Steven Cox Entrepreneur Interview on MarketPulse – ESPN Radio

| May 23, 2013 | Reply

 

Interview Transcription

Starts at :48

Chris: As I mentioned before the break, we have a wonderful guest in studio today, Steven Cox, founder and CEO of TakeLessons.com. The team at TakeLessons has been connecting music students with the best local music teachers since 2006. They pride themselves on providing safe, affordable, fun music lessons to students of all ages. Steven Cox, welcome to the studio!

Steven: Thanks a lot for having me, Chris. Glad to be here.

Chris: So TakeLessons.com, we’re going to get into what that is. Obviously we’ll find out more about what it is that your company provides, but I want to get a little bit of background on yourself, where you came from, how you got out to the West Coast, and how you got started into TakeLessons.com.

Steven: Sure, well it’s an interesting story. So I grew up in the Midwest and grew up in Ohio, went to school in Kentucky, and I’ll tell you the quick story about how I got out west. So this is also dating myself, which is okay as well … but I was selling Prozac, actually, for Eli Lilly, I graduated — out of school, was selling Prozac for Lilly, there in Kentucky, which I can tell you all kinds of stories about–

Chris: That sounds fun!

Steven: [You can] imagine. A buddy of mine, he had invested in this company out in Las Vegas and he sat me down with a group of us, about six or seven of us, and he said, “Hey, I invested in this company out in Las Vegas.” The year was 1996 and the owner had raised $840,000 and literally gambled it all away. Every single bit of it. So he goes, “So we’re going to go out and take over the company. Do you want to go?”

Chris: All right, all right.

Steven: And I’m thinking to myself, well I just broke up with my girlfriend, I don’t have anything here anymore–

Chris: Didn’t even know what the company was?

Steven: Well that’s one thing I ask him. I said, “So what’s the company do?” And he goes, “Well, we’ve got these CD-ROMs and what we’re going to do is try to let people buy and sell stuff over the Internet.” And I go, “Oh, the Internet, yeah I’ve heard about that. So — yeah, sure, why not?”

Chris: And it’s not selling Prozac. “I’m in!”

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Steven: This was literally a Saturday. I called my boss on Tuesday, quit my job, packed everything I owned up in a storage van on a Thursday, and then the next Saturday, literally, we were trekking it cross-country in a budget mini rental van with a couple of things we owned in the back. We traveled out west to start a company out in Las Vegas, where I first cut my teeth really in the Internet space, and it was 1996. Kind of typical, goofy Internet companies, had no idea what we were doing, software didn’t work — that sort of thing — a lot of testing in that era and that environment, but it started catching on and we landed a couple clients and that company grew from about 8 people to 800 people. Went through the whole funding, IPO, was the 3rd-best performing stock of ‘99, I believe — and was kind of able to see a lot about how to build a business as well as how not to build a business. One of the key takeaways that I had learned from that was, first of all, what goes up must come down — as we’ve all experienced — and second of all, it’s to really try to build things that are of high value for people. If you focus on building those high-value items that truly solve a problem for a particular group of people, then … you have a chance of really succeeding in the business.

So I never went back. I was in Vegas, and then I visited out here in San Diego, flew into downtown, and I was like, Wow, I’ve got to move here. There’s no heat wave. This is great. Also, there’s no snow. From there, I moved to San Diego and started with a company here that a lot of your listeners may remember — it’s called College Club, which was one of the very first social networks. And they were around … from about 2000 to 2004. The company didn’t get the chance to go public, but they sold out to a publicly-traded company. Again, it was just like a MySpace or a Facebook before Facebook, so I’ve always done Internet startups.

Chris: There’s actually been some success … too. There’s a lot of websites that people just put up, and nothing happens, right — but you’ve done a little bit better with that.

Steven: We’ve done okay with them, sure.

Chris: So now that you’re in San Diego … now this company came and went, 2004 rolls around, 2005 — what’s the next venture and how did it get started?

Steven: Sure. So I’m a nerd — I’ll totally admit that. What I do — and still do, actually, I was out pontificating — I was drinking a martini, which is something I typically do, and sitting out on my deck, pontificating, “Oh, where is the web going to go?” We had seen this big move over the past five years from, really,  the late 1990s and through 2005 to where Amazon started, had launched, and really taken off. They grew from books to basically where you could buy just about any type of product that you would think about. And then we were starting to hear about this little company called Zappos that was starting to get a stronghold in the market. And I’m thinking, “If people would buy shoes over the Internet, they’re going to buy everything over the Internet.”

