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From Winnipeg to WordStream – How Larry Kim Built a Booming Business in Search Marketing

From Winnipeg to WordStream – How Larry Kim Built a Booming Business in Search Marketing

Welcome to AQ’s Blog & Grill. Today we
are really excited to have Larry Kim with us. Now Larry Kim is the founder of WordStream. He’s also a graduate of the University of Waterloo and he’s going to
share a little bit of his history about how do you go from a young person from
Winnipeg, Manitoba to the University of Waterloo and now lives in Boston and is the founder and CTO of WordStream. So it’s going to be an interesting chat. Please stick with us and welcome, Larry. Hey, thanks Alan. Thanks so much for having me. It’s great to be here. Excellent. Good show. Now Larry this whole thing about coming from Winnipeg to the University of Waterloo, how did that happen? How did you get here? You know Waterloo has those Canadian math competitions and all that kind of stuff so it’s kind of like a recruiting magnet for engineering and science so you know it did okay in those and was able to get in through I guess it was those scores. But really everyone else was doing it, basically, all the science nerds and math nerds were going there so I just went. Okay. So were you in the co-op program at U of W? I think you were. Yeah, absolutely. We mostly learned what not, what I wasn’t interested in which is sometimes just as important as figuring out what you’re interested in. Absolutely. What were two of your highlights from the co-op program? Oh god, like working in California in Silicon
Valley. Nice! During the dot com period was pretty infectious and kind of gets you with the bug to want to start up a startup of your own and then it actually happened. There you
go. So you started WordStream in 2009? Maybe 2007-2008. So how did you go from you know the successful academic career
at U of W and then you decide you’re going to open your own business. How how did that
transpire? What inspired you? First of all if you attend Larry Smith lectures at U of W you’re inspired to create some kind of a business at some point in your future. You just don’t necessarily know when. So to start off always thinking how I am I going to start something you know. And usually the opportunity just like falls into your lap somehow. You just stumble across it and then you decide hey wait a minute, maybe there’s something here, maybe I should quit my job and do this, go all in. And basically like a lot of U of W students with a background in software engineering and all that stuff I was just doing software at a company and that company asked me to do some work on their marketing campaigns. So it’s Google AdWords. And I set up some campaigns for them and basically software, like you know there’s no incremental
cost, like once you make it you can just sell lots of them. So you know I set up some campaigns for them and their business went from like $300,000 a month to $3 million a month, okay? And I was like wow this is really powerful. I should maybe specialize in this other thing. So I just quit the job, found a bunch of
clients and started doing that you know search marketing consulting work but even though that has nothing to do with the engineering background but what was interesting was like because I’m lazy I wrote software programs to make my own life easier, so that I didn’t have to do the same dumb consulting work over and over and over. I just wanted to like run a program and have that done. And then the aha moment was like wait a minute you know maybe other companies might want to buy this thing. And so you know there’s this notion of bootstrapping, you kind of need money to make money. And the thing was I had you know a dozen clients paying $5,000 to $10,000 a month so I had revenue coming in so I had revenue coming in and so at that point it was just like maybe I should pivot the business from being a services company to being a software company. And so using the money from doing consulting by day I was writing software by night to kind of build something. And the company now employs hundreds of people and has got tens of thousands of customers and manage about half a billion dollars of ad revenues worldwide. It’s you know one percent of every dollar made by Google is actually managed by my company. Yay. So that’s basically the story there. I mean it’s not a rocket ship straight line. I’d say most of the growth happened in the last three or so years. You don’t understand. Six years ago it was just myself working out of a Panera Bread – I don’t know if you have those? Yes we do. Because of the free wifi and unlimited Diet Coke refills. It’s quite an interesting journey. My understanding is usually it doesn’t work but it’s nevertheless an interesting
endeavor, especially if you’re fortunate enough to have made it. Well I think the story is now, and I tell my students this, is you know it’s not the harder you work
the luckier you get it’s the smarter you work the luckier you get. You know
sometimes it just comes down to guys I know you’re holding all nighters and things but activity does not equal achievement. Like start getting some priorities over what really matters and work on those first. Yeah, just latching onto what you said there, it’s not the number of hours, it’s kind of what you do. And I can tell you roughly three months of work is
responsible for the growth of this company you know. Just three months out of six or seven years. Basically it was this notion that we would build a tool called the AdWords grader, okay? It was a tool that will analyze your account, your AdWords
account, and tell you how you’re doing in terms of your click-through rates and your cost per clicks and then compare you to your neighbors, your competitors basically. And just doing that one thing, you know, it just makes people very competitive, it makes them more urgent. Like I need to fix my results. And basically we went from a three two- or three-month sales cycle to two- or three-week or actually one- or two-week sales cycle. And now we’re selling hundreds of these
things every month. It’s so true. It’s like you know one percent of the
work made all the difference. So what’s your relationship now? What’s the relationship between WordStream and Google? Well we’re very close partners.
We present at their company events like in terms of their employee meetings and stuff like this. They’re a really big company so obviously they like to focus more on the big spenders. Because there’s millions and millions of advertisers it’s hard to have direct relationships with every single small business. And so what we bring to them is scale. We’re able to work with thousands of advertisers using technology that they don’t have.
Is it kind of like co-opertition? Are they ever going to
turn around and say well we could be taking WordStream’s business if we
wanted to. I think we’re moving in different directions. So let me see if I can give you an analogy. So imagine if you had ten million Canadians filing taxes. What if there was only one way to
