Groupon and Descript: Andrew Mason

Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching. A newsletter and like our show. The newsletter is designed to be interesting, informative, inspiring, and most importantly Fun. It's one hundred percent free, and to sign up, just visit gyras.com. That's G-U-Y-R-A-Z. Dot com.

You said fire me. And they did. Yeah, for sure. I owned up to it publicly. About what happened and

You know. Went home that night and Sat on the couch by myself and ate pizza. Later on my own. Exact team came over and

We all got drunk together. But it was such a release, like knowing that this thing that I'd been fighting against for so long, doing whatever I could to keep this company going. That that chapter of my life was over, and really like never for a second taking a moment to contemplate what an alternative future would look like. Yeah. I had just no idea what was next.

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. they built. I'm Guy Raz and on the show today, how Andrew Mason took the idea of collective action and turned it into Groupon. the fastest growing company of its time. And what happened

After he was forced to To leave it. At least once a week I get an email or a comment on social media that reads something like this. Hey guy, why don't you do episodes about companies that failed and call it how I failed this. So to all of you collectively, thank you for your suggestion and here's my answer. Our show is about failure. Every single episode is filled with mistakes and setbacks and crises that almost tank the business. Why so much failure? Well, because it's how we learn. You've heard the aphorism, failure is the greatest teacher? I literally have that written on a post-it note stuck to my computer screen that I'm looking at right now.

Now the thing about failure, especially catastrophic failure, is that it requires a really special kind of person willing to talk about it, particularly in front of millions of people. Because Essentially what you're saying to them is Don't do what I did. It's a hard thing to do, and it's also an act of generosity.

Which is what Andrew Mason is about to do in today's episode. At one time, his face was on the cover of Forbes magazine with the headline The fastest growing company ever. At the time, Andrew was twenty nine years old and his company, Groupon, was one of the hottest startups in the world. Now many of you know how Groupon operated. It would offer different deals that, for example, might get you three ice cream cones for the price of one, or a facial for 75% off the normal price.

At one point, Groupon entertained acquisition offers from both Yahoo and Google. offers in the billions of dollars. At its height. It was valued at roughly twelve and a half billion dollars. But just as it had a spectacular rise,

It had an even more spectacular crash. Two years after that Forbes covered CNBC named Andrew Mason America's worst CEO of the year. But what's probably even more interesting than the rise and fall of Groupon is how the idea even came about, because

Group on wasn't Andrew's first idea. In fact, he spent more than two years working on another business that never got traction. That is, until he made a pivot that would lead to Groupon.

The other thing to know is that the lessons Andrew learned at Groupon would help him evolve as a leader. In fact, today he runs another startup called Descript. Which is a popular audio and video editing platform. As for Andrew, he grew up in a suburb of Pittsburgh. His dad was in the jewelry business, his mom was a photographer, and as a kid, Andrew had a particularly strong interest in both computers.

and business. In nineteen ninety five or so, when I was a freshman or a sophomore in high school. And the internet was starting to take off. I started to think that

Maybe I could make websites. Like I had made some using Microsoft front page at home. And Thought this might be a way that I could

do something that I that I really love to do and get paid a bunch of money for it. And then I remember I I came to school one day and this kid Chris Gorsky Had sold a website to a dentist for four hundred dollars. And just to show you how entrepreneurs sometimes have incredibly

Little vision. Um I remember thinking, Well, I guess he's cornered that market, you know, no more opportunity for people to build websites. And that was actually like weirdly like a deterrent for me to get into computer science more seriously. Um, but I always had that part of me that was writing code, making stuff.

on a more like amateurish level. Got it. Okay, so you uh I guess you end up going to Northwestern for college and and this is in the the late nineties. And Um, and you first studied engineering, but you ended up actually changing your your major to music.

Um, w was that what you thought you wanted to pursue as a career, uh like music or or music engineering or or something like that? Yeah. I always loved music. I played in bands through college. Went to college for

material science engineering Uh it gave it a year and a half before I Realized that. I just wanted to do music full time and

Engineering was kind of a geeky techie way to be close to it and be in the general aura. Of Right. And and after you you graduate you did uh find some work as an audio engineer. But but it sounds like m maybe you thought that that wasn't the path you should

be taking like maybe you should do something like quote unquote m more serious, right? Like g go work for a company. Um, and so I I guess I guess you also got a job doing computer tech for for like a printing company in Chicago, right? Yeah, so I put out an ad.

to The uh computer consultant for people, like an Apple specialist that was helping people like set up their printer and get their Camera working. And I started out

A as a consultant who is writing reports for Microsoft SQL. Server. And that's how I got Into that situation.

Okay. So You Basically a essentially after c college you end up working for this company. And

Uh fr from what I understand while you're there You come up with this idea for a for like a website. This is around like two thousand five or six. Um That I guess would look at

Policy ideas, big ideas like Healthcare or the Iraq War. Tell me what what the Like what was this idea? Wha wh what did you want to do? Yeah, so

I was, I guess, twenty three when the US invaded Iraq. Mm-hmm. And that was a pretty formative experience for me. Um It was the first

Kind of. Political. event. That I really paid close attention to. And

To me the problem was that you have I mean it's really not that different than what we're dealing with today, which is that you have People on one side of the conversation having conversations in their spaces, and then you have people on the other side of the conversation having their conversation in completely different spaces, and they don't overlap and they're not they're not hearing each other. And so the idea was that Policy Tree would take all of the arguments. That are being

Made in all the different locations and aggregate them wiki style. So it create this. Uh argumentation flow chart. That would start with something like we should invade a rock and then

Flowing from that in green bubbles would be the arguments that support That Parent argument. And then red bubbles would be the the ones that refute it. And then other arguments and counterarguments would flow from there. But the hope was that. It would be that solving

our policy issues would be as straightforward as just laying the facts out for people. Of course. Yeah. There's a little naivete there. I mean no brainer. We can solve everything by just giving everybody facts. So all right, so you're working on this website and in and in fact you decide to go to public policy school to to develop this thing. Yeah. That's right. Okay, but then

something happens, you get approached by uh by someone who who will become a a key player in the story, this guy Eric, um Eric Lavkovsky And he owns the printing company that you're working at. Uh but I guess he he hears about this website you're doing and and and comes to you with an offer. What what what what was it? What happened? So After I'd been in school for

Just under a quarter. He called me up one day. And he had heard about another idea for a website that I had had. Um that later became known as the Point. And

I I think his business instincts didn't know what to do with something like Policy Tree. Um he got a little bit more excited about the point. And he was like You should Drop out of school.

