In San Francisco, we meet CTO & co-founder of SKOUT, Niklas Lindstrom. He shares his story how he co-founded this startup and how the current business model works, what were the major challenges, as well as some advice for young entrepreneurs.

The transcript of the interview is included below.

INTRODUCTION

Martin: Hi, today we are in San Francisco in the SKOUT office with Nik. Nik, who are you and what do you do?

Niklas: I’m the CTO and co-founder of SKOUT. Together with my Swedish friend, we started SKOUT in 2007.

Martin: Okay, Great!

Martin: How did you come up with this business idea of SKOUT?

Niklas: Well, I came here in 2000 during the first dot-com boom with all the startups that are happening, the entrepreneurship. I have worked for 7 years in the mobile space but for a construction business. I thought I wanted to take that knowledge and everything that I’ve learned and use it in the social space as it was starting to get really hot with Facebook, etc. This was even before Facebook had a mobile strategy.

Martin: So you started before Facebook had their mobile strategy?

Niklas: Yes, we wanted to build platform on mobile, coming from Europe where mobile was a lot more advanced than here. We wanted to take a lot of what we’ve learned being Europeans and to bring it to the American market and started to build on that.

Martin: Was it always your dream to become an entrepreneur or did it develop somehow when you were still an employee?

Niklas: No, not really. It’s something that came while I was living here in the Bay area. So many people were thinking about starting something and so much cheer leading coming from people around you. So the whole atmosphere here and the energy of starting something, start to grow in you and you want to try yourself. The attitude of “you have to try and failure is okay if it happens…”

Martin: Can you tell us a little bit more about the first 100 days when you started SKOUT? When you had the idea, maybe pre-launch and post-launch.

Niklas: That would be the first 3 years of a struggle. It’s not 100 days. Struggling, having an idea, it doesn’t work, you change, you keep iterating, you have to be very persistent in creating something. We knew that we had something right, we didn’t know exactly what it was so we went back and forth. It was a big struggle.

Martin: Can you elaborate on that?

Niklas: We started creating a small community and they started using it. Since it’s a social platform, we had people loving it and that’s how we knew that we did something right. Then came the questions: how do we grow it, how do you raise money, how do you build a bigger company around it and that’s where we struggle a lot because we are first time entrepreneurs. We never raised any money before, we never grew a big internet company before. All of us that started it, the first team or engineers. It was a steep learning curve.

Martin: So you raise money only 3 years after starting or before that?

Niklas: We raised some angel money after one year. We knew we had to go full time: it would be evenings and weekends and a few engineers on the side. Everybody needs to go 100% in and to be fully committed. We knew that this was going to work, just need a lot of energy.

Martin: Okay. Great!

BUSINESS MODEL OF SKOUT

Martin: Nik, let’s talk briefly about the business model. How is the current business model of SKOUT working?

Niklas: It’s built on premium payment for premium features and advertisement. Since we struggled for 3 years, we were at the very early stage forced to monetize. We had to put the destiny in our own hands and make money. So we experimented with a lot of different subscriptions, with micro payments, points and gifts and since it’s a local social network, there were a lot of local advertisements. It’s a mix, I would say 50/50 of both. Depending of what kind of user you are, some users are prepared to pay for a clean experience, some people don’t mind ads in their experience like Facebook.

Martin: So, I understand the revenue model, but can you give our readers a broader picture, such as what is a typical user case looks like.

Niklas: There are a lot of versions of cases. You are talking to other people. You want to give things, you want to highlight your profile more, you want to be seen. Business model is very similar to Linkedin, you want to make your profile stands out among the others, you want to be able to see who are following your profile, who are interested in you. You can still use the service 100% free but if you want that little bit of extra, you pay premium, micro payment for premium services.

Martin: From my understanding, you have different kinds of applications, one application would be for business people, the other one is for people who want to have fun, party or go to concert. Is this correct? Are there any other applicationwise user cases?

Niklas: We focus a lot on the social not on the business side. We have several apps, some are focused more on meeting people, that is chatting, how to meet people who are close by, even people that are far away. You can travel to different cities and see what is going on. You can see the location-based news feed in Tokyo or Hong Kong. It’s a very different experience of where you are in the world. We also have apps for what to do in the real world: go to the night clubs, go to bars. We try to marry these two, the online and the offline, with different app. But we are still focusing on meeting new people but in 2 different ways.

Martin: And how do you match the preferences of a person that is coming to a new city and would like to meet like-minded people?

Niklas: We built a lot on time and location. People that hang out around the same location at the same time are quite like-minded. So we believe a lot in the serendipity of running into people randomly. This perfect matching algorithm is invented by a PhD , they don’t have that one, they think it’s more of when you use it or where you use it.

Martin: And are you working with Push or with Pull technology?

Niklas: Using Pull technology. It’s when people have time. They go on and meet other people at the same time.

Martin: Okay. What had been the major obstacles you need to overcome to grow such a large followers?

Niklas: It’s usually the growth. When growth flattens and the energy goes out of the team and you still need to push to the next level to get over the next bump. All these happen to every company, over and over again. You feel like it goes really well and then error goes out of the border. You fall flat and then you have to stand up again and recollect energy and then think through what you are actually doing and then push forward again on the product. We have always been about the product of the company.

Martin: When you started, when you grew to the first 100k downloads, how do you do that? Did you focus on specific city or region, or specific kind of user scenario or something?

Niklas: We focused first on mobile web, this was before iPhone came. Then we noticed how iPhone was going to change how we use mobile. We were the first meet people app for iPhone app on the market. That brought us to 100k downloads, 100k users. To be first is good luck and timing, but to be able to see the opportunity, there is something growing and grow together with the market.

