Posted on: 09/20/2016

Patrick Sullivan of 2600hz - Bootstrapping to Startup Success

Patrick Sullivan

Co-Founder and COO - 2600hz


Podcast Summary

Patrick Sullivan is the Co-Founder & COO of 2600hz. Patrick shares his thoughts on bootstrapping to startup success. 2600hz is a cloud telecom company gives developers and businesses access to cloud telecom services. At Kruze Consulting, we use 2600hz and we love it.

Podcast Transcript

Scott Orn:

Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. And today’s special guest is Patrick Sullivan of 2600Hz. Welcome Patrick!

Patrick Sullivan:

Scott Orn:

Hey Scott. It’s an honor to have you. We’ve been friends for I’d say 20 years. Something like 20 years.

Patrick Sullivan:

God. It’s funny how the time flies and it’s funny how before our hair kind of just disappears at the same time.

Scott Orn:

We’re staring at each other. We’re both very handsome, bald people here. So I hope the audience can visualize that. So Patrick’s the CEO of 2600Hz which is a telecom startup and there’s a lot to talk about here. It’s a fantastic service. We’re actually using the service. We really love it. But Patrick, maybe give kind of just the high level of what 26o0Hz does.

Patrick Sullivan:

Absolutely. So we build telecommunication infrastructure for business communications and what that means is, we really focus on building a platform that is not just a phone but it’s actually an integration of your phone and any type of dynamic call handling or routing you can do. So imagine, it’s almost like a RingCentral meets a Twilio. A nice beautiful bundle.

Scott Orn:

It’s like a phone system in software. Like there’s no wires. There’s nothing. I literally went through the setup the other day and it’s like, “Provision this phone. Click 2. Forward this.” It’s all through software. It’s all through the web. It’s pretty amazing.

Patrick Sullivan:

Thanks Scott. I would put you up on our testimonial on the website. But I agree.

Scott Orn:

So how did you get into this? You started this company five or six years ago? Like what was the path to starting the company?

Patrick Sullivan:

So the path was actually pretty interesting. I was at a bar and I was having some cocktails.

Scott Orn:

That’s how all good stories start. [02:00]

Patrick Sullivan:

And next thing you know, one of my buddies comes to me and says, “Hey, I heard you’re pretty good at business.” I’m like, “I don’t even know what that means.” And he’s like, “Well, I have this great idea on how we’re going to disrupt this major industry. I need someone who will handle the business side and I will handle the technical side.” And I had a couple more cocktails and finally right at this point, I wasn’t super excited on my current job just because I was working about five hours a week and learning nothing and every day I felt like I was dumber than the day before.

Scott Orn:

To interject that, you’re working five hours a week because you’re like the greatest salesperson of all time and so you basically are managing this huge sales team and kicking ass.

Patrick Sullivan:

I would describe it as more of I had amazing people who work for me and so they did all the work and I just look pretty. So yeah. And the joke of the time was I told my friends, I’m like, literally I’m dumber today than I was yesterday. And then tomorrow I’ll be dumber than I am today so I probably should do something important because literally my brain is just turning off every day. And so after a couple more cocktails, he’s like, “Hey, this is going to be awesome. We’re going to disrupt this major industry.” And the funny thing is, I didn’t ask him what the industry it was. I was like, “You know, why not? Let’s do this.” And for some reason I felt a little cocky. And this is probably after a couple of oldfashions and I’m like thinking to myself, I’m like, “You know what, I’ve never really failed in anything so might as well try something.” So the next day, I wake up and I get a text message from him. He’s like, “I’m super excited that we're starting this business together.” So I texted him back. I’m like, “I thought that was a joke.” So we meet for lunch. I’m like, “Okay, what are we disrupting?” He’s like, “Telecommunications.” And I was like, “Oh my God. That is the boringest thing I’ve ever heard of.” He’s like, “That’s the beauty of it.” He’s like, “Everybody’s trying to disrupt social and everybody’s trying to do something exciting. But telecom, like literally there hasn’t been anything really cool besides the iPhone and things like that but anything behind the scenes, like since voicemail.” He’s like, “It really from a business communication perspective hasn’t done anything cool and exciting forever.” [04:00] And so his whole idea was, this is kind of at the beginning of the whole Cloud revolution and his whole idea was like, let’s take all the really cool things that Google did which is it distribute network with servers so that if you actually build a cluster of servers together and then put it in multiple data centers, the system will always be up and running. Even if data centers go down. And in telecom, traditionally, they only would put a single server onsite or they put a single server in the so-called Cloud and you still have a single point of failure. So the system would never always be up and running. And looking back on that, it was actually pretty genius at the time just because this was really early on the Cloud days and no one was doing this. And so it’s funny over the last 6 ½ years, that’s all we’ve been focused on is how do you make a completely distributed system that has no single points of failure and that you can actually, it’s almost like Skynet where it can actually self-heal itself and add servers to the cluster. And the cool thing is that we accomplished it and we thought … the other cool thing is, we actually open-sourced the core of it which we’re like, “Hey, we’ll give it to the world and everybody can play with it.” The funny part about that is, we thought people would be like, shouting our names from rooftops and saying, “Wow you guys have changed the world.” It turns out at the time when we finally launched it, no one really cared.

