welcome to in the arena a show where entrepreneurs and leaders take us behind the headlines and into the biggest crises of their careers and lives and how they made it to the other side I'm Jesse Janae a startup founder and your host [Music] today on in the arena we have the co-founder of Honey Ryan Hudson he takes us inside Honey's four billion dollar acquisition by PayPal including the harrowing experience of being caught in the middle of two battling Tech Giants PayPal and Amazon prior to the deal even closing we'd always wondered how the tech Giants would feel about honey as they started to pay closer and closer attention to it in that moment when you realize that they may be thinking of M A and that the price may be north of one and a half billion you must be doing the math okay I own X percent that means tomorrow I can go from a 250 000 salary to taking home nine figures Ryan is a very positive person who rarely does podcasts and even more rarely discusses the challenges he's faced people like Ryan who kind of risk perpetuating the idea that rocket ship success can be easy for some people that's why we're so excited to share this conversation to get Beyond Honey's eye-watering acquisition we delve into the great personal risks and challenges he face to stick with honey for years of struggle before things actually clicked we are the last button that people are clicking before they choose to buy anything online uh if we can't figure out how to monetize that eventually and turn that into a business I should go back to MIT fast forward another year we haven't raised any money from any literally anybody that wasn't my mom or George's mom my George is trying to raise money and like oh where's your golf on here he's like uh he is working for another company we layered on another layer of toxic and duster absolute pass I'm gonna probably break every Taboo in the world here I want to get super personal and just talk about actual numbers how much money did you have in your savings account when you walked away and I've got the perfect co-host today for this conversation Ryan called back a startup founder and CEO himself who is also well known on Tech Twitter for discussing founder mental health all right so uh first thank you Ryan for joining us today um Ryan kalbeck and I are so excited to have you on the episode here with us glad to be here [Laughter] um so one I'm really excited because you don't actually do a lot of podcasts um I'm really glad that you decided to join us I don't know if it has anything to do with our personal relationship because we do technically have two children together and one on the way yeah that was a factor position Ryan I thought it was just to meet me that's what I thought it was I mean I've loved your content on Twitter for years so it's a pleasure to meet you in person too to be honest let's um so uh I'm gonna jump in to your story as I do with as we do with everyone uh to a moment that was pretty intense for you you have a really incredible trajectory of growing honey for many years and ultimately selling it to PayPal for four billion dollars uh not too shabby but in the midst of that deal Amazon decided to post a banner on amazon.com their core homepage that effectively accused honey of being malware and encourage people to uninstall it like actually gave them an action item like you should uninstall this uh you know that I'm curious just jumping us right into this moment what where you were in the deal cycle and also like bring us into the time and place if you can like you remember the month and sort of what was going on at honey and with the deal when a tech giant decides hey I'm gonna try to like ruin your company sure yeah no I remember it uh quite well so we had announced the deal that PayPal is going to acquire honey November 20th of 2019 and uh about one month later on the Thursday before Thanksgiving so um pretty much everything is code Frozen ready to everybody's ready to go on vacation for the holidays um and that Thursday evening we started noticing unusual uninstalled behavior and we quickly traced it back to every page of amazon.com for all of our users now displayed a yellow banner across the top saying that honey was unsafe and recommending you uninstall it immediately um so I practically right before Black Friday the deal was announced had been about a month we'd gone through all of the regulatory approvals had already happened we're gearing up to to close sometime in the next couple of weeks and one of the largest companies in the world decides to tell all of our users that we're basically malware um so yeah um the I remember we're in the office and quickly rallied the handful of people on the team that are capable of doing something about that as quickly as possible and making changes during who were like trying to leave for like Christmas break for Christmas and basically there's a Skunk Works team of a handful of Engineers that have been around from the beginning that control the keys to our release process and we we were rapidly scrambled to to respond to that technically um and figure out what they were doing and we learned that it was it was just for honey users so they made an update to amazon.com to try to detect if somebody had honey installed and then display this banner and um so our response was that we as a browser extension could see that they were putting this Banner in in front of our users and so we just made that Banner go away for our users and deploy to do a new release but um so that lasted for less than 24 hours before it had been deployed to our users we had a patch and um yeah some people in in the journalism World noticed started writing some articles about it how Amazon was um telling our users that we were malware and of course in the midst of potentially closing a large acquisition it was we let PayPal know that what was going on and why it was happening and what we were doing to mitigate it Ryan the the word unsafe is a bit subjective what I think the banner said is Honey's browser extension is a security risk honey tracks your private shopping Behavior collects data like your order history and item saved and can read or change any of your data on any website you visit is that true pieces of it are true and they're true for every browser extension um yeah the the humorous part for me that we couldn't really go out there and talk about is Amazon's own browser extension which is installed also by millions and millions of users um participates in what I would categorize as far more aggressive behavior on those fronts um and so we from the beginning had always taken a very user-centric approach to data and privacy and um to the extent that we didn't need data to power features we we never collected data even in in the initial days of the company we didn't have a user login concept for two or three years after launch like we didn't have anybody's email if we'd been deleted from the Chrome Store we literally would have been vaporized immediately it was because at that point we didn't have a need for a user's email so we didn't ask for it and it was only when we added our cash back loyalty program where we needed to start tracking an account and the signing honey gold credit to people to cash out that we created optionally the ability to create an account I could imagine a lot of Founders in that moment would not have steered towards the engineering solution they would have steered towards a marketing solution trying to broaden this and say you guys do the same thing or everyone does the same thing or trying to talk about all the things you just said why did you choose to not go down that route uh it wasn't like a PR issue it was something that instead they didn't they hadn't gone public and said hey honey is malware and it wasn't in the press that this was being communicated it was being communicated literally to all of our users during the last days of the shopping season when you get something delivered by Amazon directly to them in their interface and one of the benefits of having a browser extension is that you have the opportunity to also communicate in context to users