If you’ve ever wondered what it was like to work for Steve Jobs or if you’ve ever wanted to start a successful company, you will want to hear what Scott Abel, co-founder and Chief Strategy Officer of Spiceworks, has to say. His experience is unique, his stories are entertaining, and his knowledge nuggets are actionable. Enjoy!
Have comments, questions, ideas, or feedback? I want to hear it. Tweet me at william_griggs.
Topics Covered In This Episode
From 1988 to 1997 you worked at Apple and NEXT with Steve Jobs, take us to that moment in time…
- What was that like?
- What 2-3 things did you learn from that functional experience that you have taken with you to each subsequent venture?
- Do you have any interesting Steve Job stories or encounters you can entertain our audience with?
- What, if anything, did Steve Jobs teach you, directly or indirectly, about being an entrepreneur?
- What else does our audience need to know about this experience?
From NeXT/Apple you moved on to co-found and serve as an EVP of Motive.
- What was Motive?
- Why did you help start it?
- Who else was involved in this venture?
- What was your role?
- What are a couple of lessons you learned from this experience that you have taken with you to each subsequent venture?
- What was unique about this experience?
- What else does our audience need to know about this experience?
While at Motive, you founded All.com…
- What was All.com?
- Why did you start it? What problem were you trying to solve?
- What lessons did you learn from this experience that you have taken with you to each subsequent venture?
- What else does our audience need to know about this experience?
Finally, let’s dig into Spiceworks…
- Why start Spiceworks? Why not explore another venture?
- How did you validate the idea?
- What did the early team look like?
- Going back to the beginning, how did you build out the community?
- When did you start monetizing the community?
- How did you monetize the community without alienating them?
- What mistake did you make early on that you wish you could go back and change?
- What did I miss? What else do you want to drive home for our audience?
Scott Abel: Yeah, my pleasure. I’m really looking forward to it.
William Griggs: Yeah, really appreciate your time.
Scott Abel: I think it’s time, am I right? I mean, Letterman’s gone so now it’s just you.
William Griggs: Letterman, yes. He had his run. Now we’re taking over.
Scott Abel: Yeah, I think it’s a step up. I mean, he was a great guy, but come on, he’s no William Griggs.
William Griggs: Yeah, and he didn’t have enough entrepreneurs on. He had a bunch of celebrities of sorts.
Scott Abel: Yeah, what’s up with that? Actors and movie stars, rock stars, come on.
William Griggs: Right, we all know the real people that do the real things in the world are the entrepreneurs. They make the real money.
Scott Abel: Wait a minute, if we’re talking about real people doing real work, I’m going to have to step off the show now.
William Griggs: I got you, well that’s funny. I definitely appreciate your time today, and I want to spend the time together kind of helping the audience learn from your vast experience so they can increase their likelihood of being successful in their entrepreneurial endeavors, so they can internalize some of the knowledge and some of the lessons you’ve learned and use that as fuel and help them avoid mistakes or make the proper decisions. But before we kind of dig into a few of those lessons throughout your career, can you kind of give our audience a really quick overview of your background, including what you’ve been able to accomplish and what you’re working on currently?
Scott Abel: Sure. So I’m probably – I may be the oldest founder you’re ever going to talk to, but I don’t know. I graduated from UT Austin in 1980 with a degree in physics, spent probably the first six or seven years as a software developer in a couple of the different companies, but that got me into the first startup I ever went to work for, and I think up until now, if you include the ones I’ve started, I’ve worked for seven startups and I’ve started three. So after software developer, I moved into kind of a pre-sales tech support role for a company called Apollo Computers. Most people have probably never heard of them. They were a competitor to Sun. That got me to Next, where I did a similar role, and I ended up there, after seven or eight years, I was vice president of professional services. I started the services group at Next from scratch, and we went from me to about 70 people and $15 million in revenue annually in about three years. I like to think that’s why Apple bought us. It’s not, but in my delusional little mind, I tell myself that. But we were a third of the revenue of Next and probably all of the profit.
And then I started my, or co-founded my first company, which was Motive in 1997. And one of the things we did there was spin out my second company, Cogol.com. I left Motive in 2005 to start thinking about Spiceworks, and we opened the doors of Spiceworks in January of 2006, and I’m still at Spiceworks today, so that one’s kind of worked out okay.
William Griggs: Yeah, very cool. That’s a great overview for the audience. We’re going to dig into a lot of those different experience and try to pull out those knowledge nuggets they can use back inside of their startups or back inside of their ventures. Are you ready to dig in?
Scott Abel: Dig away.
William Griggs: Very cool. Before we touch on your current venture, Spiceworks, I kind of want to dig in, like I said, to some of those past experiences, so our audience can understand your background and take away some of the lessons like we talked about, that have kind of shaped you into the entrepreneur that you are today. So you mentioned working at Next and then getting acquired by Apple from, I guess, 1988 to ’97, according to some research. What was that experience like?
Scott Abel: You know, we used to always joke at Next about going to the Next University, and just because it was just such a fantastic learning experience. Steve, very driven, charismatic, somewhat mercurial leader, but you always felt like you were on this mission from God, and it never felt like a pedantic job. So I learned a lot about just, not to suggest I’m by any means as good at it as he is, but it’s hard to be in a Steve Jobs company and not learn a lot about why people really come to work, and their desire to be involved in something bigger than just, “We’re going to build a product and sell it to people,” or whatever it might be. So that transformative aspect that, “Let’s change the world, or at least our little tiny corner of it,” I think kind of stuck. If you get into that at all, you end up wanting to really get that feeling back again. And so I don’t think I realized it at the time, but it was probably one of the biggest impacts of working for Steve. The other was, he just is the master of simplicity.
