From Two Failed Startups to $10,000,000 in Revenue with David Darmanin

Courtland Allen 7s

What's up everyone. This is Courtland from IndieHackers.com where I talk to the founders of profitable internet businesses, and I try to get a sense of how they got to where they are today so that the rest of us can learn from their example.

Today I'm lucky enough to be talking to the one and only David Darmanin, who's best known for being the CEO of Hotjar. How's it going David?

David Darmanin 24s

Oh, good. Thanks. Thanks for having me.

Courtland Allen 27s

Yeah, thanks for coming on the show. I'm really glad to have you.

For those who don't know, Hotjar is this amazing tool for analytics and customer feedback that gives you heatmaps and even recordings that show you exactly how people use your website, which ends up being not only extremely useful but pretty fun to use in my opinion. I've been using it on Indie Hackers the past few days and it's great. Thanks David for building such a cool tool.

David Darmanin 49s

Yeah, great to hear that. Always good to hear that there's value coming out of using Hotjar.

Courtland Allen 53s

There definitely is. A lot of people listening in might have never heard of Hotjar, because you guys are only two and half years old, but you've already grown to something like $10 million a year in revenue, if I'm correct. And you're entirely bootstrapped, is that right?

David Darmanin 1m 6s

Yeah, it's been some crazy paced growth.

Courtland Allen 1m 10s

That is crazy.

David Darmanin 1m 12s

Yeah, it's been a fun journey so far. I'd say… we try to specify that we're self-funded, as in we did invest just a substantial amount of funds into the business, so just under half a million, which is worth saying. Just so that many people out there don't think that we managed to achieve what we did on no funds at all, so that would be very difficult to do.

Courtland Allen 1m 35s

Yeah, I appreciate the honesty. So you weren't starting from zero dollars.

David Darmanin 1m 40s

Exactly. Interestingly, we tried to do that twice before Hotjar, so I like to talk a lot about the failures before Hotjar.

It's interesting to compare two ideas. I wouldn't call them startups, because we didn't incorporate. I had this horrible experience of incorporating when I was in college. I was 18 or something. It was a very bad idea. We incorporated very quickly, which meant within months I was taking care of liquidation, which was not fun especially if you're based in Malta.

So I promised myself years after working in-house in a software company then becoming a consultant that if I had an idea I would take the risk of doing it as like a sole trader, and that's what I did. Anyway, the first idea worked on… it took us two years to build it, and it hadn't seen the light of day. Then when we launched it we realized it wasn't going to be successful.

With Hotjar we wanted it to be very different, so I guess our failure has influenced a lot our success.

Courtland Allen 2m 42s

Yeah. I like talking about the failure stories as well because for everyone who's succeeded there's always a bunch of failures in the past and there's things that didn't work out so well. I think it'd be really fun to dwell on those, if you don't mind, and try to understand some of the lessons that you learned back then that have helped pave the way for you to do what you're doing now.

If we could go back in time through the story of David Darmanin, what would you say is the best point in your life for us to start the story, where you began learning the things that you know now?

David Darmanin 3m 10s

It's interesting, our content team asked me the same question but they wanted to go way back.

Courtland Allen 3m 15s

I don't mind going way back, we can start wherever.

David Darmanin 3m 17s

Yeah, they traced all the way back. Even though I'm based in Malta, my family is Maltese, which is why I'm here. Many people think that we're in Malta for tax reasons. We're always like, "No, we actually pay probably the highest tax in Europe, because we're Maltese." It's incentivizing only foreigners here, which is interesting.

Even though I'm based in Malta, my parents emigrated to Australia, and I was born there. The moment they traced everything back to was when my dad — this was in the '80s — bought that original Mackintosh Plus with the smiley hello. He brought one of those into his office when I was what, four or five?

I just remember falling in love with this device, and he had a printing machine, because he was printing brochures and leaflets to circulate to the Maltese community in Australia. I just fell in love with this idea of there being an interface between the device and the human, and how that worked. So fonts, and disks, and folders and this was just… it captivated me.

Then, fast-forward, I actually ended up studying law. I'm actually a lawyer, which is kind of uh… until recently was a relatively useless thing to have done. During my time studying, I actually did a lot of work in design just to get through the weekends. Also, because it was something I really enjoyed doing. I was always obsessed with the visual side. Then I had a client who asked me, "Can you build a website for us?" I was like, "Of course," even though I had no idea.

I was always frustrated, I remember, with this idea of how do I measure if what I've built is actually good or not? It bugged me that back in those days it was based on whether you'd win a Webby award, an award, or if the client said, "Well done." There was no real way to measure it. All I had was, back then, like what? What were they called? These counters you'd put on the side, so you just know, has the number of people coming to the site gone up or down?

Then, fast-forward from there, I tried to build a startup and I failed, so many failure stories. Then I saw this ad in the paper by a Swedish software company in Malta that said, "We have millions of page views and we want someone to join us to help basically optimize the experience, optimize results." The role was an optimization specialist, which this was the beginning of this whole CRO growth hacking thing. This was a long time ago.

I joined these guys, and we traveled to a ton of events, and started using a lot of tools. I think it was actually at one of these specific events that kind of the story of Hotjar was really born. It was eMetrics in San Francisco actually.

