Bootstrapping to Inflection: Dan Stewart, CEO of Happy Grasshopper (Part 4)

Sramana Mitra: How many years was the CRM company?

Dan Stewart: Three years.

Sramana Mitra: How much did you sell it for and to whom?

Dan Stewart: That’s all really confidential. It wasn’t a sexy exit. Our largest customer did not want us to sell to their competitors. They basically bought a license of the code and then we shut down the company.

Sramana Mitra: What year was that?

Dan Stewart: It was 2010.

Sramana Mitra: At that point, you were getting ready to start Happy Grasshopper. Where did the idea of Happy Grasshopper come from?

Dan Stewart: To tell the complete story here, there’s a couple of interim steps I should explain. As we kept adding feature sets to the CRM, one of them became email marketing. We were really frustrated by the fact that 100% of our user base bought the service to send email and only 18% of the user base ever sent a single email. It was really frustrating. Email has the highest ROI of any marketing investment our clients could make. Although they were buying our service, they weren’t using it. That was really irritating. We didn’t feel like we had a solution for that.

I hired my co-founder at Happy Grasshopper. I hired here at the CRM company and she came in with a blowtorch and just started hacking off needless features. I had all these features to set and share goals. I probably had five different products bolted together. These were five different viable products that needed to be validated independently. She just teared it way back and helped us get the code to a place where we were able to stop doing that in a way that wasn’t financially painful.

After we concluded the CRM company, we agreed that we wanted to do some other things together. The geotechnical company is still up and thriving and we still have lots of cash flow. We decide to start a company called Cents Savings, which was in the SMS space. We were doing text message marketing with a purpose. We were raising money for charities by delivering text messaging to an audience. The supporters of a non-profit would opt in to receive messaging from us. We would donate a nickel to the recipient’s charity of choice.

We thought, “The engagement rate of mobile is high. This is a surefire thing.” We shut that company down after 90 days because we just couldn’t get it to validate. The non-profits loved the idea. The supporters were certainly willing to receive the text messaging, but they weren’t willing to redeem the offers. We were selling advertising to vendors who were getting no value from them. That was enough for us to decide to shut it down. In October 2010, we decided to validate Happy Grasshopper. Celeste put a single webpage up. She owned the URL. It was $19 a month price tag. That’s what led to the decision to start this. It was that pain or our CRM clients not sending email. It was the frustration that Cent Savings wasn’t viable.

Sramana Mitra: I know a lot about the early story of Happy Grasshopper because I’ve worked with you on the strategy of the company. If it’s okay with you, I’m going to ask you to highlight some of the strategic choices you made in the course of developing that company. You decided that Happy Grasshopper was going to be, instead of a do-it-yourself, a do-it-for-me company in the email marketing space.

Dan Stewart: Yes.

Sramana Mitra: Since then, there are other people who have focused on that trend and have come to that conclusion as well. In some parts of the industry, do-it-for-me works better than do-it-yourself. Now you are following the One Million by One Million methodology. I was always guiding you to go for a particular segment, and you chose a segment where you started to see success. Talk to us about how you found that segment-specific product-market fit.

Dan Stewart: We slightly selected it and then it fully chose us. We had a client at the CRM company who was a real estate coach. We had talked with him about this initial idea. He was out presenting in front of audiences of real estate agents. They really seemed to grab hold of the concept. The other side of that is, as we’re trying to select a vertical, there were a lot of things we really liked about real estate.

It was that it was relatively easy to source people in that industry. From a marketing perspective, they line themselves up in nice neat rows. There are known brands that can be targeted. There’s all sorts of channels that we have since become a presence in. Today, we have clients in many other verticals, but we are still solely focused on marketing to the real estate channel.

This segment is part 4 in the series : Bootstrapping to Inflection: Dan Stewart, CEO of Happy Grasshopper
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