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I will also say - maybe just a little window into me and what makes me tick is I like to follow my nose. Maybe it's a good scent for opportunity, and value, and the desire to solve problems for others, but that's really what it's been. I think I got into it through accident, and then just continued to follow the trail. |
**Adam Stacoviak:** Gotcha. It seems kind of a common path, to just scratch your own itch, right? To figure out a problem -- in this case, you're an entrepreneur, so your problem turned into a company. You saved over an invoice, you created a better way to do online invoicing, in an age when it wasn't really happening ... |
**Mike McDerment:** The moment when I got frustrated and saved over that invoice was actually in January 2013. If you go all the back there -- and I was running a small design firm, I had this business, I was working from home, I kind of had a constellation of contractors... So if you go back to that time, it was a ver... |
Frankly, I think this notion of being a founder was less an obvious path. I think the movie The Social Network, and Facebook, and all this stuff -- there's been quite a significant transition, I would say, in just awareness of entrepreneurship as a path, and its desirability. The markets have been exciting for the last... |
**Adam Stacoviak:** Yeah. And just to clarify, you said 2013, but I think you meant 2003... |
**Mike McDerment:** \[04:14\] Oh... \[laughs\] My bad. Hopefully, people can switch context there. Absolutely, I meant 2003. Yeah, that was the moment we got started, and it wasn't really a company for a little while, yet. |
**Adam Stacoviak:** So let's talk about maybe that path then, the early days. I don't want you to go through your entire history, I'd like to focus on some things that you're doing now as a CEO... Because I think Mike today versus Mike in 2003, or even 2010, when we last spoke on a different podcast that I ran, called ... |
**Mike McDerment:** \[laughs\] We're probably both in the terrible bucket, who knows... Yeah, I'm afraid now. \[laughs\] |
**Adam Stacoviak:** But back in these you'd mentioned that -- you're right, entrepreneurship wasn't something that was... It has become a thing that people are more aware of. And I think too, as you'd mentioned technology being available - today we have so much very modern software available at the touch of any button ... |
**Mike McDerment:** Yeah, very different times. There's two major things worth mentioning. First of all, a technology like Ruby on Rails, a framework for developing web applications really didn't exist, and we were building our own and rolling our own. There were some at the margins, but nothing like what's available n... |
**Adam Stacoviak:** Right. |
**Mike McDerment:** So I think just all those technologies that people take for granted now, like jQuery - not around; these fundamental building blocks... And then I think the other major one I'd call people's attention to, that we've seen over our tenure, is actually mobile. Smartphones were not a thing. I didn't eve... |
**Adam Stacoviak:** \[laughs\] |
**Mike McDerment:** Eventually, I got a clamshell... I may have had actually a pager for a while, and whatever... But it was just different. There was a whole other platform we needed to start building these products for, and frankly, that mobile piece started to just bring much more clarity to the art of ease of use a... |
I think those were two of the big, fundamental changes from a technology standpoint. I guess the other one would be just cloud, being able to host your products in the cloud, versus bare metal, whether you're running it, or like we did, having it managed at Rackspace. But you know, those are three huge changes in terms... |
**Adam Stacoviak:** Well, let's compare and contrast then, for the listeners' sake... I wanna get into this rewrite/competitor you built in a bit, so kind of dovetail into that if you'd like, but compare and contrast the technologies that you built the classic FreshBooks on, and the things you're using today... Like, a... |
**Mike McDerment:** \[08:17\] Yeah. So we've always been open source, just LAMP stack being a thing... It's just that they were seriously under-developed at that point in time. Today we're a single-page app, with Ember hosted Google cloud... I think those are some of the big pieces. And then you have all these tools av... |
**Adam Stacoviak:** Observability, monitoring, stuff like that. |
**Mike McDerment:** Yeah. GitHub to support your development practices... There have been a lot of changes in and around the actual technology choices that you use to build your actual product. A lot of the improvements have come in, like how we facilitate the production of software as well. |
**Adam Stacoviak:** Well, let's dovetail then into how you almost killed FreshBooks. I assume that at some point -- I don't know really, I can only speculate, but it seems like maybe the technical direction of FreshBooks wasn't going the right direction, you needed to scale and do things, as you'd mentioned, mobile cam... |
**Mike McDerment:** Yeah... To be honest, I think it's a proud moment. We like to think we find creative solutions to problems here at FreshBooks. That's part of the art, and this was definitely one. |
Effectively, where we got to was -- you can talk about the age of some of the technology, and we had moved on and started upgrading parts of our stack, and using... We use a lot of Python today. We'd already started that for a lot of our back-end services... So we're using an ever-evolving and improving collection of t... |
But one of the places we were stuck is the architecture of our application when we started out was just not clean, so we had a lot of back-end, or almost middleware (if you want) logic baked in with our front-end. So if I think about the root cause for what we decided to do, which was to fully replatform, it was really... |