So having been through my whole career and failed startups, and all these things, I went to this event and I remember there was eBay speaking. They were saying, the degree to which they go to understand their user and customer. They would go meet their typical user, a seller and a buyer in their house, to understand the context of within which they use it. And the ethnographic research. The surveys. I was so excited by the fact that these things existed. And there were many other companies speaking there: Amazon.com, Booking.com…

I was really inspired by what could be done. Equally, I was really frustrated that these tools that were also being exhibited at this conference were so expensive. I went back from the trip trying to pitch for us to use these tools but they were so expensive, crazy expensive.

Yeah, I guess later on then I moved on to become a consultant and I worked with really big companies who I was consulting, and they had these tools, which were so unreachable to this point. To be honest, they were so disappointing. In the sense that they were typical enterprise tools, so they were built around the sales team. The user experience was poor, you needed multiple tools to get something done.

Then it dawned on me like, "I've worked for a decade in software. I know this industry really, really well. I know exactly how to use these tools, maybe this is the big thing I should be working on." It dawned on me that my failures were coming from me not thinking big enough.

So this was the point where I thought, "Okay, I'm gonna think big. I'm gonna persuade people to give me money. (Laughter) I'm gonna put…" which was one of my co-founders. I spent six months working as a consultant, putting all the funds into the business. Yeah, that's how we built Hotjar, basically.

Courtland Allen 8m 0s

You talk about how you had all these failed startups before the story really started, before you became a consultant, before you saw these tools that you really wanted for everybody to have.

What were some of these startups that you failed at? Because I think most people… it's interesting in and of itself to have multiple failed startups in your history. Most people just dream about starting a startup and never actually take the plunge. But you've done it numerous times and didn't quit even when it didn't work out.

Maybe talk about the… what's the story behind the first company or the product that you worked on that ultimately failed?

David Darmanin 8m 30s

Sure. The very first company, that was early 2000, and that was an advertising agency, so it wasn't really a startup, it was more of a business. It failed because the team that we put together didn't make sense. We were doing it because it was fun to have a business card and to have a business, as opposed to… You know what I mean? We were very young. I wasn't even 20 yet.

It was this whole idea of… Again, I'm glad that we did it because I think the real key is to just be doing stuff, you just need to do shit. Because if you're out there that's how you're going to learn as opposed to just planning or listening to others. The key is just to get out there and fail quickly, and just learn stuff.

I'm really glad that I did that very early on, because I guess it scared me off a little bit for some time. More importantly I realized like I had to go learn from others. I decided, okay, I'm gonna go find myself some amazing bosses to work for and learn from them.

Courtland Allen 9m 27s

What was the first boss you worked for that you felt you learned a lot from?

David Darmanin 9m 31s

Yeah, I was lucky. My first boss, he was a German entrepreneur here in Malta, and he was looking to raise funding for an m-commerce incubator. This is the time when SMS was just the new thing, that's how long ago this was. He wanted to build businesses around this new m-commerce thing that was coming. I joined before they raised, and I had in like design and project management stuff, so IT and stuff, so again, very young.

I went through this process of raising… I think we raised from Hutchinson, Orange, it was quite a substantial amount. I think I was lucky in a way to have experienced that in Malta, right in this tiny country. More importantly, what he gave me, he challenged me personally, constantly. I did this to everyone, and nearly in an aggressive way, but I liked it about him in the sense that he would force you to think much bigger of yourself and to think much bigger of what can and cannot be done.

In fact, I then left that business and he helped me launch a business plan competition at the University of Malta, which was an amazing opportunity. I think he taught me a lot around believing in yourself and thinking much bigger than just the location that you're in. He helped me a lot from that point of view.

Courtland Allen 10m 53s

Did you ever have this feeling that you really wanted to work for yourself and that you didn't want to work a job forever? Or did you feel you were pretty comfortable at the job?

David Darmanin 11m 5s

No, I was never comfortable at the job, to be honest. I always enjoyed the adventure and the thrill, again, I was quite young. I guess that influenced the second startup then. After this I continued studying. Then when I finished studying I spoke to my cousin with whom I had done the advertising agency in the beginning. I basically… having built so many sites for my clients, I hated the experience of building sites. I was playing around with Drupal and ASP and all these things.

I was like, "What if there was a framework where you just go there and you just build a site from there. You just pay a subscription." I think I got the idea of the subscription based from paying for so many domains. I was like, "Oh my God, this is genius." You have a domain and they charge you every year. I was like, "What if we could build a site in this way?"

We were trying to build a framework essentially where someone can build a site just by using the components, which was a great idea. Because this was pre-Squarespace, BigCommerce, and all these tools that do these things. But again, it was me and my cousin, very young, in my garage, thinking a little bit too big. Probably, in reality, back then if we had, I don't know, found an angel investor and really pursued this, maybe we could have succeeded. I think we were just ahead of our time.

Ironically though, my cousin went on to now work for Automattic that own WordPress, which is a funny story in a way. Yeah, that was the second experience. We failed because, again, we weren't just thinking big enough and we weren't really committed to it. My cousin had another job, I was doing things on the side. I was studying, and so we weren't just doing it completely and really believing in it.

If there's anything I've learned throughout the last decade and a half or something, it's when you believe in something, you just do it completely focused. It's better to just exhaust that idea as quickly as possible, as opposed to doing it on the side with other things. Because timing is really, really critical for success. You have to have the right timing. It's better to know very quickly if you've got the right timing or not.

Courtland Allen 13m 17s

Yeah, that makes a lot of sense. What was your skillset like at the time? I'm curious, because you're building websites for people using all these tools, but would you have considered yourself a programmer?

