Ten Years In The Making is a weekly podcast on how to effectively grow a startup.
Adam Robinson: Dennis Hegstad, Shopify app ecosystem entrepreneur and VC hater. Can you give me a five-minute bio, your significant career milestones, including what got you started building Shopify apps? Because I look and I don’t see that you had a bunch of e-comm brands, you were solving your own problems.
Dennis Hegstad: That’s true. So, five-minute bio to get to kind of where I am now, I guess, I started doing e-commerce during Myspace around 2008, 2009, built a website on WordPress when WordPress was freshly new. PayPal had just put out either a buy button or express checkout, I forgot what they called it. And me and a friend or two friends, one of them was a graphic designer, more of an illustrator, and the other one was a front-end kind of developer. I was like, “Hey, I want to build this brand,” and basically, got the site live and started selling products through Myspace and going to work music shows like Warped Tour and things like that.
Then I did that for a couple of years. Myspace went away, I got a little older, moved to Los Angeles, stopped doing the e-commerce site, got heavy into Twitter with building meme accounts, grew a meme network of accounts for about 12.5 million followers. And I was building websites that were like viral blog sites, basically, like BuzzFeed before BuzzFeed was out.
Adam Robinson: Yeah, just like all in arb.
Dennis Hegstad: Just arbitraging ad revenue, yeah. And so, I was sending clicks from my social media accounts on Twitter, my 12 million followers, to websites that I owned and operated and had people producing content on and would monetize with Google AdSense and affiliate ads and other things and was generating thousands of dollars a day in revenue. And I thought I was like, figured it all out.
Adam Robinson: Yeah, totally. Yeah, at that age, it doesn’t take a lot. You’re like…
Dennis Hestad: Yeah, I’m gonna buy a Mercedes and do this and blah, blah, blah. And then as soon as I get banned from Google AdSense, I lose my monetization, I started having to figure things out again. Then I got into affiliate marketing because of that because I didn’t want net 30 payments and I didn’t want to get banned from Google and lose all my income. And so, I got into affiliate marketing with my Twitter accounts, which then grew to building a platform to monetize social media accounts. This was in 2014.
So, I got all my friends on Twitter and Tumblr and Snapchat and whatever. They all connect their accounts and they would opt-in to share their analytics and data with brands. And brands would create campaigns that were self-serve and we were doing decent. Fast forward it.
Adam Robinson: What’s that called?
Dennis Hegstad: It’s called Exposely. It wasn’t massive, but in terms of revenue, it was like a couple maybe like a million and a half or $2 million in our first year, which was great for where I was.
Adam Robinson: Yeah, that’s fantastic.
Dennis Hegstad: Because I was so deep in it, I thought that the market was supersaturated by 2015, 2016, and I got out. And then even now, it’s still growing some of that. Maybe I should have stuck around with that.
Adam Robinson: Yeah. Like just the marketing and connecting people with audience to brands.
Dennis Hegstad: We were performance-based too. A brand could pay for a click, they could pay for a conversion, they could pay for an install, they could pay for any type of performance-based marketing. And the brand shows what those parameters were and the price, they provided the links, the postback URLs, pixels, creative. So, the influencer literally could just copy and paste stuff and share it, could actually even post it from our platform, and we would share it to their account via our app so that we could authenticate that the message was shared properly and no foul language was used. Anyway. So, like winding it down, selling off some of the parts for scraps.
Adam Robinson: Do you know Justin Rezvani, by the way?
Dennis Hegstad: Yeah, he was actually a competitor, his company called– I forgot what it was called.
Adam Robinson: Yeah, I forgot what it’s called also, but like it just sounds…
Dennis Hegstad: He did something very similar at the same time too. He lives around the corner from me actually.
Adam Robinson: Yeah, yeah, yeah, I know Justin very well.
Dennis Hegstad: Yeah, so I ended up winding down, selling some of it for way less than what it was worth, then got back into e-commerce around 2016, having this paid knowledge of Facebook and media buying, meme advertising, monetizing the web, and also doing e-commerce in the past. Like 2016 was a great time to get back into that. And so, I started running my own private label brands, where I’d order products from China, get my own label designed, having sense…
Adam Robinson: This classic, like Alibaba dream, I’m going to buy 100,000 new corkscrews and then brand them, whatever.
Dennis Hegstad: I did charcoal face mask. And so, in 2016, Facebook ads were really easy to run videos and images. If you had a good enough ad and it was sensational, you got a high click-through rate, you can just print money, basically. And for me, I didn’t have aspirations of making like a $10 million, $20, $30 million, $100 million brand. I’m like, can I make 50 grand a month in profit or 20 or whenever it is? And I was, and I was like, sweet, this is keeping me beyond fed and happy.
And so, I did that to the point of consulting for Fashion Nova in 2017 for about 8 to 10 months. And while I was running their paid ads there, I started kind of getting more exposed to Shopify apps that were like a little bit more impactful for a larger merchant. And I could sort of see like, whoa, this merchant or this app is doing X for, say, Fashion Nova, and then I was starting to talk to other friends who had bigger brands and they’re like, oh, yeah, I pay this app this much. And so then, just kind of explored that.
My friend, now co-founder kind of was like, man, yeah, after looking at some of these apps, we’ve been doing e-commerce stuff kind of churning and burning, almost like affiliate marketing or just chasing trends and making money and starting over and making some money and starting over. And then we just kind of decided, let’s pick an app that an idea that’s going to make sense. Messenger marketing was getting really big on Facebook and we didn’t like Facebook because you can’t take your list with you. And they were capping the reach of fan pages and meme pages and saying, hey, you have to pay to extend and boost your post. And we were like, what the hell, no, the one place that wasn’t tapped that was kind of making a revival was SMS. And so, we just decided like SMS was where we should go and we built an app for it.