And Come build this company. I'll give you a million bucks. In funding. To do it.

And I'll help you along the way with the resources and and whatever you need. So I was like that sounds pretty good. And You know, a couple weeks later, I was back up in um

River West working on Working on the point. Mm. Okay. Okay. So let's let's talk about the point. Um what what was this idea you had that That Eric wanted to put a million dollars behind.

It was designed to solve the problems of collective action. All of these situations where the people want something to be a certain way. Yeah. But they need a way to organize to actually bring it about and make it happen. And I'd been thinking about like consumerist use cases like We're all mad that the cable company won't let us get Alacart channels or

Things like that. But but also organizing actions for social change. And the idea was that you would determine some kind of a tipping point, hence the name the point of participation or funds that would be needed. before people would actually commit to the action. So it might be something like we're all going to switch to a competing Telephone company. Unless you do this once we hit

fifty thousand members or something like that. And and reading about this, I saw that there were um definitely some interesting ideas. Like I think at one point you were suggesting like Maybe people could build like a

Build a glass dome over Chicago to protect it from the cold winter? Okay. This this idea is indicative of what a terrible idea the point was. Um Um it was like this academic theory.

Yeah. That sounded like a good idea. But then when we actually started doing it All of the use cases required. such th the they were few and far between or they required a ridiculous number of people. So there was no like how do you get from here to there part of the story. Yeah. Um and yeah, that was like one that

we came up with that got us some attention was to try to raise enough money because there was a financial component to this too where people could commit money. Or did that come last inspired by your idea. I don't th I wouldn't go that far. I think it's just inspired by common sense if you live in Chicago for anyone. Fair enough time. Fair enough. So all right, so you but but how much traction did this thing get? I mean what were you getting I mean you were getting media attention for this, because I've read contemporaneous articles about this. So how many like or tens of thousands of people going to the site and just contributing? Not a lot of traction. Like we would get stuff on there. The kind of traction we did get was usually unwanted. I I I I remember at some point we ended up getting A lot of um excitement among the Juggalo community. Like there were a bunch of uh insane clown posse fans. Like I forgot about the Juggaloos. Yeah. They're real. They dress up as clowns. Yeah, it's it's quite a moment when you realize that maybe the the that the most value that your your dream project is providing to the world is enabling juggalos, you know?

I hope that Jugalos listening do not feel like we are ridiculing them. I think we're in solidarity with the with the Juglos here. Okay. So um You have Uh this

this million dollars and I imagine That um, you know Well that money is running out'cause you're not bringing any money in. Right. Yeah. And

I remember it was getting tense with Eric and my other investors. How many other investors were there? There was Eric and then there was um N E. Um new enterprise associates. Right.

And and and so how much money total did you bring in, do you remember? So w after the initial a million, I think we raised four point eight from NEA or four million or something like that. Okay. Yeah. Well I mean Whew. Okay. So you were but that they're the heat was on because uh you're just burning through cash and they're w they're saying to you, Hey What's going on? What's the plan here?

Yeah, what's the plan? Yeah. I I think a little more clear eyed person might have just Given up. at that point. Yeah. Um but for for for better or worse, I've always had a hard time doing that.

Any time that I've ultimately Pivoted. It's only after doing absolutely every last thing I can possibly imagine, probably holding on a little bit too long to the original thing. And so what it what ultimately ended up happening was

one of the ways that people were Using the point was this idea of collective buying. Um, there'd been a little like movement in China that we read about where people were going into local businesses and seeing if they can negotiate TVs at a discount if twenty people buy them at the same time.

So basically we had this idea That was largely inspired by a site called Woot. Woot was this deal a day email where they would sell One product a day at a deep discount. Um and and we thought why don't we take that idea And

use that to Organized. a local deal per day. And It was get your group on dot com.

Get your group on. Yeah,'cause Groupon was taken, which is another Kind of funny story. but using a lot of the technology that we built for like the e-commerce backend for the point. In order to get it going. And

Fr from having the idea to actually launching the thing. Took. Thirty days. Okay, so you you make this pivot over the course of a month and get your group on. Like get your freak on.

Great name, Groupon, coupon. The idea was from the beginning was clear, it was like let's Find deals for people and then they can Bid on it. And so

Who we who did you approach? to work with you'cause this is I mean, this is two thousand eight. This is not like something that businesses would I I mean it it would just be unusual, right, to go to a business and say, Hey Well you offer a service for half of what you normally charge will guarantee you that like

X number of people. will take you up on it and then you you'll you'll introduce your business to a whole bunch of new people. Like how did you even start? Well the the other interesting context here is that we were in a recession. Right. Businesses were struggling at the time and looking for anything they could find to uh get ahead and get customers in the door. And so we we tried everything. Like we tried

Anyone that would talk to us, we would try to pitch them to get on group on Obviously we were going kind of door to door in the local businesses in in Chicago, calling the places that we loved, but we were also just trying like random e-commerce places because we weren't getting a lot of bites at first. We weren't getting a lot of interest, and we just wanted to see if we could convince anybody to run a deal. Ultimately, the first business that ran on Groupon was a pizza shop. Uh we offered Twenty dollars of value in pizza.

costs ten dollars, so people are saving fifty percent. And We had to sell twenty. In order to hit the so called tipping point and actually have the deal become real.