David Darmanin 13m 27s

No, no. I wouldn't say so. My passion has always been designing user experience, but I'm deeply in love with the whole concept of marketing. So yeah, I'm more of a… definitely more of a marketer, I would say, but more visually oriented.

Yeah, but then anything related to product and brand, that makes me tick. I guess it was me with that idea of thinking about how the product was going to work, and how visual it should be presented. Then my cousin was the programmer building the backend, and all that stuff.

Courtland Allen 14m 1s

I know a lot of people have trouble when they don't come from a programming background, partnering up with somebody who can help them out, and essentially do that side of the equation. What has been your strategy? It sounds like you've worked with a lot of friends and family, but what has been your strategy outside of that for finding good partners to work with.

David Darmanin 14m 20s

That's a really good question. I say this a lot to my friends. I get a lot of my friends asking me, "David, how do I do what you did? Uh, like, I, I can't code, and how do I find… how do I meet other developers?" It's basically, it's the same thing like dating, in a way, you need to learn to speak their language. If you have any ambition to build something which requires programmers or like a technical co-founder, just go out there, create a blog. Register a domain, install a few plugins in WordPress, or use Drupal. You know what I mean? Just play around with the basics. Understand how the internet works, servers. This is not complicated stuff.

It just requires some… basically, that you dedicate some time and be passionate a little bit about how things work. Because then, I see from myself, I get really along well with other technical people, because I ask questions. I want to understand how things work, and I find that technical… technically strong people, they actually respect someone who wants to understand and explore stuff as opposed to just dictate from a distance how things should work. I think that's the most important thing.

Courtland Allen 15m 31s

Yeah. That makes a ton of sense. I really like what you said about not being afraid to get your hands dirty, because if you take the time to learn something that you don't know, if you take the time to use what skills you have to try to make an impact on your business, then it really proves to other people that you're working with or that you want to work with, that you're not just going to be dead weight. Because their biggest fear is that working with someone who's just going to kick back and say, "Here's my idea, you guys are the programmer nerds. You just build it all on your own."

David Darmanin 15m 56s

Then there is… in terms of meeting these people, the best is to attend events, like there is all these startup marathons, things. That's a great way to get grouped up and meet people. I'd say, I really believe in this model of working for an amazing boss, especially early on in your career. I think in the media we see so many stories about… you know what I mean, the Zuckerberg and the Elon Musk's of this world, which is not the typical way people succeed, right?

Courtland Allen 16m 28s

No.

David Darmanin 16m 29s

We don't hear the stories of how… Again, most of the other entrepreneurs I've been lucky to meet, they all have a very, very similar story. They worked early on in companies they admired and bosses they loved. They got to inspire them or challenged the things that those bosses didn't do well and made them better people, and in the process also met co-founders. Obviously, working in a 200-person business when you're in your 20s, is obviously going to give you a hell of a network later on.

It's easy to discount that as a journey, a route towards getting there, let's say.

Courtland Allen 17m 14s

Yeah. I bet you that's especially true when you're working for the kind of boss that you were in a place where everybody is being pushed to do their best, and you're maybe entrusted with a little bit more responsibility than you deserve, because then you're surrounded by talented people who are ambitious, and who are likely to become your future co-founders. As opposed to working in a more normal type of job.

David Darmanin 17m 31s

That's true, because the opposite is equally true. At that age you really don't want to waste your time working in a business you don't believe in, or a boss you don't admire, because that's like… it's wasted opportunity to learn.

Courtland Allen 17m 45s

One of the things that you mentioned is that you eventually got a job as a growth consultant, working with large companies. I'm really curious what things you learned in that role, because growth is so important for any startup in any arena. It was probably a very new role for you, so what did you come away with?

David Darmanin 18m 1s

That was a wonderful experience. I was literally thrown in the deep end, in a good way, in a sense that I was given five companies to consult. I can't mention their names but they're all global, huge brands that everyone would probably recognize on this call… Sorry, listening to this session.

Yeah, it was great in the sense that it was intimidating. It was scary, but more importantly, working with the CEOs and growth teams and marketing teams of these businesses, you realized that in the end, it's all about the people. There isn't that big of a jump between what I know and they know, which is great, because you start to realize that the opportunities are much bigger than you think.

It's so easy to be a little bit insular in your world to think that kind of… you're not good enough, and that it's way too competitive, and you can never succeed. I guess, what this gave me was a short, condensed MBA in terms of learning but also speaking to what would eventually become my ideal customers, all done in a very short time frame.

I guess I was also smart in a way that I read a lot of books during this time, which helped me as I was learning, I was also reading from what others had learned. At the same time, I was also paying a developer on the side, out of the money I was making as a consultant, just to experiment with ideas as well. It's quite a hectic two years of my life.

Courtland Allen 19m 34s

Yeah, you were a busy guy. What kind of ideas were you experimenting with?

David Darmanin 19m 39s

These are the next two ideas then, the next two startups in , because again, we didn't incorporate. The first one was… My background, funnily enough, is I've also done… It's actually how I started design. I've also done a lot of events, parties, here in Malta, and it's how I learned to design in the very beginning.

Now, originally I started doing events because I was very frustrated when I launched that business plan competition at university, that not many people were participating in it. They weren't interested. I was like, "Okay, what do people like in Malta? They like parties (Laughs). So let's do parties about their business plan competition." That worked, but the party thing, maybe I was a little bit too good at it, so we ended up doing more of that. Then when I stopped the competition thing I ended up doing more events. What was interesting was that I learned a lot from this in terms of sending emails, using social media that had just launched, and how to write persuasive content, creating a guest list to create this concept of exclusivity and whatnot.

