How Mailinator CEO Paul Tyma grew to $126K revenue and 300 customers in 2017.

this is the top where I interview entrepreneurs who are number one or number two in their industry in terms of Revenue or customer base you'll learn how much revenue they're making what their marketing funnel looks like and how many customers they have I'm now at $220,000 per talk 5 and6 million he is hellbent on global domination we just broke our 100,000 unit sold Mark and I'm your host Nathan lka hello everybody this is episode 703 I love do these you know I love this right guys it's unbelievably fun tomorrow morning episode 704 we talk to Eric Dolan and I he breaks down a son saving his mom that's really what's happening he is a son he is saving his mom with a health tech product that recognizes seizures and it's big big financially tune in to find out especially if you're interested in the health Tech space good morning guys my guest this morning is Paul tea he's the founder and creator of a tool called mailinator it's an email system he's also the startup veteran a startup veteran has focused on four Silicon Valley startups including preemptive Solutions many Brin Inc which owns mailinator home account.com which was later acquired by bills.com you guys might remember we had the bills.com CEO on about a week and a half ago and refresh Inc which was acquired by LinkedIn he's a frequent speaker and writer and is author of one of the original books on Java called Java PR primer plus Dr Teo received his PhD in computer engineering from Syracuse University focus on Java and.net performance Paul are you ready to take us to the top I sure am W is a bio man congratulations yeah thanks tell tell us first so you obviously studied Computer Engineering at Syracuse right out of that did you go right into one of these startups or did you work for somebody else no I actually started my first company during my PhD and actually incubated it at Syracuse it it eventually moved back to Cleveland where I was from uh right out of PhD I ended up working for Google got and I was just a happen stance that I happened to move out to Silicon Valley and talked to Google and there I was and so which one of these companies was your first kind of big win preemptive solution home account.com or refresh in I think they've all been interesting in their own way preemptive is actually still a going concern I'm still on the board of the company it's about 30 employees um refresh was was a little bit more of a sort of um I'd say advertised or very visible uh exit because LinkedIn purchased them you can now see the refresh technology in what LinkedIn calls its ice breakers uh in application their mobile app right now I'm not sure if it's on on their web or not what year was that refresh acquisition the acquisition was one year ago okay got it that right no two years ago I'm sorry two years ago and I left LinkedIn a year ago okay and what was the uh what was the acquisition price on that uh well obviously it was confidential but I think everybody was pretty happy what was the business model of refresh was it a SAS business or that was Absolut no that was absolutely a consumer application that had it was you know it fascinated me to pitch investors who didn't ask how you're going to make money and never at any point had a anybody asked us and nobody cared the goal was to absolutely get users and build technology and we raised enough money to do that how much we raised 10 million total okay and was that I assume you got into a series that price Dr that wasn't all note right no we started our first round was was uh two two on four pre which was a priced round we started priced and then the second round was priced also so just to everyone understands again Paul started out doing a equity round in other words he didn't do a kiss or a safe or one of these I notes that you're you're hearing about he got you know he raised $2 million and his valuation was $4 million pre-money uh $6 million post money so he sold what about a 30-year company Paul yeah yeah that's about right got it and were you the sole founder of a fresh or do you have Partners no I I had another founder Bob and Shaw okay and then what did you grow that to in terms of number of users where it be suddenly became so interesting to LinkedIn um you it was only a couple 100,000 users at the end of the day it was the first startup I've ever had though and you know you could think of it sort of this people search on steroids it basically found everything about you from GitHub LinkedIn Facebook P Pinterest Ford Square YouTube we hit all these networks and it was the first startup I never had to explain anybody I simply showed them their dossier and their jaw would usually drop open were you paying for access to the data pipelines of companies like return path and consumer insights product or clearbit or full contact or discover org or was it were were just scraping the web front structured data none of the above clearbit didn't even exist we tried full content honestly we didn't like the data and we built our own identity engine from scratch and and what was the technology what was it built on was it again just scraping unstructured data online um you know I would I'd be a little more careful to say it was sort of semi-structured you know to be fair um but it was a heck of a lot of work and yeah it was M it was real time so you walked in a coffee shop typed in someone names we looked it all up in real time and provided the results that's amazing so was refresh your you know get me inside of your quote money brain right was refresh your first big win or was the bills exit uh enough to like basically have you set free for life you know there's the exits that are the the car the house and the plane and I don't think I've had the plane yet so I'm still I'm still working you know there's no question about it now everybody got though on the refresh you raised 10 million bucks everyone made money on that right I believe so yeah yeah okay well I mean you would know because you would have been one of one's making money all right good so that one well and then we're working backwards so refresh was your most recent exit what was the bills.com exit right before that no it was a good five years before four years before okay but in terms of your company prior to refresh you were building home account.com correct that's correct okay so you built that for uh for uh how many years