It's so smart because if you bid ten bucks for a meal at this pizza place, or maybe five. nineteen other people you're gonna have to call your friends and be like, do this. Let's all go. It's five bucks for pizza. Yeah.

fifty percent off's something really cool to do that's available for one day. The value is self evident. So That's part of why it was able to grow so quickly is just the word of mouth. No. Later we had the opposite problem in the life of Groupon, which is that

We We we sold way too many. Yeah. But in the early days it was part of the fun for people. It was part of what created community and excitement and made people part uh feel like they were part of What you might call it a movement almost.

Yeah. So you had this Okay, so you went to this pizza place and what did you say to them? You said uh we'll s just split like We'll do this. We'll we'll set this up. If you honor these, you know, we'll split the profits. With you We'll do like a a percentage, like you'll get

Let's just say it's ten bucks a ticket. And they sell t so twenty tickets. You you guys get ha hundred bucks and they get a hundred bucks? W we didn't take that much at first. we might have taken if we if we're ten dollars a a unit, we might have taken a dollar, if anything, in those first deals.

Um As we did it more And we started to see the value that these businesses were getting out of it and started to realize that this is basically a form of advertising for them. Then we got to the point where we were taking as much as fifty percent. All right, so you start this thing and this is in the middle of a recession, and initially you start it in Chicago.

How quickly Did you start to see Some traction. In retrospect it was fairly quickly, having gone having a few of these startups under my belt. now and having some perspective on what normal feels like. It was not normal. It was very fast.

Um so it was maybe like A month. Or two of very intense experimentation Trying a bunch of different things.

And then like I remember a a breakout deal was the first time we ran a a sushi restaurant. And got like five hundred people to sign up and blew through the three hundred person limit. Now. You were just advertising this on the website initially, or were you also emailing

Do you have email lists? So a big part of the model was building these email lists. Where Everyone who signed up. would automatically be added to an email list and then they would get one of these emails every single morning.

Wow, okay. And it became like a ritual for a lot of people. Yeah. Uh I wouldn't go so far as to say that they organized their lives around it, but it was like a meaningful thing. You wake up and you have your coffee and you read your daily group on. So Okay, let's just break down some of the challenges that you must have faced. So, first of all, you had a couple people just doing deals, right, with local businesses, and how would they find Who who would they go to? Like w did you guys would you guys sit around and say, You know, we really should do like

I don't know, um spas or we should do uh, you know, escape rooms or like what how are you thinking of what kind of things to offer and who to what businesses to approach? Oh, th that was the fun part. The more exotic. the offer the more excited we were to give it a try. We were using these

Discounts as a excuse for people, kind of a catalyst to get out of the house, try new experiences, do things that they maybe otherwise wouldn't have done. So Sensory de deprivation tank center.

Awesome. You know, let's put it on there. There was a there was a tour of the Childhood. Sights of Michael Jackson to Gary Indiana.

Like, let's see if we can give people a big enough deal that they're gonna go out and have that experience because It's gonna be something, you know, they'll remember that day. I mean here's What's so fascinating to me is that in like You make this pivot.

to what becomes group on. And it's just like a I mean. To the point where by like March or or April of two thousand nine.

You're getting ready to go. Yeah, to expand to other cities. Um, and I and Boston was the first place you you expand to Just tell me what do you remember about

What was going through your like what was your life like? Did it just go from like You know. Zero to a thousand. In terms of the pressure, in terms of the pace, in terms of like Fires all going on g going on all around you, just

You know, Dealing with all kinds of craziness. It was Exhilarating. Uh

All I did was work. Um It was mostly Great. And and and surreal. In so many ways surreal, because it really had this feeling of like we just have a tiger by the by the tail. Yeah. Like this thing is its own force of nature and we are just trying to

Hold on. and bear witness to what's happening and maybe steer it. Uh to the degree that we have some control. along the way. Um but then the emergence of

What became literally thousands of group on clones. added intensity to it because we felt like we had to stay ahead. Yeah. Mm maybe that's not right, you know, maybe that was just fear. Um, there was certainly a a fair um amount of that mixed into the surrealness of the whole thing, where it feels like is this really happening? But We couldn't slow down.

When we come back in just a moment. Andrew battles the Groupon clones? And then sees his own company get so big. that he starts to lose control over it. Stay with us, I'm Guy Raz, and you're listening to how I built this.

Hey, welcome back to How I Built This. I'm Guy Raz. So it's two thousand nine and Groupon has been so successful in Chicago that it's expanded to Boston, but When it does, it encounters a familiar problem. people with the same idea. I

can still like vividly remember The first time we learned about a Cobbycat. Um one of our local sales reps had gone into a business and reported back like they s they said that I'd already

we'd already been here and to leave them alone, but I've never been to this business before. It was really weird. And then They went back and they got the the flyer that this business had had left with them, and it was called like We Deal or something like that. It was It was the first time we'd ever heard of of a of a group on clone um that we just ran into because they were in Boston too. Starting to sell.

And The clones really had an effect on me. emotionally. I hated them. Mm.

Um, I really Was angry. About People just wholesale.

Copying the business because I had come up as a musician in the mus music world we called that plagiarism. I think now with some distance from it and having a few more of these under my belt. I have much more of an appreciation how of of how

you know, the the mark that you make in business isn't the idea, it's about the execution. But at the time it it really bothered me. I think one of the reasons it really bothered me is that I knew that the proliferation of clones was undermining the foundation of the business model.

The business model was based on scarcity. It was based on Yeah. per day in a city, and when you have Group on.

In Chicago. All offering A bunch of different things. On any given day you have your choice of three spas, you have your choice of Ten different restaurants. And it becomes

A de facto marketplace. Yeah. The business model falls apart. businesses no longer get value out of it because you don't get the same kind of repeat customer usage. I mean you saw that happening early on. But meantime

You were still growing. I mean I'm curious, like as You're on this riding this rocket ship. You're going from a guy who like just graduated a couple of years earlier.

to you know, to all of a sudden running a business that in its first year does fourteen million revenue. Year two, over three hundred million. In revenue. And Probably just g the staff is growing.