More importantly I realized working with a lot of hospitality and venues that these guys had no idea about the idea of marketing, and digital marketing, and the idea of loyalty and retention. Basically, I built a great product with a market that I had no idea about. I built a digital marketing and retention tool, with a loyalty program for retail, for hospitality, and whatnot. This is where we spent those two years. This was an awesome tool where you had iPads, where people could sign up, and you could log in from your phone, and see like points. You could receive updates about events. It was really well done.

The problem was, that once we finished and we were ready to take this to market, I realized I had no idea how to reach these people. It's interesting, because I considered myself to be quite smart, but this is the whole point, which is it's… this is why you have to be agile. This is why you have to move as quickly as possible to releasing something as opposed to spending a lot of time building, because it's so easy to get lost in this mind frame of what I'm building is going to be amazing, it's going to create so much value.

What happened was, we struggled to speak to the people who should be buying it, because they didn't have a traditional office. They were moving all over the place and had weird times. They didn't have… it's something that I mention a lot when I advise startups, they didn't have a budget, in commerce. So they hadn't allocated time and money in their brain, or in their accounts, to this tool or a service or something that delivers the value that I was trying to deliver.

In essence, what I was trying to do was… this to me is the scariest word when you're launching something, is to educate them, to do something that they hadn't been doing to that point, which we managed to do. As in, we managed to convince a few venues to use it and they loved it, but it was just going so much against the way they'd always done things. It was difficult to sustain their usage. That was a huge, huge disappointment for us, but it was a wonderful learning experience.

I remember reading… Seth Godin wrote, The Dip, and I remember reading The Dip and saying, "Okay, we have to stop (laughs). We have to pivot because so many of the, of the ingredients are not lining up."

Courtland Allen 23m 18s

Yeah, I think it's… I like how you talked about how easy it is to get lost in this building phase where you're just so confident your product is going to work, and you're not really talking to anybody and you're not really attempting to sell it, so you don't really know if it's going to work, but you feel confident. I think, one of the worst things about it is that… I know you talk about all these startups that you're starting and failing at, I know you're learning lessons. When you get trapped in the super long building phase, you're not really learning anything. I've had points in time in my career as well where I would spend six months to 12 months building something and learn zero lessons, except for how to build this product. Then it would fail, it's like I would have learned so much more that year if I had iterated a little bit faster and actually had my ideas hit the market earlier.

David Darmanin 24m 2s

In a way, thank God we experienced that, because that completely influenced the way we launched Hotjar in the market then.

Courtland Allen 24m 7s

Yeah. Let's talk about the way that you launched Hotjar, because it probably represents the culmination of a lot of the things that you learned earlier in your career, and a lot of the lessons that you learned from failing at your businesses. How did you come up with the initial idea for Hotjar and what were some of the first steps you took to get started working on it?

David Darmanin 24m 24s

Yeah, I would say it was definitely the point where I was systematically hearing clients and people say the same phrases, like, "If only I had these tools all in one," or, "It's so complicated to use this." You know what I mean? It's just all these things start to line. Where I reached out to, well, a few people I was already working on, on these project that I mentioned, but there was also two ex-colleagues of mine that were working on a startup where I saw a similar pattern to what I had done in terms of mistakes in the past. I reached out and said, "Hey, I'm happy to help out, and if things don't work out maybe we can work together." That's what happened.

We ended up joining forces, and I explained the vision of Hotjar, and we said, "Okay, here's the plan. So we're gonna spend one month, literally, only one month making sure that this is viable. Can this actually work?" Because what we were trying to do is actually build a solution that collects insights from like heatmaps, recordings, funnels, all these things, and feedback in a way that is different. So where other providers back then were collecting data constantly from all pages, all users, all the time. We said, "Let's only collect data when you need it?" Because we knew the way agencies and internal teams worked, that say, "Let's work on the home page, and let's, let's… because we need to focus on the home page next."

Or, the registration page is not working. It's physically impossible for them to optimize every part of the site at one go, so we said, there is an opportunity here for us to do things differently, which means the data will load much faster, which means we can do it at much more an affordable way. This could be a game changer in terms of no one has never taken this functionality for free, to everyone in the world and then charged premium rates for our premium features. What if we took that freemium model and applied it to this industry? It could be a game changer.

We wanted to make sure that that was doable. We were lucky obviously that timing-wise, again, with AWS reducing its pricing, and so many competition, and we spent one month building a really, really bare prototype. Yeah, Eric told us, "This is doable." The costs when we calculated everything… again, it's all about thinking big. We were thinking, "What if we had hundreds of thousands of sites sending us data, how would that work?" We knew it was doable, and that's all we needed to hear.

On the back of that, myself and Jonathan, he's the… my co-founder is more on the UX design side, we basically created very, very quick visuals of what this product would look like. Again, based on what we knew, what was possible, so we're not trying to visualize something that we're not sure is possible or not yet. We knew it was possible. We visualized that, and we put it on the site, so exactly the opposite of that other project. We just put it live on a web page, and we said, "Okay, if you want this at this price, and it's gonna have all of these included in one, right, it's gonna solve a lot of the problems you have. Just put in your email address."

Then when you put in your email address… so remember, I had just seen… I was always inspired a lot by launches of products like how Gmail had launched with five invitations. Robin Hood had done like a . We're like, "We have to definitely leverage this stuff because we knew how to do it." What we did was once you signed up Hotjar would say, "Okay, you're number 100 in the queue. Now, if you wanna move ahead you refer your friends. And by the way, if you're the top 20 you get a free lifetime account. Top 200 you get a t-shirt. Top whatever, you get six months for free."