He was so good at just almost reductionist thinking, “Make it simpler, simpler, simpler. Why does it have to be this hard?” And he would just never accept the dogma of, “Well, because that’s difficult.” His infamous, “Simple things should be simple, complex things not too hard,” which he actually stole from somebody else, but it’s very true and I think that left a very lasting impression that in some even small way helped us with Spiceworks.
William Griggs: Got you. So you talked a little bit about that sense of a mission, you’re on a mission from God as I think you said. How do you think he kind of instilled that into his employees, and how have you kind of taken that away and tried to do that with companies you’ve built?
Scott Abel: You know, the funny thing is, I don’t think – He was a fascinating guy. I don’t think he gave it any conscious thought. It was just the way he was. I think for himself, he was very much, and I’ve tried to follow this a little bit, he just was who he was, right? And he was a very unique person. And so for Steve, he couldn’t come to work and do something if he didn’t obsessively love it, and that just wore off. And so when he’s getting up in front of you and talking about, like at Next for example, he never talked about the computer, he talked about fundamentally changing higher education forever, and the computer was just the instrument by which we were going to do that. He absolutely believed that. And then, you know, how you went about that, the mechanics of what you build on the computer and what it does and all that kind of stuff, and so I have always taken that that’s kind of my job.
I think as CEO, you only really have a couple of jobs that if you’re doing it well, you know, your job is to hire people much smarter than you, and then get out of their way and let them do their work. And in the process, though, you need to craft a really crisp, clear vision of where you’re going, such that the average employee can ground themselves in that vision. So they can listen to what you say and go, “I get my part in this and what I’m supposed to do,” and then just let them do it. You know? Don’t try and do it for them.
William Griggs: Got you. So it all comes from that leadership, like you said, kind of being yourself, knowing, and knowing what you’re trying to do. Like the example you gave with Steve of knowing he wants to change the world and knowing he’s on a mission and that rubbing off on the employees. And then, like you talked about, kind of hiring, getting out of the way, and then crafting that clear vision that helps guide them as you get out of the way. Do you have any advice for people on how the heck you craft a clear vision? Is it a one line mission statement? Is it something simpler than that? What do you think?
Scott Abel: You know, I’m probably the least intelligent person to ask that question. I have a really strong distaste for these kind of classic, whenever I’m working with a company and they’re like, “Let’s have a session to develop our mission statement,” I’m just like, “Stop. Don’t do that. Just skip all the rhetoric. Just what are you really trying to do?” Like for us, our isn’t – maybe now people look at it and go, “Wow, that’s profound,” but we didn’t give it any thought. We were sitting around and after interviewing 35, 40 IT people, we just went, “Wow, their life is just too complicated.” For the average accidental IT guy, we just need to simplify everything about their job. We have no idea how we’re going to go do that, but that was our – it wasn’t a mission statement or anything like that, it was just our personal mantra when we’d get into a discussion about product features. It would be, “Is this going to make it more complicated or less complicated?”
Now as we grew, I think it kind of became this mission statement, this rallying cry, but in the beginning it was just kind of tactically functional. And so I think there’s a fair amount of revisionist history sometimes that happens where people, when they stumble onto success, and I think all of us do, that they look back and go, “How can I describe that in a way that kind of matches what really happens?” And I think the mission statements that work is where they’re authentic about it and honest, and the ones that don’t is when they try to come up with some highfalutin, high-brow, bullshit basically.
William Griggs: Yeah, yeah, jargon filled. Yeah, very interesting. Are there any other stories or interesting experiences that you had with Steve Jobs before we move over to some of your other experiences?
Scott Abel: Oh my god, we could talk for hours just about that. I think one of the most interesting ones, I just, look, I think the world of the guy. He was a really challenging guy to work for, and probably everything you’ve read and seen about him is true and it might be a little kind. He fired me, I think five times, if I recall correctly. I don’t know, I’m sure I blocked it out. But he wouldn’t remember. You know, the next day, he was just – he cared so much about what you were doing, and he always believed you could do better than you did, maybe to a fault, and sometimes the answer was – I remember the very first time it happened. I’d only been there about three months, the stress level was off the charts, this was in late ’88 and we’re getting ready to do the big unveiling of the first Next machine and this is his baby and he’s been, you know, he’s been in stealth mode for, like, four and a half years, and so he’s pretty anxious, and I was writing all the demos for the big launch and, I don’t know, I guess they weren’t good enough.
And he’s like, “You’re fired.” And so I go to his admin the next morning, it happened at like 3:00 a.m. in the morning, and I said, “Steve fired me.” And called my wife already, told her I’m coming home. And she goes, “When did this happen?” And I tell her, “3:00 a.m. last night.” Well, she’s like, “Yeah, just go back to work.” And I’m like, “No, no, no, no, you don’t understand. He fired me,” and she goes, “Yeah, if you see him today and he says, ‘What are you doing here?’ then come see me.” And she goes, “Otherwise, don’t really worry about it.” And I saw him in the hall and he just kind of grunted, and, you know, and that’s the way the other four went, and so I learned if he doesn’t say it twice, he was probably just emotionally impassioned.