\[10:46\] So we started out and said "Okay, if user experience matters, ease of use and simplicity, we have won on that today, but it will be harder and harder for us to win and win again, and win long-term, if we don't do something radical design-wise. Let's design those designs at where it would be... And then, you k... |
Questions when you replatform - if you read Joel Spolsky, or what have you - the number one strategic mistake you can make as a software company is "You just don't do it. You're bound to fail." |
**Adam Stacoviak:** It's severely frowned upon, yes. |
**Mike McDerment:** Yes, it's severely frowned-upon, and I think there's good reasons for that. First of all, it's gonna take longer and cost more than you think. You may never finish. That is a very likely scenario. And actually, we tried twice before, and failed... So it was the third time that we kind of got it done... |
My favorite ones are maybe less obvious and more business-oriented, but you could build another version of your offering, and it could fundamentally perform worse from a business standpoint, and you wouldn't even know. What happens is inside the building -- you're building a new platform, and your team is falling in lo... |
\[12:14\] Then there's the good old "Hey, your competitors are still moving, while you're standing still, replatforming." That's not good. They're catching up if you've got a lead. Okay, that's bad, because it's probably gonna be a multi-year thing if you're relatively established... We're number two in America for sma... |
And then finally, my favorite one - I like to call it a sophomore jinx, but I like to describe it this way... If you've ever had a band you love their first album, and you go buy the second one and you're ashamed to be a fan, because it's so bad... |
**Adam Stacoviak:** Yeah. |
**Mike McDerment:** Right? That is a bad scenario. |
**Adam Stacoviak:** One-hit wonder, or one-album wonder... |
**Mike McDerment:** Yeah, exactly. It's like, "Man, I don't wanna be one of those..." I think that presents itself when you go and redesign a new thing. There's no guarantee your customers are gonna love it. People are inherently afraid of change, so things are kind of stacked against you... |
So then we had a whole bunch of problems. Basically, like "Oh, how do we measure it and know it's better? How do we get some stealth while we're working on this, so our competitors can't find us?" I was chewing on all these problems and came up with this crazy idea one weekend when I was chewing on these problems... I ... |
Because it wasn't our brand -- and I think once you have a brand and people trust you, you really cannot take as much risk... A really new, fragile, embryonic technology - there's big risk in that, whether it's user experience risk, or production availability, or data loss risk... All these risks are there. So if you'r... |
I really wanted to have an environment and a set of conditions where people can take risks. So by creating this new company, which we incorporated on its own, had its own website, its own brand name, did everything over here... We ran it actually live for like 9-12 months before determining it was ready to switch it ov... |
And then I'll go further and say then we had this other problem of "Okay, we have two platforms. People don't like to switch..." We believe in the four E's, which is Executing Extraordinary Experiences Everyday. Very customer service and customer-focused orientation as a business. We recognized that people wanna not be... |
We actually ran both platforms and let our customers choose when to move over, and if they wanted to move over. We thought that was the right thing to do, because we are a serious business software, we are playing a core role in people's lives... And having that choice we just thought was empowering to then, and would ... |
So all this -- we tried to take this challenging thing that is usually a major trust-mitigating event and find a way to design the experiences so ideally it's trust-building or neutral. We had lots of people who were super-excited about the new FreshBooks. The vast majority. But we definitely had some people who were l... |
\[16:12\] So I think not only was creating a new company novel and different, our approach to migrating customers from one platform to another - I've never heard of anyone else doing that before; also novel. I think the team, and for executing the complexity in those things, and conceiving of them, deserve a lot of cre... |
**Adam Stacoviak:** Certainly it would take a lot of trust of a team in a leader like you to believe in that path and to put their neck on the line every single day, and come to work, and kill it, and do what you've done... So I guess the question hanging in my mind is "Is the new FreshBooks the same technology that yo... |
**Mike McDerment:** Yeah, we could probably write several books on this... |
**Adam Stacoviak:** Take your time with that one... |
**Mike McDerment:** No, I'll try and articulate it, because what's really fascinating about this when you're inside the problem is literally -- like, you are lost in a maze of possibilities, and it is completely overwhelming, you don't know which way to go, and it's like you're kind of at square one on this journey of ... |
So here's the thing - that seemed so complex to us, but after a time I came to realize \[unintelligible 00:17:37.17\] it's like "You know what - if you're not us, if you're a net new person to FreshBooks, and you sign up for a new offering, you don't know anything else. You don't care." \[laughs\] |
**Adam Stacoviak:** Yeah. All you want is a good product. |
**Mike McDerment:** Yeah. So it's like, we're managing all this complexity and have all this history, but somebody who signs up today - all they know is what they signed up for. So basically, what we did is we went back to the users of the new platform (it was called BillSpring), and we told them it had been acquired b... |
**Adam Stacoviak:** Okay. I was curious how that would work out. |
**Mike McDerment:** Yeah. And it was like "Hey, we've acquired it." End of story. There was not much brew ha ha. That's fine. And they could keep using it, so whatever. |
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