Scott Orn:

Why is that?

Patrick Sullivan:

Well two reasons. We built the whole system based on API. So we thought, everybody would want to make their own interface. And we thought people would want to make, if you’re an accounting firm, you’d make your own interface for other accounting firms and stuff like. If you only dealt with hospitals, you’d make your interface basically just for hospitals. So they don’t have to deal with anything that they didn’t need. It turns out people don’t like to do that either.

Scott Orn:

It’s too much work? [06:00]

Patrick Sullivan:

Exactly and it’s more of like, “Okay, well, I see the power of a distributed system but I like to click on things.” So we made a demo interface. This was about 3 years ago. And the funny part was, people started to come in droves and people were like, “Wow, this is really cool.” What we’re trying to explain to them, we’re like, “This is just a demo interface. People will actually sort of see the real power of the system.” And it got really interesting around that time because then some of the bigger companies were coming in. They’re like, “Hey we’ve been playing around with your demo interface on the open source solution. We really want to start partnering with you closer and closer.”

Scott Orn:

Were those like resellers or were those like big telecom or were they enterprise customers or what was it?

Patrick Sullivan:

Well, it’s interesting. From a business standpoint, we really focused on resellers at the beginning. Because we knew they’re kind of the lowest hanging fruit. What we really aim for was like mainly service providers. People who provide IT services for different companies. And these resellers, it was easy because we gave them a white label solution so it could be like Billy Bob’s reseller and then now he’s Billy Bob’s Phone System. And he would go in and deploy this phone system into all of his customers and what’s great for him is it made him extremely sticky. Like they all couldn’t say, “Hey, we want to get rid of Billy Bob because we have his phone system and we have no idea how we’re going to replace this thing.” It just works all the time. And so the resellers was amazing for us. But then what’s interesting, when we started this company, we never really thought about focusing on the resellers. We were thinking about the big guys like the Verizon’s of the world. The AT&T;’s. The Apple’s of the world. Things like that. And slowly but surely, we started to go upmarket and I think one of the key pieces here was because we had an open source solution, a lot of the big guys, their engineers would find us and they started to point it on site and then also someone would say, “Hey, I think we should have a giant Cisco system in.” Someone’s like, “Well, clearly within 10 minutes I deployed this whole system, it actually does much more than what Cisco could do.”

Scott Orn:

That’s amazing. It’s kind of like the GitHub or some of the other tool companies.

Patrick Sullivan:

Exactly. I hate that this is on a podcast. My old joke was, were are the drug dealers of telecom because the first one is free. Get hooked on the core and then also when they come in and they’ll be like, “Wow, we need support contracts now.” Great. Fantastic. We have support contracts. And now we’re actually at a point of the evolution of the company which is we call ourselves an open core which means the core will always be open source. [08:00]

Scott Orn:

Which is cool. That’s a huge societal benefit. It’s awesome that you guys do that.

Patrick Sullivan:

Well and especially when you think about like, how complex the core can be because it’s a distributed system that you can nearly deploy around the world, it’s all integrated together. Now, the core’s always open source but now, what we’re doing is we’re coming out with an app source so that people can turn on and turn off apps. And so it’s kind of going along with the developer community where they can now build their apps. So like we have this one guy. He’s building an app for ambulances. And so what they can do in ambulances, they can put an iPad in the ambulance and then whenever they pick up a victim, it streams back the video to the ER so they can set the ER up before the ambulance gets there. And all he did was connect to a couple of different API’s and it’s up and running. He built that like in a day.