William Griggs: Oh, that’s an awesome story. Before we kind of move on, is there anything else people need to understand kind of about that experience and Next and Apple that kind of helped shape you to move on and start some other companies?
Scott Abel: I think for me the – I don’t know that this is unique to Next per say, but I think it is unique to startups. Because if you’re really objective, Next was not successful, right? I mean, yes, they got bought by Apple and that technology ended up in every Mac we see today, but Next in and of itself was a failure, and that was part of what it taught me was, you know, sometimes you can have this really great product, but just timing, everything has to be right in the market. There’s a bunch of things you don’t control, and so sometimes you just have to keep playing. You just have to – you may get the go to market wrong or the timing is wrong in the market or there’s just, anybody who sits in front of you and says, “I’m super successful and it was all me,” is full of it. There are just so many things you can’t control, and so sometimes you just have to hit the restart button and play again.
If you look at him coming back to Apple, you know, what a turnaround story from almost dying and almost running out of cash when he came back in ’97, to the most valuable company on the planet, it’s just a great example that you never know.
William Griggs: That’s super inspiring for the audience members out there. Let’s talk a little bit about that transition over to Motive. So you left Next and Apple and you went to cofound and serve as EVP of Motive. Can you tell the audience a little bit about Motive, if they’re not familiar?
Scott Abel: Yes, Motive was a software company. We automated support transactions over the internet. That sounds silly or trivial now, but in 1997, it was kind of a big idea. The idea was to take waste out of that phone call. Every tech support situation back then, you would get on the phone and they’d ask you 20 question. “What kind of computer are you on? Operating system? How it’s configured?” Blah blah blah. We made all of that go away by remotely capturing and diagnosing the state of the hardware or software, and then if it was software, remotely repairing it. We did that all over the internet at scale, and so at it’s height, our best market, our strongest market, was all the telcos that were, back then, setting up broadband, and I think Motive was built into about 50 or 60 million devices, end points, between all the broadband providers and some of the technology companies like Dell and HP and Semantic that we were with. And so I had the good fortune to be one of the founders. And I think I started every function at Motive except marketing.
So I started sales, I started business development, I started development, I started professional services, and then right about the time I’d screw it up, we’d hire a professional and they’d fix it, and we’d be off to the races. So it was kind of fun in that regard. That’s what I love about startups; you get to do so many different things. And I think as you get further along in your career, it’s one of the unique things you can bring to the table if you’ve had some experience in all of those things. It’s a very efficient capital structure, because you can do all those early things and you don’t have to pay other people to do it.
William Griggs: Yeah, that’s definitely the benefit of working in a startup, like you said. You get to wear lots of hats, and then that knowledge sticks with you as you go through the career. As far as starting Motive, why did you all think kind of this was the idea to pick?
Scott Abel: You know it’s funny, this is really atypical the way Motive got started and Spiceworks got started the same way. We got together as founders of Motive. We had absolutely no idea on the table. No product idea, business model, nothing. It was driven more by five people wanting to go do something together, and then we kind of methodically came up with the space and the product idea after the fact. And I don’t think that’s typical. It doesn’t make it better. It probably makes it worse. Hell, I don’t know. I think the way it usually happens is an entrepreneur wakes up in the middle of the night, has some brilliant product idea, needs a company to get it to market, and they’re off to the races. I wasn’t that smart, and so that’s not the way mine have gone.
William Griggs: Right. So walk me through a little bit of that process. How did you think about the market and the idea at hand?
Scott Abel: So we ran this thing we called the percolator. I’ve done it three times now. It’s worked two out of the three times, so I don’t know, that’s pretty good I guess.
William Griggs: Sounds great.
Scott Abel: And so what it is is that the founders would get together once a week, and you had two assignments every week; one, you had to bring a new product/business idea to the table, and you did this really really high level kind of strawman business plan. You could put it on a napkin. It didn’t have to be fancy. But what was the idea, how big was the market, how defensible was it? Is it unique, or is it a commodity? And then the second assignment was the existing ideas, beat the crap out of them for four hours. And then we’d draw a line in the sand, we’d pick a date, like, four months in the future, and say, “Whatever’s left standing on that date, that’s what we’re going to do.” Just unemotional, whichever one has survived the onslaught. And they were pretty funny, you know, because it’s interesting, you learn a lot about your co-founders too. It’s a great way to teach them, teach yourselves early not to get attached to ideas.
And so you might come up with what you think is the coolest thing and then, you know, because my cofounder here, Jay Halberg, went into Harvard Business School, and he rips it to shreds. And I’m like, “Well, okay, that wasn’t so smart after all.” But that process, we used it at Motive, and that’s kind of how we found tech support and what was really wrong with the space, why there was all this inefficiency. It turned out about $70 billion in waste every year, and all these phone calls for these questions you shouldn’t have to answer. They’re knowable by the guy. And we replicated that process at all.com and at Spiceworks.
William Griggs: Very interesting, yeah. So definitely something the audience can replicate. Can you talk a little bit about the founding team at Motive, how it was compromised, and who it was comprised of and such?