Geometrically. Just tell me how did you even know what to do. I mean, again, like you're smart guy and you know, and Competent, but you didn't have any training or experience as a leader or manager, it it really

Like, right? I mean how did you how did you manage Doing that. At first I had people like Eric, my co-founder, that were mentors to me and and taught me what they could teach me about about how to handle it. Um

As I built a team I ended up learning a lot from The people That worked for me that had way more experience.

Um and really relied on that. And when you're a founder You just have this you just get a free pass on a lot of stuff. I guess you you bring something to the table or people just like ass assume that you're stuck there or something like that. And they're willing they're willing to give you some slack and and and understand that part of your role is going to be growing in the job. And I think as long as you show that you are growing in the job as you go, as long as people see that capacity for growth and That you're getting better over time, then you can keep people believing in your ability to rise to the occasion.

How did you it it seems like you managed This growth. In um I don't I wanna say unusual ways, but but in ways that uh almost kind of try to minimize it. Like I I I read a story about how at a certain point

You know, like Forbes or some magazine. had you guys on the cover like a year and a half in and it was'cause like the fastest growing company of all time. And you kind of made a joke out of it. Can you tell me the story?'Cause it's kind of Important that

I think for people to hear what you did. Yeah, so Forbes had me and group on On the cover. as the fastest growing company in history was the headline. And this is like a year and a half in.

Yeah. And we we took that cover We framed it. We put it In the lobby of the office, and then we surrounded it with similar Covers from about

Web Van and Netscape. and other famous Rise and falls. I think the idea was to give us Should be a little bit more.

have some humility, but I guess the way I've always processed stuff is to have a sense of humor. Yeah. Abo The things that we're afraid of. Um And

become full of ourselves and think that's and just remember that smart people have been in this situation in the past, people smarter than us. Yeah, the story doesn't always And The way that it's going now. That that's the

Forbes. piece comes out in Two thousand ten. And I imagine But

While you're just growing and exploding in growth. There's a lot of pressure. probably from investors, but maybe even from you to just get to every city possible. Because this wasn't a business that you could just run from Chicago, right? You actually had to be in cities all over the United States and even the world To establish relationships with small businesses so you could offer these

Coupons, these groups. That's right. So Chicago Took us six months to feel like we really had our ski legs and we knew what we were doing there.

The next move after that was Boston, it took us three months before we felt like okay, we've got this and now we know how to do cities remotely. And then Our next city was I think Washington D C

And and we we just figured out this playbook. And I remember getting guidance from an investor is just like look, now that you've got the playbook Just work backwards from five hundred cities. What does your org look like?

there. You know that's where you're headed. Even if you can't Comprehend it like emotionally. That is where this is going.

So that's what we did. We just we just kind of worked backwards and put together a game plan and put our heads down and executed. I mean it is kind of Remarkable, right? It's uh You launched this in the fall of two thousand eight. In April of twenty ten, You raised around

Yeah. One point three. billion dollar valuation. I mean ch it's just mind boggling. How quickly

this happened. I mean, did you anticipate any of this, did you think, you know, this is really gonna take off. Like when you when you started this thing in two thousand eight, did you think This is just gonna crush it. Millennials are gonna love this. Everyone is just gonna gather around this. It's gonna be This huge thing. I think it's like you

You believe it. you know that it can happen, but you you never really totally believe that it's happening. Because of what you said, how unusual it is. And you're kind of always pinching yourself and saying

I is is this real? By the end sort of towards the end of two thousand ten, you're in eighty eight US cities, twenty two countries. I mean just crazy expansion. That same year you guys get approached. Bayahoo. um with with an acquisition offer.

And it was no joke. I mean it was like Two, three billion dollar. Offer. Um Tell me how that how that went down. Tell me what what you remember about

that coming in. This was coming. When We were just riding high. Everything was going.

Incredibly well. Growth was just happening. Accidentally. And then all of a sudden Yahoo comes along.

And My Perception of Yahoo at the time. was It was a place where

Great companies. Go to die? Hm. There were a bunch of products that I really loved that Got acquired by the

Yahoo. that just were never the same afterwards and eventually and eventually got shut down. So you had this perception of Yahoo as this kind of Not a really a cool place, but still, I mean Two or three billion dollars.

A lot of cash. There's an arrogance in that, isn't there? Like just thinking about it now. Like for sure. As much as I like to say that we were trying to keep ourselves humble, I I think like Mm the mindset that I displayed in how I thought about Yahoo reflected a kind of entitlement that was that that was developing there maybe.

Um, but I think like we just weren't ready to And the journey there. Th the the path ahead of being an independent company felt so much more interesting to see how far we could take this thing. From what I understand. Um, I mean part of it was I I from what I read, you just

Th the the Yahoo folks just rubbed you the wrong way, which is totally fair. But at the same time you had a you know, you had a duty to your board and and your investors to to explore this and and so This might not be exactly how it happened, but from what I understand. You guys reach out to Google to s to say, Hey, we got this offer.

Are you interested in making a counter offer? Is is that Sort of how it went down. I think that's about right. While we were talking to Yahoo. One way or the other, Google got wind. And came along and

That was more exciting. Um There like Google was The the cool company. The cool company. Yeah.

And Um And so we took that pretty seriously and got Pretty close to accepting an offer.

You guys went pretty far down the road with them. Um At the same time you were crushing it. I mean you guys were doing really well. It it seemed like You know, things were trending in the right direction.

Honestly, I think Even considering the Google deal at that time. was coming from a place of fear. My memory is that like

We had a board meeting. And that was a moment to look at the latest numbers. And just take in the forest through the trees there of how remarkable

What we were building was. And how kind of unprecedented the growth was. And I think we all looked at that and we were like, we just can't sell right now. They uh reportedly offered about five billion dollars to acquire

But the decision. was hey. Um We can we can be bigger. Tell me did you think At the time.

