I am talking with a gentleman that I’ve shared many stages with. I’ve been in the room with him many times, but we’ve never had much of a chat and never been introduced. Alec Stern is one of the original three people that founded a $1 billion company, Constant Contact. You may have heard of them. The brutally basic information he shares on how to look for the problem and then solve rather than shoehorning your product down someone’s throat is gold. He gives us an immense number of golden nuggets in there. If you’re an entrepreneur out there trying to expand your business, and you should be if you would while you’re reading this, then you need to pay attention. Alec has got some great stuff. Get your notepad and your pen. Welcome to the show, Alec Stern. He’s a genius.
Alec, welcome to the show.
Thanks for having me, Steve.
We have probably shared stages and rooms, but this is the first time I’ve ever gotten to spend time chatting with you. That’s crazy.
We have seen each other at some of these bigger conferences and you feel you know someone. It’s almost like on social. We’re friends on Facebook, so we’re close. That’s great to be able to chat.
Someone said to me, “Do you want to meet this guy?” They started to give me your bio because you know what it’s like. You get people to contact you all day every day and they go, “You should meet Alec Stern. You should meet Steve Sims.” The question then was, “Who’s that?” Nine times out of ten, you may know Alec or Steve, but you may not know that. When the guy was giving me this bio, I was like, “That’s him.” I start Googling and I’m like, “I know that guy.” Most of the time, it was either at City Summit or the brilliant Secret Knock, which is Greg Reid’s event. Those are the places that we probably shared space in.
In both, we were speaking and do all the networking. Everything is two degrees of separation of each other. If we sat and dug in, we’re going to find a lot of other contacts and connections, which is great.
I’ll tell you this, it’s great to be able to see you and hang out with you again. At least I know already the name to the face and the background because 9 times out of 10 in communication, we don’t interview people that we meet. It takes time to get to know what they get up to. That may sound like a little bit of a strange segue, but you’re pretty up there. I’m not going to say too much, but we’re talking about you’re one of the original three that started this tiny little company amongst others that evolved in. You’re one of the original three that founded Constant Contact.
There were three of us in an attic in Boston. If we’re in California, we would have a garage but in Boston, we only had an attic.
How did that come about? Give us that story.
I had done a few others. I’ve been involved with the eight startups and with several exits. Some of them were circling around small businesses. There wasn’t anything on the front-end helping them with marketing, as we know now as digital marketing. The original technical founder, Randy, had an idea. He is a technology person. Margaret, who was the third person, was our software architect. She is into the technology and the stack of that technology and so on. I was on the business side, go to market, branding and messaging. We had a mutual entrepreneur friend. In fact, when he got married, we were sitting back to back at tables but never met at the wedding because he was consumed with his happiness at the wedding. He didn’t do the intro but we were supposed to meet. I didn’t know he was there. He didn’t know I was there.
Their honeymoon ended later and we got the call. He put Randy and I together. We had an immediate meeting of the minds of both having a passion for Main Street small businesses and working on things to help them. It was quick for us. I was brought to him, “He’s got this technology. Maybe you could help him figure out how to go to market.” “Randy, there’s this guy that’s been there and done that and had some success.” We were pulled together for the right reasons and not with anticipation of thinking about we would cofound and bring out what’s Constant Contact nowadays.
That is one of the largest emailing and mass marketing communication companies on the planet. There are not many people that don’t know that. It sounded funny because I’ve heard you talking about scaling before. I want to get into that because there are a lot of entrepreneurs that in this COVID period try to pivot, but more importantly, trying to fine-tune what they’ve got. They’re trying to see how it can be run on their own. There is something in an entrepreneur when they’re in the company and they go, “This is going to be huge and fantastic.” When was the turning curve for you to realize that this was going to be something phenomenal?
