#5 - The First Viral Website: "Hot or Not"

Basically you I had nothing to do. I was just going out drinking with my friends all the time. Like almost like five days a week. We have the system sending the stats like at noon and at midnight. Ten thousand dollars, fifteen thousand dollars on a good day like twenty something thousand dollars. And is it recording? Okay, so what is this? So something that entertains me. And so I wanted to create a podcast which was First and foremost just an excuse to hang out with people who I haven't been able to hang out with as much. So uh one way is to say, hey, let's go grab a coffee. And the other way is to say, what if we recorded this so that other people could be a fly on the wall and hear stories or chatter about random stuff. And I'm not trying to do it educationally. So for me it's uh stories. So stories is the part where so the podcast is called My First Million.

And the reason I picked that is because the audience that listens to this, they are st you know, entrepreneurs already or wantrepreneurs kind of thinking about, hey, you know, it'd be that's the dream. I'd love to sort of quit my job and start a business someday. Yeah. And I remember for me, and I think for this applies to many people, which is The idea of a million bucks is like a magic number. Even today when everyone's billionaire, still if you if you're a thousandaire, a million bucks sounds like all the money. Totally understand. And so In fact when I f made my first million, I put it all in one account and I went to the ATM Just to look at it. Yeah. And and I and I withdrew money so I had would have a slip of paper that said I had a million dollars. Yeah. Well, you know, the funny thing is like then we had all these jokes'cause I had these ATM slits with a million dollars on it and um we were just joking around like man We should like keep these in our wallet and then like when you give a girl your phone number and she's like oh uh let me let me write it down on let me write this before f everyone had phones or let me write it down on a slip of paper. I I have one right never actually did it, but it was a funny it was it was a funny idea. And actually it turned out I remember like Then I was w I was search googling the idea

And like there were companies I remember that sold fake ATM slips online. Oh wow. So it wasn't the same. So you weren't the first guy thinking about doing this. It's a whole new industry. I'm talking to people about how they made a million bucks in all different ways. So some people are tech entrepreneurs start a business. Some people made a million bucks um selling mushrooms and they're mushroomers. Someone's They did in crypto, CBD, you know, all the different uh types of things, real estate. And so I want to tell stories so that the listeners basically hear. Man, first there's a million ways to success. You don't have to follow a particular track. Right. And B, um just a little bit of inspiration and entertainment about how you know these stories tend to be really interesting. They kinda come out of nowhere. It wasn't a perfect plan.

Uh it wasn't a straight line. It usually has ups and downs. And and so I want to tell those stories. You know, like in in Harvard Business School they have these HBS cases. Right. And everything everything in those cases is like Oh, you know, Sean was looking out the window at the Charles River thinking about what was What he was gonna do for his company. And the solution is always like they give you all this data and then at the end, like it's like oh he did this and this and this and this and this and then he did that and that and that and that. It's like oh look like how Like it's everything's like the solution was like a neat package. Right. And in reality, you like you know like the guy wasn't you know, he was not sleeping and or like he probably did twenty million things before he did what he actually ended up doing or she whatever.

But you know it's it's funny because like it's it's always like that, but it's reality is never like that. You know what I mean? So exactly. And so I'll give the brief intro. So we have James Hong on the show. Um entrepreneurs started uh famously a company called Hot or Not. Uh one of the first um tremendously viral products before viral was really even a thing, I would say.

And now Angel Investor All around good guy. I'm excited to be talking to you. Last time I talked to you was like five years ago. Yes. So it's good to good to reconnect. And so I always start with you know, uh not A different sort of question which is really Did you always want to make a million bucks? Like when you were growing up, did you want to be rich? Was that a goal of yours?

Uh Not necessarily I wasn't really like oh I have to be rich. I my mom tells me that I drew I kinda remember this in third grade I drew her a picture of my house and it was I just remember it was on the Waterfront. And it had like two helicopter landing pads. And so maybe maybe I did. But by the time I grew up, by the time I went through college, I was uh I wasn't really like I need to be rich.

Uh but I did want to do something. You know what I mean? Like uh I didn't want to be bored. The thing I learned at my first job w which was at Hewlett Packard. I remember This is when the web first came out. And uh

I was doing basically sales support. uh for a technical product. And I created a website because I was tired of all these people calling me with the same questions. I basically eliminated my job and the job of two other people, my co workers. Uh we all got deployed onto other things. But I remember thinking like they gave me a bonus of like You know

They raise they gave me a raise of like five grand or something like that. And I'm like, I just eliminated like, you know, three jobs that was probably like, you know, back then like a couple hundred grand or something like that. And I got five grand. I just remember thinking like I'll never make as much money as the value I deliver in a company because a company, a big company at least, has to kind of pay people Based on kind of like the median value that any given person at the company will provide. Right. Right. I think that's kind of the one thing that's changed a little bit like at Google.

And that Facebook is that they're now willing to be like, Oh wow, like you created like hundreds of millions of dollars in value. Then maybe they don't maybe they still don't give you a couple hundred million, but they'll be like, We'll give you ten million. Right. So at least maybe maybe it's not that different today, except that things operate at a higher scale and that they're able to because the margin is so high. But In any case, I was like You know. Screw that. Like I'm I'm gonna go work for myself because then I can actually extract

You know, what I actually Yeah, most people don't see that. So if you're at a company And this is not because companies are evil. This is really just a standard way you have to operate. You can't if somebody's ten times more productive, ten times better than their peers, You can't pay them ten times as much usually. Yeah, that's exactly the point. People make straight up more money at these big companies than they would being Fairly successful as an entrepreneur, you know, hitting a double or hitting a triple uh even, you know. So And that's because the scale of these companies is

