My guest today is a brilliant technology entrepreneur with incredibly lofty goals for himself and his business.
He is the founder and CEO of Freelancer.com, a global online freelancing and crowdsourcing marketplace, but this is in no way his first entrepreneurial venture. To date, Freelancer.com has acquired 18 outside companies to add to it’s arsenal — with Escrow.com being the most recent.
My guest has received countless awards for technology, social influence, as well as entrepreneurship.
Now, let’s hack …
In this 45-minute episode Matt Barrie and I discuss:
- Why Matt needed talent to thrive (and your business does too)
- The benefit of hiring smarter, better and more experienced people than yourself
- When he realized that he was unemployable
- Why your business needs to be a painkiller, not a vitamin
- What “BIG” is for Matt
Listen to Hack the Entrepreneur below ...
The Show Notes
- Freelancer Website
- Matt’s Website – Nothing Ventured, Nothing Gained
- Matt on Twitter
- Matt on LinkedIn
- Freelancer on Twitter
- Jon on Twitter
How to Make Your Business a Painkiller, Not a Vitamin
Jonny Nastor: This is Rainmaker.FM, the digital marketing podcast network. It’s built on the Rainmaker Platform, which empowers you to build your own digital marketing and sales platform. Start your free 14-day trial at HacktheEntrepreneur.com/Rainmaker.
Voiceover: Welcome to Hack the Entrepreneur, the show which reveals the fears, habits, and inner battles behind big-name entrepreneurs and those on their way to joining them. Now here is your host, Jon Nastor.
Jonny Nastor: Welcome back to another episode of Hack the Entrepreneur. Thank you so much for joining me today. I’m your host, Jon Nastor, but you can call me ‘Jonny.’
My guest today is a brilliant technology entrepreneur with incredibly lofty goals for himself and his business. He’s the founder and CEO of Freelancer.com, a global online freelancing and crowdsourcing marketplace, but this is in no way his first entrepreneurial venture. To date, Freelancer.com has acquired 18 outside companies to add to its arsenal, with Escrow.com being the most recent. My guest has received countless awards for technology, social influence, as well as entrepreneurship.
Now, let’s hack Matt Barrie.
Let’s take a moment to thank our sponsor, FreshBooks, beautifully designed and brilliantly laid-out and simple cloud accounting software made specifically for small business owners like you and me. Your business is going online, and so should your cloud accounting software. You will know that your data is safe, secure, and always backed up to multiple data centers so you will never lose it and you will always have it if your tax auditor comes knocking.
Stay on top of your business with a clear picture of its financial health. Try FreshBooks free today. Go to FreshBooks.com/Hack and enter ‘Hack the Entrepreneur’ in the ‘How did you hear about us?’ section.
We are back with another episode of Hack the Entrepreneur, and today we have an extra-special guest.
Matt, welcome to the show.
Matt Barrie: Thank you for having me.
Jonny Nastor: Absolutely, my pleasure, Matt. Let’s jump straight into this. Matt, as an entrepreneur, can you tell me, what is the one thing that you do that you feel has been the biggest contributor to your successes so far?
Why Matt Needed Talent to Thrive (and Your Business Does Too)
Matt Barrie: Running a fast-growing technology company, probably if I could distill it down to one thing, it’s like being the coach on an all-star football team. It’s all about getting the right talent into your company, motivating that talent, incentivizing that talent, and really driving it and training it up. I think I’ve been very lucky with this company, and companies in the past as well, but particularly with Freelancer, to attract really A-grade talent to the team — people, obviously, who are smarter than me, more capable.
Really, my job is to give them confidence and encouragement, put them in the right positions, incentivize them, and really help this all-star team drive the business to the next level: unlock resource contention, do resource allocation, and make it easy for that talent to really, really thrive.
Jonny Nastor: Where did you acquire this skill and this knowledge that you needed to be this coach? Not everybody goes into business with that forethought.
Matt Barrie: I think it’s something that’s really just come about. If I think back to when I went down the path of being an entrepreneur, I think fundamentally, I discovered I was unemployable at a very early age. So if I wanted to have a decent life and do things I wanted to do, I had to create a job rather than take a job. To do that, it’s pretty tough to do that by yourself. Even though I had at some point, in the past, thought, “Oh, I wonder if you could run a business as an online entrepreneur, just sitting at home with an online virtual workforce and actually not hiring any physical staff.”
The Benefit of Hiring Smarter, Better, and More Experienced People than Yourself
Matt Barrie: It got to a point where I did need to hire people, and really, the best way that you as a CEO can improve yourself is just attracting great people around you who are smarter and more capable. Really, they’re the guys that drive the business. I mean if you hire ‘A’s, that will attract other ‘A’s. You can throw them incredibly tough problems, and those problems will get solved. If you hire ‘B’s, they’ll attract ‘C’s.
So really, my philosophy is to hire the best people I can possibly find and afford. Over time, you build up a collection of really, really talented people, and that will attract more and more talented people.