I’m a little bit more conservative in things, especially business. If I have a real strategic partnership or about to land some funding or whatever, I don’t talk about it. I don’t celebrate. I am close to the vest on it until it manifest and happens. I visualize it happening. I make sure that it does. We always have a grand plan and vision. Our vision was set by the earliest days of the company where we went out and talked to small businesses, asked them what their pain points were, what were the things that they wanted, which is no different than probably even big businesses. They wanted to stay top of mind for their customers. They wanted to drive customers back into buying the product and service.Don’t go to people you love or did business with for feedback. What you want is brutal honesty from total strangers. Click To Tweet
They wanted new people to come, referrals or new prospects showing up. They wanted more revenue. When we went out and talked to the target market of the small businesses, which were on Main Street and around the world ultimately, initially Main Street and in any major city. Although, I’ve since learned that New York and a few other cities don’t have Main Street by name. Let’s assume there are many Main Streets there. The bottom line is going out and talking to them, finding out what their vision of what they wanted and then us presenting to them. If we were able to give you a self-service, easy to use tool that could level the playing field for you against your big competitors like Amazon and others who have enterprise tools, resources and agencies. All you had to worry about was, why do you want to send? Who do you want to send it to and when? We take care of everything else under the covers.
There’s no technology that doesn’t require. You just know you’re bringing your logo up to the table with some colors and a message, “Would that be something that you would want to take advantage of?” Immediately, they got wide-eyed and said, “Yes.” As we started to develop the product initially, we would bring it to them. It would break and we get brutal, honest feedback. We got wide-eyed out of the gate to say we’re onto something when you amass that there are 30 million-plus small businesses, nonprofits and associations in North America. Imagine if we brought something to them, we got directional feedback to say, “This is what they all could use.” The question which we will touch on in a moment probably is around scale and how do you work towards scale.
The key thing was to get out, get that feedback, go there early and don’t go to people you know, love, related to and did business with. Go to people that are brute, that are total strangers to give brutal, honest feedback. That’s what we did. We landed those initial four customers to get that feedback, to find the friction points in the offering, and what was missing, what was breaking, and what they wanted. We were wide-eyed out of the gate to say, “We’re onto something.” It then became the challenge of figuring out how do you scale it.
You’ve hit something magical that we all need to be focusing on. Many people start trying to look at the problem that they solve once they’re in business. From what I can make out from you, you went out right in the beginning to define what the problem was and then you built the program around it.
We find out the pain points or the areas of their vision and what they wanted to see in growth, what were their needs, and what do they want more of. It was sending ourselves around what our target market wanted and needed. Oftentimes, listening to the voice of the customer is important in any size company. Some companies lean into that a lot more than others. Out of the gate, we were trying to surprise and delight our customers as best as we could and we put things in to do so. It was to make sure we were providing them something that made them successful. I could walk down Main Street in any city and go speak around the country, even around the world at this point. I will stop to small businesses and I will say, “What are you doing about marketing?” I know they don’t have a sign-up sheet here, “Is there a way I can join a mailing list?”
I’ll get into a conversation. Half of the people are Constant Contact customers. They are all excited that I popped in and wanted to lead with value. I asked them what they’re doing and then talk. Some want me to come over and say, “I’m working on a campaign. Can you look at it and give me feedback?” It’s always fun. The other half were having to thought it through or have a strategy around the on-premise activities they could do to build engagement, build a list, and follow through. You’ve got to get out there. Oftentimes, we know what we want and we’ll start to prototype and build it. Sometimes, we get carried away. We want to keep building.
My point in any phase of that process is to get out and get that feedback from potential customers. The sooner you get that, the sooner you will see you’re onto something. If I had a dollar for everyone that built a mobile app to turn around and hand it to their target customer to try. After rebuilding it because they didn’t do what they wanted or needed, it’s prevalent. I was like, “I know I’m in stealth mode. I want to finish it before I share it with them.” You’ve got to break down all those barriers, get out and get that feedback. We were showing stuff in PowerPoint initially, like ScreenFlow of what it could look like. We didn’t have the luxury of mobile apps back then. I’m not going to say we were carrying around a big bag with a phone in it or one of those massive flip phones. Let’s keep that aside for the moment. The bottom line is that they’re all the tools and resources, the things to let you prototype and show the flow of a mobile app or whatever it is. Getting out there, getting that feedback as early as possible is key. Channel Strategy: Get feedback from potential customers early in the process. The sooner you get it, the sooner you’ll see you’re onto something.
What year was this?
It was at the end of 1997, 1998 where we started things off. We were working it through a couple of years of figuring things out. SaaS did not exist at the time, which is Cloud. It was called ASP Application Service Provider. That started to come out where you could host up things. We were one of the first two apps on the IBM platform where you could rent the software. You created it once and shared with many. When you had new releases and new features, you put it on one massive application that everyone gets to take advantage of. We started with an installed product initially, then SaaS came along within a couple of years.