Yeah,'cause it's a trillion dollar company. The margin is high. Right. That's really the difference. So And so you you were s was it straight out of college that you were at Hewlett Packard or that was straight out of college. So I was like, forget it. Uh'cause in the meantime, you know, the funny thing that happened is this is ninety I got out of college in ninety five. And where'd you go to school? Just I went to Berkeley. Okay. Uh and did engineering, electrical engineering, computer science degree. And the funny thing is like, you know, in ninety four, I remember summer of ninety four, that's when Mosaic f came out, the first web browser. You know, coming out of Berkeley Everyone who got good grades went to grad school or

you know, at worst got a got the good jobs, which the good job was like going to Intel or H P or whatever and I went to H P And meanwhile, our friends who were not as strong students uh who couldn't get into grad a good grad school, who couldn't get a job at H V, they ended up taking jobs at uh other places that we'd never heard of, like eBay and Yahoo or whatever. So like around ninety around ninety six or not, ninety seven, maybe like ninety six. Whenever Yahoo went public

All these friends got rich. And that's kinda like when you realize that like, oh like Exactly right. Did I win? When you're when you're at a you know, when you come straight out of school, you're still thinking, Oh, whoever gets the best grades, whoever works the hardest blah blah blah deserves the you know, the big prize. And then you're like, Wait, what just happened? And that's kinda like when reality hit and it's like, you know what, like Life is not I mean, there's a lot of things in life that um determine how you end up doing and I mean a lot of it's luck.

lot of it's just circumstance or whatever. And so anyway, I realized that was like I'm not gonna get rich at HP. And Not only that, I didn't get the value of like the jobs I destroyed. Made more efficient. And so Around so around that time I was like, Okay, screw this, like

At that point I was like I'm out of here. And then I was like, Well I was either gonna go to business school'cause that back then everyone thought business school was a was a path. And actually to some degree it it kind of was, because back then to start anything you needed to raise venture money and it was easier to raise venture money if you had either a lot of experience on the engineering side or you know like It was MBA V Cs funding other MBAs, right? So

It was kind of seen as a path back then to get an MBA to become an entrepreneur. Today you don't have to do that because mainly because it costs is so much lore of starting up, right? Like Well back then it's like oh to start any company you Well, s first of all, certainly you needed a sun machine. Right, you need a s a box from Sun to run the web server. And you know, that might be like half a million bucks or something. I mean like just to get started.

cost a lot of money. Plus there weren't the there weren't as many tools. Kit was expensive. If you want to buy the box to play just to put up a website with like You know, like with a database on it, like people thought you have to have a million bucks at least. Right, and so nobody has a million bucks lying around. And to today, w what do you need for that? Nothing I mean. Five hours and No, I mean like you get your f you get a free box, you know, free instance from Amazon, whatever. It's like it's nothing. It's virtually Free. Yeah. Actually when we started hot or not, when it first started taking off, it was built on a P C I got for free from

e trade, I think, for opening an account with five hundred bucks in it. It was like the dinghy machine had no memory or anything, but it can run as a server, not very well, but it got us online, right? And the first thing we we thought was like we need to get a sun machine like when things took off. And so we got a sun machine we were leasing through Rack Space, I think, at the time. I remember distinctly like hanging out in front of some restaurant in Palo Alto and the very page saying, Oh yeah, you should buy from Rackable. Which was uh

was one U Rack Mount System company. And it turned out that like my neighbor two doors down was the gu the guy who He was like number twenty at Google, and he was a he was like the remember they used to say there we have a neurosurgeon on staff or that was him. And he was in charge of scaling all their data center ops and So he was hitting and he was like, Yeah, guys, you should get it. And this is kind of an untold story about Google's You know, one of the reasons why they were able to win and scale so crazy. People don't talk too much about this, which is

They were using commodity Cheap hardware and instead of these expensive specialized systems that were harder to scale. Because the r the robustness of a system with a thousand machines was much better than one sunbox. You know, it's basically centralizing all your problem. Right. single box. And you saw them and that was like your Roger Bannister four minute mile where you're like, Oh, we can do it with that too. Yeah. If they're doing it. Basically. And it was cheaper. I mean like we didn't have money. So I was in in debt from business school and my partner was a PhD grad student. So we didn't have money. I was we were negative uh net worth. So hot or not kind of was like Tinder in you know two thousand, right? It was it was a website where people would submit their picture and other people would rate them on a scale of one to ten on how hot they were. And this was kind of in the day when everyone was scared to post their photo online. Like if you posted your photo online, it was behind a password protected

page that you know was for shutter flyer o photo uh back in the day. Um so the concept of posting a photo for other people to see that you didn't have full control over who could see it was completely foreign at the time. Forget about the rating. That was the rating actually as an idea came slightly second. It was originally about voyeurism. Uh I was addicted to reality TV back then. What were you watching?

Uh back then c you know, I used to watch a lot of like Jerry Springer, Ricky Lake, all that kind of stuff. The best part of that those days was I actually ended up going on some of those shows. You were on Springer? Yeah. I was on like Ricky Lake, I think, or one of the things one of those. Yeah, the themes would be like my friend thinks she's hot and she's really not. And then like they would come out and talk about it, and then I would come at the end and tell them their score. So anyway, like uh So where did that idea come from? Post your photo online And then you said you added later. Yeah, yeah, so then we yeah, the rating was like just kind of an add on like oh it'd be cool to have a mechanism where like the audience could give data back and make it um there was this whole what they called the two way web at the time. It was the conver the web is about conversations, right? And so it's like

Uh the concept that the audience could actually give response back was new. So you d you're you liked people watching. Right. But that's still like still where did the lightning bolt strike? I've never. The guy actually I think Borat was based on him. I I think the guy who does Borat denies it, but it's so clear. Um there was this guy in Turkey who had a um A web page.

with pictures of him like playing ping pong or whatever, and somebody no one I don't think to this day anyone knows who did it, but someone took those pictures and made another webpage that was a fake webpage. And it was like uh he was he called himself the Turkish stud. And he's like, Who wants to come to my country I can invite you come have sex. You know, like it was it was Borad, basically like oh come sexy dad. And uh And and and it w it blew up. There's this company called E Tor. that kind of like um jumped on it and brought e Tor was like it was kind of like uh the equivalent then of stumble upon, I think.