Adam Robinson: Sweet.
Dennis Hegstad: LiveRecover, at least.
Adam Robinson: By the way, what a beautiful ecosystem Shopify Plus is. I mean, here’s a way I sort of think about it. It’s like the brands are great. There are shi*tloads of traffic and there are sh*tloads of GMV going through. All you have to do is make it a little bit more efficient and you can point at a screen that says you are printing money for them. A small optimization priced in the right way is a huge win for you as a vendor. And for them, it’s an absolute no-brainer that they would never cancel. And their business isn’t really like the little guy is susceptible to these, like, oh well, I mean this f*cked up. So, I’m out of business or whatever. It’s like a great pond to fish out of my opinion.
Dennis Hegstad: Yeah. I mean, I wouldn’t say it was a mistake because I think in the end, we did it well. But in hindsight, if we could have done LiveRecover over again, when we got to the Shopify App Store in 2018, we submit to the App Store, we launched as a private app instead of– or what’s called an unlisted app. So, we weren’t in the App Store. And so, if you went to the App Store and search, LiveRecover, you wouldn’t find us. And then competitors that started, let’s just say there were, of course, other SMSBump already existed. Attentive had just launched, not an app in the App Store, but they had raised a $10 million seed round. And we were like, okay, the space is about to get hot.
And so, we started seeing competitors pop up. Postscript launched a couple of months after us, then other ones and other ones. These apps started putting LiveRecover in their Shopify app listing descriptions so that if you search LiveRecover on the App Store, you would find our competitors. And we’re not in the App Store. So, we’re like, f*ck, we can’t do anything about this.
And so, we just let that happen for basically two years. And then after two years, we made the decision, okay, let’s go public because when you build privately and you’re not in the App Store, you save 20%, of their fee, which has now changed to 15% after the first million, but we were making over a million a year. And so, the fees were a lot for us. But we were like, okay, would we rather lose 20% to Shopify or 100% to a competitor?
Adam Robinson: Right.
Dennis Hegstad: So, it became, okay, we’d rather lose the 20% to Shopify. So, we ended up going into the App Store, and the merchant count, like I don’t know if it was 100%, but we may have doubled the user base in three months when we went into the App Store. Now, granted, how many of those merchants became paying customers and what the quality was, and how much they spent each month is different across the board. But yeah, that was one thing that I think was a little bit of a, not a mistake because we still did well, but who knows how much faster we could have grown given that we were a little early?
Adam Robinson: Right. Totally. And then, how do you compare LiveRecover to Attentive or whatever? Attentive is trying to be Klaviyo for SMS. What was LiveRecover doing basically?
Dennis Hegstad: Well, in my opinion, Klaviyo is– I’m sorry you said Attentive was trying to be…
Adam Robinson: Well, I mean I feel like that’s what their whole first chapter was like. It’s like this Klaviyo is great. It would be great to have a Klaviyo for SMS, let’s go get all the biggest vendors on it and…
Dennis Hegstad: Back when Attentive launched, actually, Mailchimp was still in the Shopify ecosystem and Mailchimp was considered, not a dominant player, but it was still very much like Mailchimp. And then Klaviyo was definitely making a better e-commerce first product. Mailchimp, the CEO had a falling out, a public breakup with Toby publicly about data sharing. And so, they left the platform.
And so, Attentive, I think at the beginning when they raised money, people were calling them the Mailchimp of SMS. So, we saw that and we were like, we don’t want to build the Mailchimp of SMS because, one, at the end of the day, money will be the mote here. Like Attentive, Mailchimp could just add SMS and Klaviyo can just add SMS. And then all of a sudden, they have the merchant base to just turn on that channel. They didn’t for quite some time, which was a little surprising.
But we wanted to do something that differentiated us enough that we were defensible, too, and maybe even complementary to these tools. The long-term goal was like, how can we be sitting alongside Attentive and alongside or even on top of Postscript, Attentive, this, that and being looked at as like the thing that doesn’t scale, but that is really beneficial when you do it. So, it’s worth paying a premium for, but it’s not something that most small businesses can afford to do because it just becomes too expensive to do in-house.
But then when you get to the top tier in the enterprise, you have enough people where you don’t need an outsourced, managed, live, conversational e-commerce person. You just either do automation or you have your own people doing the chat. You don’t outsource it, like LiveRecover.
Adam Robinson: So, LiveRecover, just for the audience, explain the basic value prop.
Dennis Hegstad: LiveRecover was a supposedly abandoned checkout recovery app for Shopify, but instead of using bots, we had a live human doing every message. So, humans were on the other end of every conversation, and every message was sent by hand.
Adam Robinson: How do you price it?
Dennis Hegstad: We charged $99 a month and then we took a 5% commission on the sales that we attributed on a last click attribution and a coupon reduction basis.
Adam Robinson: Did you ever get pushback on that attribution?
Dennis Hegstad: It was the last click and coupon use.
Adam Robinson: So, it’s both. It wasn’t one or the other, it was both?
Dennis Hegstad: It’s one or the other. But we did not do view– it was last click, and then expired after three days. Merchants could also toggle this. So, if they wanted to change it, they could. But if you changed it to a really tight parameter, like we had some people have changed it to like one day, we want it wiggle with you on price if you were like, I want a discount. Yeah, we’d be like, no. You tighten this up too much. If you were being a little more flexible on attribution and stuff and we’re happy to do a discount but not when you’re going to squeeze us like that.
So, I think 5% commission worked for most brands. And then, of course, if your average order value is hundreds, we would instantly reduce the commission down to 4%. Even some customers had 500-plus AOEs, they were like 2% commission. But what’s funny, and I think this is something that I’m still trying to make sure I’m conscious of is like the messaging around the pricing, a lot of merchants would say, oh, 5% commission, you’re charging way too much.