That’s one of the points where floodgates opened because we had a lot of partnerships that wanted to offer to our target customers that we’re working with them in one way or another, but they didn’t want to install ISP or Internet Service Providers and stuff. They didn’t want foreign software to show up in their computer rooms. They always had this third world computer room for applications that weren’t theirs. We went to all kinds of challenges initially, but a lot of those went away with the advent of SaaS and so forth.
If you are not aware of what SaaS stands for, it’s Software as a Service. You started off by walking up and down Main Street and you gathered your first four clients. I can’t help but think maybe there was a slow tumble at first and then a hockey stick. What was your hockey stick moment? Was there any?
The angle of a hockey stick is maybe I’m going to guess 60 degrees. I’m not a hockey player. I would say our hockey stick was more of a 30 degree. It was a ramp-up, but it wasn’t this fast. We have to get the flywheel going. Imagine, we’re offering a product that’s $15 to $20 a month and starts with a free trial. You land one, they tried it. They got through the trial period. They load a list of a certain size or more to start paying. You’ve got a client and then you doubled your business. You got a second client. In fact, when we started, it was in the fall. We used the football season analogy and did a foam core football field. At 100 yards of a football field, every yard was a client.
We put it on four when we started. We got our fifth one and moved in. We’re ringing a bell and celebrating. We then got to 6, 8, 10. It was slowly moving. When we filled 100, we went back down to the bottom in every yard was ten. We went 10, 20, 30 and so on. Every yard was 100 and then we went digital with it. It was getting a little out of hand to keep tracking it. The bottom line was that flywheel had to get going. You could only imagine, selling to small businesses. Everyone back then and still now would say, “No one can successfully sell to small businesses.” There are so many. They’re everywhere. A lot of times, when I talk to new startups and so forth, and even some bigger companies that want to get into the small business realm, I’ll say, “How are you going to scale it?”
They’re like, “We’ll hire 100 salespeople.” That’s not the answer especially if you’re going to get funding. I don’t want to take investment and give it to you to hire 100 people. Directionally, you’ve shown that these fours want it, but how can you get to the four customers who want it? How can you get to more? One of the key things was we 100% channel partnerships and alliances when we started. We got those initial four, but we couldn’t go door-to-door around the country selling to small businesses. We had to find out where were they hanging out. What were the trusted resources they look to learn about products and services or to do stuff for them, and so on? We amassed a whole channel strategy and played it. As I like to say, we’re an eighteen-year overnight success.The cost of acquisition is close to zero when you’re getting a referral. Click To Tweet
We started and at year ten, we got our initial public offering. Eight years later, we sold for $1.1 billion. When we sold, we had over 8,000 channel partners that on any given day, they were out there promoting us and having seminars, workshops or stopping into customers. We’re sending out communications around best practices with click-throughs over to sign up for us. We had a huge network of partners. That was 100% of what we did. As that hockey stick kicked in and we started to see some growth in the business, then they were feeding us success stories, case studies, different vertical experiences for the restaurant customers versus real estate and so on where we could start to tailor the offering to different audiences. We started getting more and more customers.
We then started getting revenue. It allowed us to hire more people and invest more in marketing. When we look at the end of the story, half of our business came from referrals. With a referral, somebody is telling someone else and seeing in their inbox our logo at the bottom of a nice-looking email and saying, “I want that too.” That’s half the business. The cost of acquisition is close to zero when you’re getting referrals. Our customers were telling other people. Our average customer told two other people that signed up. For our lifetime value, it was not just our customer who stayed five years, but we had signed on to others through them. It was the tripling of that initial customer.
Whatever cost us potentially to get that first one, now we’ve gotten the benefit of others. Once that got going and we got a lot of customers started to come in, then we could afford to put our marketing program together. Imagine Constant Contact at the time, digital email marketing for small businesses. We heard these objections from investors and people who tried to get loans from and so on. No one uses email as a marketing tool. Everyone has an inbox. They all had an email tool. No one sells to small businesses and you can’t go door-to-door. You can’t do this and that. Sun is in your eyes. We heard all of the things that would say that we wouldn’t succeed. We were successful with kicking off that channel strategy and getting to our target customers through others. This is one too many concepts through different partnerships and many of them.