Scott Abel: Yeah, so there were five founders. Four guys from Tivoli and then me, and to this day I’m not quite sure why me was included in the five. That would be a better question to ask Scott Hartman, who was founding CEO. He’s still in Austin here if you want to go ask him. I’d love to hear that answer, by the way. I’ll pay you for that. And so the connection they had all worked very closely together at Tivoli. It was Scott who had been VP marketing at Tivoli, Brian Vetter and Tom Barider, they had both been kind of senior architect/developers, so they became, Scott obviously was the founding CEO of Motive, Tom and Brian became kind of co-CTOs – little unique but it worked for them. And then Mike Maples Jr. who now runs Floodgate Capital, he was one of the co-founders and he became our VP of marketing. And then I think, my best guess as to why I was involved, I don’t know, maybe they needed a charity case or something like that. I don’t know. Is because most enterprise software companies, which we knew we were going to be, in a perfect world, what you do if you’re a founder, if you’re trying to get a high evaluation before you have any product, it’s all about the team.
And the more of the skillsets that you need as a company you have in place with an experienced team, the more likely you are to get the high evaluation. And so he’s got these two super strong technical founders, Mike covers marketing, Scott was a product marketing guy, Scott Hartman, and then my background was business development and professional services. So the only thing really missing was sales, and I think my biz-dev experience, like, half counted as that. So if you’re Hartman and you’re trying to assemble that corporate perfect team to drive a high evaluation, he’s got almost every base covered. And so in front of a venture guy it’s like, “Wow, if that team is going to figure something out, if they can’t do it, then nobody will be able to.” I think that’s kind of what drove the process.
William Griggs: That’s really interesting, because it seems like you talked about that founding structure of that founding team, or the structure of the founding team rather. Like you said, a lot of them had worked together previously, and I think that’s an overlooked opportunity for lots of people listening to the podcast that haven’t made the leap yet, or even the ones that have, looking back at that network of people that they worked with, the ones that they enjoyed working with, the ones that they always said, “I like that guy,” or, “That guy is super smart. I would like to work with him in the future.” Thinking about that and building those relationship over time is definitely a differentiator that allows for opportunities like this one and Motive. Is there anything else that the audience needs to kind of understand about the Motive experience before we jump into kind of your switch over to all.com?
Scott Abel: No, other than to say I think you’re dead on. I would just strongly reinforce what you just said, because as I went through three startups because of the all.com story we’ll come to in a second, when it’s a huge failure and a big chunk of it was the exact opposite of Motive. It was this smashed together management team, and it just sucked. Because you had all these weird motivations and drivers, and I told myself I would never ever do one like that again. If I don’t intimately know the founders, I won’t do it. And so you’re spot on. That’s great advice that you’re giving to the audience. For me, it’s the number one thing. Because you’re going to go through all this pain. If anybody tells you, like, startups are fun if fun means you’re a masochist. And so if you don’t love that pain, do not do it. So the only thing that makes it worthwhile is there’s people you trust, really trust, really trust in the boat with you, that you know have your back. And if that happens, then everything’s great, whether it works or not, because you’re in it for the experience.
But man, when it doesn’t, it sucks.
William Griggs: Yeah, kind of like you said, you have the all.com which we’ll transition to now, you kind of have that hodgepodge or the smashed together team, and it seems like lots of the ones that are most successful are the ones, in most startups it appears that they’ve worked together in the past, and what that’s led to is that sense of trust, like you mentioned, that sense of comradery, that sense of, “Let’s band together and fight through this,” versus I guess maybe your all.com experience. We’ll learn in a second, kind of pulling different directions for different goals and different interests. But let’s take it to all.com. You were at Motive, you started all.com. Was that inside of Motive and spun it out, or how did that work?
Scott Abel: That’s exactly how it happened. You know, you could think of me as, at best, the reluctant all.com founder. It was my fault. I was on a ski trip, and I was thinking about other ways we could deploy Motive faster to get more market traction even faster than we were getting, and we had grown really fast. I think in our first three years we went from zero to, like, $30 million in revenue. But it was – you had friction in deployment, right? So this is early ’99. I’m thinking of what, back then, we would have called an ASP, now we would call a cloud. So I’d come up with this crazy idea, taking Motive technology, combining it, when I started to really think about the technology I’m like, “Wow, if you were going to make it easier to use, the missing thing is the actual support guy.” Forget the technology, people just want to buy a service. They just want to get tech support. So I came up with this idea, this peer-to-peer network of support guys that were kind of contract based, coupled with Motive technology, all targeted at the consumer market.
And we were in the middle of raising our series C and this crazy time and everybody was putting all kinds of money into startups, and so Motive had no problem raising a couple hundred million dollar ground. But in the process, my co-founder is parading me in front of these venture guys, “Oh, tell them about that all.com idea,” and they’re like, “We want to fund that too.” And I’m like, “But I don’t want to go. Can I stay? Can somebody else go do – “ And Scott’s looking at me like I’m a four-year-old. “That’s not the way it works. It’s your idea. You have to go.” And I’m like, “No, I don’t want to go.” Like I was 12. But they kicked me out anyway, and so 13 of us spin out in November of ’99. We ended up doing it as a joint venture with Dell. Dell was a big customer of ours, got really interested, and so it was kind of this interesting structure where Dell committed capital and a guaranteed amount of revenue through their support organization, we committed people and technology.
