SurfEasy provides easy-to-use solutions for protecting customers’ online privacy and security on any smartphone, tablet and computer. We sat down with CEO Chris Houston, who was the fourth employee at Boost and co-founded Amp’d before he started SurfEasy. In this in-depth interview, Chris talks privacy, bringing an idea to market and raising almost half a billion dollars in funding.
For the last fifteen years I’ve been in wireless. My most recent job was in Product Marketing for Virgin Mobile in Canada and before that it I was the co-founder of a couple big MVNOs; one called Boost Mobile in the US and another called Amp’d Mobile which went really big and then really small really quickly.
Across all of those my role has largely been about creating products for a retail environment. We did a lot of interesting things on Boost. We used push to talk, because we were using the Nextel phones. We priced it in such a way that it had a bit of a virality factor. It was a dollar a day for unlimited usage and it really incentivized buyers to get a social circle of people that were all using it because it made it a lot cheaper to talk that way than doing a regular phone conversations.
Then with Amp’d we did a lot. This was pre-iPhone and with the first 3G networks. We were doing streaming video to Motorola flip phones and building clients that did amazing things on that. For me it’s always been about creating products and trying to bring them to a consumer audience. With SurfEasy I was looking for some more privacy solutions myself. At the time I was running product marketing at Virgin and knew how much the IT Department was watching what I was doing and how much information was being left on my computer. In fact, the big moment of realization for me was when I installed Dropbox on my work computer so I could get access to my personal files, and then I was looking through some of the network sink drives and all of a sudden all my personal files were synced to the company Internet. I thought, “Well that’s not what I meant to happen.” That’s where the idea for SurfEasy was created and actually I built a small prototype just for my own personal use. A number of people thought it was interesting and we kept doing small proofs of concept beyond that until we finally decided to give it a real go.
I tried to do it iteratively to get little bits of reinforcement along the way. The first thing I did was set up some pages, ran some ads on Facebook and Google just to see what sort of appetite there was. We saw enough clickthroughs that we thought there was interest, and we could see how the economics could actually work.
I’d left my job at that point. I swing before the rope is there; it’s a character flaw I guess. After that I talked to some different people that were in related businesses; Jeff Brunet who is the founder and CTO of a company called Clickfree. We were able to get some advice on manufacturing costs, on distribution channels and a bunch of other things. It was very helpful. We just kept getting more proof points. Ultimately we started working on a more formal proof of concept, hired on our co-founder and CTO Athir, and got the product far enough out. Then we filed a couple of patents so we were comfortable talking about it publicly and did the Kickstarter project. At the time Kickstarter was a lot smaller than it is now. We raised about $70,000, but it was one of the top ten tech projects at the time. Then the Pebble watch came and just blew that whole thing up. I was so happy until that happened.
After that we just took little iterative steps and then finally launched it at CES two years ago. We had a lot of interest, good sales, a lot of press pickup and now it’s at Target, Best Buy and Staples.
We did our first seed round with Mantella before Kickstarter. It was a small round, but it was enough to get a couple of people in here and start working on patents and a couple of other things we wanted to accomplish. Kickstarter helped validate that there was an interest; before then we had internally validated that and then on the back of the Kickstarter we went to IAF and started doing a little bit larger fundraising rounds led by Mantella and some new investors.
A lot of prep work went into Kickstarter. We really wanted for it to go well, as with every launch. I spent a lot of time looking at successful Kickstarter projects, what made them successful. What we found when we started researching to see what the success factors were for companies that had done well with it, it seemed like velocity out of the gate was really important. If you made it on the front page, and you were able to stay on that front page, then there is a certain amount of inertia that came with it. We had a few hundred people that had signed up to find out information about the product. We basically spammed every single person we knew and said, “Here’s the day, here’s a calendar reminder. Even if you only do one dollar, just give us something so we can get some velocity going.” And we stayed on the front page of Kickstarter pretty much through the entire campaign. There was a blog post at the time that said if you looked at the graph of average revenue by day of a Kickstarter campaign that it’s a big U-shape. You do 80% in the first week and the last week, and the rest in the middle is no man’s land. Ours was completely different; it was almost flat the entire length. So that campaign worked well for us. We spent a lot of time on supporting assets for it and the videos were really important too.
“If you ask somebody in a room if they'd be interested in this product they'll say yes. But you tell them, “Great, give me your credit card I've got five in my trunk.” and they become quiet.”