Scott Orn:

So that future that you saw like five years ago is actually starting to happen now? You just have to basically see the market a little bit?

Patrick Sullivan:

And Scott, as you know, in business, I think personal timeline, you’re thinking, “Wow, we can crank this out in a year.” And then 6 ½ years later, you’re like, “Okay it’s finally starting to happen.”

Scott Orn:

I think that’s how all good business are. It’s the overnight success that took 10 years to get to. I mean people don’t know this because they just find us but people don’t know Vanessa started Kruze Consulting four years ago. It’s like, it takes a long time to build these things.

Patrick Sullivan:

And I think it was like, Reed Hoffman was talking about LinkedIn which is also in 2007 everyone was like, “Oh my God where did LinkedIn come from?” And Reed Hoffman was like, “We’ve been around since ’98 and everyone just ignored us until all of a sudden one day you weren’t ignoring us.” And so I think that’s kind of where we’re at because we’re finally at the place where the big companies are now coming to us. And they’re like, “Hey we’ve deployed your stuff for the last six months. We’ve been testing it and now we want to move on to the next evolution.”

Scott Orn:

That’s huge. That’s amazing. [10:00]

Patrick Sullivan:

Yeah it’s exciting. It’s absolutely exciting. It’s also funny because and Scott, I think you and I briefly chatted about this which is, when we first started the company, we were like all young little entrepreneurs. Not really knowing what we’re doing. We still don’t really know what we’re doing. But when we started the company, we went to a bunch of investors and we were like, “Hey, Mr., Mrs. Angel Investor or Mr. and Mrs. VC, we’re trying to change telecommunications blah-blah-blah-blah-blah.” And the common response was, “You guys should build an app.” And we’re like, “You’re missing the point. We’re building a platform. We’re building this whole thing.”

Scott Orn:

We’re building the plumbing for all the apps.

Patrick Sullivan:

And it’s funny. It’s like if you guys ever watched Silicon Valley, that was our life at that point where the VC’s are like, “No. Just build an app. Apps are cool. That’s what people want.” And then what’s entertaining was a company by the name of Twilio started to get some real market share and they were spending a ton of money in marketing which is fantastic because they were kind of educating the public on what a developer API is for telecom and next thing you know, all these VC’s start to call us. And they were like, “Hey, we talked to you guys about building an app. You didn’t do that. But now …”

Scott Orn:

But you’re smart not to do it.

Patrick Sullivan:

Yeah. Well, they’re like, “Now, we think you should just only focus on what Twilio’s doing. Just build a couple of simple API’s and that should be your end goal.” And we’re like, “Why would we want to compete with Twilio? They just raised like $100 million and they’re about to raise another $100 million and they’re going to out-market us on everything. We would rather compete on the bigger picture which is how do you have an actual business phone system and all these API calls you can interconnect with where right now, Twilio can’t even connect a business phone system to their service. All they have is a couple of just basic API’s.” And so, we couldn’t convince the VC’s that that was the right solution. So we selffunded it.

Scott Orn:

I was going to ask you, how much venture capital have you taken?

Patrick Sullivan:

Scott Orn:

To date, zero dollars. That’s really really amazing. [12:00]

Patrick Sullivan:

We’ve taken zero angel dollars. It’s completely employee-owned. The entire company’s 100% employee-owned and it’s been a wild ride. My old joke is if I had hair, it’d be gone now. But it’s funny because we get a lot of people that come to me and they’re like, how did you guys do it?

Scott Orn:

Yeah. How did you guys do it? I mean we’re 100% bootstrapped too and I know how we did it and it’s through working crazy hours and saving money and not paying ourselves very much and all these kind of things. It’s brutal.

Patrick Sullivan:

Yeah.

Scott Orn:

It’s really hard. But you get to the point where we are now and where you are and it’s like, Holy Cow. This is like the gift I gave myself over a five-year period. It’s amazing.