And um Wh people I don't know if people remember some. Yeah, which is the equivalent of uh Reddit maybe today. It just took you to random random things on the web, because back then there wasn't that much on the web, right? made a big deal out of this guy and he ended up on Letterman and whatever, you know, like in within a month He had like, you know, a million pages or something like that, right?

And we just my my my friend and I just thought it was funny. My co founder, Jim Young, he and I just thought it was hilarious because There were all these companies back in those days that were raising tons of money, throwing lavish parties and stuff like that. And and and you know, this is when like C Jerson was starting to talk about viral marketing with Hotmail and we're like, This is so fucking awesome because This it was just the irony, right? It's like this guy is like he didn't even do it. Someone did it to him and he ended up like on Letterman and getting all these hits that all these other people were dying for. We just thought it was funny. And so we kind of had in the back of our mind like Some day I wanna I wanna build a trickish stud. Yeah. Right. So it wasn't even about money. It was about I wanna do something that goes viral. Right.

If you want to make that first million, you've got to do your homework. Our sponsor, Monday.com, is back to help you prepare with another weekly dose of the Monday.com motivation. Got a goal? Get yourself a roadmap and do research before you dive in. An educated brain is like a roadrunner holding knives. It's really fast. It's hard to stop and it's a little dangerous. Visit Monday.com backslash pod backslash million to get 10% off.

and see how their color-coded platform can prepare you for success. It'll increase your workflow, manage your workloads, and get you one step closer to getting that money. Well, and I was obsessed with this guy. Like I had I remember I had like a I had him as my screensaver, I had him playing ping pong and so Uh so when we were talking about Uh

the w just various ideas one time. This voyeurism and whatever came up and then And then like oh you know, then you could rate them or whatever, like hey this could this could be our Turkish stud. Right. And so actually when we built it You know, like Jim was a grad student. I was working at a friend's company at the time. We were just killing a lot of time and we were ready set up in this house to do a start up. So anyway, Jim just

disappeared in his room and like three or four days later he came out. He's like, Okay, it's done You know. Literally like twenty minutes. But back then, like you had to do a lot of extra stuff, right And so he came out he's like it's done. And then it lets you upload a photo. Yeah. And I click through other people's photos. Basically. And then I tested it that weekend

Um I was just playing with it. My dad came in. Then I started looking at it a couple of days later when I was at home on the weekend My dad was looking over my shoulder. He kinda walks in the room. He's like, Oh, what are you doing? I was supposed to be like working and by this point actually no, I had quit my job. I'm sorry. So I was unemployed. So I uh now I remember I was tr I was supposed to be looking for a job probably, so

I lied and said, Ah, this is just something Jim's doing And so he he my dad starts playing with it and then I see him, he's the first person I ever saw get addicted to rating Swipe. Swipe, swipe, swipe. Yeah. And we just had like I had just taken photos from Excite Personals to like seed it. Yeah. Um And so he was like, Oh, she's hot. She's oh I'm like, Oh my God, like it's my dad, like sixty year old Asian engineer who's supposed to be asexual, except you know, the three times he had my mind. Which was you know immaculate conception siblings. Exactly. So I was like, Holy crap, like this is pretty interesting. Uh so then we launched it like

couple of days like that Monday, I remember. Monday or Tuesday. I think it was Monday. Uh and I just we launched it by sending it I sent an email uh put myself in the Jim on the site and then I sent a link to our pictures and sent it to a bunch of our friends. It's like

I remember f uh f it was forty two people. Which I counted it later, but you know,'cause forty two is a magic number, right? Yeah. But uh anyway So I sent it out and like Uh it just

immediately took off. And I think by the end that was at two o'clock in the afternoon and by the end of the day we had had like thirty something thousand IP addresses in our logs. Distinct why and so that's probably you know, back then a lot of people went through proxies or like AOL and a lot of these dial ups use proxies or so it's probably like, you know, a hundred thousand people or more. And uh we're like holy shit. That was crazy. So people were just sending it to their friends. Yeah, people were just sending it and like within an hour we had you know had like twenty or thirty submissions. And so I was like, Okay, we can take off the fake photos now because like you know that was'cause most it was so slow because it was running on that one machine. I think like

One like after you voted it would um it would take you to the next page view where it would tell you the score of that person and then show you someone else to rate. And that That the turnover of that page was about twenty seconds.

Clicking away to like going to their other browser window, doing whatever, and then coming back. But people is is amazing. Like people were just doing it. And um So we're like holy shit, like this is nuts. Like um it was just took off like crazy. And um so by the end of the week I think we were doing like a couple of million pages a day. And this is all still running on the laptop or at this point. I'll get to that, but yeah, yeah. Like there was there were all these crazy stories about how we scaled it. But like It got to two million a day and then like within two months like we were in people magazine.

I think like we were one of the top twenty Most trafficked websites on the web. At that time, you had your Turkish stud. Yeah, we had we beat the Turkish stud, right? You know what the funniest thing about that is that it turns out that the Turkish stud got popular because He first hit the scene because there was this um woman at salon.com. Salon was like an online magazine back then that was pretty popular. And there's this woman who was a writer named Janelle Brown, and she wrote about the Turkish stud. She made the Turkish stud happen really, because that I think that's how Etor and everyone else found out about them. Well, my friend was called me up, he's like the first day that we were running it, he's like, Hey, I got a friend who works at Salon.com

Name Janelle, can you talk to her? I'm like Okay, you know, like we'll talk to her but like we have to remain anonymous. Because we didn't know if we were gonna like get in trouble for or you know, like people were gonna be offended by this or whatever. Uh, and so he's like okay, she said she'll talk to you anonymously.