And I’m like, what do you get on your retargeting performance on Facebook? Do you get like a 3x ROAS, 4, or 5? Like if you had 2 or 3, like 4 maybe and I’m guaranteeing you 20x return on ad spend with 5% commission, I guarantee and I charge after I provide the services. I’m upfront it. The cost of our agents, the estimated cost, the time, and trust that you’re going to pay, 5% is not unreasonable. But I’m like, oh, when you say 20x return on ad spend guaranteed, that sounds like oh, a no-brainer, 20x ROAS guaranteed, but 5% commission is too expensive.
Adam Robinson: Have you ever looked at the wunderkind final page of their deck when they talk about their pricing?
Dennis Hegstad: No.
Adam Robinson: Have you heard about what they do?
Dennis Hegstad: No. Is it magic or what?
Adam Robinson: Well, it’s all along the lines of what you’re talking about. So, they just became masters at like– so the whole deck, it doesn’t talk about anything. If you look at the website, no idea what they do. Pitch deck, no idea what they do. It’s like, here’s the money we’re going to make you. Here’s a brand that works with us. Here’s all the money we’re going to make you. Here are the brands who work with us. Here are the brands who work with us. Here’s the money we’re going to make you. Here’s how we’re going to guarantee the money we’re going to make you.
And then, they’re like, okay. And the conversation centered around triggered email. So, what they’re arbitraging is that most people, either only have a checkout abandonment setup because Klaviyo forces you to do that and they call it cart abandonment. So, most people don’t even realize that they don’t have a cart abandonment setup or they have checkout and cart and nothing else. So, they basically say, okay, I’m looking at your Klaviyo, agree with me that you’re making $30,000 a month in triggered email revenue. And they get the brand to say, okay. And it’s like, all right, agree with me that if we go through a two-month onboarding and a six-month pilot, that at differing degrees of multiples of this triggered email revenue as seen in Google Analytics because we’re going to put you TMs in everything, we will then guarantee you ROI relative to the amount of incremental we generated.
So, then they have a table at the bottom that’s like it was 30 grand a month. If it’s an incremental five grand a month, they’re going to charge a thousand dollars. If it’s an incremental 100 grand a month, they’re going to charge $10,000 or whatever. And it kicks them into a 12-month agreement based on that. But they’re talking about the entire thing in terms of ROI.
And then what they do is they just build seven more flows, use identity to expand the audiences, and then get the brand to buy into last-click attribution on the entire thing. So, they just expanded the entire funnel and are taking credit for all of the revenue at the very bottom. It’s pretty genius.
Dennis Hegstad: I mean, and then they just charge a commission on this lift…
Adam Robinson: They roll you into a SaaS contract based on how this six-month pilot went of literally just setting up more flows and then growing the sending pools with identity, but that’s kind of like a…
Dennis Hegstad: Good for them.
Adam Robinson: It has very good brand equity with very large brands. It has very bad brand equity with the Shopify Plus crowd because fully managed service, these guys don’t want that. I think they sort of get the joke after it happens to them also. And they’re just like, dude, are you serious?
Dennis Hegstad: Like an agency saying that they’re going to come in and do great, like charge an ROI on added results, and then they just start retargeting all of your traffic and you’re like, wait a minute.
Adam Robinson: I mean, that’s in essence kind of what it is, but it’s perception of value. I mean, there are a lot of lessons to be learned there. And it just reminded me when you said that it’s like the pushback when stated one way versus the blind acceptance when stated another. It’s like you just need to be very conscious of that when you’re pricing stuff. So, three years in and out LiveRecover, did you bootstrap that? Did you take any dough? What was the funding sort of thing there?
Dennis Hegstad: I wasn’t against raising money, but I don’t have any experience with that personally. And my business partner, both him and I came from a place where we were doing affiliate marketing and had experience generating profits with our own money. And so, he had the engineering experience to build the app. When I asked him like, hey, should we be raising the money? He’s like, why? I can build the app and you can market the app and get customers. Why would we raise money?
Adam Robinson: He was like, all right.
Dennis Hegstad: You’re not wrong. So, we did that. We just decided, let’s not raise money. We don’t want the stress of not having the flexibility to decide when we, not call it quits, but if we get to a point where we’re not maybe the best people to run the business because maybe there’s an opportunity for it to become a bigger business and we just don’t want that stress or lifestyle or maybe that experience level has needs to change. I think we wanted the flexibility to have an outcome whenever we wanted to have an outcome. And so, bootstrap ended up being great because all of our competitors had raised VC.
And so, when you looked at the Shopify SMS app ecosystem from the top down, I mean, obviously, Attentive was number one, and then arguably, Postscript number two, and then number three could have been SMSBump, maybe number four is like an Emotiv or Voyage or someone else. And then number five, everyone always talks about LiveRecover. And so, we were at least part of the conversation and it was like not do you use LiveRecover or one of those visions, we use LiveRecover and its vision alongside because LiveRecover is the best at checkout recovery and you guys do all the other stuff. And we would send customers to all those other people because we didn’t see them as competitors.
And so, yeah, I think when the time came and the comps, people were flooding in saying, hey, we want to have a piece of an SMS marketing app. If you looked at all the opportunities, we were the best deal on the market because, one, we hadn’t raised any capital; two, we had built an efficient and profitable business with no one on the cap table. And it was just me, my co-founder, one engineer, and then our texting agent in the Philippines. So, it was 10 people, three people plus seven in the Philippines.
Adam Robinson: Yeah, that’s amazing. I mean, that’s how I like doing things too.