as that message would be there or not and so we we use the communication Channel we had which was the browser extension to suppress that message and we then thought we could manage whatever uh the process side of it was later and telling our part of the story which we also might did and the interesting part through this deal process is I don't know how much people know about deal close-ins and the processor on selling a company but we had announced that PayPal was going to acquire honey in November the deal was not closed there are very specific rules about what collaboration is or is not allowed to happen between the aquarium company and the acquired company in that window of time um basically you cannot start to operate as though the deal is closed and there's a lot of limitations on what they can they PayPal was able to do for us or not um including telling us if they were getting cold feed on the deal closing and like we're worried about it or what what was going to happen next and so we were transparent with what was happening but they were unable to provide any guidance on what they as our our future bosses um wanted to happen in that situation or anything so we were doing a lot of autonomous decision making against the backdrop of massive uncertainty on um what happens when Amazon goes to war with PayPal and you're in the middle as potential collateral damage on that was very interesting backdrop for making those important decisions I think in the time window that that Banner was up we lost probably 50 or 60 000 users to uninstall um which is pretty substantial and what was the base uh we had tens of millions of active users at that point in time but not all of them were visiting amazon.com so if that had stayed up and persisted for a longer period of time I'm sure that number would have continued to go and not everybody that uninstalled that day um I mean they're certainly brand reputational potential hit from that so we were definitely concerned we didn't know how concerned PayPal was or was not until after the bill closed which unfortunately I just feel like if you if you can rewind to you know one of what like it's a very intense personal process to be in an acquisition uh flow like and especially of that size and so like if you're dealing with this already really intense moment of your company internal comms people are like worried about their Futures like all excited or not all these things and then in the middle this thing happens like how much if you can remember how much of the time did you actually Wonder like wow could this like ruin the deal I mean you you've personally seen many deals go uh you know go the other way when new information pops up basically yeah I wasn't sure how it would go I think the part that gave us less uh stress and more confidence through that period was the uh the business was doing great so we weren't selling the company because we needed to sell the company uh we were selling so we saw an opportunity to partner with a very interesting large player to accelerate the vision we had about helping people find interest in things to buy online and so it was a strategic acquisition that was interesting to both Austin PayPal for um different reasons but it wasn't what the company was profitable it was rapidly growing if we had continued to build the company I think we'd still be doing great and so there wasn't an existential piece to it which I think made it less scary but we'd always wondered how the tech Giants would feel about honey as they started to pay closer and closer attention to it um Google was an interest in large player and that we built a huge audience on their platform the Chrome extension store that they had potential to wipe us out overnight so that was not a unknown thing and to the extent that we were increasingly tapping into retail advertising budget as our core Revenue driver um wait there was an unknown of what would happen then um we weren't going head-to-head with Amazon but similarly as we start getting into the realm of the tech Giants um it's a different game and it's part of the reason from a comms and business strategy we kept a pretty low profile relative to the size of the consumer audience that we had we weren't out that they're trying to get TechCrunch your business for us to write articles about how great we were doing in part because we didn't want small competitors copying what we're doing and in part because we didn't know how some of the larger companies would feel about it if they thought too hard about what we were doing yeah were there any debates Ryan when this moment was happening any debates between you and George or co-founder or other teammates who thought you should be taking a very different approach uh actually not really I mean we we understood the technical capabilities we had to manage that the banner pretty directly and so it was Britney like how fast can we get this deployed and what is the update cycle time um before everybody is patched with the new version that's not going to scare them into uninstalling um so there wasn't much debate about that I mean George and I had had debates at various points leading up to the acquisition on if we should sell or just keep going because things are going great and we had built effectively our dream job and we're enjoying every single day that so um there's more conversations there but in that moment it was pretty clear what we needed to do and how quickly we needed to respond and it didn't drag out for too long embarks we suppressed the message and then the deal actually closed uh January 3rd I believe of 2020. so it was only a couple weeks between the time that Amazon had done this and one it actually closed and all of the international Regulatory Agencies plus the deal that they weren't going to stop in for antitrust or any of the reasons and it was a lot to close so we didn't have to sweat it for too long to orient Us in time because you gave us the date I mean it's like the tail end of 29 time none of us knew except for how cool 2020 would look like writing out we didn't know how insane 2020 would be there would be a global pandemic and all the offices would close and everything and so like I don't know now looking back orienting this you closed a deal like just a few months literally before the world like ground to an almost halt um I don't know like obviously you then didn't have any perspective but I'm curious if there's any conversations when you endured or just stuff where like did you feel that that was lucky like closing the deal in in that time frame like when you had a little when you kind of realized the pandemic and stuff was crushing forward or or conversely Ryan wasn't unlucky because e-commerce took off to that point yeah I think it was both and then I mean it started off feeling like it was super lucky as we didn't know what was going to happen and everything kind of collapsed there and it looked like just the world might seize up completely um within a month or two it became clear that a lot of the spending had shifted to e-commerce and everything skyrocketed including PayPal stock price and so that went for a good year of Boom of like oh we probably could have gotten more if we waited um like the market value today would be higher than it was and then everything since then has kind of settled back to the other side um I think for us the decision to sell was less about timing the market as a macro cycle or anything there um it was clear that people were paying attractive prices historically for for companies and investing um we actually the acquisition process started as we were looking to raise another round of capital not because we needed it because we we actually like so all of the money that honey Ever Raised is on the balance sheet when we sold the company and we periodically raised money in part to finance the working capital of the company and also to get a new print on the equity um so as we're hiring new employees having an accurate reflection of what the market price of the stock that we're granting people was important and so we raised money a few times for that motivation and we're