And so we had $10 million out of the chute and 13 employees, and I start getting unsolicited calls from venture guys. It started $150 million pre-money, and we ended up, three months later, closing a $60 million round at $300 million pre, and I had like 17 employees at the time.
William Griggs: Special time, those days.
Scott Abel: Yeah, we didn’t need the money, but that’s how it kind of all got started.
William Griggs: Yeah, that’s super interesting. So as far as getting started, you spun out of Motive, you had all.com; you had a dream situation or scenario in some people’s eyes, right? You have the Dell.com partnership, you have the initial amount of funding. Where do you think it kind of went south?
Scott Abel: Oh my god, how much time do we have? I’ll simplify it by things I’ll never do again. No disrespect to Dell, it’s a great company. I’ll never do a joint venture like that again. And you try, you know, companies are great at what they’re good at. So Dell is a phenomenal company, they found a way to kind of change the cash flow of a manufacturing business so it was positive versus negative, but they’re not motivated to make this thing successful at all. Even if they were contractually obligated, which they were, and so they couldn’t get their people to sell the all.com service, not because they’re bad people, it’s because they have a value chain already established inside their company that says, “You get paid on margin.” And no matter what, we weren’t going to be the highest margin product. So sales people aren’t stupid, they’re not going to sell it. And that caused all kinds of friction because they had this, I had written a contract well and there was this ticking clock around the revenue and that made everybody uncomfortable, understandably so, and then everybody wanted to be part of this crazy thing.
And so management team members got slammed together, and so our executive team, me and one of my coworkers that’s here at Spiceworks with me, Greg Catawar, we’re the two founders, but everybody else, now there’s six or seven people, all from despair places, all hired – you try to do the best job you can, but it’s really tough with executives you don’t know. And then as soon as – it’s fine when things are going okay, but as soon as the first idea doesn’t work, we pivoted two or three times, and I’ll come back to what was the fundamental flaw in a second, but as soon as it starts to look like it may not work, the people who really aren’t committed, who just came for that quick hit in the internet age, they start running for the hills, which meant they were really never committed, and that’s why really knowing the people is so important to me.
William Griggs: Yeah, that’s interesting. It seems like most entrepreneurs see joint ventures as super sexy, but I’ve rarely found any that either I know of or have been a part of that have been anything that anyone wants as an outcome of their joint venture. It’s typically, like you said, it’s kind of like that misalignment of what the companies want, even though there’s a contractual alignment. There’s just, like, a cultural misalignment or something.
Scott Abel: Yeah, look, even the Motive piece, no slight against Dell because they’re big. Take Motive, right? They contributed technology, and the original idea was this service would be built on Motive. Well what we learned quickly, in about four or five months of trying to use it that way is it’s not right for it. Now, a little easier to deal with that, because my co-founder at Motive, very rational dude, he’s like, “Dude, you’re running all.com. You’ve got to do whatever’s right for you.” So two of the things that were supposed to be these big, strategic assets ended up being just friction. And so just a clean slate and no baggage, and being able to go fast, that’s the name of the game. That’s why I’ll never do one like that again.
William Griggs: Very interesting. And then how did you all get the domain all.com? That seems like a pretty premium domain. Do you remember that story?
Scott Abel: I do remember that story. We ended up buying it and I think at the time we spent – I think it was maybe $30,000.00 to get it. And the geek in me, I developed these criterias for what the name – because I didn’t care what we called it. It was a consumer service, so the criteria were short name, one you wouldn’t misspell, because it was weird spelling or something, and that was kind of it. We didn’t really have to represent support per say. I mean, there was all this friction because these lower level biz dev people at Dell didn’t like it and tried to get me to change it, and that was their first introduction to me saying, “Pound sand.” But – that guy is probably listening right now.
William Griggs: I’ll definitely find him. What’s his name? I’ll send it to him on LinkedIn.
Scott Abel: Well, he’s still in town. I’m not saying anything. But yeah, I think we got it for around $30,000.00. It was way less than I expected. Now no way in hell I’d spend that now. Our domain for Spiceworks, I think we paid $3,000.00.
William Griggs: That’s interesting. That’s just a fun story to kind of think through buying that premium domain and finding it. Let’s transition over to Spiceworks with the remaining time. You went through the percolator process, out comes Spiceworks. How did it survive all the thrashing and all the knife throwing at the business idea?
Scott Abel: Well this is embarrassing, so I promised myself no revisionist history at Spiceworks, so now I’m going to tell you a dirty little secret, which is the percolator worked perfectly, and then we ignored it. And so we went through the same process I described. I bet we looked at a dozen ideas. About 1/3 were consumer ideas, about 2/3 were Enterprise software ideas. One of the things we did uniquely when we started Spiceworks, because of my experience at all.com, is I asked the founders to write down everything about the last seven or eight years they did not like. And I said, “We could spend a bunch of time trying to aspirationally create the perfect environment, or we could just take all the crap we experienced and design it out. And I bet what we’d be left with would be pretty awesome.” And that also takes less intellectual horsepower, which is perfect for me. And so on the top of that list was the Enterprise sales model. Because it’s just a nightmare.