Dennis Hegstad: Yeah. So, when you look at other apps, they’re raising at 40x revenue or 50x revenue. And so, for us, it’s like, wow, we could have raised at over $100 million valuation based on the comps. But then it’s like at what point do we– then we’ve got to really go for this massive, now we’re kind of stepping into the pros out of gradual from a certain league where we felt comfortable. And it’s not that I’m not confident in my skills, I don’t care to play for that kind of level of stakes. So, we felt…
Adam Robinson: It’s almost like if you raised at that valuation, you would have had to have built Attentive, like that would be the next thing because they raised it $7 billion and they had to go build Klaviyo.
Dennis Hegstad: Exactly.
Adam Robinson: And Klaviyo raised it $10 billion and they had to go build Attentive. And f*cking adpost doing the same thing, like they’re building, it’s a weird deal. And I sold my first business last year and like, I don’t know anything about selling businesses. All we have are these bankers, and they’re just explaining. It’s like the larger the valuation is that you’re trying to sell for the fewer buyers there are of it, which makes intuitive sense, but it just doesn’t occur to you. It’s like if you’re probabilistically trying to maximize a situation that gets you in a really good place in your life, the smart thing to do is try to sell for $50 to $100 million because you can probably if you’re a good entrepreneur and you know how to build software and you know how to market products and you understand product market fit, like there’s a really, really good shot you can create a business worth that much without taking any kind of funding.
And then this came up in a conversation. Last week, I was having about our current business. We were just talking to this, maybe we’ll do a big secondary in a couple of years, I don’t know. But I’m using some venture debt. I’m buying a co-founder out of 80% of my stake. And the idea is if the trajectory continues to ramp, take chips off the table to the point where I’m fine and can really gas it. And we’re talking about the type of investor to do that with.
And this private equity guy was like, yeah, if you end up raising with Sequoia or something at some crazy valuation, it has this incredible benefit of like the press is amazing. The employees you’re going to get as a result of that are outstanding. But they won’t let you sell the business for $500 million. That’s not a possible outcome anymore. You have to go so much bigger than that if you sign up for that type of thing. There’s just all of these like if you go in sort of bright-eyed and optimistic into these scenarios and don’t sort of have the guidance of the downsides of some of this stuff, I just think it’s really easy to get stuck. What’s Attentive going to do with a $7 billion valuation, having raised a billion dollars?
Dennis Hegstad: We were just going to have to go hopefully that they can double revenue with email or 50% growth and then try to go public and just keep that story chugging along because, at this point, they’re getting too big for anybody to buy them and…
Adam Robinson: Yeah.
Dennis Hegstad: That’s kind of how it goes, I guess, when we go into that. But yeah, I agree, I think in that range of under $100 million, which is building a $10 to $15 million ARR business, which takes time and a team and skill. And I haven’t hit that level of scale yet, but that’s kind of what I’m hoping to do next if in an ideal situation, I’ll say.
Adam Robinson: I think you’re on the right track. This conversation makes me highly confident that you’re going to get there very soon. So, three years in and out, how quick was the product market fit on that? Our members talking, Matt from the feed was like one of your customers, right?
Dennis Hegstad: Yeah.
Adam Robinson: So, he was telling me how great it was. He’s like, dude, if you combine your thing with this LiveRecover thing, it would be like the best product ever. And I think I even hit up, I wrote somebody on the website and I was like, dude, do you guys like white label? This is like really early in the journey when we weren’t quite as defined as– what was the perfect product. And somebody blew me off over there. But how quickly is a product market fit? What was the iterations of that?
Dennis Hegstad: I mean, my business partner and I were both running our own dropshipping sites and our own private label brands, and I was consulting for Fashion Nova. And then when I left them, we were using SMSBump and then had situations with customers texting back the bots, being like, hey, I have a question or whatever, and they just wouldn’t get responded to. And it became something that we’re like, damn, this is an obvious need.
But then we didn’t want to respond and do all those texts ourselves. And it just made sense that that was something that we could build even for ourselves. So, my co-founder kind of did that, and then it just was something that we’re like, this is definitely an app that we should build and kind of stopped the brand stuff, the dropshipping stuff altogether.
In the building process, I probably had 25 merchants in the first couple of days or the first maybe week. I live in Los Angeles. I knew a bunch of e-commerce brand owners, so I don’t know what point we felt like we had product market fit, but I know that and we went from like, call it 400K in revenue or 40K in the first year, which was four months, 2018. The next year was like 10x that. And then the year after that was like 400% or 500% more than that. And then we got to the point where people wanted to buy the business.
Adam Robinson: We would buy.
Dennis Hegstad: Yeah. And so, that was like we ended up selling at month 30.
Adam Robinson: That’s crazy.
Dennis Hegstad: But I think product market fit probably came whenever all these other apps started raising more money because we were early in 2018, saying, hey, you want to do text message marketing and we have a live human on the other end? Some of the people were like, that sounds spammy. And then whenever Attentive and Postscript and all these people had raised a ton of money, they’re giving away AirPods to get on phone calls to get marketing about SMS. And then all these brands are like, hey, have you heard about SMS marketing? I’m like, yeah, I hit you up about it a year ago.
Adam Robinson: Right. Exactly.
Dennis Hegstad: I want to pitch you. And now, you’re trying to tell me about it. I’m like, yes, of course, I’m aware. And so, I think they kind of helped educate the market, which gave us more validation because it exposed the problem that automating every conversation wasn’t the way. And there are certain conversations that for sure need to be automated, but when it matters, it matters, right? It’s like, do you have a live chat window on your website? And it says, hey, talk to us, we’re live. And then you click because you have an actual question. And it would have been the difference between buying and not buying. And you click and it’s like, oops, sorry, we’ll be back Monday. It’s Friday. Why is this widget here? Don’t even show this to me.
Adam Robinson: Yeah, totally.