kind of always out talking to investors that's actually how the investment came to or the acquisition came to be is we had done a series D that City Ventures had done this like really small dollars but got a new mark on the stock and we're doing talking to people similar um and we're talking to the PayPal Ventures team and it rapidly accelerated into acquisition docs and turning point try to give us a turning point of that though like there must be a moment where you're talking people Ventures you're talking to many people you mentioned City uh you're and I do just want to pause it just reflect on like just how like how low-key you are about insane success things just just like I know you really well but like just even when you dropped you're like you know George and I were just like you know not sure are we leaving a lot on the table when you're about to sell the company for four billion dollars like um I think that is both really cool and also very earned because the company is growing so fast but just as a host I just feel the need to reflect on like how that is just not like the typical story and and not that's why we're going to force you to cover many of the other more difficult uh points you go through to kind of get to this moment but you also just nonchalantly covered like the conversation with people go from PayPal Ventures to more of acquisition talks but but how like you know I've talked to many investors like it does what does that pivot actually look like when do you realize they this huge Tech Giant is actually thinking of you but more as a acquisition Target what changes like when do you get that do different people get involved like tactically how do you realize that's occurred well so the interesting thing for me is it was uh it was out of nowhere George and I for whatever reason handled fundraising um based on whoever made first Contact so he talked to a set of people I talked to a set of people and we both were fairly interchangeable in a lot of the roles um but he George was running product and he was uh talking to Paypal in part about doing like payment Financial products and he was meeting with the ventures team with another one of our guys on the team and the mother's Avengers team and then the follow-up was all of a sudden there's 40 people online creators I did the people and all the various pieces of the organization and so it accelerated really quickly to that the funny part for me were you in that meeting too Ryan I was but they didn't know that I was the co-founder they thought that uh the other guy was the co-founder with George and so when you go ahead yeah so we had another uh exact name Costas with a fintech background and so he had met with them with George and it wasn't until like a couple meetings in that they realized that I was the other co-founder can you put us in that in that moment Ryan you show up you George uh and Executives show up and they bring 40 people into the room did you know that there'd be 40 people in the room before you step step foot in no no but okay I've learned it's not uncommon to have 40 people on a meeting at PayPal though yeah fair enough uh but when that happens at some point in that meeting especially when people start to introduce themselves being from Corp Dev something goes off in your head that they are thinking about M A oh yeah for sure that was a pretty obvious immediately and in that moment you probably don't have a number of 4 billion in your head but you probably have a number North of a billion and I you know based on the revenue or whatever yeah we were talking to investors we had term sheets in the one and a half to two and change kind of range for an investment um some of those were hairier than we'd want to do structurally but we had a sense for the market rate for a growth investment for what where we were at is probably one and a half to two you come across as a very level-headed clear thinker calm in that moment when you realize that they may be thinking of M A and that the price may be north of one and a half billion you must be doing the math for yourself you must be doing like okay I own X percent that means tomorrow I can go from a 250 000 salary to taking home nine figures yeah I get I guess um things are going great I guess it's the backdrop on it where um all right so so yes but also um I basically built my dream job working with an amazing set of people every day um on a schedule that was flexible like we're rolling to work at 10 o'clock sleep in I go to the gym you know things like that um and having the time of our life building this company with and massively profitable I guess the context is when we built a pitch deck for what we thought might be possible with the company and February 2015 . um I dug this up not too long ago just to like make sure my memory was accurate on it but it made a hockey stick graph like every startup ever does for the five-year projections on what we think we're going to do with this fundraise and like the story was what we did um and the craziest part of it all is the year 5 2019 Revenue um we ended up we were off by a 5 million on it was like in nine figures we hit the hockey stick the first part of it was accelerated about a year faster than the first part of that the first three years and and when we made that graph we had zero dollars in Revenue um and so things were going almost objectively insane so we were almost communicating is like possibly is there some part of you actually when you're in that meeting kind of basically thinking I don't want to deal like I mean that's sort of what you're we we didn't want to sell I mean yeah like yeah so there's two the two parts that we didn't want to sell is one we knew that we had this incredibly valuable company that was growing company internal and profitably like everything about it was in great shape we knew that we could take as much cash off the table as we wanted at a reasonably insane price like historically insane insane price and de-risk it to the amount that mattered personally for George and I um so there wasn't like a oh this is the only option and so the part that made it less like we thought we'd sell the company is one we liked running the business but the second part was I didn't think that another company would understand the value that was flexible so that was interesting because it was unlikely you thought it was unlikely I'm like yeah it which is what I ultimately told the head of Corp Dev in the conversation about price and like Jeremy I don't think you can pay what the number is that would take to get this done okay we need to pause we need to pause there because please break down I want to know and I I want to know what is it like to negotiate a deal like this and how and how much is handled by you and George first teams of people just pouring over models and things like that because ultimately we just admitted is like there's a number that you and George kind of have in your brain and you what you just said is like you feel like it's just a number that someone will pay and therefore deal is unlikely but somehow it goes from that to you getting a number that is like you guys are like okay and so yeah bring us through that like how does it happen and how much is you to talking to whom verse teams of people doing stuff yeah I mean at the core it was we didn't want or need to sell and so negotiating from a position of selling your best best alternative is like we don't do anything it's the ultimate leverage to have um and then the other half is that truly was the position it wasn't posturing or anything like that and um I honestly would say that there wasn't a number for Georgia right that were like hey this is the number and if we hit this number then we'll sell the company um it was the fact that PayPal ultimately really got them to a number that communicated enough understanding of the value of what we had built and the potential for it that we believed that they would be committed to seeing through the rest of the vision and so um at a certain price they're as committed to making this work because we wanted it to be and so that combined with Assurance