What does leaving money on the table look like? Ask Cliff Lerner who lost $79million while selling his first company.
We have interviewed many startup owners and ecommerce gurus in the past, but this Cliff Lerner interview is quite different from the rest. Why? Cliff Lerner is a multi-millionaire who made all his money only through his clever mind and smart product marketing. When he started he was another average kid with a business degree. With his sheer dedication, consistency, and creative instincts, he has developed multiple successful startups and most of them have scaled to more than $100million.
Cloudways: Please introduce yourself and share your career highlights with our audience. (in a short video if possible, if not then move on to the next question).
Cliff: I am the founder and former CEO of Snap Interactive (sold in 2016 and renamed to PeerStream), the first social media company to become publicly traded and creators of the first successful online dating application, AreYouInterested. I managed Snap’s extraordinary growth to over 100 million users & $100m+ in revenue while pioneering many online dating features that are commonplace in apps today.
I am also the author of the Amazon Best-Seller ”
Cloudways: How did you get the idea of Snap Interactive and AreYouInterested ? What problems did you see in the market?
Cliff: I first had the idea to start a dating website in 2005 while working as a research analyst at Lehman Brothers on Wall Street. My group of colleagues included a few single women who would frequently try to find dates on Match.com at the end of their day when a client meeting got canceled. These were very intelligent and attractive women, yet they had a lot of trouble finding dates on short notice. I thought there had to be a better solution as any guy would be very lucky to go out with these women.
So, I decided to quit my job and start my company, which would become Snap Interactive. The idea of my first online dating site was called IamFreeTonight.com. It was designed to make it easy and fast to meet people for a date. Instead of making users search and send countless emails, I created functionality that would simply let users indicate when they were free to go out and match them up with users who were free at the same time.
From my experience of analyzing companies at Lehman Brothers, I began to see a pattern as to what created a good entrepreneurial opportunity – find some action that people are already trying to do, where the current offerings are insufficient or ineffective, and use technology to create a far superior experience.
So, I created IamFreeTonight.com to specifically solve the needs of my coworkers.
Cloudways: You have a BS degree in Applied Economics & Business Management from Cornell University. How your university education helped you in your business endeavors? How was your first job experience at Lehman Brothers?
Cliff: One of my favorite quotes is from motivational speaker Jim Rohn who says, “You’re the average of the five people you spend the most time with.” Going to a top-notch university like Cornell made it easy to always be surrounded by intelligent and driven people, which helped me become even more motivated to succeed.
Cornell has a very strong entrepreneurial and business program that had a big impact on me. Their entrepreneurship classes helped me understand how to write business plans, what it takes to start a business, and how to talk to investors and raise capital.
As soon as I had the idea for a new company, I was also able to tap into the Cornell network for advice and fundraising help which proved to be enormously valuable.
Also, graduating from a top university such as Cornell made it easier to land a job on Wall Street. My analyst job at Lehman was very challenging, with early hours and hard work, but it set the stage for my success. I was surrounded by some of the most talented and intelligent people that I’ve ever met. I was able to learn from their skills and mentorship while gaining invaluable experience. Many of these people are still close friends today and went on to invest in my company.
Cloudways: When you created AreYouInterested (now FirstMet), what problem did you want to solve in online dating? What are some really interesting online dating startups do you see today?
Cliff: I first envisioned the idea for AreYouInterested when I read about an opportunity to build applications within the Facebook ecosystem. The unique opportunity I identified was the ability to tap into a friend’s social network. Previously, this information, known as one’s ‘social graph,’ had never been available to companies.
Since most singles meet their partners through their friends, I viewed the ability to build an online application that let you meet through your friends, and friends of friends, as a game-changing concept. As I previously mentioned, if you can use technology to make it much easier to do something that people are already doing, you’ll likely have a winning product. So, I had a feeling this was a once in a lifetime opportunity to create a compelling product and help millions of people.
The first successful feature we built was creating the ability for Facebook users to browse through their friends to see which ones were interested in dating you. When we launched this feature, which included some viral incentives to encourage you to invite friends in order to see who liked you, our application exploded and started to get 100,000 users per day.
Today, online dating is such a large and growing space that we see new ideas nearly every day. However, I think users are as frustrated as ever with a lot of the current offerings despite the growing usage. I believe a product that can leverage the enormous amount of data we have in order to create superior matching algorithms will be the next big winner.
Historically, dating apps have innovated by making it fast and easy to meet people. Back in the day, it was actually a really tedious process and would take weeks to set up an actual date. But now, with the invention of mobile apps that leverage GPS and UX enhancements such as swiping, meeting people has never been easier…but that doesn’t mean it’s better.
Today, singles don’t want to just meet people easily, they want to meet the ‘right’ people. Far too often singles get really poor matches, which ruins their online experience. So, the product that can build superior algorithms to help you meet the ‘right’ people will be the next big winner.
Cloudways: Why did you opt to sell SNAP Interactive?