before you sold that to bills um I was there for the first year of the company and left the company went on for another two years or so so home account wasn't your company I was a I was a minor founder what's a minor founder mean well I didn't get 50% of the company I got you know more than the opt something out of the option pool and less than uh you know 50% yeah and for those folks that don't understand or theyve never heard the term option pool before describe to everyone what that is uh when you take investment you you do the calculation of how much Equity you just gave up and then the venture capitalist say oh no by the way you need to give up 10% more or 15% more that you're going to put aside for future employees and typically when you hire you know uh first employees you know all depending on on their their skill set what they're bringing to the table but it's typically um in the early days one to one to two to three four five% of the company and in the later days 0. 25.5 you know that sort of thing and those of you listening right now that are thinking about raising you want to watch out for that conversation because many of these Venture VCS or just investors will ask for you to set that up before they invest so it doesn't dilute their share that they're buying into was that your experience I I don't know if any would do it any other way they absolutely are not going to get deluded by the option pool that I've ever experienced and and you know 100% watch out for that but it's also pretty standard you know you expect it yeah okay let's fast forward to where we are today so these companies are going well you're doing well you you sell to LinkedIn you stay there for a while why' you leave the company you just get bored um you know I think it's almost the Silicon Valley cliche to say you sell your startup to a large company and you stay precisely one year and you go um and you know I'm not sure I ever never understood that but you know keep in mind when you come in through an acquisition nobody hired you nobody championed you to for this role and and that sort of thing so it is and you come in as part of a big group of people so it's it's a very different um you know situation there's nothing wrong with the situation that sort of thing but you know um I'm always looking for bigger and better opportunity and it was I was that was fine there but it was time to go did you have a one-year earnout as part of the deal yeah sure okay got so part of the part of the exit deal was an earnout that's really what kept you even a year that's why you didn't leave immediately yeah well I I don't know if I would have met left immediately anyway I remember my mind you know my thought process back then but yes definitely earnout was a factor in the in the decision okay so take us through today what is mailinator and how do you support yourself how does it make money so mailinator was a side project I built 13 years ago for to scratch my own itch which is basically a free disposable email service it is a receive only email service it can't send it can only receive that being said you know I have trouble explaining to people there's no such thing as accounts there's only inboxes every inbox is public anyone can change can check any inbox and read any email every single inbox you can think of already exists so the real trick to it is I at one point went to a website maybe it was New York Times they wanted my email address in order for me to read an email and I didn't want to give them my email address because I felt that be put on a Spam list so with mailor you would just put in something pick it out of the pick it out of the air nathan1 123 mailinator.com New York Times then emails that email address the account or the inbox is created on the Fly you then go to mailer website second read the email click the link read your article never use that email again if you don't want to New York Times puts that in their spam list spams it forever um and it's just a like it say disposable email as far as I know it was the first one that sort of did that a lot of copycats came out later I say this is it's a very interesting concept and I could totally understand why you'd have trouble ISS describing this because it's so not Norm not the normal way people think about email inboxes um that's right the fallacy we discovered early on was people Associated email with identity they still do and it's such not a truth yeah and uh you know so a mailor you've got a couple trillion inboxes at your disposal yep and they're created on the Fly you can type in anything it's like picking a domain name almost yeah any anything you want as soon as the email arrives the inbox will be populated but you can check anything to your heart's content right now go check Joe or Fred or Bob 123 they're all they're all there and talk money to me how do you generate Revenue well you know like I said for a long time this was this was a side project for the last 13 years so I've been at Google I've been at LinkedIn I've been at four startups in the meantime so just just to emphasize that um and in the early days of course it was like let's try some ads which actually I can't complain the ads paid for the servers and more where you where would you put the ads um on the sidebar or something never never terribly obtrusive but in the sidebar when somebody goes to read the New York Times article that they were spammed with no they go to read the New York the email that they want to get from The New York Times got it you know it's a web mail site right at the end of the day so the ad would be on the side and you know let's not pretend the ad made a ton of money but they certainly paid for the servers and and that sort of thing um so then from there uh you know and I have to say it was always a side project it was always something I wanted to work on and what occurred to me was there was a lot of traffic going through that um that was affiliati but the problem is you get a lot you know if you have if you have a Running Blog you go ahead and you write an article about some shoes and you put an affiliate link and that makes sense and you you hopefully get some revenue from that if you hold something like say a forums or a disposable email site you don't control the links that are put on your site so it's hard to affili tize them and actually what mailor is always done is sort of give me this test bed to create new technologies