And I know this is hard to talk about and I So I appreciate your candor on this because I think it's really important. I mean, sometimes Yeah, you know. Uh there are plenty of examples that you can you can point to where The founder sold too early, Instagram.

Right, Instagram is now worth fift, forty, fifty, sixty billion dollars, right? And the founder sold it for a billion, which was a lot. But you know, you could say, Hey, what if you held on to it, right? Or Th there are plenty of examples, right?

But did you think at the time You know, we're the next big tech company. We can be The next Amazon or the next, you know, one of these big Tech companies.

Absolutely. Yeah, we absolutely had that kind of mentality. We were looking at Facebook's numbers and

saying okay, it took them this long to to to get here. Um are we on that path? And and it could've maybe it could have been. Were it not for some execution mistakes. that happened after we made that decision. Yeah.

There's also I'll I'll tell you a funny story about it too, and how how how I thought about it. I remember sitting in the board meeting and saying like, look, my calculus on this is like Say we pass it up, like what's the Downside risk. What's the worst that can happen? Maybe things really fall apart and the company's worth a couple billion. That's still a lot. That's still a lot more than any of you invested at.

And and I remember like one of the investors giving me the kind of like Kid in the Room, uh Yeah, pat on the head and saying. Andrew, it doesn't work that way. Like, that's not how we think about these things. You know, you don't get to say, like, two billion dollars is better than You know, that the twenty million at which we invested and that's a win. It still sucks if you could have sold at five billion and now you're selling at two billion. Yeah.

Alright, so you um Basically in December of twenty ten, you turned down this Offer from Google. There must have been some rumors going around. I mean there I think there were at the time, and on and articles were being written. So you have to announce this to

The staff at Uh Group. That you were not Um gonna be acquired. And um

H how did they react to that? W were people relieved? Were they happy? Were they like woohoo or What do you remember? This isn't gonna make any sense. The announcement was so Bizarre.

In other ways that I can't remember how people actually felt about I don't even know if people knew how they felt because of the weird performance that we put on. Um So basically what happened was we had an all hands meeting at this church down the street from the office and You know, they're the Five hundred or a thousand.

group on employees were in this church. And I came up I said, Hey, I have a special announcement. At this point employees didn't know what was going on. There'd been some stuff leaked, but

Nothing nobody really knew for sure. It was all just speculation. And um I said, Hey, I want to introduce someone. Um Joining me on the stage is Carol Barts, the CEO of Yahoo. And we had hired this woman.

to place an actress uh of of Carol Bart. So weird. Okay. And sh and she came up And she goes. Hey, what's up, F Tards? Except she didn't say F, she said the whole word. Um I'm I'm super excited to own you all. I got

Pizzas out in the front room. Let's get going building this thing together. And uh and then eventu everyone eventually realized it was a joke, but but we did that. Um To kind of prank our employees. And that was it. Like I don't even know if we talked about The fact that we hadn't sold. It was just like onward. Yeah.

So once once you made the decision not to sell, I mean, now the board and and the investors knew that you know you could have gotten five billion So I'm assuming there was some Pressure slash desire.

Go public. Did that was that something that you also wanted to do? Um That was basically part of the agreement with the board.

As soon as we passed on that, it was kind of like off to the races with with doing an IPO. Okay. So that's fast, right? It's like two years. A little over two years after you you launch To file

Yeah. Um, I mean, and by the time you filed you had seven thousand employees. eighty million subscribers. It was you know, you were you'd grown. really quickly. Um but then at this point you have to put all your cards on the table. All your books are open.

Everyone's can can see the you know the inner workings of the business. And you started to take A lot of heat for Your business model.

Yeah, so this was really I think the Biggest turning point. was When you file your S one You

Have This ninety day quiet period. Where You can't talk at all. The media to anything, anybody. That's right. And

All of a sudden to be in the situation where we were getting criticized for some of the financial metrics that we put in the S one. Some people were really dunking on the sustainability of the business model. And we mostly just had to keep our mouth shut and and not respond to it. And

Not only was it Painful. As as a coping mechanism, you almost have to train yourself to not care. Yeah. Um lose that sensitivity to public opinion.

And there's a real like sadness. That comes with that. Okay, but You did go public. You go public in November of two thousand eleven and

Despite all of that, despite all of the negative press. It was the biggest internet IPO since Google. In two thousand four it was a massive success. twelve and a half billion dollar valuation at the end of of the trading day.

That's right. Yeah, and it and it and it rose from there. Um But the skepticism. never went away. The noise never went away. And the tax that it created on

running the company. Both in terms of Managing employee morale. And just doing all of the stuff that you have to do when you are A public company.

Um, was so high, and we were still such a young company that it made it difficult to do that at the same time as we were like operating the business and trying to like You know, find the next version of the business model. Right. So you're focused on all these putting out all these fires in the previous several months, but m meantime the business starts to lose Market share because all these competitors.

Yeah, it wasn't so much as that there were other people that were gaining market share. As it was as The growth was slowing. I mean a big part of our story. was trying to evolve

The model. Mm-hmm. building uh like a real time deals marketplace where we would have smaller deals that would pop up as you're walking down the street in the mobile app. that was doing things like loyalty programs at businesses, um

We that we wanted to evolve group on to be Something that wasn't just this. Dying daily deals model. Um and so We had kind of like a dual problem, which is

Growth was slowing, but at the same time We were just having a hard time having a predictable business, like understanding what was going to happen in the next quarter. We're not a subscription business. It's harder to understand what's going to happen, especially when like you're completely turning over the inventory. of your website every single day.

Um, with completely new stuff. So So I think we were like difficult for Wall Street who really values Predictability. And being able to say, This is how we think we're gonna do this quarter.