Martin: Okay.

CORPORATE STRATEGY

Martin: Let’s talk about the corporate strategy. What sets you apart from the competitors or other applications that tried to target similar needs or wants of the end-user?

Niklas: We are about the openness of the network. We try to keep it open for as many as possible, otherwise you close it in. We are trying to marry the offline and the online. There is something about you like to meet someone online but how do you bring that offline. Where do you go? What do you do? Do you go to bars? Do you go to night clubs?

Martin: Is it because that you have this open standard that you get more people signing in and so creating this network effects that you become the largest player? Does this have some kind of positive externalities or is there something in terms of functionality that distinguishes you from the competitors?

Niklas: We believe in keeping safe network. We have a lot of algorithms and community moderation everybody to feel safe. When you are with a stranger, that has been one of the biggest challenges of developing a social network that is not like Facebook. In Facebook you are checked by your friends and you know the people who you are interacting with. If you turn that completely around, you put the user or our user, together with strangers, so it’s completely different scenario. We invest a lot of technology, a lot of time, a lot of thought in how do we make people feel safe and how do we make them safe. Educate them on where to meet, don’t meet in the dark alley at midnight, meet in public place.

Martin: So you are giving some guidelines in written form or is there some kind of technology behind it as well?

Niklas: Guidelines are in written form and then we have technology in the background to filter out people who do misbehave if it happens to be. Luckily enough, there are very few that do but you need to be able to find out pretty quickly.

Martin: Okay. Great.

MARKET DEVELOPMENT

Martin: Let’s talk about the market development. How would you slice and dice the market for SKOUT? Can you give us some kind of statistic, roughly, in terms of market size, market growth?

Niklas: I don’t have those numbers with me right now. What we see right now is the top of an iceberg. Mobile has now gone through the US and still growing. But we see a lot Asian market, Southeast American market are growing. The market for sort of like this, to meet new people, is huge. I would say, it’s bigger than Facebook in a way because we all have the need to meet new people. Just ten years ago, when we started, I said Okay, I met a date online, it would still be a little bit taboo. It was an interesting fact that it was different. Today when you say I met my best friend online, it is still Okay. It’s not completely normal, but a few years from now that would be how we meet most people.

Martin: There are several social discovery apps for example out there that try to focus on this kind of example, more general, not only dating but matching people based on other preferences. What is your assessment for the future, would there be some kind of specialized meet up application, or there would be a more of general holistic application that covers all the different section of people?

Niklas: The key is to get the mass of people. I believe there is going to be one generic app that you can tailor for your needs. I can get certain verticals of specifics that I am interested in and I can get more people that are interested in the same. It’s very important, you can’t make an app for everything but you should be able to make it configurable enough to fit everybody’s need.

Martin: Okay.

ADVICE TO ENTREPRENEURS FROM NIKLAS LINDSTROM

Martin: What have been your major learning or maybe mistakes that you would like to share with our readers?

Niklas: Never give up if you have an idea. I see too many startups all around the world that have great ideas, we almost want to copy them, but they give up a little bit too early. They feel that struggle doesn’t go into millions of users in the first year. They are comparing themselves with Snapshot and Facebook and if it doesn’t happen and they give up even if the idea is great. I think they should keep iterating on it because it never happens overnight.

Martin: How do you keep your focus when you were at the point when you say,”I’m not sure this would be something big… Should we start something else? Or shall we go back and be an employee somewhere?” Why did you stick with this idea?

Niklas: I think it’s our users. We have people who love using our service. Sometimes we get to narrowed on building technology, building product, that we forget that we have millions of users that actually love to use what you create and what you iterate on. That helps you driving it, it’s a guarantee or proofs that you are doing something that actually works. Keeping focus is probably the biggest challenge. We lose focus or you look too much to other people on the side, that you go back and forth. If I would have done something better, I would have stayed more focused.

Martin: What else can you share? Maybe a big mistake that make you go,”If I would start all over again, I would have not done that like I did, or maybe just adapt it a little bit.” Or maybe it was wrong at that time but now it’s right at this time.

Niklas: That’s a good question. Just because something failed that we tried 5 years ago, it doesn’t mean that it’s going to fail today. Many common mistakes that we did since we’ve been doing this startup a long time ago. We look back and say that we’ve tried that before, it never worked. But so much have changed in technology, how the device is used and mobile and even now the wearable is coming. I would probably take a lot of things that failed first and try them again.

Martin: Are there any specific mistakes that are done by a lot of startups, not only specific to SKOUT, but to a lot of first time entrepreneurs seem to make the same mistake again and again. So, you can say this is a mistake and this would be my advice for you.

Niklas: Give up. Don’t give up. It’s going to be a struggle, there are going to be a lot of sweat and tears, there are going to be a lot of late nights but it’s worth it in the end, to build something. The best thing in the world is to build something, but it’s not easy.

Martin: Would you recommend people who want to start a company to come here to Silicon Valley or New York or rather being in Madrid or Berlin and then why?

Niklas: I don’t know the energy or atmosphere in Madrid or Berlin. I assume it’s similar. But there’s something that really helps here that everybody is cheer leading, everybody believes in you. Even if it’s not a great idea, everybody will say it’s a great idea, pat you on the back and say,”Keep going.” And you need that pat on the back sometime. I would really recommend moving to build a startup here. If I did this in Sweden, I don’t know, I haven’t been to Sweden in 14 years. But it’s a great environment. You’ll find smart people, a lot of people that asked for help. And people are willing to give a hand even it’s almost competitor space, they will help you because the world is small they know they are going to run into you again.

Martin: Great. Nick, thank you very much for your time. If you want meeting people app next time in a new city, maybe you should think about SKOUT. Thanks!

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