I think we’re still figuring it out. Web has done well in ebbs and flows. When we get PR it’s great, but we haven’t found a real repeatable online acquisition model, at least not for the Private Browser product. Our new VPN solution is doing very well online and in mobile. Another channel that we do a lot is TV shopping, and we’ve found that to be very successful for us. Home Shopping Network, QVC UK and QVC US all run our product on a fairly regular basis and they can do very substantial volumes. It’s a nice channel because you get the opportunity to just stand up there and tell somebody about the product. You get ten minutes to say, “Here’s what it does, and here’s the problem it solves.” Since the success with that we’ve also expanded into retail, and retail is a mixed bag. There are some channels where they are really good at promoting new products and helping with discovery and there are other channels where it sits on the shelf and that’s it. If you look at the retail channels we’ve got some that do very well with our products and some that we need to figure out what needs to be done better for the audience.
Everybody I know is doing a SaaS service or things like that, so for them it’s a totally different acquisition channel. The other thing is that with a physical product, it’s hard to do that freemium acquisition approach. How do you give somebody something that costs you X dollars to make and say, “Here, try it for free; if you like it pay me.” You really have to get a lot of trust from that consumer before the purchase. I think from comparing it with that SaaS approach, totally night and day. Now we’ve jumped into that world over the last few weeks, after we launched our solutions for mobile and laptop or VPN products, which basically encrypts all of the data in and out of your devices. Thankfully the NSA did some premarketing for us, and it’s really helped.
Now that we’re in the SaaS business we’ve been able to leverage more of that trial, premium, viral type of thing where you get a certain amount of data for free and refer some friends and get more. That’s been working very well for us. Now that we’re doing that for the VPN product, and actually drawing more people to our site, onsite sales of the browser have been increased as well. I think it’s just a factor of getting more eyeballs and more discovery.
Press for us is big. We did a lot of content marketing as well, but our audience is small. And again, because we’ve traditionally sold our product primarily through third parties, we don’t have a huge base of people coming to our website to really start messaging them. We got some good coverage in Canada; we have some good press relationships here, we were in Canadian Business and a bunch of other places. We also had a little bit here and there in the U.S., but it was a busy news cycle and it was tough to squeeze ourselves in.
It all depends; there are so many variables on it. For the most part the TV shopping audience is largely female, a little bit older, but very high household income. They’re sitting there with their credit card and their phone just waiting to find something they want to buy. That doesn’t mean that everything that goes on TV does well; a lot of the stuff doesn’t do well. You have to be very authentic; you have to have a high-quality product, because if you get a lot of returns or bad customer reviews, then you’re done.
I can say from our experience that you can do very high volumes. QVC in the U.S. is the most profitable TV channel; they make more money than NBC, Universal, all of them. They do around $8 billion a year in product sales. If they get behind a product they can make the company overnight. The Holy Grail for TV shopping is the TSV, the Today’s Special Value. Some products fit well for that; some products don’t. But if you can get one of those shows you can do amazing volume.
“Thankfully the NSA did some premarketing for us, and it's really helped.”
In the electronics space, QVC customers are not early adopters of technology, so your product has to be very usable and it has to solve a problem that they’re actually worried about. If you came up with a solution for better synchronization of your ten different devices in a Linux environment, they’re probably not going to buy. But with our product because we’re addressing some pretty big fear factors in a demographic, “Who can see what I’m doing when I’m online? Does the website know my physical address? Is this Wi-Fi hotspot safe?” there’s definitely a bit of a fear sale going on there. I prefer to call it an educational sale. Our product is easy to use; you plug it in and that’s kind of it. We found a niche where we’re solving a problem that a lot of people in that demographic are concerned about but have zero idea on how to actually solve it.
I lived in California for awhile, started both Boost and Amp’d down there, and my wife is from California too. Actually we were starting this company in the winter, so it was a very active discussion of whether or not to stay here or go there. There were a couple advantages to being here; number one, there are some great government supports financially for startups. And because we were doing some innovative stuff we were able to take advantage of a lot of that whether it was SR&ED or IRAP or MaRS, and the IAF investment. That really helped. Also, it’s a competitive environment in the valley and anywhere in California for talent resources. In a lot of ways it’s easier to build a team here. Although it’s not as easy anymore; there’s a lot more competition.
Boost did very well. When I joined the company I was employee number three or four, and it was a small startup that had come in from Australia and done an MVNO partnership with Nextel. We initially launched that in California and we grew it across the U.S. It was interesting from a startup standpoint because it was basically a joint venture with our largest supplier who was also our largest investor. That came with a lot of weirdness in the relationship, but overall, it did very well and we had a successful exit at the end too.