is about how the business would operate and how we'd have flexibility to to continue to grow the business and we're on our teams um was the piece that tipped it over more so than any number um because at some point the numbers are pretty insane no matter what and arbitrary were there debates with the investors the investors you know wanted to sell earlier later anything this sounds Ryan if I'm someone listening to this right now I'm thinking to myself this is the smoothest exit in history there's not a single debate they weren't looking for it they got four billion dollars and I have a feeling make us believe you we threw a price up on Zillow make me move and uh um well explain your voice or maybe but answer the question again so Jesse knows a bit more so because so let's rewind the company we launched the product in 2012 and it was immediately interesting from a consumer point of view we had like organic growth and over the next year and a half we grew it to a couple hundred thousand active users purely word of mouth with a handful of small press hits no did not raise any money we've uh went up to Silicon Valley and tried to raise money a number of times and nobody wanted to invest in a browser extension on the desktop when all of the trends were around mobile like what's the mobile strategy what's your app strategy oh you have no revenue and maybe you'll monetize through affiliate marketing which is like toxic for PCs especially then and you have a browser extension that is like a toolbar this is like only been used by criminals to do malware sorts of things in the past so it was like three for three toxic from an investment point of view and so we couldn't raise any money I personally got to zero and had to stop doing honey full time and go back and take a job as a product manager at another tech company for a year well I need to pause here because this is the first piece of bad news you've shared we're finally getting to a place where like you so you've mentioned you had high organic user growth at the beginning which is really really cool but most pivotally you the company saw Zero revenue and then has all these attributes that investors find very very unattractive to the point where you can't raise money at all and you actually have to leave the company for a little while at all at all yeah like we had a product where as we were first started growing um that my background is I'm like a self-taught engineer um for programming and I have an MBA from MIT and so George and I would go into these investor meetings and George is a biology major um who grew up in China until he was 10. and so we'd walk into these meetings and everybody assumed that George was the programmer because he's the Chinese guy and I'm the white MBA guy and when they learned that I wrote the code they're like this meeting's over it's like we were the opposite of what the pattern matching for what successful Foundation team Ryan that must have that must have shaking your confidence a little bit you go up to Silicon Valley you're pitching 50 VC how many how many of these these did your pets that turned you down yeah something like that like 50. we went we went back so we were every all of them yeah we drove up to Silicon Valley um it was still like Sand Hill Road era of investors that moved up to San Francisco yet and we met with as many people as it would meet with us for six weeks in a row every week we did that drive through Central Valley of California past the smelly cows and you must that must have shaken your confidence oh yeah um but at the same time like on the user side we we saw the potential like as I described to some people at the time and then did have moments of like oh wow um I was like we are the last button that people are clicking before they choose to buy anything online uh if we can't figure out how to monetize that eventually and turn that into a business I should go back to MIT and tell them I don't know what the [ __ ] I'm doing um and so I said that to people in let's say early 2013. fast forward another year we haven't raised any money um from any literally anybody that wasn't my mom or George's mom had put money into the company for the first year and a half and yes uh confidence was shaken it was uh not not a fun time can you can you pause there and just talk about that time like your relationship with George your confidence is hurting are you guys debating fighting you have different viewpoints were there moments where you know the stress was boiling over there was like a couple moments that never fully made it to um a real decision point but around let's just sell this thing to anybody let's take in any offer is better than like this thing appears to be worth zero nobody will fund it we can't like generate any Revenue off of it and um there was one company in the affiliate marketing space that we talked to that lowballed us and then like we're like oh we've had a lot of conversation hard thinking back and forth on it in the four to five million dollar range for me that would have been life-changing um for George yeah just to be clear for the whole for the whole company yeah not not as an investment as like hey we'll buy this from you yeah and then um Georgia sold a couple companies they'd done earlier enough where he was comfortable beyond that um being interesting so we had like a Divergence of what our numbers that would be interesting was um ultimately we were on board to sell it and then they lowballed it even more it's like oh that's not really that's not really you like reached the bottom and you were like willing to take the deal and then they were like I don't know they're like actually it's really more like two or three and that's really just your salary for the next five years or something absurd um and so we didn't do that obviously um we had a couple investor opportunities where they wanted to do um I would call it's Shady sorts of things with the with the the extension um and we we turned down those in a similar time frame of like this thing was probably worth zero but we're not going to sell it to somebody that's gonna do illegal or Shady stuff with it um even in that moment so this is where we got a lot of clarity on like the data collection and privacy and like how to think about that was like even when it's probably an l zero on the scoreboard or like it's it's not worth it to give it to somebody also mess it up so rarely I've rarely heard stories about where if one of the co-founders actually has to step away more fully and take a job and then comes back and is it like a full co-founder that is just as much part of the story as the other one like that that's pretty rare so I don't know if it speaks to the strengthy relationship with George or your early contributions or like how you would break that down for a casual onlooker but one like maybe just explain that like how long were you gone a little bit more of the personal circumstance that must have been stressful because it was completely by need not by desire yeah it was it was by need but then if we were unable to raise money can you imagine then George is trying to raise money and like oh where's your co-founder he's like uh he was working for another company it's like we were over three before and then we layered on another layer of toxic investor absolute pass like your other co-founder is not in it's like all right and then we've been around so long that like it starts to look just stale like everybody passed on it because they did um and so it was it was in a terrible spot as a business I think for me I I don't have George's full experience of it but um working at the other job as a product manager is objectively the best job that somebody would have hired me to do um with that skill set in that time and I hated it because I didn't have the passion for it and it gave me a lot of clarity that I needed to be an entrepreneur um and through that period of time George was scrapping around with basically a combination of volunteer and the cheapest people we could find to work on building stuff at a garage in what I call the auto body District of Pasadena it's like if you