Patrick Sullivan:

Yeah well, and we’re pretty similar to you guys. When we first started out, I took a step back and I’m like, “Okay, what do we have right now?” It’s just me and my co-founder. This guy Darren Schreiber and he’s pretty well-known in the telecom open source community. And so I took a step back and I’m like, “We don’t really have any software because we’re building right now. We don’t have a product. So I can’t sell that.”

Scott Orn:

There’s not a lot there.

Patrick Sullivan:

Yeah. I can’t get resellers yet because we have nothing to resell. I’m like, I had one person. I had this brilliant engineer in mind who is a real visionary where the industry’s going. I was like, I can sell that.

Scott Orn:

And you had the sales and marketing background. Like you’re really good at this stuff.

Patrick Sullivan:

Well, I wouldn’t say I was really good. I think I was just really scrappy which is slightly different. Scrappy is like, when you’re against the wall, you have no other options. So you’re like, either the fun is over and I quit this high paying job and easy cush job and easy life to like this hard life and it’s about to be … the music is almost over. [14:00] So it was entertaining because we started to give a couple of speeches at different conferences about where we see the industry and out of the blue, we got a phone call from a supposedly major carrier. They might be called Deutsche Telekom in other places. I cannot confirm where the night is. But they called us and they were like, “Hey we want to talk to you. We heard one of your speeches.” And the funny thing is, at the time, we’re working out at Darren’s apartment in the Haight and they’re like, “We’ll come to your office and we want to meet with you.” And we’re like, “First of all, we don’t believe that you guys are really Deutsche Telekom.

Scott Orn:

This is a crank call, right?

Patrick Sullivan:

Yeah because we get this all the time. We get people who are like, “Hey we heard you guys talk. We have no money but we have some good ideas. Let’s work together.” And we’re like, “We don’t need good ideas. We have plenty of good ideas. We need money.” And so they’re like, “We want to come to your office.” We had no office so and this was before the workspace era. So there was literally nowhere to go. So we told them, we’re like, “Okay, there’s a nice little coffee shop. It’s called Squat and Gobble and if you guys are in the Haight area, that’s a great place to eat lunch.” They’re like, “Eleven o’clock.” We’re like, “That’s when we’re at Squat and Gobble. That’s our offsite meeting when we try to get away from all the employees and stuff.” And they’re like, “Okay. We’ll meet you there.”

Scott Orn:

That is really good.

Patrick Sullivan:

What got crazy is that they called us back. They’re like, “Hey, we have to change it to two o’clock because we’re running late.” And we’re like, “What a coincidence. That’s our second offsite meeting at Squat and Gobble.”

Scott Orn:

Twice today we meet at Squat and Gobble.

Patrick Sullivan:

So we’re sitting at Squat and Gobble and if you’ve ever been to Haight, there’s a bunch of panhandlers and it’s a different type of crowd and all of a sudden we see two guys in full suits, three-piece suits. They’re very …

Scott Orn:

They’re European Telekom executives. Yeah.

Patrick Sullivan:

They’re very tall. They’re very like, just looking around like where are we? And we’re sitting there and I’m sitting there with a baseball cap on. My cofounder has like a t-shirt and some shorts and some sandals on. And they sit down and they look at us and I think they could not want to get out of there fast enough. But they looked at us and they were like, “Okay, how about this? You guys bring your team down to our office. We’re in Menlo Park and we want to talk to you guys and if everything works out, we have a really big project coming out and we would love for you guys to be the consulting arm.” And I’m like, “That sounds fantastic.” And they’re like, “Be there on Monday of next week.” I’m like, “Fantastic.” They leave and all of a sudden I look at Darren and he’s like, “You know we have no team.” So I looked to him and I was like, “We don’t have a team yet.” So we literally called a bunch of our friends and family and we were like, “Hey we just need you to come down with us.”

Scott Orn:

Wow you did that. That’s amazing. [16:00]

Patrick Sullivan:

“Stand there. Bring your laptops. You can look at Facebook but if they ask you a question, do not answer it. Just pretend like you don’t speak the language and whatever. They’re not going to ask you any questions.”

Scott Orn:

Look physically at me and I will answer the question.

