In Palo Alto (CA), we met Founder & Chairman of ShareThis, Tim Schigel. Tim tells us his story, how he came up with the idea and founded ShareThis and how the current business model works. He also shares some advice for young entrepreneurs.

INTRODUCTION

Martin: Hi, today we are in the beautiful Palo Alto in the ShareThis office. Hi Tim, who are you and what do you do?

Tim: I am the founder and chairman of ShareThis.

Martin: Awesome.

Tim: Yes.

BUSINESS MODEL OF SHARETHIS

Martin: How did you come up with this idea?

Tim: Well it was about 2007 and it was right when social networking started to take hold. People didn’t know the term ‘social network’ yet. I had been investor in a number of advertising companies and noticed that the world was becoming more driven by people, more people oriented then it was data and information oriented. And after a lot of research and talking to people who were using the internet from young age to the older age, didn’t matter, found out that people were sharing a lot. They were searching a lot, they were sharing a lot and so focus groups revealed that basically the number one way people got new information was through share links. It is interesting, I do that, that’s why I know it is true but who measures it? So I started to investigate and I started talking to research organizations and others to say who has the data. How many times do people share? Then I found out that nobody had he answer and so that was the beginning of realizing that there was a big opportunity if you could somehow know collectively across the web who was sharing what to whom.

Martin: And how did you then start? Did you build an MVP, just checking out if somebody would use your snippet?

Tim: I actually co-founded with Dr. David Goldberg from the University of Illinois who is one of the worlds authorities on what you now call big data but generic algorithms and machine learning and he is kind of rock star. We had some PhDs working on it and we were taking quick stream data from other websites and trying to see if we could predict behavior.

Ultimately what we did was we did the toolbar extension so we could as user share any page where we are and we would mash up at the time e-mail or MySpace or Facebook. This is before they had APIs, it was very early. The results were pretty promising but we knew that having a toolbar wasn’t sufficient.

After talking to publishers we found out that they obviously wanted to promote sharing on their web sites but they didn’t have an easy way to do it. They had a lot of image links on their sites where forward to a friend e-mail image link no one ever used and we said if we can give you a one stop shop to get all the services and give you the analytics so you can actually track this and make your content more shareable I think they would like that. And it turned out we partnered actually with Alex King who was the WordPress developer who had developed the icon at the time but there was no code behind it. So we were the first ones to basically build the java script service because in order to do the tracking we had to know every time that page was loaded, every time it was shared what happened. And so we basically married the icon, the image with backend java script service and it just took off from there.

We launched in November 2007 and I remember our goal was to get to 200 websites and in the last two months of the year, November and December and we had over a thousand sites in first week. Then I said, “Hmm, there is something happening here” and it just continued to take off and still growing today.

Martin: Did you approach those 1000 sites or how did you get to acquire them?

Tim: Some of the big ones yes but many of them did on their own and we quickly became popular WordPress plug in and provided other platforms as well, so it really was organic. There wasn’t a lot of PR and marketing required, just good publishers on good sites and they said, “Hey, we need to use the ShareThis tools” and it just kept growing from there.

Martin: And when I look at ShareThis I know this I’ve seen this tool but is it that it is only software as a service so to speak or do you also give some kind of recommendations for example if I was liking some articles you can recommend me some other articles from other websites for example and monetize that recommendation that you are giving?

Tim: Right, we are not doing recommendation service today. So it is really providing a service to the publishers, more publisher focused tools so they can customize their website and customize the look and get the analytics and the insights from it. But we think there are a lot of potential capabilities given the distribution which is over 3 million websites now. We are looking at a broad range of capabilities that we could do.

One of the fundamental principles was that people share in a lot of different ways. We know we all share e-mail, Facebook, Twitter, we are multidimensional. So we are not trying to compete with the social networks, so finding things that can be effective and valuable to users and publishers that are sort of meta-social be near where we are looking to navigate.