want to get your oil changed during work we got the office for you Ryan we alluded to it before you stepped away because of financial reasons is that right yeah yeah so I'd uh prior to working on honey had spent over a year working on other projects that also didn't work out and were unable to raise money for I know it's harder to imagine now because there's been a lot of seed money available pre-seed money for everybody for the last five plus years it's been pretty flush but there's weren't a lot of people especially in La writing checks to pre like I don't know early early stage companies and and so yeah we didn't have the resources so I'd burn through my personal savings like literally I had a bank account you know how much you spend every month and it's here's here's the day that it hits zero and I took a job at openx an ad tech company like six weeks before the zero line and worked that to to pay the bills and then sometimes I'd run over to the uh the Pasadena auto body shop after work and and work with George and the guys later into the night so I wasn't not involved through that period I just needed to supplement my non-existent income and then uh ultimately I guess it reached the point where I knew that I had to do it and quit the job at openx in January of 2020 or 2015 and uh that's why I was talking about the deck from February 2015 it's like an interesting one for me this is like I decided you know what I have to see this through one way or the other um fall time no more excuses um George had somehow managed to piece together pieces of a small seed ground so we'd basically erase approaching the million dollars and had a small team and they decided it was more efficient and more important to pay other people but I was able to jump in full time again in February 2015. Ryan did you have kids at that moment I did how old are the kids uh at that moment it would have been like six four and two-year-olds in that 2015 moment um oh 2015. when you stepped away though did you had kids as well yep also yeah like five three one yeah so so when you stepped away you said you were looking at your bank account and it was six weeks away from being empty yep can we get I'm gonna probably break every Taboo in the world here I want to get super personal and just talk about actual numbers how much money did you have in your savings account when you walked away uh probably four or five thousand dollars and you walked away for a job that paid what uh I'd have to look up what we paid me initially but it was subsistence maybe or do you mean the next job the openx shop I'm sorry oh the openx job was also not well paid it was a hundred thousand dollars a year for somebody who was the MBA and like if it feels like that wasn't valued at all so you had you had you had three kids and you went from being a Founder with five thousand dollars in the bank to a job that paid a hundred thousand dollars yep then you decided I'm gonna go back to being a founder and I'm gonna make even less than a hundred thousand dollars yes how do you just just help me understand that Ryan because let me a little bit of background when I quit my job in growth Equity I had 30 people in finance call me and say some version of I am so jealous of what you're doing I wish that I could do this I don't think I can afford it I've got two kids they're gonna go into they're going to go to school I've got a wife I want to get married just like some personal reason that they had in their case golden handcuffs like they couldn't afford to get off the hamster wheel to pay them eight hundred thousand dollars a year or whatever the number was in your case you had close to no money I had non-golden handcuffs um yeah and right and uh was going through a divorce and so it was like a very rock bottom in all of the ways phase of my life and were you looking for purpose is that what the difference was I couldn't imagine not trying to build companies as the only thing that I felt like I was good at despite all evidence to the contrary like at that point uh there's not a lot of evidence yes it just suggests that I was good at this thing but uh it felt like the only thing that I could find excitement doing and having that other job give Clarity to that it's like like this is the only thing people are going to hire me for I'd previously um been through faces where I also had to work at jobs that were not exciting to to pay the bills I'm like it's and um yeah so it was that YOLO just bet on myself and try to figure it out kind of moment and I guess I paint the picture of it's like it's trending to zero I knew that I could sleep on George's couch in fact there were phases when I did um I was in George's guest bedroom for a little while um I knew that my parents were always there so there was like a safety net that you wouldn't want to use but it wasn't likely that I was going to be literally on the street um yeah you have three kids at that moment I think I have three kids and so even if they had even if you didn't have custody of them because you're going through divorce whatever it is like I can imagine that it was still hard emotionally for you to be thinking okay but I can still sleep on George's couch yeah I mean this is like a major element of why I ended up divorced is that um it was not a rational thing for a father of three kids to do to to make that choice um but I couldn't imagine a life where I was happy that I hadn't made choices like that and it was uh yeah it was it was tough because it's not the rational thing to do it's not responsible um all right yeah I was called the deadbeat you know that's not a good feeling as a father yeah I think this gives like much deeper lens on on how you're feeling when PayPal when there's 40 people sitting across the table from PayPal and you're running a rocket ship company that's extraordinarily profitable and at that phase you're helping support your kids in an amazing way and like it like life has turned around financially before the acquisition like you're able to contribute very meaningfully in all of the ways and so you're in a way you and honey have like grown your confidence alongside each like yourselves like like I think this is something I've felt in my entrepreneurial career which is like my company is like this character in my life like we grew alongside each other we developed our confidence together and stuff to a degree and so I don't know it paints a scene for me a little bit better about like why you might not be so eager to sell even for a high price I don't know if that resonates with you yeah no it absolutely does like basically from the moment that things started working um it was incredible and like which is when which is so so we just talked about kind of a rock bottoming Moment Like 2014 20 like 2014-ish yeah when do things start working from you know a little bit more financially the crazy thing is that they started working effectively immediately after I rejoined I could try to take off all the creditors out I think the day you join and then the revenue just just hockey sticks basically basically we we also hired our head of Partnerships at the same time it's the real reason um now we hired uh Chris to build our partnership well ultimately to build it but first to do our partnership relationships uh out of Santa Barbara and he persuaded George and I that we we could probably monetize the audience that we had and understood how to to sell it in ways that we didn't and so 2015. this is 2015. so we first started getting Revenue in late April early May of 2015 and it sequentially starts later yeah just months after it started doubling every month for like from there it's got a large user install base and so um when you plug in monetization to an existing audience like it does actually start to to make money and so through that phase that like the crazy part like we're sitting down in a bar in Santa Barbara with Chris at some point and we're just like if we ever get the revenue to this amount per month like the most crazy number he can think of uh taking the whole company to yacht week and BVI like um we had that number like six months later and