Jonny Nastor: That’s excellent. Is it hard to hire people that you feel are possibly smarter than you in their field and to be like, “Well, I’m the CEO, though, and the founder of this company,” you know what I mean? Is it ever hard on the ego in that way? Because I know people that never want to hire somebody that will outshine them and make them not look like they are, but you seem to be the exact opposite.
Matt Barrie: Look, I think, as a manager, it’s your greatest failing when you try and build a moat around you and try and be the smartest guy in the room. Obviously, we have 420 staff in the business, and over time, there have been people who have gotten themselves into certain positions and not wanted to hire people who are more experienced and more capable. What ultimately happens is that their job function breaks down, because you can fake it for a while, but at some point, you become the bottleneck and a critical point of failure, and that becomes immediately obvious to the entire organization.
You have to be practical and pragmatic. This technology industry is growing so rapidly, and things are changing so quickly, that it is absolutely impossible to be an expert in every field. I’m 41 years old. Even at the age of 41, there’s a lot of inertia that you have because you’ve been trained up with old technologies, old ways, et cetera in the past.
I make a comment: “I only work with PhDs: poor, hungry, and driven.” You get some of these fresh grads coming out of school, and they don’t have all the baggage or the inertia of the old ways of doing things. They’re trained up in some really modern, new technologies. You just need to be on the cutting edge now to really drive a business like this.
Jonny Nastor: I love that: “poor, hungry, driven.” Let’s go back a couple of minutes to how you said, early on, you realized you were unemployable and you could not work for somebody else. Could you take us back to that time and when you realized this about yourself, Matt?
When He Realized That He Was Unemployable
Matt Barrie: My background is that I did engineering and computer science at Sydney University, and I was fortunate to go to Stanford in ’97 and ’98 and did a masters in electrical engineering. All throughout university, I had run little businesses on the side. I didn’t really think of myself as an entrepreneur. I did things I liked to do, but then I had some traditional jobs as I did graduate, working for more corporate-style companies.
I like to move quickly, and I like to question authority and ask, “Why are we doing it this way? Isn’t there a better way of doing things?” Sometimes, when you’re part of a corporate bureaucracy, that doesn’t always get looked at in the right way. I found both myself rejecting the system and the system rejecting me. I thought to myself, “Well, gee, I need to create my own destiny here.”
The great thing about being an entrepreneur today with technology is that you get to create your future. You get to imagine these amazing things and make them real and then try to make the world a better place through building great products and great services. So I think it’s a pretty magical time to be an entrepreneur, and as I went down the path of doing my own thing, I really loved it and enjoyed it. You can take your mind to wherever you want to take it and work around really, really great people that you want to work with.
I tell you what: I hate weekends. I hate it when you go home. It’s like, “Okay, what am I going to do? Maybe go down to the pub or whatever,” but I love coming to the office and the buzz of being around really smart, excited people doing amazing things because it’s a great learning experience. I think a lot of people that work for Freelance.com feel the same way. They come to work, and they love it, because you’re around amazing people doing amazing things.
At the moment, it’s 10:30 p.m. here on a Thursday night. There’s about a dozen people who are sitting about 10 meters away from me. I told them to be very quiet. They’re talking about work and different things we could do with the business and so forth. It’s a pretty amazing place.
Jonny Nastor: It is. So correct me if I’m wrong, but was your first business, major business, Sensory Networks?
Matt Barrie: Yeah, that’s what you would classify as my first major business, yeah.
Jonny Nastor: Did you do businesses before that?
Matt Barrie: I did, but they’re all little attempts at start-ups and so forth, so Sensory was the first real one. We went out there, and in that business, we built integrated circuits for high-performance scanning of network traffic.
It’s an incredibly complicated product. The technology today actually runs at about 180 gigabytes per second, and we built that using a field-programmable gate arrays that we put on a card, like a graphics card. Just like you think of graphics accelerator on a graphics card, this is an accelerator for scanning network traffic at high speeds. It was useful for things like firewalls and security appliances and so forth. We supplied that technology to people like LG and McAfee and so on.
Jonny Nastor: That seemed like a logical progression because of electrical engineering, obviously.
Matt Barrie: That’s right.
Jonny Nastor: Right?
Matt Barrie: That’s right, and I think this is a classic entrepreneurial mistake. I’d graduated from Stanford. I had studied security over many years. I actually had a little consulting business in security that I started back while I was at university back in Sydney, so it had been 1994 or 1995 – so very, very early days in the security space — and I studied VLSI design and computer architecture at Stanford.
Why Your Business Needs to Be a Painkiller, Not a Vitamin
Matt Barrie: I came out and was really more in love with the technology than I was thinking about, “Am I solving a problem?” And every company needs to be solving a problem, and that problem better be a painkiller rather than a vitamin. Because vitamins, we’d all love to buy and we’d love to take, but we forget. If I’ve got pain, if I’ve got toothache, I want to pay for a painkiller immediately. I want it now. So that company was really a solution looking for a problem.
We had some theories that networks are getting faster and faster, so you need to be able to look deeper and deeper into the network and understand what’s going on in the network, so therefore, you’d need an accelerator, et cetera. But there were a number of issues with that particular company in terms of building gigabyte-scanning technology in a world back in 2001 where there’s no gigabyte networks being deployed. So it was way too early for the market.