And then so I did I was talking to this woman, Janelle. She was interviewing me and she's And we didn't have that many photos on the side of the time, so she hit mine. But there's no way for her to know that, but she's like, Wait a minute.

Is this James Hunk? And like uh yeah. How did she put two and two together? Because Janelle Brown was the very first person I met in college. She her door literally faced my door in the dorms at Berkeley. So I was like, She's like James, it's Janelle Brown. I was like 'Cause at that point I just knew her if his friend Janelle, right? So it's like Oh my God, like you know, like

Please don't tell anyone I'm doing this. Like So she's like, Okay, okay, no problem. I you know, I said you I you would be anonymous and I'll respect that, right? Wow. So so she did. Uh actually But the traffic actually got so bad that first day that I called her Uh Saying hey, do you know, like

Don't run it. Yes. I was like, Can you please not run it because like Remember, like we were running on a server that was at a time when we were hosting the photos and it was a thousand dollars a megabit per second. So I figured like at the end of that day or whatever, I was like, Man, this thing's gonna cost like the run rate was like, you know, fifty thousand dollars a month. And it was doubling every like whatever hours. And and so the the trick with bandwidth pricing, like no one knows this anymore because everyone just goes to AWS and gets charged on throughput. But back in the day like w when you when you pay for bandwidth

Most carriers will give you Will bill you at the ninety fifth percentile of your Usage. Which means you have five percent of you can spike to infinity and you're fine, right? So that basically is a day and a half. on the uh you know in thirty days, right? So we had basically a day and a half

of uh forty thousand uh to do as much as we want, but we were approaching that day and a half and we're like, Holy shit, this is gonna be forty thousand dollars a month or whatever Like we were actually we almost shut it down. Yeah. And uh so I c I told Janelle I'm like or ask Janelle Can you not run this? She's like I would love to help you, but It's a slow news day.

So you know, like now I understand how journalists work. You know, like she they're uh you know, they're on a daily, like they gotta put out something every day or whatever. And so I was like, Oh shit. So our solution was to that night We moved it to Berkeley. Because like I said, my partner was a grad student at Berkeley. So we're just the university. We drove I remember we drove to Berkeley at like

Three in the morning. And uh we went to his grad student office and we set up the box We you know hid it under his desk. We b stacked Like it was just like this lone wire coming out from under his desk. That's costing the university. And doubling like like I said, it was a it was doubling like every like four hours.

Anyway, we turned the serv the site was down for a couple of hours. We turn it back on and like We looked at the logs lot you know, we tailed the log and it's like boom. Boom. Boom, boom, boom, boom, boom, boom, boom, boom, boom. Right. So like we're like holy shit. Like we th because we weren't sure if it was gonna die once we turned it off for a couple hours or whatever, right? Anyway, so

I remember we that was at like five thirty in the morning. We got it finally back up and then we like drove home and like crashed. And then Jim got like a call from his advisor at like nine or something. Apparently like the the IT guy at Berkeley, like Spit his coffee out when he saw the logs or whatever the the you know, the knock management tools. And uh followed the wire. Must have followed the wire. Luckily he didn't turn the box off. You know, actually I remember

We taped uh I took like a box of thumbtax and took half the box and put it over the power switch and taped it. So like maybe that was a signal to them not to turn this box off. But anyway Uh, luckily Jim's advisor was a He was the dean of engineering at Berkeley. And he was also one of the co founders of like Cadence and Synopsis. He was like a father of that and he was also a venture partner at Mayfield. Venture partners. So he was like a very entrepreneurial guy, right? And so

He's like okay. This wasn't a problem, this was an opportunity. Yeah, he well, in his wisdom he saw this is an amazing thing. He's like okay, look, I will buy you Couple days. Like but you gotta you gotta figure something out. Yeah. And so we did. So we ended up calling Rack Space, which at that time was a rinky dink

Very small company still, relatively. Uh but they were the leaders in managed hosting at the time. And I just happened to know you know, I looked at their about us page and their VP of Biz Dev went to Stanford Law School. Around the same time as a guy named Josh Becker uh went to law school at Stanford.

So Josh put me in touch with him. And then I was like, hey listen, you know, like We don't have any money. But I think we're a good poster child for you guys because that's their whole stick is like you don't have to have money up front. You can they can scale you up.

Today. Because they have machines ready to go. You know, like because back then if you wanted to buy machines, even if we had the money It would take A month. Right.

To get the machines. And to wrap them up and all that kind of stuff. So you say this is the best marketing money. This is perfect. So they're like, okay Put a logo of Rack Space above the fold. Uh we love what you're doing, we love the growth. Uh and I and I basically said look, I'm getting a ton of inbound

Inquiries about press, like I will mention you guys everywhere I can. And so they're like perfect, let's do it. And to the gr I mean they didn't even we didn't even know how big how many machines we were gonna end up taking and they didn't care. They're like Look, just t when you need new machines, tell us. And we end up calling them every night.

Saying we need more machines. Right. And they were like, Yes, let's do it. Like then and r like we hadn't even worked out the Yeah, like there was no paperwork at this point. Well sometimes things move too fast. Well, yeah. And this is how the web really was back in the day. Like everyone just kinda helped each other, you know, like you know, I think eBay hosted Yahoo, or maybe it was the other way around, but anyway, th you know, or maybe is Netscape hosted eBay Anyway, everyone needs to help everyone and so Yeah, so they're like, Yeah, don't worry about it. Like just get big and then we'll figure it out later. That's what we did. And and so it grew.