Cliff: Simply, it was time for a change. I spent 11 years building Snap Interactive and felt the time was right for a new challenge. As a founder and CEO, you need to absolutely love what you do in order to be a great leader, manager, and motivator. It came to a point where I was no longer enjoying the role and knew that it was time to move on.
Cloudways: You were one of the finalists of “Ernst & Young Entrepreneur Of The Year Award”. What product you were presenting at that time? How was your overall experience? Why would you recommend other entrepreneurs to compete in this kind of award competitions?
Cliff: The E&Y finalist award was one of the most rewarding experiences of my career. In order to qualify, your company needs to be among the fastest-growing over several years. Then, they interview you, and if you are chosen, you get to attend an amazing event and meet other incredible entrepreneurs. I would highly recommend anybody who has the opportunity to participate in these events.
We ultimately grew to over 100 million users and $100 million in revenue, so the recognition validated all the incredibly hard work everybody at our company did. Beyond the financial achievements, we were most proud of the 1,000s of marriages and millions of connections we created.
Cloudways: What were the top three growth metrics which you used to measure initially and did any of it changed after achieving tremendous growth?
Cliff: The goal of any startup is to basically achieve user traction before the money runs out. What we learned is that there are three critical metrics you must measure to see if you’re on the right path to getting this critical traction:
1. Is your product remarkable?
2. Do people love your product so much that they were telling others about it?
3. Are users coming back over and over to use the product?
These three insights are crucial because they are actionable, can predict future success, provide invaluable insights with only a handful of users, and are relevant at any stage of your product life cycle.
Fortunately, it was pretty easy to measure these things and get the relevant answers we needed. The three questions above correlate to the only three
metrics that really matter in a startup’s early days:
- Whether a Unique Selling Proposition exists – (USP)
- What the Net Promoter Score is (NPS)
- Your User Retention
Obviously, there are numerous other metrics you’ll need to measure in order to manage and grow your business including growth, engagement, and profitability metrics. The problem with most of them is they do little to tell you why your product is underperforming or not growing. The reason USP, NPS, and retention are the only ones that really matter is that they tell you why your product is underperforming,and hopefully give you the insight you’ll need to fix it.
There was a point after we achieved our explosive growth, where we noticed our core metrics were declining. At first, we couldn’t figure out what was going on, but then we focused back on these three metrics. The data enabled us to uncover the root causes of our issues and fix problems before it became too late. For us, it became clear that our product wasn’t unique anymore. I discuss how to measure these in more detail in Explosive Growth: A Few Things I Learned Growing To 100 Million Users & Losing $78 Million.
Cloudways: What do you want to achieve with your best-selling book “Explosive Growth: A Few Things I Learned Growing To 100 Million Users & Losing $78 Million.” Why did you take the route of telling the whole story of your success and failures instead of just writing a “Step by Step Guide”?
Cliff: The book was a passion project after I sold my company. I wanted to write it to remind myself of the lessons learned and mistakes I made so I could look back upon them for my next company and not repeat them. Also, a lot of friends and colleagues reminded me of the incredible journey we went on, and how valuable it would be to tell the story of what we went through to help future entrepreneurs.
As an avid reader of business books, I find most business books only tell about their wins, and rarely talk about the failures. But it’s in the failures that entrepreneurs and startups learn the most about how to achieve our goals. So that’s what I decided to focus on with my book.
Interestingly, the book actually started out as a how-to growth and marketing book, but my friends and I just hated the first few chapters. There are so many of those books written already, and I offered nothing new or special. What jumped out, however, were the stories behind each business lesson making the lessons more compelling and relatable to entrepreneurs. So, I started the book over and focused on the storytelling, with an emphasis on the mistakes that were made along the way.
Cloudways: What are the major challenges you faced while getting your first 100 then 1000 and then one-million users? What are some principles that you think a company should follow to grow its revenue from $10M a year to $100M in the next 3 years?
Cliff: I’ve found that it’s much harder to get your first 100 passionate active users than it is to grow from thousands to millions. The reason is that in order to get 100 active and passionate users, you have to have a great product that solves some specific problems for your target audience. This is known as product-market fit.
At this point, you have some data and feedback to constantly iterate and improve upon your product. And since these 100 or so users really do love your product, it shouldn’t be hard to build the right tools and incentives to encourage them to invite their friends and grow organically.
#ExplosiveGrowthTip: A few fanatical customer advocates are worth more than hundreds or even thousands of casual signups. Fanatical users will supply word-of-mouth growth while providing the necessary feedback to iterate on the product.
#ExplosiveGrowthTip: Having a remarkable product is not subjective. Either people remark and it grows organically or it sinks.
Cloudways: I have read it in your book that PR played a great role in growing ‘AreYouInterested?’ Our audience would like to know how you attracted some of the major publications?
Cliff: Companies spend a lot of money and will do anything to get one story or press release to go viral. It became clear that we could use our data or survey our users for content to create a non-stop stream of fun and compelling stories that would grow our brand.