Then, fundamentally, the way in which we sold the technology, we sold it OEM because we were not confident in doing an enterprise sales team, being fresh graduates out of engineering programs. We thought maybe a VP engineering-to-VP engineering sale would be something that we’d be more comfortable doing. We chose to sell the technology piecemeal as an OEM chip or a card that goes inside the piece of equipment, but unfortunately, that business model was a squeeze play. The vendors are not really going to increase the cost of their product, so the ultimate customer didn’t incorporate the technology.
Some other component inside that box has to give, and ultimately, we’re battling the Intel chip, which was not a winning strategy. That’s a financial loss-making strategy. It certainly was a massive learning experience for me. The business actually ultimately did sell to Intel, and ultimately, we went from a hardware model to a software model, and in fact, the software ends up running faster than the hardware due to really smart things that some of the guys did with the cache.
But our business has been acquired by Intel, and ultimately it’s in a better place. When you’re supplying OEMs to the big guys and you’re trying to sell to a Cisco or a Juniper or what have you, they’re not going to buy from a startup, but they’ll certainly buy from Intel.
Yeah, that was a classic learning experience. I think that was my trial by fire in the real world of entrepreneurship, where anyone can hold the rudder when the sea is calm, but when the proverbial really hits the fan, that’s when you really do learn. That business was six years of great people, great technology. We had business model failure. We had market failure, being too early to market. We had very troublesome investors that were at each other’s throats, and if not, they were at our throats.
It was a loss-making business for its entire life because the business model of the hardware business is an incredibly difficult business to build. That’s why all the VCs today really focus on software companies and apps in particular, or online market places and things like that. Because you need one copy of the software, website. With inventory, you’re not making any money because you can’t sell anything. If you’ve got too much, it’s depreciating on the shelf pretty quickly, and you’ve got to tie up a lot of capital.
That was a business where I really did learn a tremendous amount, and that really paved the path for what came next, which was Freelancer.
Jonny Nastor: Yeah, I love that: “painkiller, not a vitamin.”
Matt Barrie: Yeah.
Jonny Nastor: It’s such a crucial difference.
Matt Barrie: Or even better, you want a narcotic, right? You get them hooked. So something like Uber, when you use the service once, not only does it serve a real pain, it’s just so addictive that if I try and stop using the product, I have withdrawal symptoms.
Jonny Nastor: I love that. But it was interesting, because I thought that Sensory Networks was your first venture into creating and founding a company, but you said that there was a bunch before it that never made it or never took off?
Matt Barrie: Yeah, there were a bunch before that. Either I was not the original founder — I was brought in — or ideas were not scalable ideas for service-orientated businesses, or the market wasn’t right or things like that. All the common mistakes you make in your first and second companies. The good thing is, if you fail fast, you can learn quickly and then move on, but Sensory was the one where I really had a great team and great technology and persevered for six years.
Jonny Nastor: Wow.
Matt Barrie: Ultimately, that business ran from 2001 to about 2013 and sold to Intel, so I left in about 2006.
Jonny Nastor: Yeah, I was just wondering how you come out of university, and you maybe do some security consulting. You get a corporate job at one point, and then all of a sudden, you go into founding a company that ends up getting acquired by Intel. It’s a big gap, I thought there was there.
I was like, “What is the mindset of coming out of college?” Becoming a consultant — that makes sense. That’s a natural progression. And then usually, you’d go into a service-type business, or you try and grow your freelancing in some way and confuse it with entrepreneurship, sometimes. But then there’s a magnitude of scale difference, especially then a leap to Freelancer, which is massive.
Matt Barrie: I can give you the short story of how it all came about. The consulting was happening when I was back at Sydney University, and some of the guys I was studying with at university were really into network security. So it was the early days when the web really was coming about. So we were supplementing our incomes installing firewalls and so forth. Back then you could sell a firewall for $30,000 for the piece of software, which were very different days, but then after I finished Stanford, I actually joined a startup.
I joined a startup called Securify, and I was employee number eight. It was a startup that was founded by all these rock stars in cryptography. Taher El-Gamal from the ElGamal cryptosystem was the CEO. You had all these really, really well-known people working there, and it’s interesting, because leaving Stanford in ’98, it was a pretty magical time.
Google was just starting. PayPal started by one of the guys in my class. All these big, big businesses were just getting going, and I joined this startup that had a bunch of rock stars. I thought, “This is going to be a bit of a sure thing because of the big names,” and it was funny seeing that all my classmates who were the ones that ended up starting the businesses that ended up being worth $70 billion. This company formed by rock stars ultimately did sell. It was nine months old. It had about 22 people. It had no revenue and no products and sold for $64 million. We thought it was too low.
It was pretty crazy times back then, but after that, I went back to Australia because it was around 2000 at this point. I actually came back here before the crash, and I decided to go into venture capital because that sounded like a really exciting thing because, obviously, it was ’97, ’98. The boom was happening.