And grew and what did the traffic get to kind of at its peak? gosh, let me I'm it's it's been so long ago. Like I think we were doing about Maybe like fifteen million, ten to fifteen million pages a day.

Today, but at the time it was It was hard for things to grow as fast as they do because there was no social media. So like when things got passed around, they were passed around by email or you know, it wasn't as easy as just clicking a button. Mm-hmm. Which you know, and you know, any bit of friction reduction can increase the liquidity of any system by like ten X, right? So like

Things did just did not grow that fast back then. And it just I mean, like today like it would have probably been like insane. Anyway, it was insane by those days standards. And like I said, in within two months, I think Nett Nielsen or whatever had us as like we were bigger than ESPN. You know? And it was just like two guys like in their underwear like in in their living room like coding, right? Or whatever. And uh

Yeah, so anyway, we cut that deal. with them. And but we still had the problem of like They gave us when we finally worked out the numbers, they were like okay, you can have a year. They gave us a half a year of free hosting And then a quarter of like

Uh fifty percent off and then a quarter of twenty five percent off and then we and then in the year we would have to start paying. So But that was more than generous, right? That that was just amazing. But we did know that like in in at that point in time, like we're like Okay, we made our Turkish stud. We want this thing to keep going, but Jim needed to get back to his dissertation and I needed to go back to finding a job or whatever. We didn't think that there was any business model in this. In fact, we stuck ads on the site

When it first started I I remember we were going through like twenty four seven media or something like some some ad network back in the day that was pretty big. The CPM at that time was point two five cents CPM. Which means for every thousand pages, we got 0.25 cents. You know, today it's like dollars, right? And so it basically wasn't enough. It was barely enough like it wasn't gonna cover anything, right? So we still needed to figure out how to like make this thing last. So the first thing we did was

That's when we stopped hosting photos and we started sending people to Yahoo. And saying, hey, just send us a URL of the photo on Yahoo and let Yahoo basically pay for this, right? And that cut the bill by what? Uh well I mean that that killed almost all of the bill. Yeah. Right. Now we just have to pay for the machines, but basically all of the cost was basically all of that fifty thousand in Dublin was bandwidth for the pictures, right? And uh you know the s the funny thing is a month or two after we did that Yahoo shut off. Uh uh

um ability for anyone to host th to to use pictures that were hosted by them. But somehow we got whitelisted and and and like two years later I was speaking at Berkeley and uh I I met a guy who worked on G on GeoCities. He was your angel inside. Yeah, basically. And I was like, Hey, listen, I don't wanna you know look at gift force in the mouth. I'm kinda nervous to ask you, but Why why are you doing this for us? Oh yeah, you know, like we love hot or not, we just didn't want to be the guys who killed it. So like I said, people used to help people out. It was really cool. And um but anyway we knew we had to get off of them. So the first thing we did was we cut a deal with O Photo, you know, people were starting to get digital cameras at the time and they were

Willing to pay a bounty. for every user that has a digital camera. So what we did is we said, hey, if you don't have a digital camera, which most people at the time didn't Go to GeoCities and Yahoo will host it for free. But if you have a digital camera, please go to O Photo and they would pay us a dollar, basically. And they even paid us twenty five grand up front. Again, really just to help us out. You know, there's there's a guy I knew named Mitch Brown who worked there who did B D, and at the time the company was run by this guy, James Joaquin.

who uh he was CEO of a photo, he's now running obvious ventures with Evan Williams. Anyway Zeman James Awesome people. James loved it too. So they were really just doing it as a favor to help us out. And they didn't they didn't really know us, right? But that's how the web was. And so did it ever become a business or what ended up happening. So we realized it had to make money because we needed to hire somebody to run the thing because clearly like we weren't gonna run it. We were gonna go back to getting a real job or going back to finishing his Jim's PhD.

And so but you know, like the ads were started you know, slowly the ads started making more money. It wasn't enough to pay for the bills. That's why we added the dating side of it. So we were the first ones to do Like the concept of what you would call double opt in dating, like if you

If you say you're interested in someone, then they can say they're interested in you too. You know, like what Tinder is today, they have swiped we invented the To my knowledge, we Uh invented the JavaScript auto submit radio button. Back then you remember you had to hit submit every time you clicked a button. So Hotteron was the first one that uh yeah, it was two clicks. So we made it one click. We had never seen it before, so we think we invented it, but you never know. Someone probably did it. But like but we had to figure out how to do it on our own. But that's amazing, because now there's no rejection. It's like if we got connected. It's because we both are hot. Right. Because our whole thing was you you have a highly liquid marketplace

There is no rejection'cause you don't even remember everyone you said yes to. And the other thing that it did was it protected the woman. Who like you know'cause basically we saw match dot com and all these guys is basically Pimps, right? Like oh look at my look at my you know, all these you know, women are men that the you you might think they're hot, like oh you wanna talk to them? You know like give me twenty dollars. You gotta pay, right? Like and and what that did is that that what that ended up doing is like that led to lots of men paying and flooding women with messages and where like the women are just look at their photo and be like, No And then that guy just like got

Basically ripped off. And and the women got um you know the signal the the signal to noise was too low for the women. And so we thought that was Just kind of an inefficient. thing. And so we thought you know, doing it

Basically it was speed dating. Mm-hmm. uh and doing it a speed dating bringing speed dating online was Uh, and so that's what we did. And that actually so we turned that on we turned on charging for it. So the way it worked was like one of the two people, once you matched, had to be a paid member.