What are the common mistakes that people make when they sit there and they’re starting to get some momentum and then the word scaling comes into their head? You’ve been able to scale companies. I am loving the process and the way you’re talking to us about the problems and the pain points and communicating with your clients. That’s the biggest thing that I’m getting out of you. The fact that you are communicating to find out what the problem is. What are the common mistakes that people either make or need to avoid when they look at that business and they go, “I’m going to scale and ramp this up?” That is not included in the, “I’m going to employ 100 people and get someone else to fund it.”
One of the things that I spent a lot of time working with companies on channel strategy, alliance, and partnership strategies to scale. If you were sitting with an investor and you have your idea, directionally, we had these four customers that love what we were doing and gave us great feedback and we had those success stories. When they ask the question to scale, I ask it of many because I wear a lot of hats. One is being a limited partner in G20 Ventures here in Boston. We’re always looking at tech companies for investment. I’ll always ask the question, “What’s your scale strategy? How do you see the scaling?” A lot of people can’t effectively answer that. That thinking is, “We got those four. If we get eight, then we get sixteen and we get more.” I was like, “That’s the path to scale by the number of customers and revenue. How are you getting to them? How are you going to affect that?” The answers are things like, “We will do a lot of marketing. We will do social media and all kinds of marketing. We will hire a bunch of foot soldiers to go sell to them. We will contract sales organizations to make the calls for us and so on.”
All of those things will work in one way or another. All of those are potential, different aspects of your go-to-market strategy as touches to get to your target market. What’s the one key way that you can do it? I have seen in most instances, it’s a channel strategy and it’s working through others. I do exercises with groups or individuals to talk through that channel strategy and how do you scale through these intermediaries and relationships with others? There’s a longer story here about how you sell to go land those partnerships? What’s the give and get between the partnership and you? What’s the win-win-win for you, the customer and them? How do you get to the customers through them with providing them tools and resources to market and so on?
There’s a bunch of stuff to sort of unpacking all of that. The biggest thing I always see is that most people are not aware of that or they back into it. When we landed this consulting firm, they want to take our product into customers, I’m like, “Are they bundling it in or offering as a ride-along? When they sell something, do you get sold? Are you in the tool bag and it’s an afterthought? Do we have it in case it comes up? How are you working through that firm?” They then said, “It’s great. They love it so much that they’re selling us with there as well.” You couldn’t get any better than that. I say, “How many clients are they going to get a year and this, that and the other?”
You start analyzing, “How many other consultants are there like them? How many firms like them?” In just that one category of a partnership, you could potentially find gold. An enterprise sold tool usually sits well in there and sometimes even small business tool if that’s the focus of the consultancy. I would say that’s the one. The pitfall or the thing is now you’ve agreed and you said, “The average company can find fifteen categories of partnerships that they could work within.” The one everyone shares, no matter what your industry is an association or member org. There are association member organizations that every industry has, national, regional, local networking groups, workshops and conferences when they come back online.
Where are your target markets hanging out? How do you get in there with thought leadership and sharing best practices to get on stages to present that to that audience? If you do a good job and you show you have a unique value prop and it’s going to help them succeed, the associations welcome you to come speak and be in their newsletters and other podcasts interviews. It is because you’re going to help their membership who’s paying them to succeed. If you can bring value to them, they’ll love you. Most don’t want to work with vendors, but if you bring in value then they look at you as a vendor. I’ve been on the major stages of every national conference for every industry you can imagine.
They’ve always said, “We don’t allow vendors.” I was like, “We’re a vendor. We’re a digital marketing tool for small businesses.” We offered so much value with thought leadership and best practices. They didn’t see us as a vendor. The associations and others were allowing us to get on all those stages as other partnerships because we could bring value to their customer. Think of channels and the pitfall is don’t assume you land a partner in a category like consulting firm. They may do nothing. Don’t rule out the category like consulting firms are no good. Go find another one. I guarantee you, the ones you thought are going to do a lot, do nothing. The one you thought will do nothing do a lot. Write it out, work with them, and don’t cry wolf about this next one’s going to be the next big one. Wait until you have that success before you share it with your team, the board, and investors. We tend to want to judge them quickly. I would say don’t. Ride it out to try to get more in your category of that type of partnership and you’ll see success.