We threw in a lot of kind of incentives in there. It just took off. It went crazy, literally. So within a few months we hit around 60,000 emails and growing.

Courtland Allen 28m 27s

That's crazy. It's funny that you did exactly the direct opposite of what had plagued you in the past with your earlier products, because I felt the same pull as well.

David Darmanin 28m 36s

Exactly.

Courtland Allen 28m 36s

If you've failed a few times you remember those experiences and you just like make sure to never fail for the same reason ever again. That's really great to hear.

David Darmanin 28m 45s

Great. That's why it's so important just to be doing stuff. Because funnily, looking back, every tiny thing I did, contributed to that plan. I remember even back in the software company where I was, I always wanted to do a beta program, but we never got down to do it. I remember telling the team like, "Okay, we're constantly thinking, how do we launch faster, faster, fastest, so we can move faster? So let's just do a beta." The idea was that what we put on the site was actually, "Get access to the beta program," not to the actual tool, which again, saved us time, which meant within one month we started slowly inviting people in, giving them access and getting feedback.

Then I guess this is where probably we… most people think that genius part was the viral thing, but actually the genius thing was that everyone we invited was listened to carefully, every suggestion we got was written down. If we acted on it we let them know, if we didn't we let them know. We treated them with so much respect that we created this community and initial fans, which we still feel the effect of until today.

Courtland Allen 29m 56s

I think a lot of people hear this advice about how crucial it is to have great customer service, but at the same time it is probably the most often ignored advice. I suspect that's because when you're actually in a situation of having a ton of features to build, a ton of bugs to fix, a ton of fires to put out and sales to make, it's hard to justify spending time to go above and beyond for your customers. It's just like not as clear what the return on your investment is going to be, and so you prioritize other things.

I'd love to hear you dive into a little bit more detail here and talk about how this paid off for you guys at Hotjar.

David Darmanin 30m 29s

Yeah, I was also part of that group, that I didn't get it. I didn't understand the value of that. I read an interesting book actually, it's called Selling The Invisible, which was a great book, by the way. It's positioned itself as modern day marketing, even though it's not that kind of recent anymore, but great book, I highly recommend. Even the title itself tells you everything, which is you are selling the invisible, you are selling bits and bytes on a webpage, coming from the server. When you think about it, what's left as a flavor at the end of that exchange is really how you interact with them.

That is so important, even much more than the actual product itself. Obviously, you don't want to have a shitty product. At the end of the day, what adds nitro to that product is the experience they have around that. So just the small examples that I can give are, for example, we've had customers, big customers, tell us that they've chosen us just because of the way that we've treated them. We've had reviews online, from people saying, "This thing, maybe didn't work, but these guys are awesome and I know they're fixing it."

You'd be surprised at first… I mean, our case, we communicate our product roadmap, we're very transparent. These things do add up and they do contribute to your brand, and they're much, much, much more powerful than you might imagine.

Courtland Allen 31m 53s

That's really interesting, and it makes me curious, how much of what you've learned and the lessons that you've applied, came from your own experiences, and reacting to those? How much of it came from things that you've learned and books and from other people? Can you talk about your viral launch campaign for example, where you got 60,000 email subscribers? A lot of the tactics that you used there like exclusivity, and social proof, and the incentives that you provided, could easily just be read about in a book without really needing much experience. I'm curious what your ratio is overall, because it feels like you're about half and half of learning from books and learning from your own mistakes?

David Darmanin 32m 26s

I was going to say, I think it's 50/50 actually. What's great about that is the two compound on top of each other. The thing is, nowadays, it's kind of we're losing a little bit the most effective way of learning that we've had in humanity for quite a long time, which is, someone has a very successful career, or someone has been doing something for a very long time, and they write a book about everything that they've learned. It doesn't mean you need to copy what they're doing. It's just the ability to look at this shared wisdom, and look back at what someone experienced is truly powerful, in my opinion.

It took me time to realize this. So I think it was just five, six years ago that I started taking my reading seriously. I joined Conversion Rate Experts, which is the consulting gig, and basically I remember going to these meetups we had every quarter with 20, 30 other consultants from all around the world. I was like, "Oh my God, like these guys are talking about things that I had no idea what they're talking about."

I just went around ever, I was like, "Okay, what's your favorite 10 books?" I did it with everyone, and I just took the top 10 in common with everyone and I just read those books, then kept on going through the list. Then those books within them recommend other books, and it's just a never ending thing. Yeah, I think based from what I've seen like if you really want to be a successful entrepreneur, you need to read. It's important, but it's so easy to read crap. Unfortunately, there are so many people that are now just writing books for the sake of doing books, or you write a book, it's build a successful business, you know what I mean. It's this whole thing going on.

I highly recommend, if you are really passionate about what you're doing, reach out to five, 10 people that you truly admire and ask them which books they have read. Or even if you read online, there's a ton of thought leaders that have said which books that they love, and start with those. Start with people you admire.

Courtland Allen 34m 25s

That's really solid advice. I like how your story highlights kind of a third leg in addition to learning from your own experiences and learning from books, which is to, as much as possible, surround yourself with other people who are already, ideally, already good at the thing that you're trying to get good at. Because those are the types of people who are going to recommend the books that you should read, and who are going to suffice all sorts of information and tips and strategies that you'll probably never know about otherwise.