Dennis Hegstad: We just wanted to close that gap. And so, no, that was it. And to the point of like not having to raise money, I think that gave us our outcome. We didn’t have a venture scale exit, but it was still eight figures and for my co-founder and it was a life-changing amount and also…
Adam Robinson: Yeah, man. Hey, I sold our business for eight figures at three co-founders, and that gives you a lot of cushions. It makes me treat this experience a bit differently. There’s definitely orders of magnitude that happen with wealth, but I think, it’s like, I read the great CEO within and the guy is like– so like in his mind and I don’t know, this is written five years ago or something like that, he’s like most people I talk to, there’s a line at $10 million and a line at $100 million. And you can kind of do anything that you want to do for the rest of your life if you’re just reasonable at $10 million. The problem is, once you have that, your brain starts tricking you into thinking there are scenarios in which it wouldn’t be enough. And he’s like, that’s why $100 million, no one’s brain can trick them into thinking that’s not enough unless it’s like, whatever. It’s like the money will stop benefiting you in any possible scenario after that, which I think that’s an interesting way to look at it.
One more thing I wanted to ask you. How do you set up a team in the Philippines that’s competent? We run our prospecting operation out of there, and it’s five people. It’s run by this one guy named Jim. Jim is instructing these people to list build and then just send outbound emails that when they get answered, it goes to the US salespeople. This girl, Diana, who works for me, knew Jim. I personally wouldn’t know how to just find someone in the Philippines. You know what I mean? We explain to people what we’re doing and it’s like, okay, well, how do you find a Jim?
Dennis Hegstad: Yeah, so I think that was definitely something that was a small learning curve. And it’s not like we have some process that I think is great or perfect or anything. But we went through some websites that are essentially a job board, almost kind of like Upwork in the Philippines, specifically for remote workers there. And you create listings. In a couple of days, we would have a thousand or plus applicants.
Adam Robinson: Right.
Dennis Hegstad: You set the rate, you have a description about what the job is, then we filter them out from their resume and the application down from a thousand people that applied to 100, that maybe 50 that we wanted to have basically go through this test. And it was called a WonScore and it’s a cognitive ability test that’s digital and you can pay to have them go through this WonScore test. And then based on that WonScore, then we would take them from a WonScore.
We’d have 10 example conversations from a LiveRecover SMS chat, and then we would just have questions and then we would ask them to go find the answer to the questions on the product pages. We’d have them go do whatever research. And then we’d filter down from 50 to 10 or 15. Then I do interviews with all of those people on Skype calls and then we’d basically pick three. We would hire three, and then we would do a trial for a month. And then at the end of the month, we would fire two and keep one.
Adam Robinson: Yeah. That’s funny, that’s like…
Dennis Hegstad: Not fire…
Adam Robinson: I built a dev team in Argentina. In my experience with my last company, I built like– it was a really tough boiler room sales environment that built my first company to this kind of lifestyle business that it was. And then we ran out of leads and got rid of the call center and whatever. But I was like, yeah, build some devs in Argentina. I’ll go down there, I’ll hire three, let go of one after a few weeks, whatever. You never get it all, and like get down there, do that. This guy served me illegal letter. He serves the co-working place we’re in and leave the letter. He serves the guy who runs the colleague. I’m like, holy Nike’s. I am out of my league here.
And then, of course. I realize how much I don’t know. I spent 100 hours with lawyers in Argentina trying to understand what I can and can’t do, and what makes it hard there is everyone there is paying people under the table for at least half their salaries in US dollars. And they’re playing this game where they know when they fire somebody that they’re going to “get sued,” and they know they’re going to have to pay the person off to let it go because the legal system is so in favor of the employee, but you’re just playing that game. And you owe the person when you let them go twice the amount of salary as the time that they were there. So, everyone fires everybody after two years.
Dennis Hegstad: How about the…
Adam Robinson: Yeah, I know it’s bananas. It’s just so crazy how different it is, but the decision that I came to was, as a US person with a US company, no Argentine entity. I could just pay people under the table like everybody else is doing on whatever platform, TransferWise or whatever, and there would be no possible consequence for me if I kept the team under 20 or 25 people or something like that because like, could you even imagine if an Argentine showed up in New York and was like, this guy was paying these employees for the last two years their full wage, but then he let them go? So, they want three and a half years because that’s what the Argentine law is. Could you imagine what they’d say in New York? They’d be like, dude, next. I’m not wasting my time on this. But there’s some team size where there could be this mutiny scenario, where it would be worth some ambulance chasing, lawyer flying up to New York, and creating some horrible drama in your life. Anyway.
Dennis Hegstad: Yeah, I know for us, we had just people who were in this phase of kind of like trial. They were not employees. Even at the end, they were still just contractors who had agreements that were for one year.
Adam Robinson: Yeah, yeah, yeah.
Dennis Hegstad: But we also followed whatever. I know we had to pay a 13-month bonus every year and all these. We try to follow whatever, obviously, like…
Adam Robinson: Traditional.
Dennis Hegstad: Philippine, yeah, traditional stuff. But we had a small team, so we were kind of doing what we thought was best. Still doing that too, by the way.
Adam Robinson: Yeah. You still have Philippines people?
Dennis Hegstad: Not right now. But I imagine that we’re going to at least hire our head of customer service most likely to be in the Philippines. The only downside is that I don’t love the time disconnect whenever we want to be a really good– I mean, we get great service from everybody that works within the Philippines. I just think that the downside is really, there’s the time disconnect.
Adam Robinson: Right. Yeah, we do. Diana has them working like a four-hour block that’s right before her morning and then a four-hour block that starts at 8 p.m. her time and she’s Eastern. You know what I mean? So, it’s like she has overlap on both sides, but she’s not ruining their lives by being like, you have to be, you know what I mean?