Unfortunately, in venture capital, if you’re a really young guy or girl and you get into venture capital and it’s not your money, it is an incredibly boring business. It is an incredibly soul-destroying business. The reason is every day, you’re meeting entrepreneurs. Every day, they’re pitching you plans. Every day, you’re reading these plans. Every day, you go, “Okay, I’m reading 50 business plans. There’s at least four or five great ideas here. Maybe some need a bit of workshopping. You need to bring one or two of them together.
Every day, you’re meeting these entrepreneurs, and every day, you’re disappointing them because the fund that I was in, you’d fund two a year. The two that they’d fund a year, the deal origination is not going to come from a fresh grad with a small amount of experience in the real world. It’s the guys who, it’s their money, or it’s their fund, the general partners. They’re the ones who make the decisions, so I was just meeting all these entrepreneurs every single day and disappointing them because being a venture capitalist, you’re going to be the one that says ‘no.’
You meet with people, and you go, “That’s actually a pretty good idea,” and then you talk to the general partners, and it’s like, “No, we only fund two things per year, and it’s not going to be this one.” It’s like, “Okay,” and then you meet they guys again, and you like the entrepreneurs and you think there’s a bit of potential, but you’re constantly disappointing them.
I decided that when you question whether the economic contribution to the GDP or the country is greater or less than the amount of fuel you consume on the way to work, you wonder whether you should be doing something else.
At that point in time, what had happened was that my old thesis supervisor from electrical engineering had an idea for a business, and he came to me and pitched that to me. I said, “I’ll help you raise a bit of money and get that going,” and I helped him get his first round of money. It was really not in the space that I was interested in. It was in audio and video transcoding. So at that point, I thought, “Okay, it’s time to go off and do my own thing and VC. I’ve raised money for other businesses and helped my own professor get going.”
I’m now at that point where I could actually go do it for myself, and I never really intended to be CEO of the first business, the first real business, Sensory. I just ended up there. It’s a very long story, but at some point, you realize that the only person that’s going to be as passionate doing the business is you. You have to go out there just do it. Over time, I had a few good mentors back then that really helped me with a few fundamental insights into the role of being a CEO and the role of the board and so on.
Over time, it’s a lot of trial and error, and I think you’ve got to go through that trial by fire and the school of hard knocks to come out the other side and actually be a good CEO. I went through a lot of fire and a lot of errors. Basically, that’s been very beneficial for Freelancer.
Jonny Nastor: What sparked the idea for Freelancer?
Why Matt Walked out of His First Real Business
Matt Barrie: What had happened was I’d spent six years running Sensory, and after that, I’d collected around eight or nine venture capitalists. They were all at each other’s throats, and it was all just through the disalignment or unalignment, preferred-stock capital structure that works in the venture space.
You have old VCs. You have new VCs. The old VCs who have been in for a few years reach a stage where they reach the end of the life of their fund, and they need to generate a return and return cash back to shareholders, so they think you’ve got an exit or a liquidation event at some point. Of course, the business hadn’t really set the world on fire. At that point, you had new VCs that had come in who wanted to put more money in and really build it up. You had Australian VCs. You had Singaporean VCs. I had American VCs.
The American VCs thought the Australian VCs were hokey, which they mostly were. So they were at each other’s throats. I had strategic in there. I had Xilinx.com in there as a strategic, which was ironic, actually, because we were using their product as the core device to actually implement our technology. I thought by bringing in a strategic, we’d actually get better pricing. Actually, what happened was after we raised money from Xilinx, they went and said, “Wow, you actually have got really good pricing here. We’re raising the prices.”
I said, “Are you kidding me? We’ve just taken money from your venture arm, and you’re raising the price on us,” and they said, “Yeah.” I said, “Can we pretend this meeting never happened, because this is like really, really going to screw up the ability for us to deliver product, because obviously we’re a component in other people’s network equipment.” But it was really Kafka-esque, so in fact, right after I took the money from Xiolink, I had to design Xiolink out of the product.
That’s when we had a bunch of really, really smart guys think about other ways of implementing the technology. Ultimately, they figured out a smarter way to do it in pure software. That’s the long way around of saying, I’d just come out of this really difficult business, because we were doing a couple of million in revenue, not very much. We were losing a huge amount of money. I’d raised about $30 million into that business, and it just became really painful to operate.
Because raising money in the venture world, unless your business is going fantastically well, when you’re doing multiple rounds of financing in the preferred-stock structure and you’ve got series A, series B, C, D, E and so forth, it’s like a boiling frog. You look at the first term sheet and you go, “That’s probably not too bad.” You negotiate something a little bit better, and you give up a board seat, and you give up a few rights. It’s all fine, but then you go raise the series B, look at the term sheet, negotiate. You get it in a fairly good state, give up another board seat, give up a few more rights.
At each individual financing point, what you don’t realize is that you’re a frog in a sauce pan in boiling water, and the water’s getting hotter and hotter, and it got to the end and you realize, “What the hell happened to this business?” At this point, I had a very small amount of the company. I had all these restrictions on what I could or couldn’t do and just the nature of the investors and where they were, et cetera. All these different options were just completely ruled out for running the business, and there was so much conflict around the board that it was just unbelievable.