you did not and we didn't have time to take the company you're like how about pizza day how about yeah instead of growing the revenue um but yeah so basically through the end of 2015 we started plugging in Partnerships through affiliate marketing um and then as the money started coming in I'm like oh we should experiment with paid user acquisition and in late 2015 we figured out how to Market on Facebook and had payback in less than a month on paid spends and so we just started dumping every dollar we could find into paid user acquisition on Facebook and that worked for the next year and then that started fizzling out and we started working other channels and like did a lot of stuff with influencer marketing and um but basically it became paid acquisition as the growth driver and we effectively ran a growth rocket ship at cash flow neutral through that whole phase oh Ryan you the the journey you're describing is more extreme than in in a tighter time period than most Founders I've ever met both down to I've got five thousand dollars in the bank three kids getting a divorce to I'm surpassing Revenue goals that I thought were insane in a really tight time frame I would think that a lot of Founders that might be in your shoes would have turned to something outside of work to try and keep them sane to blow off steam it could be meditation and working out it could be alcohol or drugs it could be something how did you stay calm or levelhead or were you not I mean were you just pulling your hair out I think in general I'm fairly even Keel as a baseline personality um just I feel like the 2012 to 2015 phase like gave me so much perspective on what my personal like worst case scenario feels and looks like that it's made everything else from there seem just incredible and the appreciation I have for it is like to me it feels insanely genuine of like wow this worked out better than the wildest dreams that I literally wrote down from the financial part um and so that's that's been incredible um I run as like uh I run without any audio input like being a lot of people listen to podcasts or stuff like that for me running is the meditative Escape where brain can wander not be distracted by the internet or any other stimulus and so for me that through all these phases has been like something I do as a thing for me um and yeah and I just I think I've been lucky to have a partner um in George and then and Jesse uh to to share this life experience with somebody that understands it and understands me and it is equally capable of dealing with uncertainty in life there's a lot of people that I think deal with challenges in ways that are more counterproductive to themselves and I think George is like he's as level-headed of the guys you'll meet and like Jesse's pretty incredible as well thank you double clicking on George I do think that your co-founder relationship is pretty unique I guess unique is a blanket word that could be used for many relationships but you mentioned how you two are were fairly interchangeable in investor conversations um you both at different times in the company held the CEO role although George for much longer and through the acquisition but but some of these things of just like how you would that load balance between each other fluidly I find to be pretty unique like in my co-founder relationship we had more delineated roles and it was like Stefan does certain things I do certain things that Lumi um I found that to be more of a normal pattern uh so maybe you could speak to some of how you load balance between each other and also the personal Dynamic like you somehow I feel managed to be true friends and especially George I believe was a really true friend like truly you knowing that he is how his couch was somebody who could crash on like he was really there for you like as a rock through some of your darkest moments to be honest and he was an effective co-founder to you I I just find that very unique how you guys balanced all of those roles like break it down for us more like how did that work yeah I'd say the on the business and work side um I think we're both capable of doing a lot of different things kind of generalists who like to then operate generally from a very first principle get to get to the floor of why things are how they are and so we share a philosophy on how to approach all of the different disciplines I think because of that I ended up with a massive amount of respect for his product and human psychology decision making and foreign human psychology informing product decision making where I trusted him as the ultimate decider for product choices for the company pretty early on and explicitly gave him those keys that didn't mean I didn't tell him all of what I thought and how we should build things and had lots of ideas and I'd do it but ultimately I knew it was important for the organization to have one person responsible for that sort of thing otherwise you just have people that was while you were CEO run I was I was the original CEO so I built the original product George was right there with me the two of us are on the patent together um but I was the original CEO and it was when I stepped down to take the other job that we're like you can't have the CEO it was bad enough that you had a co-founderly if you can't have the CEO not in the meeting raising money um so George became CEO then and then he held that title for the rest of the time I arbitrarily held either all of the titles or none of the titles I kind of rejected any other title besides co-founder because in a lot of ways my role was filling in whatever our biggest area of need at that moment was so there were points in time when I ran the growth marketing as we ramped that up and then ultimately we hire somebody else full-time to do that job hopefully better than I was doing it and so a lot of the different roles in the company I bounced through until we built up internal expertise on it if there were one delineation of like just general responsibility George would lean more towards the product and managing the teams around that especially and I touched all of the legal and finance sorts of things but that was I think we either of us could have done either of those things as more just a specialization line and then like I said when I came to fundraising we both were out there meeting with people and actually I think our pitches were literally interchangeable where we would be saying exactly the same thing we spent so much time together especially late night dinners and Sushi and talking about the vision for the company that the way we talked about it became like very very similar and I think ultimately very interchangeable and aligned so that as we scaled the company there was a lot of clarity to the employees on what we're trying to do because it was the same for both of us someone who's listening to this podcast is thinking about starting a company they're thinking about what they want in the co-founder what did you find was so special about your relationship with George that you think you could teach someone to look for in a co-founder that's that's a tricky one I think it's like uh might be different for every person what the balance that works the best with them is kind of like a in a romantic relationship probably similar for George and I think it was a lot of alignment of the way we thought about approaching the world and thinking about things from a first principle point of view um I think that combined with a preference to go deep in relationships versus wide this is actually how we met in the first place we were at a networking event at Caltech at 8 A.M in the morning on a Saturday so imagine Caltech we didn't know anybody and because of that we were both just lingering next to the the coffee and bagels or whatever they had and like the approach was that we both just wanted to connect with people that we thought were interested in in a deep way and not just like how many business cards can I collect and meet as many people as possible and so I think that approach to life kind of is how we we both have operated I think I think that helps initially set