And the fact that We just got that wrong so many times. Um led to a lack of trust. Did you start to hear from small businesses also that they would try Groupon and then they would get overwhelmed with people

who would just come in for that one Events. clean'em out and never come back. And that actually for many businesses it didn't end up working out well. Um

When you start to hear businesses say that What was your reaction? I mean We'd feel bad, obviously. Like like um And and the way we s responded was to try to understand it better.

I think like for sure there are businesses that Lost money. On Group on. It's a little tricky because it's this

new form of advertising, basically. Businesses lose money on advertising. All the time. Um, and I think because it's this novel thing And there's a

company like us that's The the symbol of it. Um the plane crashes tend to get a lot of attention, but Most people still

Love their experience with Groupon. All right. I guess about a year after the IPO. Um You get

Some worse than expected. quarter earnings report and it it the stock hits Like two dollars and seventy six cents. Um Did you start to feel the pressure of

The the declining revenue did you s or did you w w were there people explicitly, whether they're investors or or Wall Street, you know investors saying to you, hey, you've got to do something here. Like you're not

You're not managing this correctly. Mostly where that showed up was with my co founder Eric, where As long as the company was growing, we really complimented each other. Well

And got along for the most part. Um it was only When growth started to slow. That's it.

Differences and different points of view about things started to um Come into relief. That you and E the tension started to build between you and Eric. Yeah, we just had like different ideas about the the direction to take the business.

And I mean when did you feel like Maybe You aren't the right. person to keep leading the business.

Honestly, I only ever felt that way. At the point where I felt like my Public credibility. After having missed a number of quarters. was no longer intact.

Um And uh And and I just had to get out of the way. And that hopefully a new face would um give Groupon a chance for for a new start.

It was never like I didn't think I could do it. And maybe I should have felt that way. But I didn't. Um It's hard. It's hard to d it's it's a it's a form of like giving up on your baby, you know, and it really it really felt that way.

So at the end of that that Q three In in twenty twelve, I think the board said to you, look We're gonna give you another chance. Um turn it around for the next quarter and and we're good to go. But I think around that time, or maybe shortly after you decided That you probably wanted to find.

Uh somebody to take over a CEO. I d I decided that because like The board gave me one more chance, which was very generous of them. It would have been totally reasonable for them to say, like you're out of credibility at the at this point and you've got to go, but they wanted to give me a chance for one more quarter. And then like A couple days later, my CFO and I were meeting with investors in Barcelona or Madrid or something like that, when we got a call from our French o office that

There was some So I'm like Air in the spreadsheet they were using to track stuff and we were gonna miss our number and In France.

Yeah, the the next quarter by ten million dollars. immediately at that moment I knew we were gonna miss And at that point I was like, Okay. Let's figure out.

Who Can take it from here. Because it's not gonna be me. I can't I can't do what I said I was gonna do for the board. So you presented this, I think, to the board. You said hey

Uh this is my plan. Mm-hmm. H how did they respond? 'Cause I mean by February of twenty thirteen Groupon was still valued at three billion, I mean down from twelve and a half billion, so not great.

But you know, this this happens. There's plenty of examples of of companies that this has happened to in the last five years. Um so there you know But so you come to the board and in at the next quarterly meeting to say, Hey, this is the plan I want to step aside. And what do they say?

That's right. I my my memory of this is that is that I came to them and they said, let's we're we're getting ready to do our earnings call. I'm prepared to announce that I'm transitioning out And we're kicking off a process to find a new CEO. I've already got an executive recruiter going on the search. And they were like

Thank you very much, but I think we're just gonna make Eric the CEO for now. Um And I mentioned earlier that we didn't have a s same vision on on where to take the business, so I wasn't super into that idea. And I was like, You can do that, but you'll have to fire me. Um

And they said Don't do that, Andrew. It'll be the worst like a terrible decision, you'll regret it for the rest of your life. Trevor Burrus They wanted you just to voluntarily step aside so they could say, Andrew has uh you know, decided to s to r resign and Um, you know, to Seek uh opportunities and

We wish him well, he was an amazing blah blah blah. The usual thing when when people are quote unquote, you know. They decide to step down or step away and Retire. Anybody that's like looked at one of those, you you can see it a mile away. It's like so obvious this wasn't this person's choice. And For me it felt like it was gonna be that tenfold. Like who are we kidding here, folks, with me saying that I've made the decision. Um so so that just never

sat well with me and I kind of decided to go with the the route of just embracing Getting fired. You said Fire me.

And they did. Um Yeah, for sure. And I owned up to it publicly. about what happened and

You know. Went home that night and sat on the couch by myself and ate pizza. Later on my Exec team came over and

We all got drunk together. And uh And and that was that. Four and a half years. And this thing you built, but of course when you go public.

Or you know. When you've got investors who Control majority. Of the company. You know, you're num You can be fire, that happens.

I mean it's it's but it must be An emotional. Experience. Oh yeah, it's very emotional. I was like

crying on my way from the boardroom to the elevator leaving the office. It was But it was such a release. Like some of it was just that, you know, it was um U it was like knowing that this thing that I'd been fighting against for so long, keeping doing whatever I could to keep this company going. that that chapter of my life was over and really like never for a second taking a moment to contemplate what an alternative future would look like. Yeah. I had just no idea what was next.

When we come back in just a moment. Andrew launches a new business that does not get off the ground, but in the process discovers another idea. That does. Stay with us, I'm Guy Roz, and you're listening. to how I built this.

Hey, welcome back to How I Built This. I'm Guy Raz. So just five years after launching Groupon, Andrew is out of a job. Fired the CEO. And he's also dealing with some unflattering portraits of himself.

in the media. Actually I was trying to do some preparation for this uh for this interview and just like remember my life. And I ended up like stumbling across a story that was like And the first line was great. It was

Andrew Mason didn't get fired for his personality. But it certainly didn't help. Um so I like I would occasionally Do things. That we're kind of

Quirky. Like I remember Going to present at a tech crunch. Conference. A

Side project we came up with called Gru Spawn. That was A dating site for People who had met On their first date using a

a group on and then gone on to have a baby and it was a way that they could apply to get a scholarship because we felt like These were group on babies and we were responsible for their existence. And I presented this thing wearing bronzer with my hair slicked back like a fancy Tech CEO.