I think a lot of people have a rule, if you’re going to start a business, you need to have a rule for not working with jerks, and I reached a certain point where I felt, “Gee, I can’t work with these people anymore, this is just soul-destroying.” So I left, and at that point, it was probably one of the most difficult points in my life, because walking out of the business I founded and ran for six years … I had great people there.
I thought the technology was great. I was a little bit, too, blindsided by the technology. As I said before, it was a solution looking for a problem, but it was a really, what I call, I guess, a dark moment where you walk out and you’re like, “Sh*t, what am I going to do now?” My parting moment, which got me into a lot of hot water, was I said to one of the venture capitalists, I said — which I thought was an unethical activity at the time — “If you’re going to do that, well, I’m just going to walk out. I’ll just consider this my $30 million MBA.”
They didn’t like that very much, so I was persona non grata amongst the Australian venture capital community at that point in time. I’d walked out of my business. I was at rock bottom. I hadn’t made any money out of it. I was devastated for a number of reasons and, of course, my ability to go on and do the next venture and raise much capital was seriously curtailed by that comment.
There was also the fact that we very much had a ‘tall poppy syndrome’ in Australia. Well, not just a tall poppy, but we’ll say the syndrome where if someone fails at something — unlike in the Valley where it’s seen as a positive thing because it’s a learning experience that’s very valuable for the next venture — back here, particularly at that time, although it’s changing a little bit now, it was, if you fail at something, “Don’t touch the person. They blew up a business or the business failed.”
Even though I consider the business failed, actually, ultimately, it did sell to Intel. It was a reasonable exit for the guys who continued on. Anyway, at that point, I was pretty devastated. I was sitting at home. I took time off. I went skiing. I was trading the stock market and so forth, and I was working on a few little side projects. I was looking for something to do next.
How a Side Gig Led to the Birth of Freelancer.com
Matt Barrie: I was helping someone get a website built, and for that website, I just needed to get some data entry done. I need to fill in a spreadsheet with a list of companies, their phone numbers, their email addresses and so forth.
I thought, “Well, this is pretty boring work. Maybe I can get a little brother or sister or a friend of mind to do it. I’ve got about a thousand rows in the spreadsheet to fill in, and I’ll pay about $2 per row, so it’s about $2,000 worth of work. Surely some kid would love to do that, just sit at home at the computer and work whatever hours they want to work, just as long as they get the job done.” What happened was after four months, I actually couldn’t find anyone to do this job.
I’d find a kid, and they’d say, work on it for about half an hour and say, “This job’s really boring.” I say, “I know. I’m paying you $2,000,” right. “That’s why I’m paying you the money,” right. “Oh, I’ve got soccer practice. I’ve got exams.” And it’s not the sort of job you could go take to put on online classifieds site because it’s just a bit of part-time work, and it’s like “Where do you go?”
After four months, I was completely frustrated one day, and I think I typed in ‘data online’ or ‘cheap data entry’ or something like that into Google, and I found this website called Get a Freelancer. It was horrible. It looked like Craigslist. It was absolutely one of the ugliest websites I’ve ever seen, and it was all these grays and designs of the paint left over from the USS Midway. It was just horrible. I posted a job on the site, and there’s all this activity happening on it, but it’s like, “Is this real?”
I didn’t know what was going on. There’s people bidding on jobs, and so I posted the job, and I walked away, and I actually forgot I posted a job. But three hours later, I came back to my email, and there were 74 emails in my inbox saying, “I’ll do it for $2,000, $1,000, $500, $400, $300, $200, $100.” And I thought “What? My entire inbox was spammed,” and I thought, “What is this?” I said, “I couldn’t find anyone for four months. There’s no way that there’s 74 different people who want to do this job.”
I thought, “This is just … this can’t be real,” and then not just that, but they’re not just willing to do it for $2,000, they were going to do it for $100. I thought, “There is no way. That this is impossible.” I hired one of the teams. It turns out they were in Vietnam. They did the job in three days. It was perfect, and I didn’t have to pay them until the job was done. It was $100, and this is the “Eureka!” light-bulb moment going off in your head.
This is the point where I was … think back. I was a frustrated entrepreneur. I’d walked out of a business that was a hard slog for six years. I was like, “How do I go start my next business?” I had a tough time raising financing for anyone to go, which is a critical part in any business to get going, because you need to hire people. I hadn’t made any money out of my last business, so I was like, “Yeah, there I am, broke. How do I get going? I can’t raise any money. What do I do?” And all of a sudden, all my problems are solved.
I could hire an online army to do anything I wanted. The cost was just a fraction of what I expected to pay. I could literally finance an army off a credit card, and I could literally sit at home on a computer in my underpants and build a business, and I thought, “This is just phenomenal.” In terms of my comment before about how every real company needs to be solving a problem, this just solved so many problems for me. I was liberated. I thought, “This is just incredible.”