Patrick Sullivan:

Absolutely. So we did the horse and pony show. We brought in about six other people. We sat down at this table. We’re kind of going over everything. Darren was phenomenal. He’s talking about the vision of telecommunications and where it’s going and how DEP phones, they’ll always be around but they’re going to be used less and communications are going to be in every device and everything’s going to be tightly integrated, loosely coupled. And it was amazing. And then they were talking to me about the business and then they’ve looked at they’re like, “Does any of your other engineers want to talk?” I’m like, “No. They don’t really talk. They get nervous.” And so they just sat there and I swear to God, they’re still all playing on Facebook for like an hour. And so the guy pulls me into the other room. He was like, “Hey, we’re ready. Let’s sign a contract right now.”

Scott Orn:

That’s amazing.

Patrick Sullivan:

Yeah. Well, then it got weird because they came in and they’re like, “What’s your general terms?” Well the thing is, I’ve never put together a contract like this. So I’m literally texting one of my buddies who’s done these contracts under the table and I’m like, “Hey, how much do you usually charge for consulting?” He’s like, “$225 an hour.” I’m like, “Okay.” So I looked at this guy straight in the face and I was like, “Okay. We’re obviously going to have to negotiate down to $225 so I got to start at $300. So $300. I won’t take a penny less.” And the guy’s like, “Done.”

Scott Orn:

That’s amazing.

Patrick Sullivan:

Scott Orn:

I’m like, “Chi-ching!” So did you basically fund the company for the first couple of years off of the consulting deals?

Patrick Sullivan:

That’s how we funded the company. And so then we literally and the good thing is, because we were so tightly integrated with the open source community, we knew who the really good engineers were and then we called them up. We’re like, “Hey guys. A company like Deutsche Telekom, I cannot confirm or deny, may or may not sign a massive consulting contract with us and now we actually have to have people to have consulting for them.” So that’s how it all started. That’s pretty much what funded the company. Just to get our product off the ground.

Scott Orn:

That’s super scrappy though. That’s amazing. [18:00]

Patrick Sullivan:

Super super dooper scrappy. And I hope these guys supposedly from Deutsche Telekom are not listening to this podcast. If they are, they’re super happy with us because we killed it for the consulting fees.

Scott Orn:

What did you build for them? You basically built your product for them?

Patrick Sullivan:

Well, they wanted to build a very simple switch and they’re looking to eventually come into the US market. I think eventually and they had some weird regulations. I think they eventually moved the project into Germany. It launched there and I think they might have scrapped it after a couple of years but from our point of view, we literally had at that point now we had two jobs. We had to do the consulting during the day and at night, the engineers come back to our office and we just start cranking out codes until like two in the morning.

Scott Orn:

That’s amazing. Talk about motivating too. It’s like they can see the future and they can see that people want those stuff and so it’s like … I always find it like when you know there’s demand, it’s way easier to build something.

Patrick Sullivan:

Scott Orn:

Oh absolutely. You’re just so driven.

Patrick Sullivan:

Well, and that’s the thing. I talk to a lot of entrepreneurs all the time and I think one of their biggest problems is they believe in themselves to a certain point and then they stop believing in themselves or they stop believing in the market.

Scott Orn:

It’s like ‘The Dip’. Seth Godin’s ‘Dip’. Yeah.

Patrick Sullivan:

And the problem is, a lot of times you just literally have to fight through that and just be like, okay, trust me. This is going to work out. Something’s going to work out. We are working way too hard for there’s nothing to ever work out.

Scott Orn:

Yeah.

Patrick Sullivan:

And I know that people will hear about the bad stories of it. It doesn’t work out. And yet that could happen but you hear more than not about companies that if they just hang on or they barely hang on for like the last two minutes and then it finally just took off. [20:00]

Scott Orn:

I see this all the time. One of the reasons like in every presentation we give, we’re always talking about extending your runway, be smart with cash, be conservative, give yourself three to six extra months because it always takes longer than you think. It’s heartbreaking to say but I’ve seen a lot of companies that finally get product market fit with like two months left of cash and they don’t have enough proof to raise more money and it’s a total heartbreaker.

Patrick Sullivan:

That’s the tricky part of when you’re raising money. And then you have to play the game which is, “Hey I need to hit these expectations by this date otherwise the game is over.”

Scott Orn:

Yeah.