Amp’d was a bit of a different story. Some of the things that we liked and didn’t like about the environment Boost we “corrected” and it ends up that we screwed some things up. But the idea behind Amp’d was that Verizon had just applied their first high speed 3G network, and everybody was getting excited about the capabilities of what you could do on that. We all saw the future of mobile media, but weren’t quite sure how it was going to shape up. Our bet was that we were going to create an MVNO, which is basically a carrier on top of a carrier — you don’t buy the cell sites; you just rent the minutes. We raised a huge amount of money, about half a billion dollars by the end of it. We had launched into three different countries. We were in Japan, Canada, and the U.S. There were certain things that were going well for us, like our data ARPU at the time was five times the industry average. But we were also growing very rapidly in customer acquisition, and we were doing a postpaid wireless model, which meant that we lost a boatload of cash every time we brought on a subscriber and you’d theoretically make it back over the life of that customer.
We were just shoveling cash into the fire at the end of it. It’s a very expensive business model, especially when you’re trying to venture fund it. Then at the same time we were targeting a demographic that wasn’t particularly quick to pay their bills, so that cash conversion cycle really started to stretch, and it was a big burden and challenge for the organization. To put it in perspective, even though we’d raised and spent a lot of money during the business, what we raised during the five years that the company was in operation, it was about what Verizon would spend in quarter on a marketing budget. So there were a lot of warnings with that one.
“It's easy to chase shiny objects, and it's hard to stay focused on things.”
I think privacy is going to be massive. We’ve hit the tipping point in that over the last couple months. When we first started the company there was always a question, “Does anybody care?” Last year at the Grow Conference I did the startup smackdown. Some guy said, “Nobody cares about privacy.” And I think now that has totally changed. In the last couple of months that has gone from nobody caring about it to it being on the cover of every major newspaper. It spilled over to people asking questions about privacy policies in big companies, not just government, but also in a big data and who’s tracking you online. Mozilla is coming out with a strong stance on stopping ad tracking. It’s hit the mainstream. I think as I look at this company, our biggest challenge is how do we get ourselves to be part of that conversation; that solution set. There are a lot of companies that are going to start pivoting into that space with much bigger marketing budgets to get the word out. Now that we’re into a little bit more of a SaaS solution with the VPN we get to leverage a lot of things that allow small companies to get big very quickly. I’m excited about that, because it’s challenging with a hardware product. It’s hard to get that scale of growth, that virality, and also the revenue component without a SaaS solution.
It’s all so situational; it depends on the thing I’m trying to solve. I’ve been given a lot of good advice; some of it I’ve listened to and some of it I didn’t. Focus versus ambition, I think is one of them. It’s easy to chase shiny objects, and it’s hard to stay focused on things. It’s funny, we’re all very excited about the idea of fast pivoting, but how do you know that you need to pivot; and how do you know when you need to hunker down and actually bull-nose through this thing?
What’s your current state of mind?
Very energized and optimistic.
When and where were you happiest?
Hanging out with my son Lennox — it's so fun to watch him discover new things.
What is your idea of misery?
Recurring committee meetings.
What do you consider your greatest achievement?
Hasn’t happened yet.
What is your greatest extravagance?
I once had a Cadillac Escalade with 24 inch rims... that was ridiculous.
Which talent would you most like to have?
Speak a couple languages really well.
What’s your favourite quote?
"If it were easy, everyone would do it."
What's the best advice you've been given?
Focus versus ambition
What is your biggest challenge as a company?
How do we get ourselves to be part of the privacy conversation; that solution set?
Where will your industry be in five years?
Privacy is going to be massive. We've hit the tipping point in that over the last couple months.
With Amp’d I think that we didn’t do “focus versus ambition” and expanded way too quickly. We got very excited about what we were building, and a lot of people were very excited about what we were building as well. Before we had everything really hunkered down in the U.S. we were already in two other countries. That’s a lot of breadth for an organization to cover. I even remember at one point we were doing pitches on an airline brand. I didn’t listen to that advice before we did some stupid things and just tried to do too much and get too big too quickly. It’s easy in the startup space, for everybody to look at the seemingly overnight successes, and get down on yourself why your company that’s been at it for a couple of years isn’t there yet. The reality is that if you look into the coverage of nearly all of those companies they’re not overnight successes, and the ones that are are just one in a million.
The whole startup industry in general, we get very excited about a very narrow slice of what a new company is — this idea of a startup. If somebody decided to start up a paving stone company you wouldn’t call them a startup. But they’re going through starting a company and they’re doing the same things. Arguably those companies are much more focused on fundamental business metrics as opposed to the things that we all get excited about. Thinking about fundamentals of the business is how we could have fixed that.
What question would you pose to our next interviewee?
What's your best advice on how to get the word out about a product on a relatively low budget?