I come up with lots of opportunities--not just ideas, but also deals, initiatives, products--and for me, when I come up with them, it's pretty exciting. However, if Dave says it's a really good idea, that's the ones that really do well. There are also lots of times where he pulls back, and those are the ones that have often saved us from failure.
Finally, back to Convertro -- what's next for the firm?
Jeff Zwelling: We're just about ready to go to market. We've spent the last two years perfecting our product, and we have a whole list of quality customers. We have video testimonials, we've got referrals in pounds, because what we've built is fully working and operations and creates lots of value for the customers. That's what I do. I'm not one of those entrepreneurs who raise money, and then goes to the market, and does TechCrunch Disrupt. I'm just the opposite. I get stuff to really work, people to talk about it, to love it--that's what we did at YLighting, where people had a great experience, and that's what we did at Echosign, which people really love too. I get emails regularly saying how much people love EchoSign. I feel the same thing about Convertro. I don't believe in the companies you read about in the media, where you build it and Google comes around and buys it before you've done anything. I don't know that business. I do know how to make something that people tell their friends is awesome, and then, figure out all the stuff on top of that--the sales, marketing, tradeshows, whitepapers, and so on, which only reinforces the true benefits that you are providing to people. The reason we haven't missed, is that we have been successful figuring out the underlying things that work, the things that really do things that they're supposed to do, that I would use and that I would pay for. In this case, we'd taken two years post YLighting to make this happen, which was lots of work. I now see us blowing it up, and seeing how big we can make this. I think we're onto something that will be of value to lots of big companies, and lots of medium sized companies as well.
Jeff, thanks for the time and best of luck!