We started the general thesis back then with a couple guys I knew that, at some point in the future, services would move to the web very similar to how product had moved to the web. We’d see this giant shift — services in general make up over 75% of the economy, yet it’s very difficult to buy services over the Internet — and the main reason is, if I want to buy a product, it has a SKU number, right? I can take a look and I can accurately compare what that product is versus another brand or another site. When it comes to buying a service, whether it be financial services, or an accountant, or in our case, a tutor or a music lessons provider or a dog walker or a babysitter — you name it — we don’t have SKU numbers. So it’s very difficult to compare. Our whole thesis is, that at some point, brands would establish themselves as the place to go where consumers could go to know that they could get a trusted, vetted service provider that would give them a good service, and if they weren’t satisfied, that they could get their money back as well. That was the general premise, as far as the Internet goes, for starting TakeLessons. That tied in with one other thing that was happening at the time — that I could tell you about, if you’d like.

Chris: Yeah, absolutely.

Steven: In-between my startups, I come from a very musically-oriented family. My grandparents cut records, my parents cut records, all my brothers are session players, and I’m kind of the least musically-oriented out of the entire group. But I’ve always been in bands my entire life. I DJ’ed my way to pay for college.

I was playing in a band back in 2002, 2004. No, we weren’t any good. Most of us, anyway. I was, again, the worst out of all of them. But I was the lead singer in the band — and our drummer was just an incredible musician. He had studied for years, had a masters degree in music performance, and not only just an incredible drummer, but also an incredible human being. We had just finished a gig, and after the gig we went over next door to the bar to drink, and he said, “Hey Steven, I’ve got some news for you.” I said, “Well, what’s going on?” He said, “I’ve got to quit the band.” [I was] thinking, if you quit, the whole band’s going to break up–

Chris: You are the band!

Steven: “You are the band! What’s going on?” He had a wife, and he just found out that his first baby was on the way. And he’s like, “I’ve got to make some life decisions and I can’t pay with this. So I’m gonna quit working in music and I’ve got a job lined up and I’m gonna be a cook at Chili’s.” My heart — and his heart — you could just see it, just sunk to the bottom of the floor. And I’m thinking, Wow, this can’t happen to this guy.

We started talking, and I ask him if he was teaching. He said, “Well I’ve got my posters hanging up at the local drugstore, but not too many people [are] calling me.” I said, “Why don’t you use the Internet for that?” He said, “I don’t really know anything about marketing or the Internet and, plus, I just really want to teach. I don’t really know how to really run a business.” I said, “I’ve got a little background in that — why don’t I help you do that?”

That concept was what also kind of — the genesis of the idea was: how do we keep Enrique out of Chili’s — our drummer — out of Chili’s? And really help him make a living out of doing what he really loves to do? The belief of the company is that if we can help enough people make a living doing what they love to do, we can make a very positive impact on the world because we believe people are just generally happier when they’re doing stuff they love to do.

Chris: Absolutely. That’s a great point, great philosophy. So — what is TakeLessons.com? Let’s talk about what it actually is and what it is you guys actually do.

Steven: Sure. We’re a marketplace where you can come onto the site and find a local, vetted instructor for music lessons as well as tutoring service — academic tutoring services — as well.

Chris: Okay, so, perfectly matching up people that want to get instructions either via music or any other type of potential lesson via your website.

Steven: You got it. Instead of — you can imagine Mom hopping on Craiglist and finding some long-haired dude to invite into her house to spend time with her nine-year-old — it’s kind of creepy.

Chris: It can be, sure.

Steven: We take the creepiness out of it. All of our instructors … they walk through a whole 7-step process — all 40,000 that we’ve had apply — a 7-step process where we vet them out, they do background checks, we check with their professors, they walk through best practices before they’re even allowed onto the site. And about half — well over half of the people that apply don’t make it onto the site. They just don’t pass the standards.

So you could think of us — if you think about eBay and it’s a very open-type marketplace online where anyone can come, buy and sell — we’re kind of like that, but just for power-sellers in the same realm. Meaning, just the best-curated type instructors so that way the consumer knows that they’re going to get a really great experience.

Chris: They’ve done all the legwork for the person looking for an instructor because you’ve already vetted them all the way through.

Steven: You got it.

Chris: Okay. It sounds like a great website. I know I’ve checked it out — it’s awesome. We’re going to take a quick break here with Steven Cox, CEO and Founder of Takelessons.com. Stay tuned, we’re going to get right back at it after the break.

[commercial break]

Chris: Welcome back everybody, you’re listening to the Market Pulse here on ESPN 1700. We have the wonderful Steven Cox, Founder and CEO of TakeLessons.com here in studio with us, just talking a little bit about your background and how you got into TakeLessons and obviously some of your passion with — your family was … musically inclined, and you had a little bit more business sense as well to go with that. It popped up — how to keep your good friend Enrique out of working for Chili’s. So whatever happened to Enrique? Is he still with you guys? Did you help him?