I go, “I could hire graphic designers. I could hire programmers.” I mean, I can write code myself, but I could hire a whole team of programmers. I thought, “This is mind-blowing to me,” and I thought to myself, “Actually, I need to get into this industry.” I thought, “This is like an eBay for jobs.” I thought, “I’m in this global marketplace for products that are huge. Why aren’t there global marketplaces for services?”
You’ve got Amazon, which is firsthand goods and products, eBay, which is secondhand goods, Alibaba, now there’s manufacturing groups from China. Surely a global marketplace for services is a massively overlooked category that there’s no dominant player, and this is back in 2007, 2008, at this point.
I thought, “Okay.” I wrote a website called BidItOut.com and put it together, a really rough version in about two weeks, and I got a feeling for the dynamics of how the business model worked and so forth. I did something which I always tell entrepreneurs to do, which is I did a really rudimentary financial model. I said, “Okay, how would I make a million dollars here? What’s the pricing? How many people do I need to sell the product to or service to? How often are they going to use the product?”
It just gives you a feeling for, does this make sense? Is this a business that’s going to be real? I thought, “Okay, and how much money do I need to get going?” I did a bit of an operating model for it in terms of having the staff I would need, and what’s their skillsets. I thought, “Maybe I need to raise $4 million to get going on this business. And I did do a bit of a survey of the space competitively, and at the time, there were hundreds of little companies out there doing the same thing, I discovered.
There were about 12 that had a bit of traction. None of them individually had really set the world on fire, and I thought to myself, “No one’s going to really finance me to be number 13, so maybe I need to borrow up and move a little bit quicker.” And again, to go back to this point, to understand my mindset, my frame of mind was I’d just spent six years banging my head against a wall running Sensory Networks. I thought to myself, “I don’t have the patience to start from scratch.”
That first million dollars in revenue is the hardest million dollars you’ll ever make. Once you’ve got a million dollars in revenue, it slowly becomes an operations research problem, because you can start pulling some knobs and dials and actually testing some things and doing things like AB testing and conversion optimization. You actually have traffic. You actually have revenue, so you actually have data you can actually test on.
When you usually have no customers or a sale once every day or two, it’s really hard to do AB testing because you can’t send one person that way and that person that way because you’ve got no traffic. The results you get won’t be statistically significant, so it’s like, “Okay, it’s guesswork.” I thought, “Okay,” so I reached out, and I contacted anyone that didn’t have any institutional backing and I said, “Do you want to sell?” and about three or four of them said ‘yes,’ and ironically, the one that looked the best was Get a Freelancer.
The reason why it looked the best is because it absolutely dominated the industry for search engine optimization, which is, ironically, the way I found the site in the first place, because I typed into Google ‘cheap data entry’ or whatever it was, and there it was, number one in Google. The same way I found it was the same way other people were finding it. It had phenomenal traffic, but it just converted horribly. It was just a giant leaky boat.
I just looked at it and thought, “Gee, there’s all these things I can fix.” And anytime someone says, “Look, I found a bug on your site,” I think it’s fantastic, because I can just fix it. I know I can make more money. I look at a site and I just go, “Wow, there’s all these problems with it.” I thought, “This is fantastic, because if I buy this business, I can fix this. I can fix this. I can fix this. I can fix this. And I’d build a financial model for it a vendor provided me.”
At the moment, we’re at market capitalization of half a billion dollars, and at IPO, we were actually $1.1 billion. It was the third-biggest opening ever on the Australian Securities Exchange. I wasn’t actually thinking that big. I was just thinking, “Well, gee, it’s doing a million dollars in revenue right now. I’m pretty sure I can get it to five.” Really, what happened was I negotiated an option agreement to buy the business for a good price.
Jonny Nastor: Exactly.
How Matt Doubled the Site’s Revenue by Overhauling Its Look (a Lesson in Trusting Your Gut)
Matt Barrie: I went out there to raise the money to close it, and long story short, it wasn’t easy, but eventually I did raise some money. I just starting fixing things. The first thing I did was re-skin the website. It went from the USS Midway to something a little bit more modern. It wasn’t fantastic, but it was just a little bit more modern in color. It went from black and white to Technicolor. It went to Technicolor. It was pretty basic.
A friend of mine in New York did a basic skin, and I coded it in, but it was pretty slapdash. At that time, there were no employees. There were three contract freelancers out in the Ukraine doing programming, and there’s one customer support agent in the Philippines doing support for half a million users. The Ukrainians were like, “No, don’t change the colors. It’ll hurt our eyes.” I said, “No, I’m going to change it. It’s horrible.”
Let me tell you — it was amazing, because another thing I did very early was I put a dashboard up, straight away. I looked at all the key drivers of the business — traffic and projects being posted and sign ups and revenue and things like that — and the minute I re-skinned the website, revenue doubled. It was phenomenal, because the Ukrainians are like, “Don’t do it.” I’m like, “Yes, I’m doing it.” “No!” and I just turned it on. Literally two hours later, I knew that it doubled revenue permanently in the business, and it was just phenomenal.