this set it in motion and then ultimately it was just a lot of time especially as I went through the most challenging point in my life I think fortified that and he was um like it's rock solid through that and I can imagine a lot of other people would have vocalized I don't know the extent he had to which he had it but vocalized their frustration that their co-founder was the reason that they couldn't make this thing work like and using it as an excuse for the lack of the thing working on how he hoped um and so he never did that he never made me feel bad for having to to go work another company for dealing with my own things on the timeline that worked for me and so I think that set a foundation of trust and understanding that I think as the company grew it was that same Baseline but with more fun problems to deal with instead of just The Grind did you continue to vest while you were away from the company yep was there any tension in fact when we set up the company we didn't even have investing we just owned the shares outright so there wasn't no kind of a schedule for it um yeah okay but there was no but to your point about how magnanimous he was about just the intense process in your life where you had this need and you had to do your job Etc he he never tried to implement a penalty for that whether it's verbal or even structural with the company yeah um I'd like to go forward a bit in time to when honey ends up with some more people involved so you know we're talking about some early days I don't know how many people are at the company in 2015 that's actually interesting like maybe 30 or 50 or something no no no okay sorry are you telling me 2015 would be about yeah as we're starting to do things I'd say they're maybe 10 people in varying levels of contractor and part-time and because that's right that's still like right before that economic engine is really starting to click and so it's three years after the company started but there's still just a ragtag group for lack of a better term kind of working to build this so to to just putting people in perspective of like three years after starting it's like that like 10 people a lot of them contractors like I remember some other jokes about like your health insurance plan being like a gummy vitamins in the office so so just kind of stuff just kind of setting its own and then and then though uh at let's say uh I mean again orienting at some time like 2018 going in 2019 the companies hundreds of people um you honey ends up growing uh you mentioned the paid Facebook stuff you were doing but you end up going very deep on influencer marketing um and I kind of want to illuminate a different phase of Crisis handling uh from we just covered a lot of formation and like just the grind component but after the economic part starts working the company is making money uh crisis does not just drift away unfortunately like money flowing does not make crisis Drift Away uh uh top of mind is some of the employee um things you may have run into around some of your influencer marketing I'd love to cover that but also anything else where it would help illuminate like just because a company starts having profitability Within Reach Etc does not mean that crisis is uh not at your door so um give us a couple tidbits of like what you start experiencing and managing during that phase where objectively the company is working yeah I mean at some point the the project that you're working on shifts from building the product and let's say we kind of reached that product Market fit once we figured out the modernization side of it we had the growth engine side of it figured out it really became about building the the company as the product for George and I and so we shipped a lot of attention on to organization design people issues and how to um manage uh through that growth and make sure everybody stays aligned on the same page and look what you're trying to do so a lot more of the focus becomes about internal Communications and uh and frankly hiring but more importantly firing people um it might sound a little cold-hearted but I think actually this is one of the things a lot of companies will admit that they don't do as well as they they could effectively a startup most of the time a lot of a high percentage of the people are doing jobs that they have never done before that no one would ever hire them to do because they don't have that experience and there's a lot of on-the-fly learning and so the people that thrive in that environment are different than people that thrive in a different sort of corporate culture environment but one of the biggest things that every single one of those people especially in I'd say in Los Angeles especially at that time we're hiring people that did not have experience in those roles but in particular managing other people so one of the biggest learnings that George and I as individuals who also had never managed large teams before had to realize for ourselves is that firing people is one of the hardest decisions any manager ever has to make it's some combination of admitting you are wrong because you probably hire them and admitting that you're a failure because you didn't coach them into successful output and then dealing with the generally uncomfortable communication with somebody about one of the most important elements of their life and so for me I I think I internalized that based on based on my own personal professional experience I realized that I was in many of the jobs that I'd had not a good fit like the tech company that I was the product manager at um I was objectively not a good product manager for them because I was focused on other things so I wanted still my energy in my head was still on making money successful not on making better uh detection systems or whatever the projects were and so I learned that George actually learned that later than me um in many cases just as a fun aside George had attempted to fire somebody and they had persuaded him that maybe they should get another try and just a phrase attempting to fire is attempted to Fire and so I started I had to come in for the cleanup [Laughter] um and this is not just one case of this and so um anyway it's a lighthearted way of talking about a heart issue which is that then as we're Battlefield promoting all of our great individual contributors who are clearly really smart capable people who are good at this that now you're managing a team um the last thing that they're going to do is want to fire somebody on their team for all the same reasons that it was hard for us and then additionally now they think this reflects on them as a manager and so one and they want to be a manager because that's the next step in career ladders and so one of the things that they do is go hero mode and start covering for everybody's failures on their team and especially in engineering where that's like possible they just jump in and bug fix everything and they're doing all the releases and so we had to teach people that it's okay to identify people that maybe would be a fit for a different job somewhere else and help them build the process around that so I think one of the things that I spend a lot of time focusing on was that part of the education because either the company would have to get to 100 efficacy on hiring or if you don't if like it's safe to assume that you don't hire 100 the right people for the right job especially in a company where this the size of the company was doubling literally doubling every year and so somebody that would have been a good fit a year ago might not be a great fit now or certainly trending toward not being a good fit like a year from now just because the the work environment is changing so rapidly and so um helping people learn how to to approach that was a piece of what we're doing in the team building um so that that'd be kind of like just another racist version of it crisis version gets more towards some of our um more controversial marketing is one that comes to mind or controversial to some people I think the world post uh Trump election started to or maybe continue to fragment into Different World Views