I know personally, I've gotten much better at designing and programming and launching startups, just by talking to people and living in San Francisco where people are always doing this.

A lot of people out there are working in isolation. They're working in a town or a place… I'm sure Malta was pretty similar, where not everybody is on the same page, and they look at you funny when you tell them what you're up to. It's worth at least finding some sort of online community of people that you can join.

David Darmanin 35m 15s

Agreed. As soon as you can afford it, then attend events; super powerful in terms of getting inspired, meeting people, networking, couldn't agree with you more.

Courtland Allen 35m 25s

You had… back to the story of Hotjar, one of the things I think is interesting about how you got started was that before you started Hotjar, you were working with all of these clients that were huge. That's the world that you understood. Yet when you started Hotjar, your entire hypothesis at the beginning was that you want to bring these tools to everybody, and that you want to sell to people who don't have as much money. You want to make the tools affordable as possible, which is really interesting because you didn't necessarily have experience knowing what people at that price range wanted. Is that something you were concerned about at all?

David Darmanin 35m 59s

Kind of, but at the same time, having failed twice, I was kind of at a point where I had no option, I had to succeed.

Courtland Allen 36m 7s

Were you desperate?

David Darmanin 36m 9s

Yeah, I was desperate. Definitely. I was trying to avoid using that word, but that's correct. In fact, pricing-wise, we probably low-balled ourselves a little bit too much, but I'd much rather do that and succeed as opposed to doing the opposite. We definitely probably spent the least time on pricing for example. It's the model which was important. I remember reading… there was an article, what's his name? Trying to remember the name of the guy who wrote it, but anyway, it was an article about the future of enterprise software.

It talked about how in the future enterprise software is going to become more B2C. It was great to read this essay because I suddenly realized… It was one of the founders of Y Combinator actually. I remember reading and saying, "Oh my God, this is exactly what I feel as well. I don't think enterprise software is going to be as it is today." I got a real glimpse of enterprise software because I had consulted enterprise clients, not in our field, but I could see how it worked.

That was interesting, I was helping these enterprise companies grow, and most of their users were telling them their feedback, was, "Oh my God, like why do I have to speak to sales team, and the prices are hidden. And, like I just wanna use the fucking product. I just wanna see how we're ."

Courtland Allen 37m 28s

Exactly.

David Darmanin 37m 29s

These kind of things… in a way, interestingly, the fact that I was consulting these companies gave me a window into how teams were thinking. Then there was also our personal belief of a future where software is no longer gonna be super complicated, expensive, and you have to speak to a sales team. Well, there will always be sales teams, because you have to sell to bigger enterprise, but it's just a different model. We really believed in that, so we said, "Okay, let's build something for teams and let the teams sell to the organization." That was the biggest shift in thinking for the industry that we took. It paid off really well.

Courtland Allen 38m 8s

Yeah, it sounds like it. You guys have grown a crazy amount since the beginning, and your growth started right off the bat. Today about how many websites would you say are using Hotjar?

David Darmanin 38m 19s

We have around 250,000 sites sending us data. We have 16,000 customers.

Courtland Allen 38m 26s

That's huge.

David Darmanin 38m 27s

Yeah. We've grown to €11 million in ARR now.

Courtland Allen 38m 32s

That's crazy.

David Darmanin 38m 33s

We're just over two and half years. Yeah, so it's been… Yeah, we have to pinch ourselves every now and then.

Courtland Allen 38m 39s

I was going to ask, two and a half years ago, if I had told you that this would be the result, would you have believed me?

David Darmanin 38m 43s

No idea. In fact, I say this to my wife every now and then, we still remember being in my parent's apartment in Malta, and logging in to Braintree to see how much MRR was, and it was just €2,000 or €3,000. I always tell my wife, "Who would have told us that things were gonna just spiral so much." Yeah, we definitely considered ourselves to be lucky.

Courtland Allen 39m 11s

What were some of the first things you guys did after you had all these tens of thousands of people sign up for your mailing list? Specifically, what were some of the best decisions you made to help sustain your growth rate and keep it to where it is, up until the present day?

David Darmanin 39m 26s

Yeah. There were two things that we did quite well, and we're thankful for doing them. One is that as soon as we… like one, we communicated a lot with everyone who were waiting like about what the hell is going on. Because obviously, we couldn't invite everyone at one go, that would have killed us. We were five people literally doing all the support for these people and doing updates, some changes, and fixing bugs. This was probably the most intense 10 months of our lives.

Yeah, so we did very well. We communicated constantly, every week I sent out an email to everyone, saying, " Here's what's going on. Here's what's happening. Here's what's happening in the beta. Here is why you're waiting." We addressed… we used Intercom back then, so we addressed all the questions that were coming in. We allowed everyone to just reply to any email, and we'd reply to everyone. Then we started noticing some questions were coming in, so based on the question we'd get, we'd actually eat our own dog food and actually use surveys from Hotjar. It was the first feature that we finished, because it was the easiest.

We'd send out surveys to our beta subscribers waiting for access, asking them for example, we noticed a lot of them were agencies, so like, "Okay, if you're an agency, we'd like you to take this survey." We asked them questions about how they wanted to pay, and how they wanted it to work. We were blown away with the results. Some of the results were the opposite of what we thought. That early feedback helped shaped the way we built the product.

Equally, as soon as someone came into the beta, like after two weeks we sent them a survey. After three months they also received a survey. There was a lot of feedback loops going on, which helped us shape very quickly back then how the product was built. In fact, many a time we say like we wish we ran the beta for another six months.