file the taxes for all ten million people? And what if they designed it only for very, very rich people? Then that would be a very fantastic user
experience for the rich people but might potentially be a little bit confusing for
less sophisticated, smaller returns. So I think the direction that Google is moving towards, because so much of their revenue comes from their top clients, they want to move upmarket and make this thing really powerful for enterprises and we’re trying to make something like a TurboTax, like
kind of an idiot-proof way of doing this advertising. It’s kind of moving the opposite direction. So I guess the opportunity exists because there are so many millions of users of this ad platform and only one way to use it right now. Yeah. Excellent. Now Larry, just
recently as a matter of fact it might have been, it was recently, you posted a
blog about the five entrepreneurial myths and busting them. It talked about
what you expected and what you didn’t get when you thought you were going to
become an entrepreneur and thought you were going to get As One and it didn’t come true.
I know the first one was Hey, I’m gonna be my own boss. Right. So many people like to turn their hobbies into businesses. I used to love doing search marketing but now it’s just a chore. When it becomes work it’s, I don’t know, it loses the fun. Especially when you’re doing it on so many thousands of accounts. And of course you never really are the boss. Your customers are your boss. Your investors are your boss. So the control and being a boss unless it’s a lifestyle business where you’re trying to build something with scale and huge enterprise value, I think that’s a myth. That’s an interesting little insight into venture capitalism
which is sometimes referred to as vulture capitalism, I know in working
at the Accelerator Centre which is connected to the University of Waterloo
and then with the entrepreneurial students that I have, you have to kind of
explain that Series A money is not, you know, you don’t just find it. It
isn’t laying there waiting for you. The bootstrapping is still one of the
prerequisites of getting your business some sales. Absolutely. Although that’s the beauty of going from productizing a service. So you have that nice service revenue, then you can divert some of that to building this escape vehicle that then takes off on its own, you know what I mean? So you have to bootstrap and basically
get into a position where you don’t need the money anymore and then you’ll get your Series A, basically. But the exception to this is if you’ve done it before. So you know
having built a company with huge enterprise valuations north of whatever, eight figures or whatever so the point is if you make a lot of money for your investors then the second time through
they’ll be open to just throwing money at you, you know, even if you haven’t
bootstrapped anything, if that makes any sense. We see it happen. Larry maybe you could just give our young entrepreneurs the benefit of your experience. What are the
three things that you would advise them to be thinking about? What should their
frame of reference be as they start their businesses? What would you advise
them to be doing and thinking about? Well you know so much is talked about how to build a business but maybe not
enough attention is spent on should or why should I build a business? So I
think you really have to be honest with your own expectations. So we were just talking about
being your own boss you know. I’m definitely telling you you’re deluding yourself. That is not true. You have a board and customers and they’re more demanding than just having a regular job where you can go home. Another reason why a lot of people do this is for the money of course. Myself I thought this would be like a get rich quick thing. But I
encourage your students to think about it as rather than money being the
primary objective, of course we all hope to make tons of money and everybody
would be happy. But I think of the value as being kind of the journey in terms of
the people you meet, the skills you build and most people don’t make it on their first try, so not necessarily looking at that as failure but as your MBA or something like that. So another area this notion of sometimes people will go into an entrepreneurship because they feel like they have nothing else to lose. I’ve got nothing else going on or whatever. But it’s like one thing I realize here having done this is that, and especially the first three or four years, we weren’t killing it or anything but we were just getting by if you will. So I just want to make sure people know you definitely have something to lose – your pride. When you’re doing this, people will ask you how’s that startup going and you’ll be like uhh we’re struggling. And you know there’s naysayers out there, you know? They even want you to fail. It’s kind of sad. Well I’m wondering at 3:30 in the
morning, I don’t know if you as an entrepreneur have ever experienced and
I’m sure you have, waking up at 3:30 in the morning and saying I don’t know if I
can make payroll next Friday. Oh on two occasions we were near death so
absolutely. It was kind of touch and go early on. Yeah. So what got you out of bed in a
positive way after that cold sweat that you went through at 3:30? Was it something about what Larry
Smith said? Was is something about the work ethic that maybe your family instilled in you? Or this you know need to succeed? What was it? I think it’s a sense of obligation to your investors. When you – geez, I’ve raised tens of millions of dollars here of investor money and I’m personally promising them big returns like venture-size returns, five, 10X their money and I’m like trying to make good on those promises, you see what I mean? And you just have the weight of expectations on your shoulders, the more you raise, the more you’re on the hook for it in terms of returns and that’s kind of what motivates me. Okay so just as we close up what were the highlights for you as a student and
a resident of the University of Waterloo and Waterloo, Canada. The thing that we used to do was like go to Best Buy. Best Buy! Well believe it or not there was like a revolution happening in personal computing at the time and there would be new printers and new CD burners and all this stuff. It was kind of a big deal going all the way out to Kitchener, Fairway Road. Kitchener. That was quite a hike. Folks at home we’re interviewing a very successful nerdy guy from the University of Waterloo who used to spend his free time at Best Buy checking out the new printers. And CD burners.That was a big deal. Remember those things? Oh yes. I have one. I still have one. Well Larry thank you very much for spending time with us today. It was
very generous of you to allow us into your busy schedule and I know the entrepreneurs are going to really enjoy this and find some real
value. So thanks again and thanks for being a guest at AQ’s Blog & Grill. Awesome. Thanks Alan. Have a great afternoon. Thanks Larry. AQ’s Blog & Grill

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