Dennis Hegstad: Yeah. I like it, but I will see. As of right now from our new app, it’s just myself, my co-founder from LiveRecover. Again, he’s also here in Austin, Texas. Me and then we have another engineer in Vietnam who’s in a trial. I guess, we’re testing him out to see if he’s going to stay, but he’s just doing front-end development right now.
Adam Robinson: Yeah, yeah, yeah. So, Twitter, you got lots of followers. You do sarcastic and amusing stuff. I was unaware that you had a massive network of meme accounts and I was just starting to make a lot more sense. Is that sort of like when you were doing the meme accounts, did you uncover this, like, was part of that for your own entertainment in addition to making money? Or why do you do the Twitter stuff?
Dennis Hegstad: I mean, one, it was fun to have control over like– not control, but it was fun to see how people, kind of knowing how people would react to certain content and then testing it. Sometimes you write content. And to be fair, like 80% of the content that was posted on these meme accounts was just curated content that I did not create, like food porn or house porn or cars, this, like obviously, I’m not taking photos of cars and videos of houses and producing all this. I was just finding awesome stuff on the internet and sharing it but…
Adam Robinson: You were spending time doing that, like you were…
Dennis Hegstad: Oh, a lot. I mean, it was built that one.
Adam Robinson: Yeah. You were the editor of this?
Dennis Hegstad: Yeah, full-time. I was running 12 to 15 accounts and they had 800K to a million followers on each and 500K on some. Some accounts, I had one called Not a Cop, where it was like a pretend police officer. The picture was definitely a police officer who was like 45 and I just made tweets that would be like, hey, tweet me your longitude or tweet me a picture of your meth lab, I want to hang out, or just like dumb things, like something. And I get 40,000 retweets. You’re like, holy sh*t, but this went so viral. And you gained 80,000 followers in a weekend and you’re like, wow, okay, people really find this funny.
And then eventually, the meme would die out and you would change the account to a new theme, and then you would just kind of ride trends. But yeah, I think it was for fun, but also when you know you can make money off of it and it’s meaningful money like hundreds of dollars or thousands of dollars a day to a point where you’re making $10,000 a day, it’s like, okay, this is fun and it’s profitable. And so, of course, I use my meme network sometimes to write a funny tweet on my account and share it through those accounts.
Adam Robinson: So, you’re still running these accounts?
Dennis Hegstad: No, I’ve sold the accounts.
Adam Robinson: Oh, okay, I got you. And the account that you have right now, that’s so kind of funny. You’ve been at it forever on that one?
Dennis Hegstad: It’s just my personal account. And I used to not tweet anything about like– I used to basically run my personal Twitter account like a meme account. So, I would just post generic motivational hustle quotes and random sh*t, and then I would retweet them from my meme accounts just so I could grow my personal. But I always had a business or some kind of thing in my bio, and so, I always knew like, hey, when I had Exposely, people would know I had a meme account network on Twitter. They knew I was monetizing it and I was maybe one of the better people at monetizing his own network.
Oh, he also has a platform for making money for his friends who has networks. Okay, great. I found him through his own personal account being shared by meme pages. So, it’s kind of like promoting yourself a little bit to get closer to your businesses, but also, because like for vanity, I guess it’s like, why would I not do it just because I already have the followers there anyway and, yeah.
Adam Robinson: Yeah, totally. It’s funny. I feel like I’m now understanding this meme account and influencers and how the game works because I just read a bunch of things and had a bunch of people make the case for exactly what I’m trying to do, which is win this very tight market and be the brand in this very tight market. It would move faster if it was a person than just the word Retention.com. People will connect to a face faster.
And then you start like, I’m watching the mechanics. This guy Tommy is helping me out with LinkedIn posting, and I’m watching what he’s doing and what works. And it’s just like in a million years, I would have never (a) arrived there myself, (b) thought that you could repost a screenshot of some very vague but universal truth statement, like marketing helps sales. And then hashtag the guy or whatever, and then it gets 5,000 interactions. It’s so…
Dennis Hegstad: Wake up, still a light on your face.
Adam Robinson: But I understand Bitcoin Twitter now because these people are so devout, and then they’re saying things like, Jesus Christ is Lord and Savior, that people are just like– but the equivalent for Bitcoin, it’s like Bitcoin is…
Dennis Hegstad: The future.
Adam Robinson: Or like a Bitcoin will save us, like the seller’s tweets are ridiculous, but he gets the game. His whole life is now this like meme. And I think before you understand that, I would watch Russell Brunson stuff and think that that was Russell Brunson, but that’s not, that is a meme of a business guy, you know what I mean?
Dennis Hegstad: The thing is it’s hard to outsource a lot of it when you want to do it really well. I think if you look at certain people online and I’m not saying any specifics, but you can generally tell, like, oh, these are all accounts run by the same kind of ghostwriter network. And they keep talking about the exact same thing, same format, very generic.
Adam Robinson: Totally.
Dennis Hegstad: Becomes very saturated quick, like you’re saying a lot, but you’re not saying much. And so, I think, I would love to outsource all of the “time” I spend on Twitter, even though I probably spend an hour and a half a day on Twitter at the most. And that’s on the computer and on my phone. And so, I’m like, yeah, it’s some time, but for me, I sold one of my Shopify apps because of a tweet and a DM. It’s like, cool, I made a lot of money off of that scenario and if I didn’t have a Twitter, I don’t know if that would happen. And so, that to me, I’m like, okay, there’s been many other times than that, but lots of business, lots of DMs, sure, I probably burned a lot of business too from saying stupid sh*t on Twitter, and I’d rather say stupid sh*t and burn bridges than just post the same regurgitated information eight times a week.