I don’t want to leave it until the end because there’s a lot of gold here. There truly is. Thank you very much. What is your website?
It is AlecSpeaks.com.
You’re all over social as well, aren’t you?
If you go to my website it tells you a little bit more about me. There’s a fun little video. There are all kinds of stuff. It’s got links to all my social channels to connect on those as well. If someone wants to spend more time, there’s an opportunity to connect on the site as well.Your best prospect is your current customer. They are a sphere of influence and a trusted source of information to their family and friends. Click To Tweet
You leaked it slightly before, which I’m going to push out. They may be able to share time with you maybe a glass of wine and sitting in that chair on a Sunday afternoon and the fact that you’re going to be releasing a book. How’s that coming along?
It’s in the earliest stages. I am manifesting the writing of this book and getting it out there by talking about it publicly. Thank you, audience, for reading because you’re another reason why when we hang up, I’m going to get back on it. I’ve had ideas for several. You got to pick the one thing to start with. I’ve got the making of the first one that I’m starting to spend. I’ve got a little bit more time. I’ve been spending time talking about it publicly so that I get going on it. I’m kicking myself in the butt to do it.
Hopefully, the crowd here in the Steve D. Sims world can help hold you accountable for getting that book out. There’s the knowledge that people need. I like the fact that you’ve got communication as one of the strongholds right at the beginning. I liked the fact that you also look at joint ventures, partners, franchises and channels. You look at how to assume the crowdsource mentality of getting your products out there. We’re going through some strange times. We’re in a what they call the new normal, which I’m not quite sure if I like that word, but things aren’t like they were. What do people need to be doing to be able to get the attention of potential new clients?
I’ve spent a fair amount of time on this. The first thing is businesses in general, regardless of time, always want to go get net new customers. They often think about going to get those new customers. They leave their current ones aside for a moment. They’re good, they like us, they work with us, they buy from us, and they use our service, let’s go get new. More than ever, we can’t avoid engagement with our current customers. It was always important than now. Even more so now, we need to be engaging with our current customers. We need to keep them engaged and keep them involved. There are a lot of ways to do that. Your best prospect is your current customer because they are a sphere of influence and being a trusted resource for information to their friends and family and others. People trust 85% of the time the status. They trust peer recommendations and things from people they know and 15% from an ad. Your current customers are your best prospects to help you go get new.
Now more than ever, you’ve got to be spending time with them. Just because your business may be is on hold or you’re at the end of a queue for coming live again, you should be doubling down and doing things for them. I’ll give you an example. I was sharing this with an art gallery and I said, “Where’s all the art?” “We’ve got it locked up in our shop on Main Street.” I was like, “Why don’t you take that out, bring several pieces of one artist, curate a show, go live on Zoom? Show the art, bring the artists on the Zoom call. Let the artist tell them about their background and what motivated them to want to paint and what’s the motivation behind this and that painting. Tell the stories and so on.” Lo and behold, Watch Parties started selling and watching it. They shared it for others to watch on Facebook and so on. The audience grows and more people start engaging. They see their list growth. They see all kinds of things happening with subscribing. They want to be up to date on new curations and new things happening.
If you don’t want to do it often, you can do it every two weeks or every three weeks. Eventually, every week. Not every day because they’ll go numb to it. Start getting the art out there. Lo and behold, I get a message that a piece of art was sold, not from one of their customers, but someone that was on a watch party that someone had shared this curated thing. With likeminded people, the way it used to work before I would buy the art from the gallery, I’d put it on my wall. I’d have you over, Steve, and you’re like, “I love that art. Where did you get it? Who’s the artist?” I connect you then to that gallery for you then to go in. You can’t come to my house and you can’t go to the gallery. What are you going to do? Think outside the box for what can you be doing on this new normal. Virtual is here to stay. That will be part of the mix going forward. As we in different worlds that we all live in, the experience was always to go into the restaurant to go into the Main Street shops or get your services.