Martin: How is the revenue model working? Do you have some kind of specific pricing tiers or what is the pricing driver?

Tim: Well, it is free to publishers and we use the data for advertising. So it is all non-PII, no personalized data that we help advertisers understand the target. The users they are most interested in on a real time basis and that is the trick of it. That is the hard part because we are generating terabytes or so of data a day processing that, being able to cross 700 million users around the globe and being able to build an audience segments for advertisers very quickly.

Martin: And the advertising, how do you display it then, is it a normal banner of the block or is it next to the ShareThis?

Tim: It is not in the widget or in the service itself. We use it for any other display or video mobile ads that the advertiser might be trying to buy anywhere else on the web. So to give an example perhaps you shared a lot of stuff on vacation with your friends or family. When you go to other sites in any of your other surfing you may start seeing some interesting travel ads. So in that way we are buying inventory exchanges from other partners.

Martin: And so basically this means an advertiser who wants to target some specific customer segments and he needs some more preference information for some users then he could go to ShareThis and say, “Guys, you know so much about some click references, I would like to buy this information in order to improve the advertising”.

Tim: Well, just like search. Search is going to be highly effective because it is a very good insight into what users are interested in. Sharing is very similar. It is also very real time, meaning you have to capitalize on it quickly or the attention fades away and the value of that attention fades away. So being able to identify these users in real time becomes very important.

Martin: Tim, all the year what have been the major obstacles during your entrepreneursial journey and how did you overcome them?

Tim: I think that startups grow in phases. So the first phase was the product-market fit, developing the product and the service for ShareThis and then letting that grow organically. The next phase was revenue generation and we are still in that phase. The good news is we were patient, making sure that we build the right kind of product from our own view standpoint before we launched it because I knew as an entrepreneur and investor that the moment you start generating revenue if it is not going fast enough it can come against you. The idea sometimes is more valuable than reality if you start generating revenue and it is not growing as fast. So we held off until we had very large reach and when we turn on the revenue it grew very quickly.

So we are now in that scale mode and we said, “OK, we have achieved that scale from revenue stand point, go back and look at where else we are investing on the product side.” Because we think there are a lot of possibilities still. It’s the early days of social on the web and so picking the right spot and the right road map for us is really important. It will lead I think to a next generation.

Martin: Were there any other obstacles where you said, “Oh, this was a really hard or decisive point in the history and this was the situation and this is how we managed it”?

Tim: Well one of the things for example in the early days we decided to work with advertisers instead of just selling our data. We believed that is important for a number of different reasons. One we didn’t want to provide a negative perception to users, we didn’t want to have publishers question what we are doing with the data and at the end of the day we said, “If anybody knows how to use this data should be us”. So we did something that was, we could have easily solved the data and had revenue but we said, “No, we are going to sell it ourselves and really work through the issues and the challenges of how effective does this make advertising” and I think we worked through that well.

And now we are at a point where we say, “Okay, now let’s look at how we can partner with this data in a way that doesn’t create channel conflicts or other issues.” I think that the issue with data nowadays and advertising, problematic advertising is the quality of data varies greatly depending on where the data comes from. And usually it is its latency is an issue. The data is too old and so that signal quality is low. Ours is very high, it is real time so we are very selective in terms of who we partner with and how we go to market with that. So that is something that we are in a number of conversations now are exploring that and are pretty enthused about what can be done with it and so that is. We are around that challenge now.

Martin: When you grew the organization from your first start of two or three people to maybe next 20, 30 – what have been your findings when building the organization? Was there some point of saying, “I didn’t expect that, there were some kind of issues how I put the organization in place”, or something like that?

Tim: Right. I used to give a speech at every quarter which is to say the folks, “Don’t get comfortable with your job function or your title, or where you are sitting at your desk” because if you are in a fast growth company that is going to change. We are a creatures of habit and we tend to, so when we are twenty people we all kind of like the office, we like having 20 people, we all go out for drinks on Friday. And then when you go from 20 to 50 or from 20 to 100 whatever it is that is going to change and not everybody is going to be comfortable with that. So that was a speech I often had to give, every quarter.