Steven: So you know what? Enrique never started at Chili’s, which is a big, big win — for both him and me. He still teaches for us today; he is one of our drum instructors. If you are in the Encinitas area of town and need a fabulous drummer, hop onto our website and look up Mr. Enrique. He is the bomb.

Chris: Perfect. I’m glad to hear it. That’s a good story. Now, obviously you have a musical background — and even yourself, you play some musical instruments. Other than that, your passion to getting this involved, and raising funds for it, and understanding the business side of it — what was that process like? Did you guys have to get fundraising for it, or did you use your own funding for it?

Steven: Sure. [I’m] super passionate about music — and one of my even larger passions, or I should say, just as passionate with music is the idea of — how do you build? — you know, we’ve been very specific in the Internet space, that’s all I’ve ever done — and my idea was, can I go start and found a company and then build something that becomes a household name? And continue to build something in — one of our core values of the company is ‘build stuff you’re proud of’? That was something that was very dear to my heart is assembling a team, building out an ecosystem to where if you are working for the company, you wake up every day excited to be inside the company, and if you are not in the company, you’re thinking to yourself, “Hmm, how do I get in working with those guys?” That’s the type of company we wanted to build. That was a big passion of ours from Day One.

When we first started the company and we decided to take a run at that … obviously there’s a couple things that one needs, and that is a decent idea, a lot of elbow grease, and the third is some capital — so we had the first two. The third came from myself — I was my own angel, if you will. Angel money — we put some money into the company to get it started. I recruited five, six guys and they literally worked for zero pay for about the first six months — my co-founders. And then after that, they got a giant raise — they were then making $750 a month.

Chris: Right — huge.

Steven: Unbelievable, huge, huge money. But when you’re starting a company specifically and you’re looking for what we call a “product fit” — right? — and can you build something that the market values enough to pay for? Specifically in the Internet space — that’s … the first minimum viable product that you’re trying to search for. And sometimes that’s exactly what it takes. If one is not a proven entrepreneur with a track record, to where you’ve sold a couple companies off in the Internet space, then what you have to do is you really have to buckle down and either find people that believe in you and [are] willing to pony up and invest in you — because they’re really not investing in the idea; the idea’s going to change a thousand times in your first year — it’s very, very typical — but people who believe in you. Or if you’ve had some kind of exit in the past, and believe enough in the idea that you’re willing to put your own money on it, that really speaks accolades and volumes to the next group coming in.

Chris: Right.

Steven: So we funded the company — I funded the company myself, starting, and from there we started getting a little bit of traction, figuring out what’s right, what’s wrong. We launched here in San Diego, we launched in a couple other cities, and was able to attract our first round of friends and family. We raised another $800,000 — mostly it was people who just knew me. I had guys that were like, “Man, I don’t understand a thing you’re doing. but here’s some money–”

Chris: “We know you’re going to work your tail off!” Yeah, okay.

Steven: “Just, don’t lose it, okay? Try to make it something.” But luckily for them, we didn’t lose their money — which was great.

Chris: Awesome.

Steven: Then we found a local investor, and also a tech guy — his name is Jordan Greenhall. He was an early guy at MP3.com, a local company here in town, DivX — which went public, also a technology company here in town. He was our first lead investor. Finding that first lead investor, who is experienced in the space, savvy — what that does for the young company is that grants some credibility. So all the other guys who were kind of on the fence and thinking about investing — as soon as our lead investor came in — boom! Then all the rest of them. All the rest of them just fell right in line.

So we were able to close that round. The next round, what we did was another friends and family round, and we got a couple other folks from LA involved. One of the early founders of MySpace came into the company, and again gained us a little more credibility. But all along this way, I’m talking about the investors getting us credibility — but we were getting credibility ourselves. We were actually working on a product, solving a problem that we felt customers needed and customers were validating that. …

So this is 2013 — then [in] 2011, so we’re into the company 4 years or so, we had enough gunpowder and enough results here for what we were doing to where we were able to go out and do a first institutional round of financing. [We] looked around in San Diego — there’s not too many venture capitalists here in town, so we did a road show through the Silicon Valley area. Talked with 32 venture capital firms, had really good meetings and follow-up meetings with about 13 of those, we were able to get three what’s called term sheets — which is not a promise or a commitment — but, “Hey, we’re kind of interested–”

Chris: Good intentions.