Patrick Sullivan:

We were in a funny situation because we had recurring revenue but we didn’t have a lot of recurring revenue from this consulting project. And we were also really aggressive because we wanted to hire some really great engineers and stuff. So we got in this weird situation where my run … well, take a step back. A good friend of mine, she started a company around the same time. And they were killing it. Absolutely killing it. But she’s dealing with the VC’s and after the first round, she’s gaining her second round and they tried to play hardball and they’re like, “We’re just going to delay the funding of this until you give us all the Terms and Conditions.”

Scott Orn:

Total normal tactic for a VC.

Patrick Sullivan:

So her and I, we grabbed dinner. We’re talking and she literally just starts crying in front me. And I’m like, “Why are you crying?” She’s like, “The stress is killing me.” And she’s like, “We’re literally going out of business and these VC’s can save us but they’re not willing to do it until we give them all the Terms.” I’m like, “Well, okay. What’s your runway?” She’s like, “Literally we’ll be out of cash in eight months.” I had a drink in my mouth and I spit it out. I started laughing. I’m like, “Do you know what my runway is?” She’s like, “What?” I’m like, “15 days. Every 15 days I have to figure out enough money to pay payroll.”

Scott Orn:

Payroll. Yeah. Yeah. Yeah.

Patrick Sullivan:

I’m like, “Eight months, I’d kill for an eight-month runway. You have plenty of time. Don’t worry about it. Just focus on your business and trust me, even if you get the numbers in order, that’s better than just begging these VC’s who like try to get …”

Scott Orn:

Eight months is plenty of time.

Patrick Sullivan:

Scott Orn:

Yeah. But everything’s a perspective. Yeah it’s perspective, right? You became comfortable with that shorter timeframe. I’m sure it was very stressful.

Patrick Sullivan:

Well, it changes your mindset on what stress is. And you can’t take the stress anymore. You just have to take a step back and look at the bigger picture.

Scott Orn:

This is the reality. This where I live in. [22:00]

Patrick Sullivan:

One of my friends pointed out that she’s like, “Before I go to bed every night, I imagine tomorrow is my last day and I’m literally dying and tomorrow is my last day.” And she’s like, “All of a sudden, all the stress just disappear.” It’s because you’re like, “This person just signed a contract. Who cares? Tomorrow’s my last day.

Scott Orn:

Yeah.

Patrick Sullivan:

And so I didn’t do anything like that extreme but you take it, you’ll go crazy if you let the job stress you out like that. So you have to figure out what works best for you and stuff.

Scott Orn:

I’ve learned that the hard way too but now it’s way easier now. What are some … just a couple of tips for bootstrapping? I mean that’s an amazing story. Using the consulting revenue to fund the product development. What other little things did you do? Did you co-share office space? What other little things helped you extend your runway?

Patrick Sullivan:

Well, I think the key is don’t listen to the hype. So people will tell you like, “Hey, a strong engineer in Silicon Valley costs $150,000 or $200,000.” Or if they’re at Google it’s like, now they’re all making like $400,000. And so what we learned really quickly which is I can’t hire people in Silicon Valley. So what I did was, I started to put Craig’s List posting all over the country and then I find someone really good. We vet them out. We talk to them. We have them submit some code. And then we literally would move them from like Tennessee or Kentucky or wherever and it was just a lot cheaper to move them from where they are to Silicon Valley.

Scott Orn:

Yeah. But they’ve also a huge value to opening them up for that opportunity.

Patrick Sullivan:

Scott Orn:

And they’re working on something they really like.

Patrick Sullivan:

Scott Orn:

Oh absolutely. That’s the thing. That’s what people forget.

Patrick Sullivan:

A lot of times, people were like, “I’m just going to sell the product and the value of working on this company based on your salary.” And to me it’s like, we never had that option.

Scott Orn:

Can’t agree more. Sorry. I’m going to stop myself.

Patrick Sullivan:

Alright Scott Orn. So if you want to make a lot of money, come work at Kruze Consulting. [24:00]

Scott Orn:

It’s like if you … what is enjoying your work worth to you? It’s worth more than money. It’s super valuable. I mean we pay people very competitively and we want people to be motivated but you don’t want to hire a bunch of hired guns.