So, I think there’s a balance between just posting stuff just to get your voice out there versus saying real stuff that has substance which will get people to agree or disagree with you, but it does help. But at the end of the day, the girls who are running the biggest brands generally are not the ones on Twitter with a million followers posting threads every week. A guy with 27 followers, and they’re like, oh, you bootstrapped $100 million of your business. And then that guy sees these guys making $5 million a year with 100K followers or whatever. And he’s like, damn, why don’t I have 100K followers? I have a $100 million business. He starts to want to post a lot because it feels good. And then it’s like, dude, you’ve already got it figured out. I don’t think Twitter really is going to change much for your business.
Adam Robinson: Yeah. And this brings up an interesting conversation about authenticity. So, I just don’t have time. Chase Dimond, for instance, he’s one of my advisors sort of helping me with this effort of becoming more visible on social media. It’s just something I think that we need to do as a brand, and correspondingly, I need to as a person. I’m like, there are all these ghostwriters on LinkedIn. I agree with you. You can tell who Houston Gold or whatever his name is he’s writing for. It all looks the same.
So, I’m trying to use more video, like have a content line that is literally me giving weekly updates about things that I’m working on in our business. That is my face talking about it. That’s impossible to set– I don’t know, the authenticity thing resonates with me. It’s like, at what point are you getting followers and people? It’s just very sort of not you, you’re not actually getting this deep connection that like, whatever.
Dennis Hegstad: Yeah, it’s tough. But again, being on social media and being social is sales in a way, but at a certain point, I think you see or I see in at least the Shopify ecosystem, there are some people who run smaller apps and all they do is post tweets and threads on how their app is doing. But it’s like they’re small businesses, they’re sub under half a million in annual ARR. They’re a founder or a solo founder or maybe a team of two people. You clearly tapped out your Twitter audience if you’re writing a thread every day and spending all the time on Twitter. Your app is not growing anymore.
There are other people who are just not on Twitter and they’re going from zero to millions in a year or even whatever time frame. And it’s like, wait, what? Okay, so clearly, there’s like a certain point you’ve exhausted it and it should be something that you just do for ongoing social media presence, for a brand, for your own personal brand, whatever, but it’s not like the lever to pull that’s going to make the biggest impact. That’s going to be running a business, sales team, advertising, marketing, SEO, everything that you should already be doing.
Adam Robinson: Yeah. I mean, I look at it as a tool. To me, it’s like I’m trying to build two audiences. One is people who have e-commerce stores who care about email, and then the other one is people who I want to hire and I create content very differently for both audiences. On our YouTube page, which anybody who responds to an interview request, I’m like, watch this one video. And it’s really a playlist of 11 videos that’s like me super yoked about the next 12 months, giving excruciating details about everything we’re doing. Like why we’re going to stay remote, these questions that people want to know, or whatever. And yeah, I think it’s just you got to know. The reason I never did it is because, and I still feel this way to some extent, I feel like it lacks a cohesive overlaying strategy. I think it’s really easy to just get caught up in the…
Dennis Hegstad: Likes and engagement and view.
Adam Robinson: Yeah, just like the nonsense of it. And there’s no purpose behind it and there’s no unity and there’s no sort of like– anyway, we’re running out of time here, so a little bit on work habits. How do you approach your day?
Dennis Hegstad: I get up, I’m an early riser, and I don’t set an alarm. I just wake up early, which is a blessing and a curse. But I’m like a 5:40 a.m.
Adam Robinson: Yeah, I’m like the same way.
Dennis Hegstad: 5:45, 6 a.m. kind of guy. I don’t have a routine and anything special. I just wake up, walk my dog, make a cup of coffee, and then I wait a little bit. I’m not diving into work at 7 or 6:45. Usually, if it’s nice outside, I’ll go for a long run first, which is probably half an hour of my time on a regular basis, might be an hour plus. And then after that, just shower, smoothie, and then I sit down and I work.
Adam Robinson: We got the same program, dude, same program. Do you know…
Dennis Hegstad: I mean, I appreciate meditation. I appreciate all this kind of like cold plunging and this and that. And I think if you have a sauna and you want to– like if it makes you feel good, those are all great habits and they’re healthy. But I’m not like Goku in Super Saiyan mode after I do any of these things, like a runner’s high and a fresh shower is everything for me.
Adam Robinson: That’s kind of the conclusion after 20 years of being an adult. It’s like the periods where I just run every day. It just seems to be the most consistently sort of feeling good all day.
Dennis Hegstad: Yeah. I’ll have a long day. I work till five.
Adam Robinson: Yeah. Do you know what you’re going to do the next day, the day before? Does that make sense?
Dennis Hegstad: Yeah. I mean, I know right now, for us, since its goal is to launch our new app, today, for example, I have to make sure in our task management system that I have the onboarding emails completed in our retention email marketing service or the customer engagement platform we use. And then it’s like, I know these tasks need to be done by Friday. Could I have done everything on Monday? Yes. Am I doing them all today, Thursday? Yes. Not everything but half of it, still. So, yeah, but I’m not someone who knows. I don’t plan the week out day by day. We have some goals that we want to hit. We have some rough deadlines and we’re not trying to overstress about it. But I’m sure once we grow the business a little bit more and we have a little bit more of a team that is waiting on our direction, we’ll probably have a little bit more structure there.
Adam Robinson: Yeah, mine has gone from pretty much like that to just my calendar is a disaster, but I mean, I’m working on fixing it, but it’s just like, oh my God.
Dennis Hegstad: I’m going to do all the sales calls for our app when we launch. So, for the next 90 days, we’ll do every sales call, which means that I’ll probably be on my computer on and off in 15, 30-minute increments, four days a week. And it might be booked, like someone books a call like 10 minutes before and says, oh, you have a slot at 9:30 and it’s 9:20, cool. I just found this link from a paid ad on Facebook and I’m going to book as you’re free and I’m like, f*ck, yes, I’m doing a call right now. I hope I’m going to walk with my dog.