All your revenue comes in at the end of the quarter, and if I was going to be the CEO in those board meetings, I didn’t want more grey hair, and all that stress, and blah blah blah. So we were leaning toward go to market models that were not enterprise, and so we come up with this really cool idea. I’m not going to tell you what it is, because nobody’s done it. We might still do it in a different way. But we come up with this thing, we’re all excited, we’re like, “Woohoo, the percolator worked,” and this is on a Friday and we have a party at my house on Saturday and the Lights are over and Mike is like, “This is going to be awesome, and we’re going to be huge,” and then Monday morning we’re all working for free, all stumble back in to this little loft above Hill Partners, it’s a real estate firm here in Austin that we’re incubating in. All six of us are crammed into 250 square feet or something, and one by one my lovely co-founders kind of come in and say, “Yeah, I slept on this over the weekend, and I’m not very jazzed about this idea.”
Most notably my co-founder Mr. Halberg, the marketing guy, which is bad, and he goes, “Yeah, just, I don’t know. The more I thought about it, the more it felt icky.” “Icky? What is?” He’s like, “I can’t figure out a way to do it and not have it be an enterprise model.” Because the space was like an adjunct to the business intelligence market, and so back then I couldn’t really think of a way that you could do a non-traditional go to market. And so they all say this, and then they’re like, “Well, I guess you need to figure out what we’re going to do,” and then they split. One of them goes back to work, and Jay’s, like, scared now he’s going to have to get his job back, and I’m like, “Wow, this is solidarity. Amen brother, thanks a lot.” And so, you know, and I’m thinking, “And you’re betting your future on the least intelligent guy in the group. What the hell is wrong with you?” And so then I go off and, kind of ass backwards, I’m like, “Okay, well what do we know?” Right? Because we’ve started some of these time and motion studies, we’re interviewing IT guys.
And so I came back and I said, “Well, what if we, like, we did the anti-enterprise thing? What if we did this agentless inventory and we sold it like sales force? So it’s super easy to download and install, no agents, scans your network,” nobody had ever done it before. And Cal Larr, my VP development, co-founder, goes on for two hours about how it’s impossible. I’m like, “Wow, this is really helpful,” but I’m watching Francis, our CTO, and he’s not talking. And so after Greg schools me for two hours, and poor Jay, he’s just like, Jay is the E in the group of INTJs, and I’m just watching the blood drain out of his face. He’s like, “I’m screwed. My life is over. The technical guy says it can’t be done.” I turned to Francis and I said, “Okay, great, thanks for your support. That was helpful. Francis, as the guy that really matters, what do you think?” And so for 45 minutes he tells me what we could do if that was the constraint. And we’re like, “Okay, so all we’ve got to do is figure out is that enough? And so let’s build the absolutely minimum and just give it a shot.”
And we really, you know, it’s just ironic that it was not – didn’t go through the percolator process at all.
William Griggs: That’s really interesting how it all came to be. It’s kind of a funny place to take us to, that meeting where one side is saying it’s technically impossible and the other is saying, “Well, there’s still light at the end of the tunnel.”
Scott Abel: Hope, hope.
William Griggs: Yes, there’s hope, and it turns out that a lot of hope, right? So this eventually became Spiceworks, the idea that you all were working on in that room, correct?
Scott Abel: Correct.
William Griggs: Got you. And how did it go from that room to, like, actually validating the idea to where everyone actually feels good about continuing on with this venture?
Scott Abel: Well, I think there were two parts of the story that matter. The part that’s missing that’s really important is, so the original product ideas, you know, download, install, up and running kind of network inventory, no set up, nothing you have to do, at the time it took, on average, one to two weeks to set up a network inventory product. So we were trying to figure out could we automatically set it up in five minutes so that a less technical guy could do it? That product idea still exists to this day. The big pivot, though, was the distribution model, and Jay walks into my little cubical, this is probably – they’re starting to prototype the technical idea. It’s mid-February and Jay walks in and he goes, “Okay, what does success look like a year after launch?” And I’m like, “I don’t know, you have 1,000 people paying us $50.00 a month, I bet we’ll be really excited.” I’ve since learned with Jay that rarely is the question he asks the one he’s interested in. And he says, “Oh yeah, yeah, that’s great. What if three guys from Stanford look at this cool ruby on rails app and go, ‘I can do that,’ and they copy it and give it away for free?”
And I thought, “Holy crap, that is going to happen. Some idiot is going to do that.” Because, you know, you’re living on Ramen noodles and all that stuff that you do in college, and they don’t care if they make money. Google will buy them for $5 million and they’ll buy a Ferrari and go do something else. And we debated that loudly for two hours, and I could not get that out of my head. I just thought somebody, someday, maybe next month, maybe in three years, somebody’s going to do that. And I didn’t want to be the last great something again, you know? Next was kind of the last great hardware company, Millard was one of the last great enterprise software companies. I thought, “This might be my last startup. For once in my life, I’d like to be the first great something, even if it fails miserably,” you know? I end up being the Friendster of something, I don’t give a shit. I want something that’s really really different. And so I turned to Jay and I’m like, “Whatever I had you doing yesterday, stop. You need to go figure out how we make money on 100 percent free. Not premium, not free for a little while, free for all sizes of networks forever.”