At that point, I thought, “Great, now I can hire a bunch of engineers,” so I started hiring a bunch of engineers. There were a lot of problems with the business model, so I start fixing those problems up. The way I run a business is to really focus on growth and grow as fast as you can, and so every time I made a dollar, I hired someone. I hired engineers and hired designers and data scientists. I’ve got a very rigorous process of focusing on incremental revenue.
I think I’ve got a very different philosophy for growing a business than you read about traditionally, if you’re going to read online in the blog sites and Hacker News and whatever. Everyone says, “Don’t worry about the short term. Focus on the long term. You make customers happy and worry about monetization later.” I do the complete opposite. If the customers are happy, they’ll pay you money.
I can’t build a financial model and show you what’s going to happen three or four years from now because technology changes, the industry changes, the delivery model changes.
Jonny Nastor: Oh, yeah.
Matt Barrie: Who know if wearables are going to take over for mobile? Who knows how big mobile’s going to get? You just don’t know, right? But I do know that I can absolutely tell you next month where the revenue’s coming from, because I’ve got these three projects going on, which is going to improve this conversion rate to that conversion rate. I’ve got a new feature coming out which I think will do this, and if you have that rigorous discipline to focus on incremental revenue, and you month by month track that over 60 months, eventually, with the power of compound interest, you get there.
Every time I made money, I hired someone. So it’s been a phenomenal ride. Now we have 420 staff and offices around the world and 15 million users with two and a half million projects posted. We’ve acquired 18 companies along the way. We acquired pretty much all the competitors who are out there, apart from two that have merged, and then they just changed their name. So that’s pretty phenomenal.
Jonny Nastor: Yeah, so from BidItOut.com to GetAFreelancer.com, to now Freelancer.com, and an acquisition of 18 companies.
Matt Barrie: Yeah.
Jonny Nastor: That’s amazing. You were projecting to the $1 million at first and then you thought you could take it to five.
Matt Barrie: Yup.
Jonny Nastor: That was as far as you got.
Matt Barrie: Yeah.
Jonny Nastor: Now, that’s a brilliant story. I love it. We don’t need, say, financial models for the future, but I do want to wrap up on this quote that I read from you last year, which is, “We want to be in every country, every language, every currency where people work on computers. The online marketplace trend is towards ‘winner takes all,’ so we need to get big quickly.”
Matt Barrie: Yeah.
Jonny Nastor: You mentioned at one point an acquisition of 18 companies, almost half a billion, I believe, as a market cap when you went. I want to know what ‘big’ is to you at this point. You have this desire to create something insanely big, and it seems from the outside like you have, yet you feel like you need to get big quickly. What is ‘big,’ Matt? What is ‘big?’
What “BIG” Is For Matt
Matt Barrie: I think in this particular space, you’re dealing with, fundamentally, a market that is huge. So you’re dealing with a human labor market, and if you think about it — every job, every country, every language, every currency that could be done with a computer — that’s changed recently. We know I’m not just doing jobs at computers. We actually two weeks ago started doing local jobs, so we can hire tradesmen and carpenters and plumbers and so on. This is a massive industry. It’s basically all jobs.
Jonny Nastor: Oh, wow.
Matt Barrie: It’s really a large section, a large proportion of jobs, right? You think about that particular market, it’s a massive market. If you look at the size and the scale that the global marketplaces of products have got to, and we’re talking PayPal — I think last time I checked, it was $70 billion. Amazon.com is, last time I checked, $207 billion, Alibaba, et cetera. We’re talking the tens of billions or hundreds of billions market capitalization, and I think this can be done in services.
Fundamentally, what’s happening is the world is just basically repeating itself 20 year later. So if you think back to 1995, that was the year that the Internet went mainstream in Western economies, so in the US, in the UK, in Canada, and Australia, people went online. I think that 1994 was the year that the geeks had email addresses, and 1995 was the year your grandmother had an email address. That was the big year that Netscape and everything flicked over into mainstream consciousness.
People went online, and being very consumer, juvenile economies, they went online and they bought things. That led to the emergence of global marketplaces of products, so eBay and so forth. Fast-forward to today, and it’s really only been in the last couple of years that the Internet for the first time is connected to the developing world. You’ve got people in places like India, Pakistan, Bangladesh, Philippines, et cetera that only just in the last three or four years are going online for the first time.
There’s 7.1 billion people on the planet, and there’s only three billion people on the Internet. So most of the world’s population actually aren’t there yet. Sixty percent of the world’s population aren’t there. But as the rest of the world connects up and they go online, they’ve got no money to buy anything. They’ve got no possessions to sell. So how do they transact? What can they do?
They can sell their services, and if they’re technical, they can jump into any technical part of the market and work in graphic design or web design or whatever it might be. And if they’re unskilled, they can start on something simple, like data entry, and work their way up as their skills improve. So this is a phenomenally large market. It is really early days in this market. I don’t see any roadblocks in the way of building a company that’s similar size and scale to the eBays, the Amazons, and the Alibabas.
Now I don’t know if it’s going to take five years, 10 years, 15 years, but it’s the power of compound interest, compound revenue. You get dizzy when you extrapolate the numbers out, but we have a track record now running for six years with a pretty smooth exponential curve of sign-ups and projects and revenue and gross payment volume and so on.