um and I built actually another site called click router that looks through like five or six different affiliate networks finds a place to send a click and then affili tizes it so now mailinator makes a couple thousand dollar uh it depends uh a month just on affiliate Revenue um so again this is not this is not like a business but boy it's a great side project yeah um take the evolution farther and what we started to see was uh malator brand became incredibly strong uh everybody knew about mailinator you know that it was this place to just test send test emails and what we started to see was a high usage from uh QA departments who wanted to test their signup process who wanted to test their welcome email right and the fact that they could create thousands of inboxes immediately was extremely appealing right they could just test like crazy so they started sending us emails asking for features um and this is where I had started having conversations with some of the people I worked on Jack specifically early on in uh the history of mailinator of of what where we should go with this and we decided to add some features specifically for QA testers which that's what spawn the SAS bus so QA teams um you know I could arguably say around the world um and it's a very new business it's it's the new you can't say around the order without giving me a number I mean are we talking hundreds of QA departments paying you or thousands hundreds hundreds of QA teams now are using this service okay paying you yeah paying us that's right and this this gives us you know what functionality can we add there it gives us an API to pull the emails and now you can you know have email delivery as part of your integration tests in your build process and many companies do that um there's just you know all these different um use cases that QA test or sometimes they just want to have 10 inboxes to test right off the bat and there they go so we give them an upgraded UI we give them a private domain so they you know they every email and mailinator by default is public but if you pay you can get a private domain and then you can check an inbox you get you if you pointed say nathan. comom at mailinator um you can basically query every inbox that starts with the letter j and have one UI that shows you every inbox with the letter j that starts so Paul what do these guys pay you on average per month what's your arpo um the well the pricing on the on the current model although we're always working on this sort of stuff and a lot of stuff's coming down the pike is $29 uh for a single user and uh 129 for Te yeah we don't we don't have time though to go into like all the different cohorts and stuff if you just take an average so like is the average customer paying you what 35 bucks a month or yeah I'd say the yeah that's probably about right right I guess that right 35 I think that is right about 15% Enterprise or 15% team and and the rest is single person okay and and you said you've got you still have the ad Revenue coming in which you said what is three grand four grand per month uh yeah somewhere around there okay but it fluctuates sure okay and and you said you had 300 QA how many how many QA customers do you have yeah about 300 QA teams okay I'm guessing like right on the money today this is good it must have been that juice shake I had for lunch all right so if I mean I can do the math right $35 jaru per month times 300 from there you're making what about 10 11 Grand per month from the SAS model that sounds yeah that's about right yeah I mean you know the interesting thing is like this was absolutely a case of me doing nothing in all seriousness and the free product gaining its own brand gaining a great representation and creating the pay product all on its own yeah it was really interesting to watch and now you know we're adding this engine behind it of actually doing marketing of actually um continuing to build out features and actually turned into a business now that we have um you know it remains a side project to me as it always has I I still love to code whenever I can and and this gives me a place to do that and we have other folks working on the marketing and the positioning in the product yep okay that makes good sense walk us through like some of the other metrics here now you've kind of let this go organically so I'm curious to see what these look like but churn right churn is always tough in a SAS business how many customers have started paying you and stopped um yeah churn is is pretty high um I don't I don't know the exact number but I'd say uh probably 20% 10 to 20% every couple months we sort of turn over pretty hard um I don't ex I definitely don't have the exact numbers on call at the on the high end maybe 10% of your customer base is churning every month that's worst case yeah something like that okay and this is all organic right you're not spending any money to get new customers they're all just finding you very little right now we've experimented with ads here and there um you know keep in mind the free site gets about 45,000 uniques a day um interestingly it gets about 9 million emails a day um which we've seen up to several hundred million emails a day so clearly we have a lot of users using the site and it's classic Model of turning them into you know paid users how many free users do you have you must have a significant number to get that volume of emails coming at you well I said 45,000 uniques a day but but but but those are just website Impressions right I imagine you have some kind of sign up process how many people are just using you for free or how many inbox have how many inboxes have been created with you well like I said first of all there is an assign up process you can check any email in any box without signing up completely anonymously let me re ask my question how many email inboxes have been set up with you I know you can set them up on the fly but how many have actually been set up well 25,000 or so new ones are set up every day got it I mean that's impressive right so about about 50% of your website Impressions convert into someone creating a new public inbox but that's the whole point they came here for this is not a da product I don't I don't use the site da stands for daily active users right yeah right I use this product every week or every other week I need to sign up for something that's when I use it that's when I come to the mail it's a very high