Uh so it was equivalent of look, you you c uh y a guy smiles at a girl in a bar, she smiles back At the end of the day, someone's gotta buy drinks. Right. Right. And it's usually not the girl. So and that's that's how we had a payment model. So all of a sudden, like As soon as we turn that on, I think it was Like within a month it was like by the end of that year we were at like a half a million dollar run rate. Which was enough to like hire someone and pay the cost or whatever. I mean like actually at that point the cost was zero. 'Cause we had the free hosting or whatever. Right.

But even you know, if you have any if you can find any model that can convert even a small percentage of I think we were converting Actually we were converting like five percent of our users were Paid, including the women. And then by the end of it we had optimized it to like twenty percent of People who join paid, right? Awesome.

It was enough to pay for everything. And then no, if it doesn't matter if you have scale, if you can even have Any model that makes enough money. If you are a lean operation, you can definitely pay your salaries and have like a lifestyle business if you want, right? And so that's what we had, basically. We were doing half a million and uh and it just kept growing.

Like organically. And so all we had to do at that point we were basically like We were the modern day equivalent of people who ran a laundromat. Like we just have to keep these machines running and you know, we have to install new machines to support and you know, like we have to like but we're just collecting quarters. And uh Yeah, so that so we kind of stumbled upon It wasn't r you know, like it sounds much more intentional than it was. It was like

Uh, we kind of stumbled into having a very profitable business. And then you decide to sell the company at some point? Well, yeah, so we ran it for eight years. Around year three or year four we finally started We hired people. So what happened is we ran for three years or so out of the house, just the two of us.

And At that point we were doing like three to four million in revenue, almost all of it was profit. my co founder started riding motorcycles and at some point I was like, Hey, you know, like if you if something happens to you, that's probably not good for hot or not. And and also, like frankly, he was tired and I was not to be a buzzkill, but when we were also like Look, I mean at that point we were running like he w he was running ops on like a hundred machines. He automated it as much as he could so he wouldn't have to go in that often. But at some point in time we brought in a f a a friend of his from high school

Greg Lynn. And we brought in Don Polak who did customer service'cause at that by that point I was doing a lot of the customer service emails and stuff like that. And um So we brought her in and so we

Basically have Now a company. We had employees And then we started hiring more people and more people. Not that many, but we hired a few more people And then it kinda became like We we had

responsibility. We had employees and we had to you know yet we always have to manage people to some degree, and that wasn't really either of our thing. And so we both kind of flamed out on on it. Um we're just not very operational people, either of us. Uh or it's at least I wouldn't say we're not operational, it's not the part we enjoy. And so the more people we hired kinda like the more of a drag it became and

Yeah, we both got tired probably year four, year five, I would say. And then I took a break and Jim took over And then Jim left and I took over. And then at some point we're just like let's just we're just gonna sell this thing. It was right before the two thousand eight crash. So it was a good timing in that sense. But we probably let it go for a lot less than it was worth just because it was a downturn. Right.'Cause at that point in time it was doing like six million in earnings. Um, but both of us, frankly, were so tired of it. And you know, our good friends

had just started uh Jim's really close with Steve Chen at the time. From YouTube and we watch them go from zero to one point six billion in like how long? You know, like a year. Yeah And we didn't really Si Hotter not getting to that skill that quickly ever.

Arguably, you know, you see what happened with Tinder, and maybe that's true, although it's not clear Hotternaut would become Tinder because Hotternaut had the rating part, which Made it grow, but could also hold it back from being pure play dating. But in in any case, we were just like, Screw it, you know, like w we both just wanted to do anything else. At that point when I had left I had started this um with Al Leib, he was a co founder of Evite.

Called Save My Ass. Which would send your girlfriend or wife flowers on a regular but semi random basis. It was one of the first subscription commerce. It was one of the first subscription commerce things we'd ever I'd ever seen. But then I had to go back to Hot or Not, so I stopped working on Al started clear slide, which took off, so he had to go so we ended up shutting it down just'cause not it was actually doing Decently well, like the scale was pr but anyway, we neither of us could deal with it. So Yeah, we ended up selling the company mainly because we were just tired of it. Um wanted something else to work on.

And so how did uh again because You make your first meal and you made it basically during that Dude, that was a awesome period of time.'Cause I was like I was still in my late twenties. We had the system sending us stats like at noon and at midnight.

And uh That was mainly so we would know like how the system's doing, if it if it had problems or not, you know, we how many matches were made per hour, blah blah blah, or up to that point in time. But it also had how much money we had made up to d uh up to that time for that day. And so at noon and at at midnight I would basically get this thing saying, Oh, today you made ten thousand dollars, fifteen thousand dollars on a good day like twenty something thousand dollars And you know, I would have to divide divvy it up and figure out my portion, but I was like, Holy shit, like magic. Yeah, it's funny, it's like uh I had a bunch of my friends always knew like

When we'cause basically I had nothing to do. I was just going out drinking with my friends all the time. Like almost like five days a week. And at midnight it'd be like I remember like I think it was my friend Philip Kaplan I just remember him like you buying? Yeah, because like'cause the'cause he saw me pull out my phone at midnight and I'm like, I'm buying. Yeah. But it's funny, like back in those days, like no one was making money on the web. This was like the like the dark period, right? I mean I used to like go out drinking with Philip all the time, Evan Williams from uh you know, at that time he was doing blogger.