Courtland Allen 41m 15s

It sounds like you guys are experts at talking to your users and learning from the things they say, which is not surprising because you are building a tool for collecting feedback. Alongside having good customer support, I think talking to your users and learning from them is one of the most challenging and yet common pieces of a startup at first. It's so easy, and I know I've been guilty of this myself numerous times where I know I'm supposed to talk to customers but I'll just look up and it would have been three weeks or a month since I've talked to anybody.

It's really easy to just get behind on that. What are some of the more unintuitive things that you guys learned by talking to your customers, and how did that change your game plan?

David Darmanin 41m 52s

Yeah, and the reality is we've made a mistake as well, so I should be speaking to customers every week, but sometimes it's difficult to do that, especially when the patterns become the same and your challenge is more scaling up the technical side of things. That's been our biggest challenge, like how do we grow the team to keep up with all the things that our customers want us to do. Then you end up having always the same conversations with your customers.

The reality is, that your customers just love to be heard. Now, that's even more important than nearly doing the things that we all want you to do. As in, they go together, as in, just listening to them and explaining, "Hey, like we've been very successful. We're hiring, we're inve-, we're investing." These things do work. There's been quite a few things like especially on the pricing front that have been very revealing speaking to our customers. What I've noticed is when you build a tool and you price it, and in your mind you create this bias of how it should be understood and used. I think the empathy you get from speaking to customers, is you get this, oh shit moments, where it's like, "Oh no. Like that's, that's not like how it works, that's not what we meant it to be." Or, "Actually we already shipped that, like that's already available in the product."

I think it just gives you visibility into how everything in your brain is never going to reach your customers. You always need to be thinking creatively about how you're communicating. The communication piece is so important. How you're passing on that information to your customers.

Courtland Allen 43m 26s

Yeah, it's always been crazy to me how much the curse of knowledge comes into play when you're trying to promote your product. Or even just build your product. Because as someone building something… this happens to me all the time, I'll build something and I would know exactly how it's supposed to work. I know exactly what you're supposed to do. Then I would release it to people and think it's pretty good, and they will stumble over the most basic things. Things that I just didn't even conceive of being possible to misconvey or misconstrue.

This is an equally important challenge at every phase of your business, especially in the early phases when you don't have thousands of customers, you still need to communicate. You have to put up a landing page where ideally customers can come and they can understand what it is that you're building, and why it's valuable to them, and why they should use it. Even if you know the answers to all of these questions, I think it still cannot be overstated how difficult it is to get this idea perfectly from your mind and to your customer's heads.

David Darmanin 44m 18s

I agree. That's why it's a huge advantage to come from a… to build a product to solve a problem that you actually have. So that just makes it so much easier to describe it and to understand how it should be explained to the person using it.

Courtland Allen 44m 34s

Yeah. Your background going into Hotjar is really is like a marketer or growth consultant. I always think it's interesting that there's so many angles from which people ultimately choose to become founders. There are a lot of programmers and product people obviously who think, "Hey, I know how to make stuff, so I can become a founder." And a lot of times I think they end up focusing too much on the code, to the exclusion of everything else.

Then you see a lot of people who come from bigger businesses, who say, "Hey, you know, I've seen the inner workings of how companies work. I can start something." And very often, they're kind of slow moving and not really all that scrappy, and they're not sure how to go from zero to one and do the very beginning stages to get something off the ground.

Then there are a lot of people who come from the direction that you came from, which is as a marketer. It strikes me that that's probably a really good way to come into business, because you understand how to communicate with people. But at the same time, I wonder, are there any disadvantages or any blind spots that you had as a marketer starting a company?

David Darmanin 45m 29s

Definitely. To be honest, the way I see it is that I was always an entrepreneur, but I just became a growth consultant like in the mean time. And that's not good, because the thing is, again, I think I was quite good at doing it, and the problem is that it just switches you on to that mindset. There's nothing worse than an optimizing mindset if you're an entrepreneur. Because, in reality as you said, you need to ship things first and you need to stay scrappy for as long as you can, because the moment you stop to optimize and spend too much time thinking about that, you're just not moving fast enough.

In fact, many people are shocked when I tell them that at Hotjar, in two and a half years, we ran maybe three split tests. That's it. Even for me, it's shocking, but the reality is, now we're going to start doing more of it. The reality is like, when you know what you need to do because you're speaking to your customers, there's just no time to run split tests. You know what I mean? You know what you need to do. That's a good place to be in.

I think many a time the optimizing mindset can be extremely detrimental to change, which sounds ironic. The more obsessed you become with measuring change, sometimes change can become slower. We have a mantra at Hotjar, which is simple, which is, "You need to be slightly ashamed of the thing that you're shipping, because if you're not, then you've probably gone a little bit too far."

Courtland Allen 47m 2s

That's a great mantra.

I love that you point out the limits of optimization and… because, I mean, it's so easy to read stories of how Google is testing 42 different shades of blue, and all these different A/B testing suites. You just think, "My website is so under-optimized, you know, I could be doing so many better things."

But ultimately, those are incremental improvements.

Like you said, if you have these huge things you need to build, if you've been talking to your customers and you know where you need to go, then increasing the conversion rate on your home page by one percentage point is not going to be the most important thing on the top of your list.

David Darmanin 47m 38s

In fact we get asked a lot around why don't we do tests… Sorry, why don't we offer testing within Hotjar, why don't we offer split testing.

