How one man learned to build things that matter, the hard way.

Alex Tew’s name may not ring a bell to Gen-Zers today, but for Millennials and the generations before them, Tew’s story is the stuff movies are made of. Venture capital funded growth and stock exchange listings didn’t mean anything to Tew. He just wanted to make money, quick, and that’s exactly what he did. At 21, Tew was a millionaire. And it took him only 4 months to get there!

Then he became depressed.

Then he made it big, again.

How?

And what lessons can we learn from Tew’s story?

Striking Gold and Post-success Depression

One late night in August 2005, Tew was in his room, wondering how he was going to pay off his student loans. At the time, he had just enrolled in business school at the University of Nottingham. Tew decided to brainstorm cheap things he could sell a million of. He managed to come up with a few ideas, including one for a questionable product called the ‘Gum Slinger’, which was basically a small pouch for used chewing gum.

Then he struck gold: Tew decided to start a web page with a million pixels that could be purchased for $1 apiece.

Today, this idea would have been laughable. But remember, this was 2005, and the internet as we know it today was still in its infancy. MSN Messenger ruled supreme, and internet advertising was a virtual mirror of the Wild West.

Two days and $50 in domain fees later, the Million Dollar Homepage was born.

Tew’s concept was extremely simple. For a minimum of $100, an advertiser could buy a 100-pixel block (10 x 10 grid) and display an image or logo of their choosing, with a hyperlink. The only guideline was that it couldn’t be porn.

Tew managed to successfully sell 4.7k pixels to friends and family, and he used the money to hire a PR agency to draft a press release. The release was picked up by the BBC and The Guardian, and advertisers started buying up pixels on his site.

One month in, Tew had raked in $250k, and was receiving 65k hits per day. By the end of October, he’d made $500k from more than 1.4k advertisers. Come New Year’s Eve, 999k pixels had been purchased. Tew auctioned off the last 1k on eBay; MillionDollarWeightLoss.com bid $38k, bringing his grand total to $1.04m

After paying the tax man his fair share, Tew was left with nearly $700k to his name. He promptly dropped out of college and moved to London. Over the next four years, Tew tried to replicate his initial success by launching various different ventures. But it was all in vain.

Lesson 1: Provide Value, Don’t Demand Attention

Success can be like a treadmill. Once you achieve a certain amount of it, there comes an insatiable hunger for more. This can trick people into focusing their energies on creating things whose success entirely depends on virality or fame. Instead, Tew argues that you must focus on building things which actually enhance someone’s quality of life i.e. provide value. “Success can actually be bad, and can teach you the wrong things. I was thinking about ideas that would get attention instead of provide value” says Tew.

Unable to replicate the success he had with the Million Dollar Homepage, Tew moved to San Francisco and joined a friend’s startup incubator.

Lesson 2: Look To Your Own Problems To Find Your Next Idea

The four years he spent looking for his next big idea (2006-2010) took a toll on Tew. He didn’t eat or sleep well, and his mental health took a toll. Till then a lifelong meditator, Tew found himself slowly drifting away from his daily practice. Tew realised that he had to initiate some corrective action..so he built another website. The result was donothingfor2minutes.com, a simple website with a 2-minute timer that would restart if you moved your cursor. It was Tew’s way of forcing himself to meditate.

The timing was perfect. The rise of the internet and the proliferation of smartphones had brought with it loads of ‘mental clutter’ and people were starting to talk about digital detoxes. Questions were being asked about the long term impact of social media on one’s mental health, and the practice of mindfulness was having its moment.

Lesson 3: Take Your Time To Build

Alex was in no hurry. He built donothingfor2minutes.com in 2010. He took the next two years to figure out what he was going to do with it. In 2012, he finalised his plan to build a more robust meditation app.

Finding the seed money wasn’t easy and Tew was laughed out of many meetings. “When you talk about meditation with people who don’t meditate, and who work in tech, it’s so far outside of their world of focus” he says.

Tew eventually managed to put together $1.5 million, and launched Calm, the meditation app.

Lesson 4: Be Clear About How You Are Going To Monetize

From the outset, Tew was very clear about what his value proposition was going to be, and how he was going to monetise his app. To this day, the app’s flagship feature– a 10 minute guided meditation– remains free. Calm makes money by selling premium access to things like ‘Sleep Stories’ (which are basically bedtime stories for adults), and masterclasses on wellness topics.