The other thing that happens and the reason you have to look at everything from a zero base line in terms of staff and overall resources is that you grow given the certain set of assumptions and in overtime some of those assumptions prove to be valid or false and so you have to correct as you go. I think every companies goes through that regardless of size. So that is something that to keep in mind and I think I am reminded of often just when things are going great and you have several months of great growth and great success you are reminded, “You have to recalibrate.” And that is not necessarily a bad thing. You shouldn’t assume that this is just like a linear process. Growth just keeps going cranking without any change and market conditions are changing, underlying metrics. So that is one of the big reminders is that you need to readjust and calibrate every so often.

Martin: It seems that you also felt that emotional roller coaster quite a bit. Can you give us some kind of insights and one moment that you feel really, “Wow, this is awesome. I will rock the world” and the other one will “Oh, I am really on the brink of going to bankruptcy, whatsoever”.

Tim: I used to say: “Sometimes I feel like I am on top of the world and some days it is on top of me”, so that is for sure. There is a risk of being bipolar when you are an entrepreneur. I remember that one time we had launched new service or capability and I remember a big company (don’t remember the name) but I got a threatening e-mail and it just ruined my weekend. I just felt like everything is just going crumbling down and it turns out it didn’t and I realized that it was just kind of flattering. The big company was taking notice of what we were doing but at first I just thought competitors will come out and I was like “Somebody is doing exactly what we are doing”.

Over time again it proved that that you put it in perspective I guess, this is the point. When enough of those things happen you get more and more of that perspective and in our case the mode, the fencibility we have is the distribution. Three million websites and those are all independent decisions, publishers come to us to get our tools and it think that stirred things in the network.

I used to say in the investing days as a VC: “Companies that come on the radar screen quickly go off the radar screen quickly.” So it is easy to fall into a hype cycle but there is no business fundamentals there. You will go away just as fast. So what I like is that it is grown over time and we certainly have had fast growth but it has also been building a really strong foundation and that is the most important thing.

Martin: When I look at the publishers is there any kind of benefit that you are offering them that is based on this economies of scale or is it just free and you have analytics for your website?

Tim: right now it is free and analytics, although it is some of our biggest publishers we roll up our sleeves and we did a hackathon with their team and our team, and we are exploring ways that publishers could take advantage of that data, take advantage of that network in bigger ways that aren’t possible today. We believe that because of that distribution, because of the type of data that we have we can enable new capabilities that just aren’t possible with others and that is just where we are looking to navigate, not to replicate features. Recommendations for example have been around for a long time and then you have got our brains to build on others doing some of those sorts of things. Well, that is possible with or without our data. But what we want to look at is what is possible that nobody else can replicate. That would be unique so that is where we are headed.

We like working with the customers and I have always been about customers driven design. That is basically how ShareThis was created. I was really understanding end users and publishers so we like to go really close to those publishers to figure out where we are going to navigate next.

Martin: Lots of first time entrepreneurs think “Oh, I need so much money to start a company”. How much money did it take you to simply start?

Tim: We kept a very burn rate. It was three or four people, college students, basically PhD students for a while and even when it took off in terms of the distribution it was pretty revenue and we said, “Look we have a fixed burn rate and we are not going to violate it.” And in fact luckily we raised a series B on March 1st 2008, just before the market started to crash. And I remember saying, “Ok, this needs to last forever” and our plan was to last at least three years until we have visibility in terms of the revenue growth. And that is how we didn’t spend any more than we were already spending and then when the revenue started coming in and the first three years we blew away 20 percent of our revenue projections than we were able to invest in growth.

Martin: So if I am looking at shareability you need some social networks that are open. Do you see a trend of websites closing themselves and in terms of communities etc.?