And he lit up like a Christmas tree, and it took him nine days. I gave him 30 days and it took him nine days. I’m pretty sure he looked like a terrorist those nine days, because he’s got this heavy beard and he came in with dark glasses and a ball cap. I don’t think he showered either. And he came up with this asymmetrical business model, you know, that’s like Google, where it’s attention based and we monetize attention in all these different ways. So that was really critical to how fast we grew, and that propelled us from, in the first year, we went from zero to about 140,000 users. And at that time, the biggest market share for a tool like ours were two companies that were about 18 years old, and in that 18 years, they’d gotten to 50,000 users. So we blew past them. It took us about seven months to blow past them.
William Griggs: Very cool. And so that pivot was into the community model, is that correct?
Scott Abel: No, the pivot there was the business model of giving the app away for free and monetizing it through advertising and lead gen and data services and value added services and stuff like that. So to this day, Spiceworks and its community is 100 percent free. Today we’re the social network for IT guys that has tools, technology, and content, but back then it started as just the app. But that propelled it forward. Everybody wanted to write about how this crazy idea was stupid and it was going to fail, which meant every IT guy was reading about it, and our website, it only gave you one choice. Our website had one page, there was no bios about us, nothing about the product, there were 89 words which described Spiceworks, there was a really high gloss picture, and a button that said, “Download,” and you either did it or you didn’t. And I don’t think we’ve ever added less than 350 users a day. Today we had several thousand daily. We actually grow faster in our space than Facebook grows in the consumer market.
William Griggs: Wow, that’s crazy. So as we kind of wrap up, I want to be respectful of your time, let’s do some kind of rapid fire questions. How does that sound?
Scott Abel: Fire away.
William Griggs: All right. So like we were talking about, you kind of went from that download to the free download to now community. When did you actually start monetizing the community? You talked a lot about it being free. How was the thought process of actually making money from it?
Scott Abel: Well we, the community was a complete accident. It started because we added one feature to the product which was we wanted to crowdsource feature request. And so actually back in July of 2006, in the first release at the last minute we added this feature where you’d click a button, tell us what you want, and vote it up or down, kind of like Digg, and it just took off. And that became the seat of the community and that was the last time we controlled where the community went. But we monetized both from day one. One of my big philosophical beliefs was I never wanted our user base to feel like there’d been a bait and switch. So the advice at the time as, “Don’t worry about making money, just get usage,” and that just felt wrong. I thought, “Wow, if you’ve used this for three years and then I slap ads in there, you’re going to feel like I hoodwinked you.” And so the very first version of Spiceworks had Google AdWords in it, whether it was the app or community. It looked the same to the user. And that’s been true ever since. It’s gotten way more sophisticated now.
We traffic and sell all our own ads and there’s all kinds of other ways we make money, but it started with just being open and honest with the community, and we’ve carried that forward ever since.
William Griggs: Very cool. Is there a mistake or two that sits in your mind that you think about of the early days that you wish you could kind of go back and change if you had maybe a genie or you could just snap your fingers?
Scott Abel: Biggest product mistake, there absolutely is, is we waited too long to deeply integrate the community into the application experience. What I mean by that is, I’ve got this community of millions of IT pros today that are in the application every day. What a huge advantage that is, right? To tap that knowledge and expertise, and we probably didn’t start to aggressively think about ways to integrate those experiences until about four years ago. So I would have started two or three years earlier doing things, like we’ve built, now, collaboration directly into the helpdesk. If you’re working a helpdesk ticket, you’re just one or two clicks away from tapping the knowledge of millions of other IT pros like you. We didn’t do that early enough. I think in hindsight I would have started that three or four years earlier.
William Griggs: That’s a good, interesting piece. Sorry to those people listening, there’s a little bit of echo from there. But next question is around fundraising. We covered fundraising a good bit. We’ve had a bunch of people on talking about how to build relationships with their investors, how to actually raise money in general. Doing some digging, I found that you all have raised, correct me if this is wrong, over $100 million for the venture. Is that correct?
Scott Abel: That’s correct.
William Griggs: What’s the thought process behind that? Again, there are lots of early stage entrepreneurs. They’re looking for their first $500 k of investment. They’re looking for an A round of $5 to $7 million. They’re not even thinking necessarily that far into advance where they’re thinking $100 million plus. What’s the thought process behind raising that much money? What requires it? What does it allow you to do?
Scott Abel: Well, you know, look, to be honest, in the beginning I was no different from them. We had a seed round of about half a million bucks that Austin Ventures committed, just because of the people. They kind of, on a handshake and a wink said, “We’ll do your series A2.” What they don’t tell you is what the evaluation will be. And so I was very fortunate. I didn’t, in a classic way, have to go stumping for money in the beginning. And to be honest, there was no thought we were ever going to raise hundreds of millions of dollars. I honestly thought Spiceworks would fail. I thought – I knew the product would work because Greg and Francis had built this kind of thing so many times before, but I was pretty sure the business would fail. And so we were super capital efficient in the early days. And so we designed the capital structure of the company that we could probably get all the way to the goal line on our series B money, because we had a really really modest goal.
And then what happened was success intervened and the traction took off and 120,000, 130,000, in the first year that doubled again the second year, by the end of the third year we’re knocking on the door of 1 million. And so opportunity presented itself and some VCs came and said, “Hey, amazing what you’ve done. If you had a bunch more money, what could you do?” And so we went off as founders and thought about, “Is that a path we want to take or not?” Because of the all.com experience, I was very knowledgeable of the downsides of taking a lot of money. You don’t want to take it unless you really understand what you’re going to do with it. But for us, when we saw the opportunity in front of us, how big the market was, where we were in our careers, all that stuff, it made sense. It doesn’t always make sense for everybody.