Calm, Today

Today, Calm is valued at more than $1 billion and counts the likes of TPG and Ashton Kutcher amongst its investors. The app is locked in a two way battle for domination with competitor Headspace, and was named Apple’s App of the Year in 2017. According to App Annie, an app market data firm, Calm is the top grossing health and fitness app and 20th overall on iOS, while Headspace, its main competitor, is the seventh-highest grossing health and fitness app and 103rd overall on iOS. With more than 40 million downloads and more than 1 million paying customers, Calm’s success has been nothing short of extraordinary.

And behind much of this success is one man: Alex Tew (and his life lessons).

Is there a right way to use your customers data?

In a world where data was touted as the ‘new oil’, it was only a matter of time before the debate between privacy and data sharing reached a new crescendo. Starting with Cambridge Analytica, scandal after scandal has kept alive the ever-evolving debate around how our personal data is collected and used.

To begin with, sharing data does have its merits. For instance:

• Medical researchers need access to confidential patient data to use in their studies of diseases to identify cures.
• Retail chains need consumer data to identify markets that can support new stores while meeting demand.
• Municipalities need to share data to improve transit systems and public safety.
• Makers of intelligent connected cars need to enable vehicle data exchange and the monetization of vehicle data while protecting data privacy.

However, when companies and app developers start using this vast pool of data at their disposal to create new revenue streams by essentially commoditizing the user, there arises a question about the ethics of such practices. For instance, The Verge has revealed that while struggling to generate revenues post-IPO, Facebook considered selling access to user data in order to make money. Last year, Buzzfeed News revealed that out of nearly 160,000 free Android apps available on the Google Play Store, nearly 55% tried to extract and share the users location with third parties, while 30% accessed the device’s contact list.

In light of all this, it is only natural for users to start worrying about the privacy of their data, prompting governments to crack down hard on firms and developers who misuse personal data. But, as developers, how do we ensure that the data we collect is used for the common good, and not for any nefarious purposes (even by accident)? Where do we draw the line when it comes to data collection practices?

Here is a list of best practices (and common sense) which we advise our clients to follow

Have a privacy policy

Before you try to collect any data at all, it is important to think really hard about why you want to collect customer data, how you want to use it, and whether or not you will be sharing this data with external parties. Once these basics have been figured out, build upon them to formulate a data collection and privacy policy for your company, product, or app. Use simple, clear language (because nobody understands legalese), but run it past your lawyer to make sure that everything is okay. Finally, make the policy available and easily accessible on your website and app.

Be transparent

While the law may shape how you disclose your policies and handle your data, being transparent with your users about how their data is collected, used, and shared is a very good idea. After all, being transparent builds trust. Providing users with the power to control the data they share with you is also a giant leap forward. For instance, if you’re developing an app, consider providing users the ability to view, limit, or delete the data they have shared with you. This will ensure that whatever data you have with you, has been collected entirely with the consent of your users.

Designing self-service pages where users can control their data can be a huge step forward for user privacy and consensual collection. Users can understand the data they’ve explicitly provided, the data you’ve gathered in the background based on their usage, and the ongoing ways that data is currently entering your systems. This encourages users to take an active and considered approach to their own privacy and allows users to refuse specific types of collection with an understanding of how that may affect their access.

When given a choice between collecting and correlating data in the background and asking for it explicitly from users, it is usually best to tend towards the latter. While your privacy policy may outline various ways that you may gather data, asking directly will minimize surprises and help build trust. Users may be willing to provide more information when they feel like they control the interaction rather than when it is collected by monitoring behavior, which can feel intrusive.

If you’re domiciled in a locality where GDPR applies, then it goes without saying that almost all of the above are requirements that you must comply with. GDPR is essentially a legal framework which governs how firms can collect and handle user data, while providing greater protection and rights to individuals. The costs of non-compliance with GDPR can be quite high. Smaller offences could result in fines of up to EUR 10 million or two per cent of a firm’s global turnover (whichever is greater). Those with more serious consequences can have fines of up to EUR 20 million or four per cent of a firm’s global turnover (whichever is greater). For more information, see what The Guardian has to say.