He was like I you know I met Evan because I'd send him message saying, Hey, like he was about to like practically shut down Blogger. It was just him by himself at that point. And I was like, Hey, you know, we we had all this excess bandwidth at this point, so I was like, Hey if you want free

you know, photo hosting, happy to help you out. Right. So that's how I met him and that's that we became good friends. And so like I remember I would pick up Evan from his apartment in Noe and like You know, like he he didn't have much money at that point in time, so I was the like the I was like the I was the baller, right? So Yeah, so like you know, how times have changed, right? This one's on you, right, Evan? Yeah, yeah, yeah. Basically, but I mean like anyway, like Those were really the days because the people who were still around No one knew that we were gonna make money at the time. And like we were in the we were one of the few people who were making money. Most of the people were having a hard time. But uh you know like

a lot of like really famous names were still like after the dot com crash happened, all like the MBAs kinda disappeared. And the only people who were stuck around were like the people who were just like passionate about it. So many people That are like huge today. we're just hanging out back then and it's like you know,'cause people were always like, Oh, how do you know all these people? It's such a You know

the V Silicon Valley, there's so many people You know, running around like how do you know all these people? It's like dude, like there were like ten of us back then. We used to hang out. Right. Very simple. Yeah. And so so you're kind of amazing in that you've been here So long, uh, you built one of the kind of staple named products that everybody remembers, uh, fondly.

And since everyone over the age of X. Yeah, if you don't know, it's that's like the litmus test. Were you were you really around or you just, you know, if I was single it'd be like uh no, I probably can't date you. Yeah. Exactly. Um Since then you've transitioned to being an angel investor Uh, do you th I mean, how do you think about stuff now? Do you think about getting back on the horse and starting a new thing? Do you uh love investing, if that's what you want to do? Uh yeah, you know, like So I got I mean, I did I was never an angel investor. I just invested in my friends. Right. And so like people and you know, like like I said, people back then, we all everyone helped everyone. So like we would invest in friends You know, you'd like you would invest in people you didn't even they didn't even know what they were gonna do yet, right?

And uh like it was pretty cool. Like like uh And how what were the results of that?'Ca you know, some people would say Invest in your friends, that's a crazy strata strategy, but it seems to do really well. It dep I mean it probably depends on how well you pick your friends, right? Like I Stupidly passed on a lot of friends where I'm like, Ah, I don't see it or whatever and now in retrospect, it's like I passed on Uber. I passed I passed on like all these things where like I I mean literally I would be like a billionaire post tax. If you just if I just invested in the people that I actually liked.

You know, but I think it depends on how you pick your friends. Like all of the people that I enjoy talking to and being friends with tend to be like really smart and really quirky too. Like creative. Like people yeah, like smart creatives or whatever that um like Like People who are like a little crazy Uh but really smart and can pull stuff off, right? And so those people tend to do well. And so I mean yeah, I mean I've definitely done pretty well

I think. I mean actually I've never really compared to other people, but I think I've done pretty well with my angel investing Uh but you know like I mainly just invest in my friends and I don't really see myself as an investor and it's actually d in reality Being an angel investor, I is basically my cover for not working. Uh because I'm basically mostly just hanging out at home with my kids. Uh, you know, like I'm Mr. Mom. Driving I'm I'm like my kids chauffeur basically. Taking them to school, taking them to swimming and whatever. But but I think about that a lot. And and the other person, the person who introduced us, Michael Birch, he's another person who I feel kinda got out of the rat race. Yeah.

He he definitely does things, he does lots of interesting projects, but he's not just saying Okay, th you know, he sold Bebo for eight hundred fifty million? Next one's gotta be a billion, right? He's not just endlessly in the rap. If they choose to be in the rat race and they if that's what they want, that's what they want. I I I'm all about everyone has to figure out what makes them happy.

And and the only the only advice I have to people really about this is look You only have to make yourself happy. Don't try to make other people happy. Live your life for yourself, but be honest with yourself about what makes you happy. Because like society wants to tell you, oh, you should want to make a ton of money. Or you should want to like not make a ton of money and go meditate or whatever. Right. And I'm just saying you know, whatever is right for you is right for you. You gotta be honest with yourself.

But if you can be honest with yourself, go do whatever you want to do. Like I have friends who have to be billionaires and like look, that's not my thing. But If that's what makes him happy, go do it. Right, right. But for me, like you know, like I always thought I would do something else again, but then I had kids and then like you know, like how that that can be like all encompassing. And you know, like for me I just realized like you know what, I built an app that was like a YouTube for kids before YouTube kids came out I w I was like, I just want to learn to code again and and I made an iPhone app. And my son at some point was like and I'm a I'm a shitty coder, so I wasn't very efficient. I was always like coding until four in the morning, but the bus still comes at seven thirty, so I I'm getting no sleep.

I was c always grumpy and I'm kinda like It doesn't matter if it's a hobby, I'm always thinking about it, right? And basically at some point my son was like, Daddy, when are you gonna play with us again? And I was like, Oh shit. Right, gotcha. So well I mean like at that point it's a choice and I'm like, Okay, fuck it, I can't do this Like, I am so obsessive about anything I build. that like the dad that I wanted to be, I wasn't able to be it. And so what's the recipe for you now? What what what's the recipe that makes you happy?

It's not to say that I don't love The idea of starting a company and look, it's and it's not for the money, it's for the adrenaline rush, right? Like it's basically like gambling. Like this thing's likely to fail. It might succeed, it might win big if it w you know, and so it is like gambling in a way, but like we're and so it's a huge adrenaline rush when you start a company. Uh and the highs that's why the highs are high and the lows are low. It's like being an entrepreneur is like Volunteering to be bipolar, basically, right? And so

You know, like but I had to decide. And I said, Well, okay, screw it, I'm I'm not willing to sacrifice these things. So the next best thing is uh like I can just Angel invest more. And so that's kinda what I've done. And you know, like I I think I've been pretty successful at it. Not as successful as if I just invested in my friends. That's kinda like my new strategy is like okay, if I have a friend Yeah, yeah, like like I have a friend who just p uh pinged me the other day and I'm like, you know what, I don't even need to know. Like'cause we were we had a call scheduled and I brought in a friend and then I was like, Hey guys, I gotta go take my kids and swimming. But it doesn't matter, I'm in you know and the funny thing is like that's what happened with Odeo and Twitter with uh