There’s an opportunity to be in front of your audience and to get reached by a lot of larger audiences. If you have fun, if you’re offering value and you’re doing something interesting, they’re going to come and watch. Think about every industry, just a quick one in restaurants. Imagine Friday night cooking with a chef or a Thursday night cooking with the chef. The restaurant has a kit of all the stuff. You buy it from the restaurant, it’s all ready to go and you bring it home and you cook with the family. The chefs on a call and everyone’s on the call. There’s a prep work ahead of time. Just like the TV shows, they’ve already cut up as much of stuff. They’re going to throw it all together and make the meal together. Everyone’s going to enjoy the meal. Everyone was having fun on Zoom. The families around the island doing different steps. They’re cooking the meal and the chefs telling them the story and why this. It’s an engaging situation, which they can be doing. They can open for you to go in and eat, but you can certainly do the takeout.
There are different twists to what they can do than let’s order takeout again. How about we do the weekly cook at home with the chef? There are many ways every industry can think about being creative with this new virtual communication vehicle that was here before but not used much. We never wanted to trade it out for what we’ll do in person, which will come back in space soon. This will supplement things in between. You’re not going to go to the restaurant every week, but why couldn’t the chefs still do something like this every week later when the restaurant’s open? Think of what the gallery could be doing some fun stuff because you’re not going to go to the gallery every week. Think about your business in a way and how can you expand out on what you’re doing to get to your current target audience and get reached to potential others through them and the flywheel of getting exposure.
I’ve seen a lot of hotels because one of my businesses is a travel group. I’ve seen a lot of emails coming through to me. Most of them you say about getting numb every single email when it talks about COVID and the new normal. Eventually, you start deleting these emails because you become numb to the same message. I’ve been getting a lot of hotels. They’ve been sending me exactly what you’re talking about. The bartender knocking up their signature cocktail or their signature dish or their breakfast or their dessert. I’ve been watching those. I’ve been collecting those. That’s a great piece there. Alec, this is phenomenal. We’re rounding up but again, it’s AlecSpeaks.com. There’s so much gold in this, but the bottom line of it is finding your client’s pain point and then provide. Don’t try to shoehorn anything down anyone’s throat. I love this stuff. Alec, it is an absolute pleasure to have you on the show. Thank you very much and hopefully our paths will cross again soon.
Alec has more than 25 years of experience as a founder, mentor, investor and hyper-growth agent for companies across various industries. He is an innovator with extensive expertise in growing and scaling companies, startup and operational growth, go-to-market strategy, strategic partnerships and more.
As a primary member of Constant Contact’s founding team Alec was one of the original 3 who started the company in an attic. Alec was with the company for 18 years from start-up, to IPO, to a $1.1 Billion-dollar acquisition. Alec has also been a co-founder or on the founding team of several other successful startups including VMark (IPO & acquisition), Reacher Grasper Cane and MOST Cardio amongst others.
Performing hundreds of keynote addresses Worldwide, Alec has become known as America’s Startup Success Expert for his popular sessions at conferences like Secret Knock, CEO Space International, City Summit, Powerteam International and Habitude Warrior. In 2019 Alec is the Keynote speaker at three out of the top five “Inc. Magazine Must Attend Conferences for Startups and Entrepreneurs in 2019.” While on tour, Alec has shared the stage with the likes of Tom Bilyeu, Jack Canfield, Les Brown, Kevin Harrington and Mark Victor Hanson. Alec appears on the Influence 100 Authority List by Influence Magazine which recognizes his contribution to helping and advancing startups and entrepreneurs worldwide. He has also recently been featured on the covers of several other magazines including “Small Business Trendsetters,” “Success Profiles” and “Business Innovators.” Alec was honored with the “2020 City Gala Visionary Award” and the “Habitude Warrior Conference Global Awesome Visionary Award” for all his accomplishments as an entrepreneur as well as speaking before thousands of entrepreneurs and startups each year.
Alec advises a variety of early stage companies and serves as a judge, mentor and advisor for nationally known startup accelerators and programs including TechStars, MassChallenge, The American Business Awards, The Stevie Awards and speaks at Universities including Harvard and MIT.
One of the Northeast’s most accomplished entrepreneurs, he is a limited partner in Boston-based G20 Ventures, which provides early traction capital for East Coast enterprise tech startups. Alec is also an angel investor in a number of rising startups in various industries.
Only a sideman when it comes to music, Alec is an accomplished drummer and has had the honor of sitting in with a number of musicians including Toby Keith’s house band in Vegas.
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