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Host: It is such an honor to be here with Larry Kim. Larry’s the CEO of MobileMonkey, the world’s fastest-growing Facebook Messenger marketing platform, used by millions of users. He’s also the founder of WordStream, the world’s largest PPC marketing software platform, managing over a billion dollars of ad spend for tens of thousands of customers, and acquired by USA Today in July 2018 for $450 million. He’s a top contributor to Medium magazine and CNBC, and has received Marketer of the Year awards from Search Engine Land, the US Search Awards, and PPC Hero. Welcome to Real Life Superpowers.

Larry: Awesome, thanks for having me today.

Host: Thank you for being with us. What’s keeping you busy these days?

Larry: You know, just starting any business — it’s in the messaging space, it’s called MobileMonkey, just over a year old, and we have hundreds of thousands of users. I’m just trying to get the business off the ground.

Host: Before you unlock exactly what that business is, I have a question that’s on my mind — you’ve already built a unicorn, which is probably the peak goal of a lot of entrepreneurs, so I’m wondering, where do you get the motivation to go on this rollercoaster ride once again from scratch?

Larry: Oh, great question. A lot of entrepreneurs are not necessarily motivated by making money and stuff like this. For me personally, it’s just a personal challenge. The goal for me would be to see if I could do something twice as big and in half the time, or maybe even take the company public. You learn a lot of lessons when you build and sell a nine-figure company, and it would just be such a waste not to have another chance to use those lessons — to see if you could do things even better the second time around.

Host: Okay, so then please, what is the company currently?

Larry: Sure. My new business is called MobileMonkey. I recently sold my last company, WordStream — it was the world’s largest pay-per-click advertising software company, managing over a billion dollars of ad spend for tens of thousands of companies worldwide, and we sold that in July of last year. I just recently started a new business in the messaging space — it’s kind of like a MailChimp for sending and receiving communications to your customers, except that we send messages through messaging platforms like Facebook, WhatsApp, or other popular messaging platforms.

Host: That’s actually brilliant — the personal challenge, you’re saying, is to make it better, stronger, and faster than last time. But you said there are lessons you learned — so quickly, from the point of view of the unicorn, what are, say, three lessons you learned last time that you’re doing differently this time?

Larry: So one of the challenges is total addressable market. The product I was creating — it’s a big market, hundreds of thousands of possible companies could use it, but not millions. So one of the things I wanted to do was create software that I thought every business could use. Just to give you an idea, there are about a hundred million small and medium-sized businesses on Facebook, but only about five million of them do online advertising. My last company was in the online advertising space, so I was already casting the net on the small 5% of the marketplace. With this new company, we already have customers in a hundred and twenty different countries — WordStream was only in about ten countries — because messaging is a global phenomenon, and businesses and people use it everywhere.

Host: So there’d be a smaller revenue stream — smaller revenue streams as opposed to bigger, isn’t it?

Larry: Yeah, our average selling price is around thirty, forty, fifty dollars, whereas at WordStream it was closer to three to five hundred dollars a month, so that’s interesting. Another one — I would argue that I did everything wrong, so I’m pretty much doing the opposite of everything I did the first time around, in a nutshell. One thing I’m doing this time around is running it as the CEO myself. Last time, I raised about four million dollars in 2008, and the venture partner insisted we bring in a capable, kind of “adult supervision,” a hired-gun CEO. Part of me is curious whether that was the reason for the success or whether it was just holding me back — and you won’t really know unless you try it again. I personally think that if I had been calling all the shots, I would have been more aggressive and taken bigger risks. If you look at what I’m doing with my current company, the kind of risks we’re taking are crazy — on any given quarter we’ll bet the company on two or three things and keep making these bold moves. My previous partners and investors took risks, but it was very difficult to convince them of these crazy ideas. I guess, you know, when you buy your next car, you don’t buy the same car again, right? You try something different. So it’s kind of the same idea here — just try to do this a little differently.

Host: The reason is really interesting — it’s sort of like, the reason you’re an entrepreneur is because you can do it your way, and suddenly you’re giving something you built to someone else to lead. It’s a bit like going back to — sorry, not in a bad way — but working a little bit for someone, and not having all the control on the steering wheel. I totally understand you saying, “give me the steering wheel, I could have done things differently, or at least my way.”