The whole thing was just like Absurd. It was not real. This is a prank. W no, this the site was real. Like we had it all ready to go. I mean look, it's like one of the the I I think some of the stuff that I that I end up doing is kind of

on the line be where I'm not even sure if it's real. Like it's real, but It's also not real, obviously. Um We we just sometimes have these ideas and can't help ourselves. Andrew Um

You Definitely Work centric. I mean eccentric isn't r maybe the right word, but you you did definitely did a few things that when they were written about out of context seemed like You know, wow, that's a little weird, like, you know

Th it was report the time that you like put a you know yoga video together for your team like in front of a Christmas tree doing yoga and underwear. And and and I I get like it's part of that camaraderie and being funny and stuff, but like when it's written about in in it in its you know standalone article People might see that and be like who What who is this guy?

Yeah. Well j just to clarify that,'cause that sounds insane. Uh the the uh that yoga I did record a bootleg yoga video of me in my underwear in front of the Christmas tree, which is not insane. Um but it was just like something that I made for fun in my mid twenties and put on YouTube. Okay. And I and I consciously didn't take it off the internet after I became CEO of of group on. Because I did have that side to me that was just, I guess

Um People would often call me quirky. Right. Anyway. It was all like good and fun when we were a private company. And then when we became a public company, it was kind of weaponized as a sign that

I was like not suited for the job and immature. It didn't make sense to me because it's like I was this way before and I got the company to that size. as the same person. Yeah. For for me it's like It's just about Enjoying the ride. And

When those of us that work there. come together and talk about working at Groupon, a lot of times they're the things that we remember that weren't gonna happen somewhere else. But I but I think they're They're some of my favorite memories.

So you go, you're you you leave, I mean you're done. And and what did you do in the in the weeks and months after? Did you kind of just I don't know. Go to Europe and Kind of. I know you'd been We just gotten married, but

Around that time too, or maybe a year earlier. Yeah, I got married um a month before We did the road show and I PO'd. Um

We went to South East Asia for a month. On the way back, we stopped in San Francisco, decided that was where we were gonna live. Um By the time we got back to Chicago, I think she was pregnant with her first son.

And uh By October of that year. of twenty thirteen. We were living in San Francisco. Getting ready to have her first child.

So when you moved out to the Bay Area. Did you know what you were gonna do? 'Cause you get you lose your job in the beginning of twenty thirteen. think by May of that year you become like a a Y combinator partner or part time partner there.

Um I mean that's a nice landing pad. Start. A new

But did you have a sense that like, okay, I'm gonna Now I gotta come up with my next thing. Yeah, like the the Y combinator thing was just something to do every couple of weeks, go in and talk to some companies. So it was never like part of the career path, but it was like an interesting way to To sink into living in Silicon Valley. Um

I had basically a backlog of ideas for a next company. Like things that had come up over the course of Groupon that was like, Ooh, this would be cool. Someone should go build this. A lot of it was just like What the hell am I gonna do for the rest of my life? If I can't figure out how to do this again. Like I'm

32 or whatever. I gotta keep myself busy somehow. This is the only thing I know how to do. I hope I'm good at it, and it's not just a total fluke. And so I'd I'd always thought that somebody could take audio tours to the next level, especially with with with mobile devices. Um Something where you could Walk around a city. Use

the GPS of the phone to create this experience that feels like there's There's somebody who knows the city really well. in your ears, walking alongside you. Um Showing you

the place in a way like That only they could. Um So we launch this company Called detour.

It was like half a tech company and half a content company. Where we were making these immersive audio tours. And We ended up creating thirty or forty different tours. In cities around the world.

There's actually a lot of people who still come up to me and say it's their favorite app ever. Hm. Which is cool. But it was incredibly small, like we just couldn't get traction. And I was coming from like a group on world where we could do these create this machine for making write ups.

Yeah. And just produce a ton of like pretty good content very quickly. And then as we got into making audio storytelling. As you very well know It's not that easy. No.

And the idea was You would go to a city And there would be a walking tour, but it would be this beautifully produced audio Experience.

Yeah, so For example We have a tour that's narrated by John Perry Barlow of the Grateful Dead. walking you through the Tenderloin neighborhood of San Francisco.

And he's talking to you. There's sound effects and music coming in and out. As you get to the street corner, he says, Okay, go ahead and cross the street. I'll wait for you till you get to the other side. And it was almost like a game engine where We had ambience and music playing in the background on different tracks from the from the narration. Um and it was responding to where you were going. The narrator would often guide you into businesses that we had

Arrangements with You'll be like, Oh, pop pop into that that butcher shop and check out You know, what they're doing, something like whatever it was. Yeah. We had one with a a famous gay rights activist and friend of Harvey Milk that took you through the Castro neighborhood.

that people would routinely, you know, end the tour in in tears from what a moving experience it was. We did a tur a tour of um The Brooklyn Bridge with Ken Burns. Wow. Um

It it was it was cool, like really prestige. But each one cost us thirty thousand dollars to make. And were you financing this yourself? Yes. At this point I was like

I need a break from investors. Like I get the role. But I just want to build something. Truly great. Without thinking about anything else.

Other than building something truly great. Yeah. But but I guess while you're working on this project, um you wind up developing something else, like something that will

that you have now, which is the script. Um in this c this came out of a problem that you were having, right? Like like transcribing the interviews that you were using to produce the audio tours. Yeah. When we started the business like

Our idea was We're gonna hire Great. Radio producers. Two

create the first wave of These tours. So When they Got there.

interviews transcribed, they would do it with with humans, and people were just starting to experiment with using. Automated services for this. I'm sure you remember. And and we saw this technology developing and we were like We could just build a Audio editor where instead of

Working with this Kind of heavyweight. Timeline. We could just make it work like a dock. Like a like a word processor, the one tool that everybody knows how to how to use and just has this natural intuition around.