Patrick Sullivan:

Oh absolutely. At the end of the day, they do all these studies on it which is engineers especially are not motivated by money. As long as they’re making enough to survive and put a little away for savings, they’re fine. They’re motivated by the work they’re doing. And so if you give them a challenging problem, they’re excited about that. And if you put them on a team that are awesome people and that are really great to be around, they’re super excited about that. And so we really focus on things and this is a little cliché but we do things like camping trips or take the team out to a movie. What we learn is they start bonding with each other and they start liking each other and if you like what you’re doing and you’re excited about the team you’re working with and you’re making enough money to survive and prosper a little bit, you’re not going to be like looking for another job. And right now, our engineers probably get prospected by recruiters. They probably get 20 to 30 emails a week just saying, “Hey we heard about you guys. We’re doing X, Y, Z in telecom. We want you.” And the funny thing is, in the last 6 ½ years, I think we have a turnover of two maybe three people in 6 ½ years.

Scott Orn:

Wow. That’s awesome. So you built a really good culture there.

Patrick Sullivan:

Well, we built a good culture and to be clear, that’s two or three people that we were sad that they left.

Scott Orn:

I’m familiar with the difference between …

Patrick Sullivan:

We also learned that it’s hard to fire people. I don’t like firing people. So I learned a little trick is if you don’t think someone’s working out for one reason or another, instead of firing them, just find them another job. It’s really easy to find people jobs right now and then it happened three times where I found someone who is not working well for us but I thought they could work well some other company. So I just contacted them and they hired them away from us and it was fantastic. [26:00]

Scott Orn:

I saw the Basecamp founders said, “Success is very situational.” And it’s kind of what you’re talking about is like they may not be succeeding in your environment but they could be successful in another environment.

Patrick Sullivan:

Oh absolutely. And we just didn’t need them at that time but they worked their tails off and here’s the thing, I don’t want to fire someone who puts all their in. They might not be the right piece at that time. So my point of view is like, help them out. Help them get the next job. And all these people have always remembered it. And they’ve actually recommended us to everybody else and it’s not just making you feel good. It’s just kind of the right thing to do. And if you take care of your employees, this is why I think we don’t have turnover because the employees are excited to be there and they’re like, “Hey, we know that these guys if something went wrong, they will be there to help us out to figure out how to fix the solution.”

Scott Orn:

I totally agree. That’s awesome. So be scrappy, use the consulting revenue to help build the product, be really smart on how you hire, be creative on how you hire and hire people who absolutely love what they’re building.

Patrick Sullivan:

Yeah. And also I think early on your company, there’s a weird transition. We really focus on smart, intelligent people in that we could train. So we’re really focused on the training of these smart intelligent people. And so we got a lot of people straight out of college and we’re very creative of where we got these people as we talked about earlier. It’s funny, eventually your company does this transition and usually around the 20-person mark, that’s when the transition starts happening and people have always told me that this is going to happen and I didn’t believe them. I was like, “No, no, no, no. Our philosophy is just keep on training, training, training people. It really works out because then they feel like really like they’re part of something bigger and they’re learning and in the long run, as long as they stay, you get huge benefits out of this.” What we learned though, right when you hit that 20-person mark, it’s don’t just hire young smart people. Look for experienced because that 20-person mark, that’s when you actually need the minimal management layer. That’s when you start needing the people who you can say, “Hey look, they can go run off with like three or four good smart people and they can train them. They can figure that out.” [28:00] And we’re now, I think we’re like 37 or 38 people and it’s funny like over the last year that transition was really hard but it’s interesting, now that you get the right people to kind of manage the other people, oh my God our lives have been a million times better. And the product is just shooting. Our product development cycle is going so much faster and we have so many mini-pod teams that we are just cranking things out so much faster than we ever did when we’re a tiny little 20-person office.

Scott Orn:

That’s amazing. Dude, those are really good tips. So where is 2600Hz going? What’s next on the horizon for you guys?

Patrick Sullivan:

Someone told me a long time ago, don’t ever worry about your end goal. Worry about your product and then the product will figure out the end goal. They were right. However, it’s not as fun that way when you’re just thinking about the product all the time.

Scott Orn:

I mean the product too like what’s … because you guys are always been on the forefront of like telecom and the Cloud, like what’s the next step?