Adam Robinson: Yeah, rock and roll. Well, dude, this has been awesome. I’ve really enjoyed hearing all of the stuff you’ve been up to. Thank you for sharing. Do you have anything else to add to this?
Dennis Hegstad: No, just excited that you’re getting closer to the Shopify Plus ecosystem with Retention because I remember seeing get emails like two years ago, and my co-founder and I were like, this is cool. And yeah, just cool to chat.
Adam Robinson: Yeah, dude. So, if you could write one thing on a billboard for everyone to see, what would it be?
Dennis Hegstad: Is this for me personally or for work?
Adam Robinson: For you personally. Can be work but just overarching sort of like thing that you believe in that you feel like you would like to.
Dennis Hegstad: Yeah, just take a breath.
Adam Robinson: Boom. That’s a great one. And then final five, favorite book?
Dennis Hegstad: Favorite book as of recently. This is the language of business book, but I really like reading Ben Horowitz’s The Hard Thing About Hard Things.
Adam Robinson: Oh, what a great book.
Dennis Hegstad: I read it three times.
Adam Robinson: Yeah, just an awesome piece of art. Love that. Favorite person you’re following?
Dennis Hegstad: On Twitter right now, I think it’s Elon Musk just because he bought Twitter and I just love how obnoxious he is. It’s like I don’t know if he’s having a Kanye West meltdown or whatever it is.
Adam Robinson: Yeah, some of this stuff’s amazing. It’s now legal to be funny on Twitter or whatever. I mean, it’s incredible. Married? Single? Kids?
Dennis Hegstad: Single. No kids.
Adam Robinson: And you live in Austin. We went over that a couple of times. Last one, favorite vacation you’ve ever been on?
Dennis Hegstad: If it’s maybe based on the destination, I think probably this place called Palau.
Adam Robinson: Palau, where’s that?
Dennis Hegstad: It’s about three and a half, four hours south of Guam. It’s about a 25-hour flight, US, or like you go to Hong Kong or Tokyo, and then about eight hours to Guam and then four hours from Guam to Palau.
Adam Robinson: It’s just like…
Dennis Hegstad: It’s the only place…
Adam Robinson: A movie you’re selling? Is it like what’s the deal? What’s the schtick?
Dennis Hegstad: No, it’s the only place in the world that it’s illegal to kill sharks. They have a shark sanctuary, and they value the sharks, like, a couple of hundred grand a year for tourism. And they have this place called Jellyfish Lake. And Jellyfish Lake used to be a cove, and then these mountains, during some natural disaster, fell, closed off the lake to the ocean. And all the jellyfish got stuck in there and all their venom has been let go over evolution since they haven’t had to fight off prey. So, you can just swim amongst millions of jellyfish. And they don’t see you because all of the poisons at the bottom of the lake and the lake is black. So, my ex-girlfriend and I flew there just because she wanted to swim at Jellyfish Lake.
Adam Robinson: Wow. That’s the best answer I’ve gotten yet. I mean, that’s awesome. Palau, huh?
Dennis Hegstad: P-A-L-A-U. And they have, when we were there, Mitt Romney or whatever was there at the same time. And they based their whole capital on the Texas Capitol. So, it’s like a direct mini version of the Texas Capitol.
Adam Robinson: No way.
Dennis Hegstad: Actually, owned by the US. Palau is owned by the US.
Adam Robinson: Incredible. Cool, man. Well, thank you so much. So, if people want to see this sarcastic Twitter account, what’s your handle?
Dennis Hegstad: @dennishegstad, yeah.
Adam Robinson: @dennishegstad, sweet. Awesome, man. Thanks a lot.
Dennis Hegstad: Retention.com, baby.
Adam Robinson: Yeah, Retention.com. Thanks for coming on to Ten Years in the Making. It’s been another episode.
Whether it’s scaling businesses to $100+ million valuations or growing Twitter accounts to millions of followers, Dennis Hegstad has built life-changing income streams across the eCommerce ecosystem.
Dennis founded and exited both LiveRecover and OrderBump — companies focused on the Shopify merchant market. In today’s episode, Dennis shares insights from his 14-year eCommerce journey, including how he came up with the ideas for his businesses, why he decided to bootstrap growth instead of raise with VCs, and how offer positioning can affect your perceived value.
You’ll also hear about how Dennis incorporates his Twitter success into his business, including his growth to making $10,000 per day, building more than a dozen accounts to 800,000+ followers, and how he used Twitter to sell a business.
Key Takeaways from Dennis Hegstad
- How Dennis looks at the value of bootstrapping vs. raising money with VCs.
- Tips for positioning your commissions to potential customers.
- Is growing on Twitter worth it for every founder?
- Why Dennis chose not to raise at a potential valuation of $100 million.
- What Dennis would do differently with his SMS marketing business if he could go back in time.
- How Dennis built and monetized a network of 12.5 million followers through Twitter meme accounts.
- Dennis’s eCommerce journey, moving from MySpace in 2008 to earning arbitrage ad revenue to selling two businesses in the Shopify merchant space.
- How other companies in his niche helped Dennis determine his product-market fit.
- The pros and cons of outsourcing work to the Philippines.
- The drawbacks of using Twitter ghostwriters to promote your personal brand.
Dennis Hegstad | Are You Being Authentic on Social Media?
Dennis Hegstad Inspiring Quotes
- “There’s a balance between just posting stuff just to get your voice out there vs. saying real stuff that has substance which will get people to agree or disagree with you.” - Dennis Hegstad
- “If you’re a good entrepreneur and you know how to build software and you know how to market products and you understand product/market fit, there’s a really, really good shot you can create a business worth ($50-100 million) without taking any kind of funding.” - Dennis Hegstad
- “The larger the valuation is that you’re trying to sell for, the fewer buyers there are for it.” - Dennis Hegstad