Um So we started poking around. And we found this fella who PhD.

At Berkeley. In exactly this kind of thing. He'd been doing exactly this kind of research. And we said, Hey, why don't you come over here and um And see if you can Turn this into a product, and this can be the tool that we'll use inside of

Detour. In order to Build the tours. So I mean the idea would be that anybody right,'cause f but most people don't know about audio editing, it essentially Like we're talking now and then it appears as like a waveform, right? And then you just have this

program that you use and it's and and you start to kind of chop up these waveforms. But this would be like a word document. And instead of chopping up waveforms, you would just literally like edit out words like you do in a word document, but that would also edit the audio. Right, exactly. And it was so fun to work on.

How do you graft the conventions of a timeline onto a document in a way that feels like You just couldn't imagine it working. Any other way. So cool. Such a fun puzzle.

Yeah. It's it's starting to remind me of going from the point to group on, right? I mean this took a little bit longer, four years. But you must have gotten to a point with with detour where you realize This is just not gonna work. The the the There's no revenue coming in. No significant revenue.

For sure. And so at w at what point did you did you say Let's make a pivot. You know, let's let's focus on this other thing. This this feature that we're kinda looking into.

So After a while, like it it was obvious that Detour wasn't going anywhere. We tried everything we could think of. On the other hand, we had D script which With obviously solving a problem for people. Like we had people using it.

Everybody saw the potential. And even as we're doing this, like the the funny thing is, like in the back of my mind, I'm I'm like This is like incredibly irresponsible to be th like w we're nowhere close to product market fit for one super complicated Product.

And now we're starting to think about Building An audio word processor. This is exactly what I'm trying to teach people not to do. When I'm

Counseling them at Y Combinator. But it was actually like one of the moments where it was maybe really useful to be funding the thing myself'cause no one could tell me how stupid it was. Yeah. What we weren't sure about was like How big is the market on that?

Podcasting was going through a golden age. But at the same time. You didn't see a lot of Technology companies in Silicon Valley. building podcasting software and as we talk to investors.

Um there just wasn't a lot of enthusiasm about it. So we were like Is this a audio? editing tool or is this a narrative media editing tool? Like do these ideas apply just as much to video?

Mm-hmm. And and that was what became the pitch for For D script when we decided to spin it out. And so all kinds of different content creators are are using it, podcasters, marketing teams who are using it to make their YouTube content And when we've really just been able to thrive off of re imagining

The audio video editor the way you would build it if you were building it from scratch in, you know, 2024. What w like, how do you measure success. Like when do you you know, with Groupon There was an IPO and there were all d different milestones.

You've learned a lot from that, obviously, as we've as we've heard. How do you know Um You know, that you're on the right track. with the script.

I feel much calmer about that than I ever did with Group on. Because It's been such a different kind of company to build.

This one has been so slow and methodical. Like we started working on it. As part of D Tour almost ten years ago. And the investment that we've made in that over this long period of time. makes us feel like we've built something

Pretty special. And It feels like a much more resilient organization. Andrew, when you think about about where where you got to, you know, where you are

And how how it sort of how it started and how it's been going. Um I mean you had y you know, despite the challenges of with Groupon, it was it had a huge cultural impact. It was a really big deal for a long time and certainly is worth Remembering. Um

At its height. And now of course to script. How much of where you got to now do you attribute to to just the sheer work and how much do you attribute to to the luck or the timing of it? So um In between

Group on and detour. I recorded an album of motivational business music. Yes, I knew about that. We didn't have time to talk about it, but yes, please go on. The idea was to take sincerely useful business concepts, but Marry them with

Schlocky derivative rock music in a way where the combination was just completely unlistenable. As part of that, I did a a photo shoot for the album. Where I made these cards of Andrew like the visionary Business CEO? And it's as I don't believe in in luck.

That's the quote. Yeah. 'Cause I just think it's so silly. Like like come on. I think there's like Like I don't know, maybe Jeff Bezos and a handful of people where it almost like doesn't matter What

circumstance could have shown up in their life like they were gonna end up being a super successful billionaire. Yeah. For the rest of us it's a it's a mix of Preparation. And Opportunity and luck, for sure.

Hm. Um so Andrew, I have One Uh last question for you.

And and I know I know you've been asked this a lot, and I'm sure it's never Fun to be asked, but Uh but i if you had If you had to do it again. Do you

Do you think you might have sold Groupon, like w when you had the chance? It's a weird question, right? Like Think about what that implies. I like my life.

I love my kids. I I I also like the failure. I mean Everything that I've done that's been any form of success. Has not been

The obvious thing from the start, like you end up Finding it. in the rubble of some mess that you've created. And

I like that part of my story. I like how I Grew from it. Um Of course, like

If you're in that situation again and you knew that that was what w where things were gonna go, you would run away from that pain and and and and go go a different path. But I've lived through it and it's okay. Like I'm I'm I'm a happy person who really likes my life and And feel like that's a That makes me a a a richer person.

That's Andrew Mason, co-founder of Groupon and founder of Descript. By the way, remember how Andrew talked about that album of motivational business songs that he made right after he got fired from Groupon? The songs he described as useful business concepts married to schlocky and derivative rock music. Well, for better or for worse. If y'all seeking business wisdom, you don't need no-

Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at gyros.com or at substack. This episode was produced by Chris Massini with music composed by Ramtina of Louis. It was edited by Neba Grant. with research assistance from Catherine Cypher.

Our engineers were Maggie Luthar and Robert Rodriguez. Our production staff also includes Alex Chung, Carla Estevez, JC Howard, Sam Paulson. Devin Schwartz, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz and you've been listening to how I built this.

What you see above is a preview of the first minutes. One unlock costs 3 credits and covers this episode forever: full segment and word-level timestamps on this page, plus .txt, .srt, .vtt and word-level JSON downloads, as many times as you like.