The reality is, we explain that actually you need to have a huge amount of traffic to do split testing. Split testing is, by the way, not a tool for the discovery of how it works, it's only a confirmation that all your research and hypothesis is correct. In fact, if you look at the whole web, the majority of sites out there cannot be testing. They should be changing. In a way, that is much more top of mind for us in terms of the tool we deliver.

Then for those companies that do need to test, Hotjar is the ideal complement to that. It's the research tool where you discover what you should be testing.

Courtland Allen 48m 23s

Exactly, I was going to say that. One of the cool things about Hotjar is that it's… just watching people use the website and looking at the heatmaps, it makes me ask questions that I never would have asked before. Is that something that you intended when you first built the product?

David Darmanin 48m 37s

Absolutely. The whole idea of combining the… we call it like analytics, or in-page analytics, or whatever, with feedback is where we're headed towards and we haven't even started yet in terms of where we're going. We think that when you observe, when you empathize, that's what makes you ask the right questions, and vice versa.

When you ask questions and you see answers, understanding what… like if there is one predominant answer or an answer which is very peculiar, being able to see what were the events that led to that answer is extremely powerful. It's what we call connecting the dots.

Courtland Allen 49m 13s

That's really good stuff, and it's just so important, so I'm looking forward to all your new features, and I can't wait to use them when they're out.

I want to go back to talk a little bit about growth, because we talked about how after you launched this beta, you were super communicative with your users and you made sure to let them know exactly what was going on with the beta [and] their place in line. You publicized your product roadmap and talked about the features that you were going to do when you sent out surveys and talked to your customers to try to find out what was working for them and what wasn't.

But I'm curious about some of your more traditional marketing efforts. What channels really worked for you guys to help sustain your crazy growth rate over the last couple of years, and where have you gone to find new customers for Hotjar?

David Darmanin 49m 54s

Yeah, paid is something that we've learned to do really well. We sold software in the pre-smartphone era, that's apps for Windows and stuff. Back then, content was not the most standard route to go. I have a big belief that the key when you launch a business is to really focus, zoom in on one, maximum two channels, and do them really well. You don't want to be doing too many channels at one go, because it's very difficult to master many.

We made a conscious decision that we weren't taking the most long term best approach, but we did what we knew how to do really well. Basically, what we did was we said, "Let's, let's focus on, on growth, because we know how to do that really well," sorry, on paid. We started with social media paid, so essentially leveraging channels where we know we could find the typical teams that we wanted, we knew would be using Hotjar, and we made them aware of the product.

Then later on we moved into Google search, and now we're doing Google display. Then obviously, what helps us a lot in our case is the fact that the product is quite viral in itself. Actually it's not completely viral, so for every one user we get in a paid way, we wouldn't get more than one, but we… because our users love the product so much, we actually see quite a lot of what we call this organic uptake on the back of that. Roughly for let's say every 10 paid signups we have, we easily get another five, six that are organic on the back of that.

Then there's word of mouth, and there's the feedback widgets, which have a link in them. That has been also a big source of growth for us.

Courtland Allen 51m 42s

It's really cool that you're hyper focused on a couple of channels and they're working well for you, but at the same time you're getting this incidental traffic from other channels as well?

We're running low on time here unfortunately, so to wrap things up, what would be your advice for somebody who's just starting out, somebody who is maybe just considering starting their first online business. Or maybe someone who's a little bit further ahead and they're in the idea phases for their very first business, what does somebody in that situation really need to know?

David Darmanin 52m 10s

Be very critical about the idea in terms of its timing and question yourself like, what is my unfair advantage? Because there are just so many people out there trying to probably do what you're trying to do. Today, ideas are not that valuable.

With tech becoming so cheap and speed being so fast to execute, you really need to have an unfair advantage of some sort. It's either that you know exactly where to find thousands of millions of users in a cheap way, or maybe you know how to use this product in a way that others do not know. There needs to be some kind of unfair advantage, so be critical on yourself.

The advice on the back of that, what we talked about before, where there is no clear idea or a clear path, then don't force it. Go work for an amazing boss, I think that's a much better route towards finding that amazing idea to execute on versus trying to force it, which might end up leading you to spend a long time working on what would have been very difficult to be successful with.

Courtland Allen 53m 21s

Yeah, I agree, because no matter how talented you are as a founder. No matter how skilled you are, or what you bring to the table, if you start off with your business aiming completely, 180 degrees in the wrong direction, then you're going to have to spend a long time trying to rectify that mistake, and you're probably going to run out of money and quit before you figure it out. It's worth taking the time to do some good research upfront and build some knowledge, and make sure that you're working on something promising.

Anyway, thanks so much for the advice David, and thanks for coming on the show. Can you let listeners know where they can go to find out more about you personally and about the things you're up to with Hotjar?

David Darmanin 53m 56s

Yes. We write quite a lot about Hotjar on our blog, even though we're still in the… this is the new channel we're moving into, which is content. I've actually been writing about our journey for quite a long time. I've already published two milestones in the Hotjar story, like how we did the beta, then how we went to one million in ARR, and now I'm publishing soon to three million ARR. I think we're sharing pretty much all the details, so I think it's quite valuable, and that's hotjar.com/blog. Everyone can find me on Twitter as well. I'm very happy to answer any questions that you might have, or engage with you or even take a call. It's David Darmanin on Twitter.

Courtland Allen 54m 40s

Thanks so much for coming on the show David.

David Darmanin 54m 42s

Thanks, it's been a pleasure. Thanks for having me.

Courtland Allen 54m 46s

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