The last thing I’ll add is that two weeks ago, we acquired another phenomenal business that really just opens up the whole level of dimensionality, and that’s that we acquired Escrow.com. This is a business out of California that’s been running for 19 years that facilitated $2.7 billion in secure online transactions to date.
If you want to buy something that’s of value — a website, a domain name, jewelry, a plane, cars, heavy machinery, you name it, import, export, and so forth — you don’t want to send money on PayPal to someone to buy something or receive money on PayPal because you can get a chargeback or reversal or fraud. But this is really is the dominant global player in secure online payments, which it has been for 19 years. We’ve bought this business, and it’s a tremendous foundation for a payments platform and all global online marketplaces evolve payments platforms.
You’ve got Alibaba/AliPay, eBay/PayPal, Amazon/Amazon Credits, and so forth. And with Freelance, you have now Escrow, so I think it’s a whole new exciting frontier that’s being opened up in payments and financial services.
Jonny Nastor: I love it. Your visions are big, Matt. I love the thought of Freelancer not being just for getting websites made and the digital realm. It’s like a human labor market. Everything — the way I think about it, you think about it on this crazy, grand, amazing, different level, and it’s amazing to watch, man.
I do want to thank you so much for taking the time, Matt, for stopping by. Is there anywhere that the listener can go and follow what it is you are up to?
If you want to follow what I do, which is 99 percent Freelancer, but I occasionally will write about entrepreneurship or other topics of interest in technology or how I think about growing companies, I occasionally will post things on LinkedIn. I’m one of the influencers on LinkedIn, and I’ve got a number of essays there. You can read about all sorts of topics, issue, if you’re so much interested.
Jonny Nastor: Excellent, I will link to those in the show notes so they’re easy for everyone to find.
Matt, thank you so much for joining me, and please keep doing what you’re doing, because it’s amazing to watch, man.
Matt Barrie: Great talking to you.
Jonny Nastor: Matt, thank you so much for taking the time to talk to me today.
You know how they say if you’re in a room where you’re the smartest person, you’re in the wrong room? I wasn’t technically in the same room as Matt, but I was definitely in the right room, because the dude’s like a genius and has so much energy.
He blows my mind. The fact of the thinking big … most people literally, and I said this during the conversation, buy a website like Freelancer.com that’s doing okay and not really doing what it’s supposed to. You buy a website, and you would just try and turn it into a cool online business. Now it’s a multibillion dollar company buying up 18 others, but that’s Matt, and that’s awesome. That was a fun conversation.
Amongst that whole conversation, there were some very smart things said, some things that were so smart that I might not have even caught them, but there was one thing. There was one thing that Matt said that totally stuck out in my head. There’s that one thing. Did you get it? Did you hear it? Let’s do it. Let’s find the hack.
Matt Barrie: Every company needs to be solving a problem, and that problem better be a painkiller rather than a vitamin. Because vitamins, we’d all love to buy and would love to take, but we forget. If I’ve got pain, I’ve got a toothache, I want to pay for a painkiller immediately.
Jonny Nastor: That’s the hack.
Wow, Matt, yes. Does it get any simpler than that? “You’d better be a painkiller and not a vitamin.” Because it’s true. If your business or your service, your product, solves a problem, a definite pain right now that the person, your customer, your audience has, then you can be that painkiller. You will immediately be necessary for your customer right now.
A vitamin, although the vitamin market obviously is massive, they get forgotten about. It’s a much tougher thing to get into. It’s a much tougher sell. I love the simplicity of that, Matt. “Better be a painkiller and not a vitamin.” Thank you so much. That is awesome.
All right, this has been a lot of fun, as always. This is a milestone episode. This is the last episode of every episode of a podcast I’ve ever recorded in my life being recorded in this very office, which you can’t see, unless you go to my Instagram. If you go to my Instagram account, @jnastor, you can track me down there, and you could see a picture I took of this recording space. I’ve recorded almost 100 Hack the Entrepreneurs. I’ve recorded other podcasts of my own, and The Showrunner podcast now, and the countless interviews I’ve been on other people’s shows have all been recorded here.
We’re selling the house. It’s being packed up. We’re heading out West for the summer for a few months to live in a condo out there, but then we’ll be coming back to Ontario and getting a new house. It’s a big thing. Too bad you can’t see any of it, because you’re just listening to me but, yeah, that’s my thing. There you go.
I hope it’s been fun. It’s been a blast for me, and don’t worry, episodes are coming out all summer. I will be recording in Vancouver, and I’ll be meeting a lot of awesome people that are out there listening. It’s shocking how many people are in Vancouver. So if you are, as well, and you haven’t yet emailed me or Tweeted at me or Facebooked me, do that. Reach out to me. I’d love to take you out for a coffee. I really would. I love coffee. Vancouver’s notorious for coffee. Let’s go out and sip on some coffee and chat, but, yeah, hit me up. I would love to hear from you.
That’s it. It’s been fun. Thank you so much. I truly, truly appreciate it, and please, until next time, keep hacking the entrepreneur.