Larry: Yeah, I’m very happy with the outcome — we sold the business for $450 million, and I’d only raised about twenty million dollars, so we had most of the common stock. But at the same time, in the marketing software space you have a lot of “donkeys” that go nowhere, but then you have a couple of companies like Marketo, HubSpot, or MailChimp, and these are all five-to-ten-billion-dollar companies. A little bit of me wonders — I like to project these big, bold visions, and I wonder if one of the problems was that I wasn’t bold enough. When I started, my big dream was to be a hundred-million-dollar business. I thought that was such a huge dream, almost crazy and hilarious at the time, but we actually surpassed those numbers significantly.

Host: But you’re not disappointed?

Larry: No, it’s not disappointment — there’s a certain wondering of what might have been if we’d set even bigger, more strategic goals at the beginning, because you kind of get the people and investors that you deserve. You get a certain amount of “crazy” investor willing to go with you up to the hundred-million-dollar goal, but not to the billion-dollar goal. That’s a different kind of crazy, because in marketing most companies go nowhere, but a few — HubSpot, MailChimp, Marketo — are five or ten billion dollar companies. That’s actually what I’m trying to create this time around. I think in messaging there’s conceivably a place for a company that does all the things these CRMs do but through chat, and that could potentially be a billion-dollar idea.

Host: And it doesn’t seem to me like this is about the money to you — it seems like you’re really interested in the game, quote-unquote.

Larry: Oh, absolutely, it’s about the game. You have people like Rand Fishkin coming on shows talking about how the game is rigged and how terrible it is, and I’m like, give me a break — this is the greatest game ever. There are rules associated with it. When you raise money, you’re making certain promises and making a deal a certain way, but as an entrepreneur, in spite of these rules, you still have to find a way to be successful.

Host: I think maybe Rand felt like he didn’t craft the terms of his investments in a way that was beneficial to him, and maybe that’s something you’ve learned how to do — how to approach it well.

Larry: You don’t have to — I mean, no one’s forcing Rand to take tens of millions of dollars, he has to sign on and accept that. But it sounds almost like he didn’t fully understand the deal mechanics — like when he complains about things like liquidation preferences. For example, when you raise these super big rounds, like twenty or twenty-two million dollars in one shot, those investors are going to insist on liquidation preferences, because they’re putting so much at risk, betting such a big amount. You could have just as easily decided to raise less money — five or ten million instead of twenty-two — and then negotiate away those liquidation preferences. Everything’s a negotiation — there are no fixed rules, it’s whatever you can convince somebody to do. I think I’m in a much better position this time around, especially because I have some of my own money to put in, so I don’t really need the outside investment.

Host: But that’s not a game anymore. It’s funny, but a lot of startups now, even on a third exit or as a unicorn, putting in money of your own doesn’t actually help you get more money from investors — pitch-wise they’d always rather see other investors inside.

Larry: Right, absolutely. The investors I’ve talked to are a little skeptical — they say things like, “if this is such a great idea, why aren’t you putting your money in?” And I do, meaningfully — I’ve put money into the startup capital and participated meaningfully along the way. But someone else has to price the round. I can’t just say, “I think this has a fifteen-million-dollar valuation, so I’m going to put in a million dollars for one-fifteenth of the company” — that’s not how it works. You have to find a neutral, unrelated party — a new investor willing to lead the round — and they might put in five million or two million dollars, and then I might participate for 25% or 30% of that amount.

Host: Yeah, totally — I’m really struck by how strategic your mind is. You’re playing at a chess level of strategy, both on the business side and the product side, and I’m really wondering — how does someone become that kind of CEO? You’d already gone to that place, strategizing this whole fictional company we’re talking about right now, with a plan in your head, while you had a CEO running the other company. You sound like a really talented wild mustang — can anyone actually work with you, or under you?

Larry: I mean, I was more of a free agent — I wasn’t being managed against executive KPIs or objectives like that. I was more like a mad scientist.

Host: Have you always been like that — strategic, throughout your career, always a visionary type?

Larry: This is relatively new, as I get to know myself. I’m finding out that I have an unusual ability to see leverage — in ideas, in strategies, or in people. Just a simple example: blogging. Most of my blog posts go nowhere, I write about 200 of them a year, but about 3% of them generate millions of views — niche blogging in online advertising and marketing. I’ve done campaigns that generated over a million links back to the website from a single blog post, and I think it comes down to being able to visualize what the response to a campaign will be like. That ability translates to other areas — including hiring. When you have a company with hundreds of people, you’re going to hire thousands of people along the way, but some of the people I hired are unicorns — like the blog manager at WordStream, one of the best hires, her name’s Lisa Gabbard. She’d been there for about a decade, one of my first hires, and there’s no way the company would have been successful without her. I’m just able to see leverage in ideas, but also in people.