Tim: I don’t know about a trend but I do believe that there are actual challenges, the walled garden challenge. Will social networks go all the way up portals did and first generation on the internet?

I believe that still is a risk or danger. Facebook has done a great job and they are certainly become the internet guerilla and maybe other ones will sprout out. Theoretically Pinterest shouldn’t exist but it does and I think other ones will over time. They all face that challenge of having a wall garden and internet is an open place. And that is how we have designed ShareThis is the assumption that people will always share in different ways, not just one singular way and that presents opportunities but also challenges in terms of how much data is available.

ADVICE TO ENTREPRENEURS FROM TIM SCHIGEL

Martin: Tim, today we do not only share great links but maybe I would be interested in your advice that you can share. Imagine, a young founder comes to you and seeks your advice because you have done it several times. What tips can you provide?

Tim: Easiest way to sum it up that I have developed now after working with hundreds of startups is start with the end in mind. When I look at the patterns of all the theories on startups it is about goal setting, it is envisioning where you want to go, so start up with the end in mind. And think about END – E, N, D – evaluation, navigation and dedication. I have got this idea and people are always passionate about their idea.

So the first phase is get it evaluated, evaluate yourself, have others try to find holes, confirm or deny so your assumptions and the idea. That is the evaluation stage. It is just like if you are getting a trip and evaluate where you want to go on vacation. Look at the scenery, what you want to accomplish, things you want to do on that trip. That shall be done in the evaluation stage.

Next stage – navigation. Again if you are doing a trip how long is it going to take, how many times do we have to stop for food or stop for fuel or stop to eat. That is your business plan. Your navigation. And while you are navigating it you may find some roads are closed, you may find some stores are not open and you have to adjust. So it is all about the metrics and understanding what metrics are driving your business and the assumptions behind your projections.

And finally the dedication phase is if you get the first two solved no matter what you get to your destination and you keep driving, you continue on that journey. And if your idea is big enough you will be driving for a very long time, meaning you are always on the journey if you have a big enough idea.

That to me encapsulates a lot of lessons and we can go for hours in terms of each one of those stages but it is really starting with the end in mind.

Martin: Cool. Do you have any other advice that you would like to share?

Tim: So the other thing that I see a lot is there are very few people that have been through the zero to ten million growth phase, ten million in revenue. There are more people that raise more money than that and the mistake raising money for revenue, it is all about the revenue. It is important to find people that have been through that phase that zero to ten million phase.

It doesn’t mean that founders need to have that to be founder of the company, I don’t think that is a requirement but if you don’t have you should surround yourself with people who have because I think it is the nature of the numbers. With a high failure rate of companies there are a lot more people out there who have stories of failure then there are stories of success. So find somebody who has been through the success. They can tell you what it is like to go from zero to ten million. Who can help you navigate, who can help you set the end goal and say how do you go from here to there.

So for example I meet with a lot of startups who are after a big, large market and are excited about it. I see their projections and they are getting to ten or 15 million in five years or so and I say, “Why don’t you go to tem million revenue next year?” and they look at you right here, “Are you crazy?” I say, “What would have to happen, what would have to be true for you to go from zero to ten million by next year?” I know it is possible. I have seen it. And even if it is not in that particular case, maybe there is more product development needed, it is a good way to think. It is good to think backwards. Say what has to be true, we don’t have to take five years to get there. We won’t even need a year to get there if we can get faster.

So part of what I look for or what I try to suggest other entrepreneurs is to find people that have gone through that experience and help them visualize that road map. How to grow in their first phase and see zero to ten. When you figure that solved you can go from ten to hundred.

Martin: Good. Tim, thank you so much for your time.

Tim: You are welcome.

Martin: And for your advice. And next time you are starting a company have the end in mind. END. Ok, thank you so much.

Tim: That went great, right?

Martin: Yes, nice.

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