William Griggs: Got you. Really interesting perspective on things. As we wrap up, is there anything around the Spiceworks? You know, we barely scratched the surface on Spiceworks. Big company, super successful, doing awesome stuff. Is there anything else kind of for early stage founders that maybe I missed that we want to drive home as far as how you kind of originated the company, kind of the trials and tribulations you went through?
Scott Abel: Yeah, I think my advice would be, and this is going to sound trite, but Spiceworks, if anything, it has been a fantastic education in this. Find a way to make your company really good at failure. One of the reasons we’re here today is we failed just a bucket load of times in the early days, and we got good at failing efficiently. We have this axiom in Spiceworks, “Fail fast, fail cheap.” And, look, here’s the only thing I can guarantee you when you started a company; you’re going to fail somewhere. You’re going to fail on the product or in marketing or in sales or somewhere. That doesn’t mean ultimately you won’t make it, but getting good at failing. Failing as fast as you can, because failure will teach you what’s going to succeed. Making that cultural, so the average employee doesn’t fear failure. In hindsight, looking at Spiceworks, it’s the biggest thing that we got right, is that I think the average employee here is not afraid to try crazy stuff in a measured way. And so don’t bet the farm. You know, if you have 10 developers, don’t bet all 10 on something.
But in the early days, when the community started to take off, we took one developer and said, “Okay, go change this infrastructure and try this new feature, and if it works we’ll come back and do it right.” That’s hard for developers, but once you get that cultural value to stick, it lets you do things nobody else can do.
William Griggs: Got you. So it’s a lot about ensuring the average employee, as you’re putting it, understands that if they go and test something and it fails, they’re not a failure, they’re not getting kicked out of the company, so there’s that kind of, you’re allowing it and it’s expected and that you’re pushing people to actually do it. You’re promoting experimentation to a certain extent, versus trying to get people that are super reserved and not pushing the envelope.
Scott Abel: Totally. And the funny thing, it’s just fascinating. In the interview process, because now we’re known for it, right? And so people show up in the interview process, and they’re excited about being in a place like that, and it always happens, without fail, two months in, four months in, somewhere, they have their first significant failure, and they kind of freeze, like, “Oh shit, now I’m going to get fired.” And you always have to go, “Really, it’s okay. It’s no big deal, okay?” Like, “We all knew it wasn’t working long before you did. So you’re closest to this. What did we learn from that? What were your assumptions so we can learn what didn’t work, and now let’s go try it again differently?” But there’s always, across 400 employees now, I have never seen an exception. It’s just how fast. Everybody goes through it and so I’ve just learned, “Get them through the first failure as fast as you can,” because then they see, “Oh, my career is really not going to suffer for trying something and failing.”
William Griggs: Right. It seems like you could, I don’t know if you do this, but it seems like parading the individuals that have kind of done the tests and done them successfully on stage to share what they’ve been able to accomplish, but then also sharing the knowledge and the lessons that you talked about from the people that failed. So everyone’s seen kind of both sides of the experience.
Scott Abel: So great instinct, actually. That’s exactly what we do. We have an all company meeting every Friday at 4:00 p.m. and I would say at least 50 percent, maybe 60 or 70, are people getting up and talking about things that didn’t work. You know, they just casually, like, “Here’s an update on this, and here’s what went well, and here’s the three things that didn’t work.” I bet a casual observer would look at us and go, “Wow, those guys really suck. Everything they do fails.”
William Griggs: That’s awesome. Well definitely, Scott, definitely appreciate your time. It’s been a great conversation. I know the audience is going to take a lot away from this. If people want to connect with you or learn more about Spiceworks, how can they do that?
Scott Abel: You can reach me at Sabel@spiceworks.com. I have no Twitter account that’s worth following, so I won’t even act like I’m cool and that’s worth your while. And you can also find the Spiceworks community as well, if you’re an IT guy and you’re so inclined to join there.
William Griggs: Very cool. I’ll put the links to Spiceworks in the show notes below the interview. Scott thanks for joining us today.
Scott Abel: Hey thank you, and send my condolences to Mr. Letterman.
William Griggs: Will do.
Scott Abel: All righty, take care sir.
Scott Abel’s Bio
Scott Abel is a co-founder and the chief strategy officer at Spiceworks. In his role, Abel is responsible for the Company’s product strategy and culture, key differentiators and enablers of Spiceworks’ success. He was previously Spiceworks’ CEO and maintains his position as a member of Spiceworks’ Board of Directors.
Abel has spent over 30 years in the technology industry. He co-founded Motive, which generated over $100M per year in revenue, navigated a successful an IPO in 2004, and secured customer deals with 40 of the world’s top broadband providers.
Before joining Motive, Scott was vice president of Worldwide Professional Services for NeXT Software (acquired by Apple), where he built NeXT’s consulting organization and worked for Steve Jobs for seven years. He grew the organization into a $14 million business in just over two years. Previously, Scott held various business and software development positions at Apollo Computer, Motorola, Tracor and Applied Research Labs. He and holds a Bachelor of Sciences degree in Physics from the University of Texas, Austin.