Patrick Sullivan:

I think our next step is really focusing, it’s interesting, we have more international business than we ever imagined. And that’s mainly because of the open source project. I mean if you look, like Russia, who would have guessed. Literally our last conference, a couple of engineers from Russia flew in and I think the Russian to English translation was a little off but they come up to me and they’re like, and this is going to insult everyone who …

Scott Orn:

Don’t do it.

Patrick Sullivan:

Whoever is Russian and listening to this podcast, this is going to insult you immediately. But they’re like, “Hey Patrick. I just want to say, you are like heroes in Mother Russia.” And I swear to God they said Mother Russia. And I’m sitting there and I’m like, “I don’t think you guys know what heroes mean.” And they were like, at that point they’re like, “You know what, we just want you to know that KAZOO,” that’s our product name, “KAZOO has really opened up our world and now we can do all this crazy stuff. And I just really want to thank you.” And that’s the kind of cool thing when you hear that stuff. [30:00] You’re like, “Wow.” Someone who I never met, globally, blah-blah-blah and these guys don’t pay us a dime. That’s okay. But what they’re doing is, they’re helping out the community. And these guys, they can’t afford to pay us anything but what they do is, they encourage the community to use the platform and they help with like ideas and suggestions and they also [crosstalk 00:30:15]. That’s the whole thing.

Scott Orn:

That’s a whole another continent which is crazy.

Patrick Sullivan:

Which blows my mind because when I first started this project with my co-founder Darren Schreiber …

Scott Orn:

After a few cocktails.

Patrick Sullivan:

Yeah. After a few cocktails, I knew nothing about the open source community. I knew nothing about that kind of developer world. I had an engineering background but you know Scott, you know me better than anybody. It’s probably been 15 years, maybe 20 years since the last time I coded. And so it’s been amazing kind of watching how this new mindset which is, “Hey, you keep on planting the seeds of your community and it will prosper in the long run.” And it’s funny because you see like these old school companies. They still don’t get it. And these goliaths, they’re moving slow and they’re like, “We want to reach out to the developers.” I’m like, “You don’t just reach out to the developers. That’s not how this works. You have to get them encouraged. You have to grow them. You gain the proper documentation.” So it’s been a real journey and from the start of this podcast, I told you how I literally was dumber every day. Since the 6 ½ years, I swear to God I think my brain has been pushed a little bit too much. I don’t sleep much anymore but at the end of the day, it’s like I feel like every day I’m slightly smarter than the day before. And even though I’m working way more and making way less than I used to, it’s that happiness. It’s that feeling of like, “Hey, we’re accomplishing something, we’re making …” As they say in Silicon Valley, “We’re making the world a better place.” And that literally was my air quotes in case you guys can’t see that. [32:00] But it’s cool. I mean it’s exciting. That’s why anybody who’s listening to this and if they’re thinking about starting a company, I mean it’s scary, it’s challenging but at the end of the day, it’s worth it because you’re like, “Wow, I’m actually doing something interesting,” and interesting is all perspective but you’re doing something that’s challenging and it’s exciting.

Scott Orn:

I think you said it perfectly. I wake up every day with a sense of purpose and I know Vanessa does and I’m sure everyone listening can tell that but your passion is infectious. It’s really awesome.

Patrick Sullivan:

Scott Orn:

How dare you? How dare you? Can you tell everyone where to find 2600Hz and KAZOO and just give the quick pitch real fast?

Patrick Sullivan:

Absolutely. So if you go to 2600Hz.com, 2-6-0-0-H-Z.com. That’s our main website. And if you see it, you’ll say wow this is hideous and we are in the process of working on that. You can go to 2600Hz.org to see kind of the open source piece of it. And we are having our big conference in mid-October so if you’re in San Francisco and want to hang out with all the cool telecom nerds of the world, people flying from all around the world for it and it’s called KAZOOcon so it should be lots of fun. And if you are a reseller out there and looking to add additional phone services to your repertoire and looking to make high margins and white label it, come check us out because it’s a great product and it’s pretty much all automated now so you just can get started on the first day and it’s pretty fun.

Scott Orn:

And even someone as technologically-challenged as me can actually set it up and get it running. So we love it. We’re using it. And thanks Patrick. This was an awesome interview. I really appreciate it.

Patrick Sullivan:

Scott Orn:

Scott, I really appreciate it. Thank you so much. Alright. Take care. Bye.

Patrick Sullivan:

You too. Bye.

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