Evan. I was like, Hey After after Blogger got sold, because actually Blogger before it got bought by Google He was in trouble and Nick Denton and I were both like kinda talking to Evan about maybe we could invest in it just to basically to bail it out. Yeah, keep it going. And uh

Ended up not happening'cause he ended up selling to Google. For you know Whatever million. You know, in two thousand two or something like that. Two thousand three. And so

When that happened, I was like, Evan I don't care what you're doing next, I'm in. Right, and and basically and then when he when he um returned the money for Odeo I was like let me know when to put back into Twitter, you know and then there's a whole long story I ended up not Oh no. Th there's a whole long story about that. It's a tragedy, but uh it's fine because uh I basically decided I I I wanted to choose friendships over money. And that's how that ended up. That's a long story short. And I don't regret that.

Actually. So But anyway, so So so the other you know, we gotta we gotta wrap up, but the one question, so normally I have these like five questions I ask at the end. Sure. But there's one that I'm really curious about for you because I see you as this incredibly Um creative guy.

Who has very humble not saying you know it all and all that stuff I'm just curious, if you were twenty one today, if I if I basically if I took all your money out of your bank account But I gave you back years and I I say you're twenty one today, you know, how would you make your first million today? What what would you be what would you be curious about? What would you be playing in? What spaces would you be playing in? If uh if you were back in the game at twenty one today.

As you alluded to earlier, you can make money in any space. So I'm not gonna speak about what's be I mean you should You should probably work in whatever space you're gonna obsess about, and that can be you know, like you said, uh What I mean, it could be anything. It doesn't have to be tech, but like whatever you're whatever you're obsessed about, that's probably a good place to start because

It's the people who like know a product inside and out. Yeah. kind of can take it to the next level and do something innovative or whatever that'll kind of get you attention to make money. So forget about advice for I'm not just curious. But what I will say to someone who's twenty one is this. After the crash happened, we actually got a buyout offer for like six million in two thousand. It was for the four of us and it was besting over five years. And It was very tempting. We thought about taking it, but then at the end of the day we basically decided that was not enough money to sell out our youth. Because when you're young, you have no liabilities. Like I you don't have a mortgage. All you have is time. Right. You're drinking five days. But the reality is time is all any of us have. Even at my age, time is all I have.

Right? Money is like a man made concept, right? Like I have my time. And I will never have time with no liabilities ever again, once I like get a family or have a mortgage or whatever, like So in at this point we're I was living a really cheap lifestyle. Like it's also true of like lifestyle, like once you lease that car, it's hard to go backwards. Right. So if you

I would say this like keep your life as frugal as possible. Don't Don't you know, don't borrow money. To live lavishly, you know, like Basically live as frugal as you can, team up with people

co founders who also can live that lifestyle with you so you don't have to raise any money Even though it's easy to raise money today. Uh I would still probably start things without raising any money. Just I mean like look, you gotta live. So maybe you gotta raise a little money. To pay r rent.

You know, you don't have to be in Silicon Valley. You can be in a You can be in an apartment in Houston you know, paying two hundred bucks a month rent or whatever, or five hundred dollars a month rent. You know As long as the two of you or three of you can live and and build.

And then just keep Keep building. Until you come across something that has traction. And then go scale it. Right. And look.

Like I said, like nothing is like an HBS case. Like the first like very few people I know have something hit on their first try. Nobody knows what's gonna happen. You just kinda like meander and whatever kind of seems to be sticking, you like go in that direction. And so it sounds like what you would do is uh you would keep your burn rate low. Yeah. You would live frugally, you'd get in a house with a couple of friends, and you would bang out ideas. that you were just curious about or interested in personally. Personally. Like if you know, like we I had the benefit of like we were living in gyms

parents they had like a investment house And uh so we were I was living there rent free. Uh no, actually no, I was paying him rent, actually, like really nominal rent. And then when Hotterna took off, I was like, dude, I'm not paying you rent anymore. He's like okay. I'm like this is gonna be big, but I'm not paying you rent. Um but uh To the extent you can keep your rate your burn low. The story the the lesson to me is not

Save money, the lesson is value the time. And make sure that you're spending every year of your life the way you want to be spending it. And one of the ways to do that is to Keep you know get that reserve capital so that you're not gonna go trade your hours for dollars. I'm I'm probably an extreme example of this argument. Look, I have enough money where I don't have to work anymore. I don't have any fiscal constraints. But I'm still not able to do this.

Because I got my kids and I'm choosing to do that instead. So You know like so it's money is not not the only limiter out there. And so when you get older, you're going to you only accumulate liabilities in life unless you're willing to like you know, just abandon everything which is you know, like not you know, different strategy. Well, yeah, I mean like like I said, people can do whatever they want for themselves, but like that's not my strategy, right? So

Life is not easy for everyone. e you know, equally and so like everyone has their own challenges on that. But like I said, if you can get if you can get a job at one of these companies go work for a while, save that money Don't increase don't live like you're making that money and then go do it. And do it with a friend because it's very, very

Mentally hard to do it alone. Mm. Wonderful. Well James, uh it's been an awesome conversation, man. I really appreciate you yeah you coming out. It's great great seeing you again, great talking to you again. And I think a lot of people are gonna both enjoy the story of Hot or Not a lot of people won't even have ever heard of it before. So this will be the first time they hear I can't date if I'm single. That's like the line. And then I think what what you said at the end here about uh about valuing your time and and making the choice that makes you happy and not playing by other people's playbook. I think that's a great Great message. So appreciate you coming on, man. Thanks. Awesome. Bye.

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.