Build strong safeguards

If you are collecting user data, a data breach can be your worst nightmare. Not only would it be a public-relations disaster, but in a worst-case scenario, it could spell the end of your company or startup. Data breaches lead to people’s identities being stolen, credit cards being opened in their name without them knowing it, and even fraudulent tax returns being filed. If you’re going to collect all this personal data, it’s your responsibility to safeguard the data you collect.

To that end, we recommend that you:

• Back up your data in case your systems crash
• Ensure there is no personally identifiable information within your database (make sure it’s all encrypted or anonymized)
• Have malware, antivirus software, and firewalls that protect from data breaches (and make sure it’s all up to date)
• Have an emergency plan in the event of a data breach

Minimise permissions

When you ask users permission to access certain data or services on their phones, ensure that you are only asking for permissions that are appropriate, and not excessively intrusive. For example, if your app is a simple tic tac toe game, it doesn’t make sense to ask the user for permission to access the camera on their device.

Don’t use code you don’t understand

Developers usually work with a lot of open-source software when building apps, and it is a very common (and good) practice to rely on other people’s code snippets, be it in the form of frameworks or libraries, where relevant. Platforms such as GitHub are a treasure trove of top-notch code snippets, which can often cut development time by a significant amount. But if that code is handling your users’ information inappropriately, it’s your problem. So make a point of checking code before you rely on it.

What are your thoughts on the data privacy vs. data sharing debate? Let us know in the comments below!

Cover image credits: Unsplash

Zoom, the video conferencing startup which managed to beat Cisco’s WebEx at its own game, recently went public. Leaving the IPO aside, there was a lot of media attention on Zoom’s history as a company, since it very much broke the stereotype of the ‘hot Silicon Valley startup’.

Before Zoom arrived on the scene, many thought that the problem of video conferencing had been solved thanks to Cisco’s WebEx and Skype. But that’s not what Eric Yuan thought. A founding engineer on the WebEx team, Eric was passionate about building a video conferencing solution that just worked. He tried to implement his ideas at WebEx, but his bosses didn’t want to listen, and Eric left WebEx to found Zoom.

Having looked at Zoom’s growth from afar, here’s what we think all other startups can learn from Zoom

Be focused on the product, maniacally

This story about how focused Zoom is on improving its product comes directly from Sequoia Capital, one of Zoom’s investors. But before they became an investor, Sequoia was a paying customer of Zoom.

“When Sequoia first reached out to Eric in 2014, he told us he admired our work but wasn’t looking for funding. Then he asked for an intro to our IT department, to see if they’d be interested in using Zoom. He cared more about our business than he did about our money — because he was, as he is today, singularly focused on his mission of making people happy.”

-Carl Eschenbach & Pat Grady, Sequoia Capital

Many early-stage startups suffer from a tendency to focus on securing funding, instead of focusing on their product and acquiring paying customers. But Zoom’s approach of focusing on acquiring paying customers, which indirectly gave them more leverage when negotiating with investors later.

To exhibit how focused Zoom is on making its product good, consider this. In a recent feature on Zoom, Forbes columnist Alex Conrad wrote that Zoom could operate well even on a connection with 40% packet loss, which is a boon for those on spotty or slow connections.

Build sustainable revenue streams

In Silicon Valley, there is a tendency to chase revenue growth which is usually fuelled by deep discounts and/or by running at a loss. A ready example can be found in the meal delivery startup sector, where profitability remains elusive yet discounts, plentiful. Essentially, most startups in the sector are hemorrhaging money to make a little bit of money or no money at all. Worse yet, some will never see a cent in profits for a very, very long time. Not so with Zoom.

Consider the following, taken from the second page of Zoom’s S-1 document:

“Our revenue was $60.8 million, $151.5 million and $330.5 million for the fiscal years ended January 31, 2017, 2018 and 2019, respectively, representing annual revenue growth of 149% and 118% in fiscal 2018 and fiscal 2019, respectively.”

But the next section makes things even more interesting:

“We had a net loss of $0.0 million and $3.8 million for the fiscal years ended January 31, 2017, and 2018, respectively, and net income of $7.6 million for the fiscal year ended January 31, 2019.”

Simply put, Zoom was already a profitable company when it sought to list its shares, a rare achievement in the startup world. For comparison, look at the finances of some other startups which went public in recent times:

• Pinterest, who filed on March 22nd, the same day as Zoom, made $755M in revenue in the fiscal year 2018 but a net loss of $63M.
• PagerDuty, who filed on March 16th, made $79.6M revenue in the fiscal year 2018, but a net loss of $38.1M.
• Lyft, who filed on March 1st, made $2.2B revenue in the fiscal year 2019, but a net loss of $911.3M.