Host: Do you have any tips for that — how to find the right hire, what you look for? Can you break that down?

Larry: Ask them for examples. If a candidate says they’re an out-of-the-box thinker, ask them what’s the craziest out-of-the-box thing they’ve ever done. If they can’t come up with an example, that’s not a good sign. If they do have an example, they should light up and be really excited talking about how they did something crazy that doubled their revenue or something like that.

Host: Does that ring true to you because it’s a good idea, or because they’re passionate and energetic?

Larry: I’m judging the energy level as well as the ingenuity of the idea itself.

Host: I have a theory about hiring — that the most important component is an optimistic point of view, which ties into energy too, because you can’t have energy without being optimistic. What do you think about that?

Larry: It’s definitely a component. I’ve also run into people who are hopelessly optimistic, where they don’t even know what they don’t know — they think they can do it and don’t realize it’s beyond their comprehension. I think it comes down to being right — I like people who take a bold chance and turn out to have made the right bet. We recently changed our pricing strategy, and it was a really risky bet, because how you charge for your software can make or break you. We spent a couple of months — an eternity in startup life — and changed from charging based on how many contacts are in your list to charging based on how many messages you send. It led to a meaningful increase in revenue and retention, and people thought it was more fair. Someone took a bet, and it turned out to be right, and I really value that.

Host: And how do you measure “fair,” by the way, as a value — fair?

Larry: You could have a big list of contacts but never message them, and be charged for that — it’s a closer proxy to the value they’re actually deriving from the product. Just because you have a million subscribers, if you take a month off and don’t message them, should you be charged for that million contacts? People don’t even mind paying for sending three million messages in a month, because they actually did that — they’d prefer to be charged for what they actually did.

Host: I’m wondering — did you ever work for someone else? How did your entrepreneurial journey start?

Larry: Oh, it’s my mom — my mom was a piano teacher, and she’s a genius, she taught me everything I need to know. Her marketing strategy was to buy a house right next to a school. She was doing piano lessons, so she’d buy a house near a school, put an ad on the bulletin board for piano lessons, and get so many customers because every parent thinks their kid’s going to be the next Beethoven. She also taught me — she wanted to be the most expensive piano teacher in the neighborhood, because there’s too much supply of kids, so you want to extract the value at the top of the market — the lower the price, the lower the commitment. I just learned a lot about marketing, sales, services, and product differentiation from my mom when I was a kid.

Host: And then, did you go to school after that, or did you start your entrepreneurial journey right after high school?

Larry: Oh no, I went to Waterloo in Canada, an electrical engineering program. It was hard, I was struggling — I don’t do well in situations where you have to have a lot of structure, jumping through hoops like assignments, finals, and labs. Don’t get me wrong, I actually have a very strong grasp of the material — obviously you wouldn’t start your own software company if you didn’t have confidence in your ability with software — it’s just that I get stressed out in those certain situations.

Host: So you graduated, and then you just started your own company?

Larry: Yeah, I emigrated to the USA from Canada — not a huge move — learned about marketing, quit my job, and started a consulting business.

Host: So you had a job first?

Larry: Yeah, when you come to the USA you can’t just say “I’m here, let me in” — you have to have a visa. I wasn’t an American citizen, so I had to get an employer to sponsor my application. I was doing software-related jobs, which were easy to get because it’s a high-demand skill. I did that for a couple of years and then started a marketing consulting business, and it was all referral — people were saying, “work with Larry.” It was pretty great, I was in my 20s, a retainer could be five to ten thousand dollars a month per client, and I had about ten clients, so I was making almost two hundred thousand, or a hundred fifty thousand, a month as a 20-year-old. It was pretty crazy — I was buying cars and houses.

Host: You didn’t seem like the type doing everything yourself, a one-man show. How did you market yourself?

Larry: I’m like a lot of marketers — we just quit our jobs and decide to do freelance work. The only difference is that when I got to around ten customers, I realized this wasn’t scalable, I couldn’t scale anymore. What normally people do is hire more people — what I did instead was write software. I wrote software to automate my repetitive tasks around keyword research and ad creation — all the processes — which allowed me to scale a bit more. Then the idea hit me — maybe instead of trying to build a scalable services business, why not just sell the software? It was kind of ridiculous — I was pitching VCs, I didn’t know anyone, I would just cold-email them. This was in 2007, 2008, and I made around 500 pitches, got about 50 meetings, and around ten offers. So anyone who says cold emailing is useless — just tell them Larry Kim raised 20 million dollars from cold emailing. No, seriously, the genesis of WordStream was just writing software to make my own life easier, and that evolved into this global domination plan of trying to become the world’s largest pay-per-click advertising software vendor.