Dozens of the stories ended up going viral with millions of page views and ultimately, significant signups. Although it took a couple of years to consistently get top press, the playbook for these stories became simple and second nature for us, and could likely be used in many other industries as well. Here is our viral marketing playbook on “How to Use Storytelling with Big Data:”
- Come up with a controversial or interesting topic.
- Create a controversial, interesting, or taboo hypothesis that relates to the industry, usually done through a company-wide brainstorm. Example: Do blondes really have more fun?
- Crunch the data. If there isn’t enough data or it’s just not possible to crunch, survey the users or run a survey using Google Survey to get the necessary
results. Example: To calculate if blondes have more fun online, all we needed to do was calculate how often women got liked vs. skipped based on their hair color.
- Create a catchy title. Find the most interesting or controversial result—something attention-grabbing—and highlight that in the title. Example: Blondes have 28 percent more fun online.
- Create a fun visual. Create a well-designed visual presentation of the data.
- Reproduce the story for a different demographic.
After the initial story is successful, reproduce the same story, but feature a more granular level, such as specific location (country, city, state), age range (millennials vs. baby boomers) or interest group (Android vs. iPhone users) to create numerous viral stories around one concept. Example: For the hair
color story, we broke the results out further by every state and then by city, age range, and gender.
Cloudways: At one time, you predicted that the Bitcoin would be $100,000. What went wrong? How do you see the future of digital currencies in the real economy?
Cliff: Nothing went wrong. Disruptive technologies take time to gain adoption and for people to understand their true value and utility. People forget that Amazon.com’s stock price declined 90%, and took 10 years just to get back to those levels. The bottom line is that we are still in the first inning for Bitcoin and have a long way to go.
I do believe that Bitcoin is the most disruptive technology of our generation. Not only does Bitcoin solve most of the problems that all fiat currencies ultimately experience leading to their demise, but bitcoin will also drastically improve the quality of lives of the 3+ billion people who are unbanked.
A digital wallet gives the unbanked access to the world’s financial system for the first time, which opens up all sorts of opportunities without intervention from corrupt governments. We’ve just never seen a technology that could have such a positive impact on humanity, and I don’t think something that can dramatically improve the lives of billions of people, like Bitcoin can, will be stopped.
Ultimately, more countries will experience rapid inflation, corruption, and other monetary issues, and people will likely turn to Bitcoin as their only solution since it was specifically designed to avoid these issues.
Cloudways: Being an entrepreneur is a serious challenge. How do you tackle this and what are your five tips for aspiring entrepreneurs?
Cliff: My book, details numerous case-studies on growth, management, leadership, and other topics and includes 79 Explosive Growth Tips For Entrepreneurs. Here are some of my top tips for entrepreneurs:
- 1. BE AT LEAST 10X BETTER: A marginally better product is worthless. It needs to be at least ten times better. Have you quantified how much better your product’s core offering is than the competition?
- 2. KNOW YOUR A-HA MOMENT: Your A-ha moment is the instant a user recognizes the massive value your product delivers to the user. Identifying and then optimizing it is vital to your success. What is your product’s A-ha moment?
- HAVE A REAL-TIME DASHBOARD: Building products and testing features without robust analytics is like driving blindfolded – it won’t end well.
- FOCUS ON RETENTION, NOT GROWTH: Growth without retention is worthless. However, retention without growth is a problem any entrepreneur should love to have because it means users love the product (verified by the Net Promoter Score – NPS). Don’t spend money marketing a shitty product.
- MAKE SOMETHING REMARKABLE: Being remarkable is not subjective. People are either spreading the word, or your product probably sucks. Don’t waste time and money marketing an ordinary product, you’ll fail. Is your product truly remarkable?
Cloudways: What books do you recommend to the founders?
Cliff: Obviously, I recommend reading my best-selling book, Explosive Growth: A Few Things I Learned Growing To 100 Million Users & Losing $78 Million, which gives readers a rare behind-the-scenes look inside a fast-growing startup that created the first online dating app and grew to 100 million users. It holds nothing back while detailing the highest highs and lowest lows of what it’s really like to run a startup. Some of my other favorites books for entrepreneurs are The Lean Startup by Eric Ries, Contagious by Jonah Berger, and Pyro Marketing by Greg Stielstra.
Cloudways: Name a few people who inspired you to be who you are today?
Cliff: My parents are my biggest inspiration. They have always been supportive and encouraged me to pursue all of my ideas, no matter how crazy it seemed, including quitting a lucrative Wall Street job. Surrounding yourself with supportive people is so critical if you want to succeed, so I lucked out by getting such inspirational parents who have been instrumental in my success.
As an entrepreneur and basketball fan, Mark Cuban has also been a huge inspiration. He is an incredible entrepreneur and one of the most rewarding experiences of my career was when we learned that Cuban was our largest shareholder and I had the opportunity to discuss strategy with him.
Finally, Warren Buffet has been a source of constant inspiration as well. I’ve attended several of his shareholder meetings in Omaha, Nebraska, and am always in awe of his ability to articulate complicated ideas so clearly and rationally. One of my favorite Buffet quotes is, “it takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
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