and at honey we built a product that I I thought and I think is for everybody it doesn't matter how much money you have um like you want to save a great product for wealthy people yeah yeah it's a universal value proposition in our marketing efforts we've had various points in time where people wanted to do personas and like who is the honey Shopper and like the honey Shopper is everybody throw that work in the garbage I don't want to see it is uh a thing that I told various marketing people several times because that's one of the best practices is marketing is to come up with these personas um but that's the setup for in our marketing efforts we were trying to reach all sorts of different people through whatever channels were effective to reach them and communicate to them and especially as we started working with influencers you start running into influencers with their own Brands their own potential problems but their own audiences and ways of speaking with them and one particular case that blew up on us a little more High profiley a little bit external but also internal is we sponsored a video with Pewdiepie where I think he got to his 100 millionth YouTube subscriber or something like that just wild which is just 100 platform for an individual to have 100 million subscribers and YouTube gives them a plaque and like you've got 100 million nothing first or second person ever to do that or something like that I don't follow those battles as close as others but um in the past he'd been associated with some anti-semitic anti-semitic comments in some of his live streaming videos I guess I don't again I'm not I'm not one of those 100 million subscribers so I don't know the details of it um but there was some concern in our marketing team that we'd be associating ourselves with somebody that had in the past made anti-semitic comments and there's discussion about whether or not we should do that campaign or not and ultimately decided that yes we would um I personally didn't believe there's a hundred million racists out there and that they're not following PewDiePie versus racist content um and so we decided we'd do that one of the conditions of the um of the marketing spend was that he was going to donate I believe fifty thousand dollars to the Anti-Defamation League like the charity and this is 50 000 sub honey it's like so it's one of our money just to pause for a sec in your mind as a like in your role honey at the time do you feel like this is is this like kind of being proposed by your marketing team to sue themselves like I'm just kind of curious if you kind of remember how it felt at the time yeah it was definitely internal it's not a good idea just to be very just be very clear with the audience not that it's not a good idea to donate 50k to this group but just kind of how it how it was motivated internally it was uh a conversation some people wanted to do it no matter what because I thought it was going to be an effective way to reach 100 million people at this moment in time there were other people on the same who had concerns about how it'd be perceived um either and they probably shared those concerns personally and so the charitable donation was the compromised approach to do it um which there's probably a lot of learning to unpack and and how this played out because the next step is we launched this video and uh some elements of PewDiePie's audience is offended that he would be donating to the ADL because we can imagine out of 100 elements out of 100 million people I said I don't believe they're all racist but there's probably something none of them are yeah and so they they start giving him a very hard time online and uh and so then the next day he publishes another video where he retracts the donation to ADL oh wow so honey so honey is associated the beauty of like the beauty and by Beauty I just mean sheer horror of how this plays out is is a little comical where like you do this thing you come up with this approach to have it like have there be a salve I'm like okay this person has sort of mended their ways there's going to be 50k to this group yada and then the person who now has publicly been associated with Honey comes back online to be like you you know my racist faction of fans is correct I'm retracting so Ryan how did you feel of it how did you feel Ryan in that moment uh that we were in a sticky mess I mean it was like clearly not playing out how you draw it up in the uh in the marketing room like the sound disappointed ashamed uh frustrated angry a little bit concerned like from a a Brand's point of view and then I guess the other piece is then internally it started a lot of employees having issues like we were unhappy yesterday that we did this we're really unhappy today because he just proved that he's who we told you he was um and so aren't you frustrated with Pewdiepie like aren't you also kind of like bro like I mean you know I'm sure you don't reach out and just say that but it's like it's frustrating I feel like I feel like he made different brand choices than I would have made for him or advised him to do but um I mean that's that's the wild card that you get with online creators that are individual personalities is that um yeah you're gonna get a mixed bag and I think for me I mean it was it entered crisis comms figure out how we're going to handle the situation because it spilled over into the Press um a bit and did you personally address it like do you at that point are you delegating to some Thomas person or did you personally address the team first the marketing team talked about it and then I jumped it we had a I think we already had an all hands already scheduled and so it was obviously the topic of conversation uh the marketing team talked about it it was Fielding questions and um it became clear that I needed to step in and let people understand what the company's position was on working with influencers and through channels that they don't agree with I think that's to me that was the biggest thing overall in thinking about the approach is that this represented just one example of a sort of content that a segment of the population in the company or in the world wouldn't agree with um we had previously sponsored things like uh that were very left-leaning and there were not issues on that we'd sponsored an assortment of um right-lane and things that periodically journalists would flag as hey how come there's honey ads on I'm making this up I don't know if there's a real one but Breitbart or some of the more toward the right side of the media spectrum and we've been clear that hey we're reaching all people lots of different places through lots of different voices and part of what works about influencer marketing is that they're speaking to Their audience and their voice which is important for our product because one of the biggest hurdles that we had to getting people to sign up for this product is that it's basically free money and so it's the value proposition is almost too good to be true and so by leaning into credibility whether that's LA Clippers or Mr Beast or people like that We're translating some of the brand Authority that those channels had speaking to a specific audience and that's why it worked so well for us um so anyway the the employee backlash was actually bigger than the external backlash and we actually had at least one person resign as a result of that and I respect that choice um completely and uh but at the end of the day getting into potentially it obviously blew up if we knew it was going to work out that way but um honey is and was a product for everybody and that that happens sometimes I guess is my take away from it but it was definitely uh The Gauntlet of internal comms especially Ryan um just kind of from bringing us through the intensity of just a massive acquisition to the origin and how unclear success something ends up successful can be for not weeks or months but years uh to how even when it's working there's lots to deal with every day I just thank you for all of that and it's just really a pleasure to have you on like 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