Host: So you identified a need for yourself, and figured — if this is a need just for me, there’s potential here. That was kind of the idea?

Larry: And I’d say the thesis was wrong, because software that’s good for me is probably too advanced for the average marketer. So along the way we had to pivot downstream to significantly easier tools — we converted from a toolset to a service set. Instead of tools to help you run your campaigns, it became more like an automated AI system that ran the campaigns for you and notified you of changes, as opposed to having you figure out what to do. That was one of the big learnings. But yeah, it was a fantastic journey — in spite of the long odds, since most of these things don’t work, I’d still encourage anyone interested in starting one of these things to give it a shot.

Host: Yeah — once you have a unicorn on your hands, how do you know how to take it from there?

Larry: I’d say around 2013, 2014, we started to see a certain velocity around the business — three, four, five years into the business, we’d sign up five to ten new enterprise customers a day, at four or five hundred dollars a month. At that point I felt like we really had something, and around 2014 we started making money instead of just losing money every month. One of my regrets is I wish we’d been a little more aggressive tackling other adjacent features and functions, the way HubSpot does — customer service, sales tools, marketing tools, everything. It was so hard to get to that “safe,” “made it” kind of area that you lose the appetite for starting all that work over again and trying to find product-market fit in a different niche.

Host: Yeah, you’re trying to play it safe and maintain the success you were already tapping into.

Larry: Yeah, early on you’ve got nothing to lose, so you’re making these bold, crazy bets, but as you build up revenue and thousands of customers and hundreds of employees, you naturally switch into more of a “don’t mess it up” mode, where you don’t want to stick your neck out as much — and that’s unfortunate. Taking risks needs to be a core value of my company — we have to keep taking those bets at all stages.

Host: Is that the reason you slowed the company down, or why you sold the company?

Larry: I have kind of an inability to focus on something for ten years — it was a long time doing the same thing. It’s like building a building — you pour the concrete, it hardens, and it’s a beautiful building, but it’s not like a child, where the future is really unknown, what the future will be and what this child will become. I was just in a great spot and wanted to try something new.

Host: And before that — when you were losing money, were you getting very scared, thinking about quitting, or did you have this visceral belief that it was going to work out one way or another?

Larry: Oh no, it’s terrifying — when you’re losing money month after month, it’s pretty difficult, and it’s just part of the game. You have twelve to sixteen months to figure out a certain set of challenges and problems, and it’s up to you to come up with the strategy and execute it within that time frame, because you can’t keep burning forever — the goal is to get to profitability. It’s just a very uncomfortable period in a startup’s growth cycle.

Host: I’ve heard this idea that some people are a “general of peace” and some are a “general of war” — some people perform best in a time of crisis, like what you’re describing, losing money with a set time frame to save the company or fold, and some people operate best when everything’s smooth sailing. What would you say — are you a general of peace or a general of war?

Larry: We’re operating on a war footing right now — the challenge with this new business is I’m not the only company that decided to do messaging, there are dozens of other companies out there that have raised hundreds of millions of dollars to do the same thing. We’re like the Rebel Alliance here — being very scrappy, resorting to all sorts of crazy tactics, hit-and-run kind of tactics, and it’s having an enormous impact.

Host: But you’re flourishing in these circumstances, right?

Larry: Yes, of course — I’m very, very competitive, at least internally. You know, you’d come to the dark side, right? No — nobody wants to work for the dark side. Would you really want to work for the big marketing software company? No, you want to join the smaller company that’s trying to create something new, right?

Host: Let’s say this company sells again — would that be enough for you, or would you go for the next challenge?

Larry: One of the crazy goals I have personally is to take a company public — one of these one-to-two-hundred-million-dollar-revenue companies that goes public for two to eight billion dollars in market capitalization. That would be an interesting journey, because when a company acquires your business, that acquirer is validating the work you did — but when you take a company public, the public is validating that work. I think that would be kind of the pinnacle of achievement, at least for an early-stage startup guy like myself.

Host: And what would you say right now — what’s your superpower?

Larry: What’s my superpower — I don’t talk about it a lot. My superpower actually used to be my super weakness, which is that I’m autistic. If you were to meet me and spend time with me, you’d think I’m kind of like an idiot savant — a lot of my friends and family compare me to Forrest Gump. The challenge is that it’s been very difficult — basically socially clueless, that’s the problem — but I’ve been able to turn that into a strength by navigating into technology as a career path, where this is more common, and then navigating away from conventional company structures toward startups, where you create your own culture and you’re the boss. And then marketing — I think it’s interesting because especially technical marketing, like SEO and pay-per-click advertising, combines certain strengths I have around computation and creativity, which lets me create those “unicorn” campaigns. I think it also helps me see unicorns in people, in ideas, in features and functions and strategies. So there you have it — my secret superpower is autism.