intent usage I am coming to read a specific email yeah because I know I sent it there yep what did bootstrap so far have you raised capital for it or no no we I keep getting asked by Venture Capital but this is a wrong type of business to raise at this level and I need to make sure I see this what's that why do you say that um well until this QA business came up with again which is semi- recent I didn't see the model to take this all you know to a significant height I I you know I've been in Silicon Valley long enough that I really want to be able to show a chart that shows $100 million after five years of growth right that's what I want to be able to show and I didn't see that path for this product that being said I'm not saying it can't be a good business it absolutely can but to take funding is a whole different level of commitment and I want to make sure it's the right one and and every turn I've had better opportunities to take funding or to build something like refresh was a good example yeah what's your team size just you right now working on this no well again I'm like corner of my desk at best and we have two others all right so three and you guys just split the revenue each month um yeah something like that you know the revenue is there it's not it's not huge we got salaries or they have salaries I don't and we uh we go from there again your your gross margin though on this product must be pretty high right are there are there significant server expenses you know we ran until last November on a single server for 13 years even when we got 300 million emails in one day and this that's because this was always my test bed for testing server architectures and building fast software we finally rolled it out to several different servers for redundancy and and this and that so no server costs are ridiculously low there's no Capital cost so what is your gross margin I mean do you break 90% 95% well I I said servers I think are 400 bucks a month okay on about 13 14 Grand of total revenue between ads and SAS yeah so there you go what else some salaries and you're done okay top tribe I have to tell you many people go Nathan you came out of nowhere your website's growing so fast how' you do it the answer is simple so I use HostGator I don't know if you guys know that but I use HostGator and the reason I do they have like about 45003 templates I can use cuz I don't code they've got a great e-commerce plugin and guys I bug the heck out of their support they've got 247 support which I love so what I've done is I've worked with them you guys know I make great deals if you go to hostgator.com Nathan you can sign up get your own domain for 30% off and a 45-day money back guarantee okay again I make great deals for you guys go to hostgator.com Nathan to grab that now yep that's impressive great PA this is good stuff man let's wrap up with the famous five number one what's your favorite Business book um I would have I don't know if it's a business book I'd have to go with se's influence um that book really changed how I thought number two is there a CEO you're following or studying right now um studying there's a there's a bunch of them I really uh like to I'm not sure I'm studying them Amy erit over at um Madison Reed is is I I pitched her once as a VC and she turned me down so I followed her ever since and now I'm excited what she's doing actually in a hair coloring business so I find I find that fascinating Brad cam over at talkable really turn that business around so I'm not sure I'm studying anybody but I like to I like to follow a few folks that's great um and guys if you uh you to the you said talkable was the name of that company yeah great number uh number three what's your favorite online tool like HostGator um you know I I would have to say lenoe that's where I host everything and they're it's so incredibly simple I'm I'm much more of a technology guy than a desktop Tool Guy and uh I use them all the time I love what they're doing number four Paul how many hours of sleep to you get every night oh definitely eight and a half I can't not I'm worthless without without that and what's your situation married single do you have kids married and married no kids no kiddos all right and how old are you Paul 50 all right last question take us back 30 years what do you wish your 20-year-old self knew um well how to talk to girls I think would have to be the the real answer I was really good at computers but uh that was that was the end of the story there you guys have it from Paul founder of melor he wish he knew how to talk to girls better back 30 years ago in the meantime he's had so many exits refresh to LinkedIn raised $10 million there everybody made money also sold his company prior to that to bills.com which did very well he's had many exits now building mailinator almost by accident as a side project over 300 folks really QA teams paying him on average 35 bucks a month for about 10 grand in SAS Revenue add on top of that another another three or four grand in advertising Revenue turns a problem but again he's focused on testing right now in the middle of building something interesting team of three Paul tea thank you for taking us to the top thanks anthon if you enjoyed Paul today go back and listen to Catherine yesterday with just 5,000 left in her bank she launched a company called the muse now they get 50 million visits annually and over 600 companies peray but it'll surprise you what they're paying for it would mean the world to me if you guys got any value from this episode if you would go leave or riew on iTunes right now and then subscribe you know I hustle up heck to get these episodes out every freaking day for you guys and trust me I love it I would do it with no listeners but boy oh boy it makes my day and it makes my team's day when we see great reviews and get your feedback so thanks so much okay top tribe I love giving away free money I feel like o we're giving away cars and I have something special for you today how many of you have heard our super sharp guests talk about success they've had with Facebook and Google ads well all of you listening right now yes if you're listening you get $100 in free AdWords here's how you get it okay again thanks for listening get the free $100 from Google right when you sign up with my website post provider HostGator go sign up now to get your free money hostgator.com Nathan again that's hostgator.com [Music] Nathan