In the technology world, running at a loss in order to get a shot at an IPO is widely considered a necessary evil. But Zoom was comfortably in the black, which allowed the company to list at a valuation of USD 8.98 billion.

Your users can be your best evangelists

Zoom credits its growth to its bottom-up user generation cycle, which conceptually, shares a few similarities with Dropbox’s famous referral system. With Zoom, users can sign up and invite others to a meeting (for free) and when they realize how easy-to-use and great the product is, they sign up too and then pay for more features.

Zoom’s S-1 states that amongst others, the company had 344 customers who generated more than $100K in annual revenue, up 141% YoY. This customer segment accounted for 30% of Zoom’s revenues in FY’19. 55% of those 344 customers started with at least one free host prior to subscribing. As more and more customers invite people to meetings held on Zoom, those numbers are only going to rise. Consider this quote from a Sequoia spokesperson:

“We had been watching the video conferencing space for many years because we were convinced that it was a huge market primed for innovation. But we couldn’t find a product that customers loved to use. That changed when our portfolio companies started raving to us about Zoom.”

Execution matters

When Eric Yuan decided to build Zoom, the problem of video conferencing was, for all intents and purposes, considered to be solved. There were many incumbents, ranging from WebEx to Skype and Google Hangouts. But they were full of problems. Some were built for an age where video conferencing was done in front of a computer, some didn’t have features such as file sharing from mobile, etc. In trying to build a better video conferencing product that truly lived off the cloud, and scaled simply and scaled well, Zoom did not try to reinvent the wheel. Instead, they just set out to make a motorized car while the rest of the world was content to ride on horse-drawn carriages. Unsurprisingly, Zoom is a company favoured by Social Capital CEO Chamath Palihapitiya, who ranks it on the same level as Slack, another successful tech startup (of which Palihapitiya is an investor).

If you’re building a startup yourself, we highly recommend that you keep an eye on Eric and his team. In the meantime, if you are a user of Zoom, what was your experience with the product like? Do you think Zoom will become the next Slack? Let us know in the comments!

References

• Forbes-What Will Zoom’s IPO Valuation Be?
  https://www.forbes.com/sites/greatspeculations/2019/04/04/what-will-zooms-ipo-valuation-be/#ae7d6f52fd00
• Estimating Zoom’s Valuation Ahead Of Its IPO
  https://dashboards.trefis.com/no-login-required/x6e280ly?fromforbesandarticle=what-will-zooms-ipo-valuation-be
• Inc.com-Zoom Raised Its IPO Price Range to $33 to $35 a Share and Could Be Valued at $8.98 Billion
  https://www.inc.com/business-insider/zoom-raised-its-ipo-price-9-billion-valuation.html
• Forbes-Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO
  https://www.forbes.com/sites/alexkonrad/2019/04/19/zoom-zoom-zoom-the-exclusive-inside-story-of-the-new-billionaire-behind-techs-hottest-ipo/#35b7e69a4af1
• Zoom IPO | S-1 Breakdown
  https://medium.com/@alexfclayton/zoom-ipo-s-1-breakdown-119249acadd3
• How Zoom grew to Millions of Businesses
  https://www.freshworks.com/freshsales-crm/resources/how-zoom-grew-to-millions-of-businesses-blog/
• Zoom IPO: How Eric Yuan Delivers Happiness
  https://medium.com/sequoia-capital/zoom-ipo-how-eric-yuan-delivers-happiness-5b3fb649865c
• Zoom: An IPO Done Right?
  https://medium.com/@jstanier/zoom-an-ipo-done-right-3b060289e7ec
• Jason Wingard-The Ascent Of Zoom CEO Eric Yuan: Leadership Lessons In Execution & Authenticity
  https://www.forbes.com/sites/jasonwingard/2019/05/15/the-ascent-of-zoom-ceo-eric-yuan-holds-leadership-lessons-for-all/#4c38290d7393
• Zoom May Be the Best Silicon Valley IPO of the Year
  https://www.fatrader.com/p/analysis/Zoom-May-Be-the-Best-Silicon-Valley-IPO-of-the-Year-201904174889.html