I have two kids — my oldest son is five, and he’s really struggling with autism spectrum disorder, and I’m hoping he finds his way into software startups as well. There’s something about the way I word things too, that I feel — I’m not totally sure — but there’s something about the simulation.

Host: You’re saying “navigating” a lot, but there’s something about you simulating and seeing pathways — imagining how things will work out, or what things will be — that you use a lot. It’s less about certainty.

Larry: That’s my whole theory of business execution — in order to be successful in this business, I have to show a track record of steady increases in monthly recurring revenue. You can’t just grow 10% one month and then 2% the next — it has to be steady. So I’d describe my management philosophy as thinking out two or three quarters, thinking about what are the lift items that are going to generate the required numbers, and then working backwards from there. Then you have to execute two or three of those ideas, because most of them won’t work, but one of them will actually work. I think that’s valid — just the ability to really quickly size up whether something is a “donkey” or a “unicorn,” whether a proposal is going to generate the lift we need to be successful, because if not, we don’t have time to waste on it.

Host: And what would be your current weakness — since your former weakness you turned into an advantage?

Larry: Still the autism — it’s still my weakness. I just did an interview for a head of customer success position I’m trying to hire for last week, and the feedback from the candidate to the recruiter was basically, “this is not somebody I would ever want to work with,” because I come off as totally socially clueless — I ask a lot of questions for 20-30 minutes, and it’s very off-putting for certain people, especially if they’ve never met me before. So I always have to be mindful of the social cluelessness, and try not to do stupid things.

Host: But I have to argue that you’re not socially clueless, because to be a marketer, and a good one, you have to understand people — and your ability to do that suggests you do understand people. I’m not saying you don’t have an issue, I’m not going into that at all, and I respect whatever diagnosis you have — but I think maybe there are certain cues you don’t pick up on. In general though, when you zoom out and look at human behavior, I think you’re very much able to decipher what motivates people and leverage that, and I think that’s also part of the secret behind a lot of your success.

Larry: I’ve just developed systems to do that — they’re all based on looking at numbers. Like the content marketing ideas — that’s not based on some deep intuition of the human psyche, it’s based on crunching the numbers on what other stories and ideas did well, and then making the assumption that if we combine two ideas together, this will be spectacular. It’s not intuition — it’s a purely algorithmic kind of insight. That’s the worst thing — if you make all these decisions based on gut feeling, you’re going to go nowhere. If it works out, you’re just lucky, that’s all.

Host: For people who feel they have the same kind of struggles, what would be your biggest advice for them, to give them inspiration to be like you?

Larry: I think you have to be brutally honest with yourself about your strengths and weaknesses, and just focus on those super-abilities. I think the future belongs to specialists, not generalists — you really need to pick something narrow and specific and be one of the best at that area.

Host: I’m not sure that’s helpful — sort of, “just focus.” What do you tell your son?

Larry: It’s really hard for him — he doesn’t really understand why he’s getting into trouble. I ask him, “did you have a good day or not,” and I already know the answer because I have a detailed email from the teacher — he really doesn’t know why he’s getting pulled out of class.

Host: Did you experience that as a child?

Larry: Yes. It’s genetic, I think — guys like Steve Jobs and others have also been on the spectrum. It seems like you have to be a bit different in order to think differently and do things that are beyond average.

Host: Specialists also have to be special — they have to have unique attributes. Sorry to be generic and special at the same time.

Larry: I would argue that — it’s almost 2020 now — children today who struggle with this are going to have an easier time, because I think society is leaning more towards looking for diversity. I’m in Cambridge, Massachusetts, which is like the most liberal city on the East Coast of the United States, so there we have a lot of resources on this.

Host: Wow, I wish you only the best of luck.

Larry: Awesome, thanks guys.

Host: It would be so interesting to see your company go public, and then meet again and talk about the journey from this day, when that happens, and what you plan on doing next.

Larry: Sure, sure — most likely, probabilistically, it’s going to crash and burn, but in the event that this crazy thing comes to fruition, then yeah, let’s reconnect.

Host: I’m betting on the opposite — I’ll take those odds. And if I’m right, I’m going to force you to talk to us five seconds before you ring the bell.

Larry: Yeah, all right, sounds great. Thank you so much.

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