Steven: If you’d like to work something out, yeah. Our first round was led by a group called Crosslink Capital. They’re a well-known fund out of the Bay Area. They also did Ancestry.com, they were the lead investors with Pandora, and with those guys came SoftTech Ventures, who backed Twitter and Facebook and a bunch of well-known companies — and some guys like, for instance, Maynard Webb, who was the COO of eBay, who in the marketplace space played a big, pivotal role. So guys like that we were able to get in once we had a proven track record that we were going to do what we said we were going to do.

Chris: Gotcha. So at that point, you must have been steamrolling ahead pretty well, having these backers behind you, and people really believing — the people that work for you, plus people that probably now wanted to come on to work for you, moving forward. Was there a pretty quick  progression in terms of growth from 2011 to today?

Steven: Sure. There’s an old saying that I like to tell all young entrepreneurs, and that is, if you take a look at the Space Shuttle or a rocket that’s about to blast off, and it’s filled with millions of tons of fuel, and 80% of that fuel that it’s going to use is going to be used in the first mile getting off the ground. And then after it starts getting traction, then it can — not coast a little bit — but it becomes a little more efficient. That’s the same thing; that you are going to spend a tremendous amount of effort on the front end getting things right before you’re able to inject that kind of capital into the business, most times. We did have traction, we were seeing some results, and the funding really just allowed us to put more fuel in that tank and press on the gas quicker. We’ve grown — we were 18 or 20 people when we got our first institutional round. We’re about 70 people now, so in the past year and a half — not quite two years — we have grown substantially just in the number of people. As well as we’re just getting more mature in systems and processes and customer base and we’re really looking to build a company with a lot of long-term value for a lot of people.

Chris: I imagine you’ve been able to smooth out a lot of rough edges along the way. Now you’re almost a finely-tuned machine. There’s still always something you can tweak, I know, right?

Steven: I gotta tell ya, it never feels that way.

Chris: It’s never done, right? Work’s never done.

Steven: If you’ve started a company and you’re a few years into it, and you still feel like, “Jeez, does this ever get easier?” That’s the way we feel.

Chris: It’s what you’re supposed to feel, right? You can’t rest on your laurels.

Steven: That’s right. It’s very natural to feel, sometimes, beat up — sometimes to where you’re like, “Oh man, this absolutely sucks today.” But I don’t know, I wouldn’t have it any other way. if this was a simple task — I think we were mentioning earlier — everyone would do it. But building a company from scratch and getting traction takes a lot of work from a lot of people. Not only just good decisions, but a little bit of luck along the way, and certainly a lot of tenacity to make sure that you persevere through the bad times.

Chris: At least at this point, Steven, you can take a look back and take some stock in what you’ve done and accomplished. I mean, you guys are heading the right direction — you’ve done a lot — your metrics are, what? You said 40,000 instructors now, or at one point? You guys have–

Steven: Yeah, we’ve had over 40,000 instructors apply. We’re in about 3,000 cities all across the US. We’re giving over a million minutes a month in lessons. Certainly a little bit of traction. And I really just give accolades to my team. This is certainly — I had the vision, but there have been just some incredible people — my co-founders, the folks who are with me today — that have been able to truly grow the business way past even where I thought we would be.

Chris: A million minutes a month. That’s remarkable. You’re giving — you’re teaching a lot of people or giving them the foundation to find what they need to move forward in their lives. That’s awesome.

Steven: There’s a lot of happy moms out there — because their kids are happy right now.

Chris: Keeping them on the right track. Keeping them out of trouble.

Steven: We’re pleased to be a part of it.

Chris: Awesome. We’re going to take a quick break. Steven Cox here, Founder and CEO of TakeLessons.com. If you have any questions for us here in the studio. We’re going to talk to him for just a few more minutes after this next break. I want to talk about if you had any mentors along the way if you have any advice for people that are starting their own business or maybe trying to get over that next hump so stay tuned — be right back

[break]

Chris: Back to the Market Pulse. We have Steven Cox, Founder and CEO in studio with us at TakeLessons.com. Obviously, they can go to the website — TakeLessons.com — or is there a number they can call as well? To get in touch with somebody or talk about more information about what they can do.

Steven: Sure. The best I did, just hop on your mobile phone or go to the website on your laptop, that’s probably the best way.

Chris: I’m pretty sure most people are — at least hopefully somewhat Internet-savvy at this point, right?

Steven: Right.

Chris: If not, ask somebody else — they can help you with it. So one of the things I wanted to ask you was, you went through a pretty big growth spurt from 2011 to now — is there certain things you guys see on the horizon for things you maybe have to overcome, or opportunities, or expansions for what you’re going to do moving forward?

Steven: Sure, Chris. So one of the ideas of the business when we were very young was: how do we develop out a platform and get to where we can launch with music and then start stacking other sorts of personal verticals on top of the same platform? So you can build once and then multiply your market expansion. We’ve been working on that for several years, and in January — or February, rather, we just launched tutoring. So now, instead of just music, we’ve also now allowed for tutoring where you can come in and find a math teacher, for instance, for your kid who’s struggling in algebra. And we have plans to launch other sorts of verticals on top of that.

In addition to the types of lessons, so just for music and tutoring for example, we’ve also launched an online product to where the majority of our lessons happen one-to-one. An instructor will show up at your house to teach you or your kid in about 3,000 cities, but there’s a lot of cities throughout the US. In fact, 12,000 [cities], so we still don’t cover the majority of the cities, believe it or not. We have all the large ones covered, but for all of those other cities we just launched an online product where you can literally, through the platform, pop in and schedule your lessons and do lessons over the Internet.

What’s really cool about that is first of all, it serves a much broader market; we have found that busy professionals such as, maybe Chris, like yourself, where you’re like, “Well I can’t go to a place once a week for lessons,” but at 8:30 at night, perhaps, you can hop on your computer and take a half-hour lesson and that’s much more convenient for professionals.

Chris: I’d rather spend my lunch break doing an hour webcam session.

Steven: You got it. So we just launched that product — it’s taking off like wildfire; it’s super, super cool — and with that we just got our very first international students — so Switzerland loves TakeLessons. They just told me about that last week, and I thought that was really cool. And it was a 53-year-old gentleman in Lucerne, Switzerland, who wanted to take lessons from an American and never had a shot before.

Chris: You went from 3,000 cities to every city in the world by doing that platform, right?

Steven: You got it. That’s the whole idea — is how do you continue to expand out the platform in such a way to where it provides a great service for people.

Chris: So what you’re saying is you’re going to become the next Amazon of the service industry on the web, right?

Steven: You know, we have big dreams, and we do things in a very methodical manner, which is something that folks ask me — they’re like, “Wow, you guys are expanding so quick!” But one thing that I’d like to point is out is that we were very lean and methodical and focused on one thing for six years, and just did one thing and tried to get the absolute best at that one, very particular thing.

I see a lot of companies out there when I advise younger startups, and what I say is they try to boil the ocean. They have this great idea and they’re going to do these 50 different things — they get zero traction at any of them because they’re not he best at anything. What I always advise is: find one thing that you’re super-passionate about and that you know you can do better and get a competitive advantage over someone else on it, because there are — if you’re in any other business, Internet or anything else — there’s probably fifty people working on your exact idea right this second. So the question is: how do you get really, really good at that? I believe in that as a focus and really diving down, focusing on one thing, because if you don’t focus down on one thing — you will never have the opportunity to focus on many.

Chris: That makes a lot of sense. That’s great advice. Did you have mentors along the way at all, or any advice you received? Or probably similar to what you’re saying now?

Steven: Yeah, you know what? I’ve leaned on a lot of smart people. That’s what I try to do. In essence, I can’t claim that I’m smart; but I can claim that I get a lot of smart people around me. That’s been the key. I use our advising group on the company, I use our board of directors quite frequently, and I’ve always tried to lean on people smarter than I — some of the very early product design came from just very good, deep conversations with other people in the Internet space trying to figure it out.

Chris: Right — that’s an awesome story. Steven Cox in studio, Founder and CEO of TakeLesson.com. Obviously — name of the company — go right to the website, TakeLessons.com. Located here in San Diego. And you can find just about every and any instructor at this point, whether it’s music medium or other medium as well–

Steven: Or tutoring.

Chris: Or tutoring. Perfect. We want to thank you again for coming on. Is there anything else you’d like to add before taking off for today?

Steven: I think that’s about it, Chris. I really enjoyed it. We love being here in San Diego. We’re hometown guys and it’s great building an Internet business here in the sunshine.

Chris: Any favorite bands you have? I know you’re in a band and a lot of people at your company are in bands, but anybody that you listen to or anybody that inspires you?

Steven: I’m kind of in the Foo Fighters, U2 realm — I listen to a lot of The Cure, just depending on my mood. 5:30 in the morning in the gym, I’m certainly listening to the heavy Foo Fighters or even Deadmau5 or something like that. I’m kind of all over the board so as long as it pumps me up.

Chris: I think that’s good. Eclectic taste. There’s a lot of good music out there. Perfect — Steven, thanks for coming on. We appreciate it. Steven Cox, Founder and CEO of TakeLessons.com.

Category: Business Philosophy, Entrepreneur Insights, Start-Ups, TakeLessons.com, Venture Capital