🎧🍌 Inside Anchor's Journey to Product Market Fit and its Sale to Spotify with Mike Mignano
Finding PMF with only a few months of runway, traits of the best product founders, how to build a close-knit community, and the past, present, and future of podcasting
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Mike is currently a partner at Lightspeed Venture Partners. Before Lightspeed, he spent five years building Anchor, which he sold to Spotify for an undisclosed 9-figure amount in 2020. He then led Spotify’s podcast, video, and live products for three years.
It's probably safe to assume every podcast you listen to uses Mike’s product. We go way back to the very beginning of Anchor and talk through how the team pulled it off.
If you don’t have time to listen or read the transcript below, my biggest takeaways:
It took a few years to get the product right. Their first few versions of the products never found Product Market Fit. It took a immense effort from all members of the team to finally crack it.
One strategy Anchor used to do this is called a SuperGoal. SuperGoals are high-stakes, focusing goals with a clear and urgent time frame, open-ended method of achievement, and a single measure of success. It’s the ultimate forcing function to accomplish something that might otherwise seem impossible.
Another one of Mike’s frameworks is “Doing the Dumb Thing”. As you’ll hear / read, Anchor’s very first product was never going to work. But it got the business funded and gave them the runway to build what ultimately became Anchor, the best tool to create a podcast, and now called “Spotify for Podcasters”.
It takes a certain type of founder to navigate this maze of finding PMF. The best have a point of view about the world, but are very flexible in how they get there. There's a determinism to end up at some future state, but a looseness around how. They aren’t precious about what they build, but that doesn’t mean low quality. It means a high willingness to be wrong, quickly take many shots on goal, and use your mistakes to make higher quality decisions the next time.
Spotify’s acquisition of Anchor started the day they launched the very first product. Mike spent years getting to know Spotify’s CEO Daniel Ek and CPO & CTO Gustav Söderström. The acquisition was a mutual agreement it was the best option for both companies, not a last minute hail mary.
Timestamps to jump in:
4:22 Why AI makes consumer investing interesting again
8:05 Podcasting in the early 2010’s
14:03 The benefits and drawbacks of RSS
21:50 Building v1 “Instagram for audio”
25:53 Advice for building a close-knit community
29:28 Raising Anchor’s first small round
31:38 Inside their splashy launch at SXSW
39:17 Why the first product failed, but enabled them to raise money to build what became Anchor
45:26 What makes a good product founder
47:39 Re-launching v2 a year later
53:51 What is a SuperGoal?
56:32 Finding Product Market Fit with only a few months of runway left
59:02 Getting to a million podcast creators
1:02:09 Launching the first ad network for podcasts
1:04:10 Why anchor started sponsoring its own ad network
1:08:13 Spotify’s acquisition of Anchor
1:14:22 How Spotify won in podcast market share
1:16:34 Why the future of podcasts is video
Referenced:
Mike’s Podcast Generative Now
Mike’s Blog Posts:
- The Standards Innovation Paradox
- The Power of SuperGoals
- Startups vs. Incumbents: The Battle for AI’s Application Layer
- All Podcast Roads Lead to Video
Find Mike on Twitter and LinkedIn
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Mike, how's it going?
Mike Mignano:
Good, Turner. Good to see you.
Turner Novak:
Good to see you too. First question, to kick things off, can you talk a little bit about what is going on in consumer tech right now? What are the big themes you're following? What are you excited about? And then we can go a little bit deeper.
Mike Mignano:
Sure. So I think the story of startups and tech investing over the past couple of years has obviously been enterprise and SaaS. That seems to be where all of the opportunity has been. Over the past couple of years, consumer has been a bit of a graveyard. I am of the belief that that's turning and that's about to turn, and maybe not surprisingly, I think AI has a lot to do with it. Last year, 2023, was so much about LLMs foundational models, image models, all these new models.
Turner Novak:
This is like infrastructure level stuff?
Mike Mignano:
Yeah, investing in the technology, and obviously there were lots of really smart teams chasing those opportunities. But I think now we're entering a period where great builders have had exposure to this technology for long enough that the great products now are being baked, people are in the lab cooking up the next great, both enterprise and consumer products. And so I think we're about to start seeing a wave of great products emerge.
In fact, I mean it's a little crazy to think about, but if you think about the two biggest success stories in AI right now, they're actually consumer products. ChatGPT, the rumor is OpenAI is generating more than 1.5 billion in annual revenue. And the rumor is that most of that is coming through consumer subscriptions to ChatGPT. Midjourney, largely I would say a consumer application, and same thing generating supposedly in the hundreds of millions in annual revenue.
So I think there's a feeling that a lot of the AI success right now is happening in the enterprise, but it actually hasn't really hit the enterprise yet. It feels like it started to happen in consumer. And then if you play this thing out even more and you think about what AI can do, I like to think about AI as a resource, like a unit of work. It's almost similar to labor or capital. If we all have an abundance of work units available to us at our disposal, what does that do? That frees up our time to maybe do things that we care about, that we're more passionate about.
And so I think AI will actually lead to a ton of opportunity in consumer land, whether it be along the lines of entertainment, education, self-improvement, all these things that if we won the lottery of time, what would we actually invest in? When somebody all of a sudden comes into newfound time, what do they do? They take up a hobby.
Turner Novak:
They start a podcast.
Mike Mignano:
They start a podcast like you and me. So I think consumer... I'm very optimistic about consumer, I guess is the point.
Turner Novak:
Yeah, it's an interesting analogy. If you just think about AI as a new technology, if you go back a couple hundred years, we used to grow our own food, we had to farm and we had to do it by hand. And then there were tools to do it for us, there were tools to store it and distribute it, and now we don't even think about where our food comes from. There's pros and cons to that, but we used to spend the majority of our time on something that simple.
AI is just, if you think about it, like exponential progress, it's just the new rung on the ladder of progress that's probably going to lead to a lot of stuff we don't even think about yet, that we don't even know exists.
Mike Mignano:
Absolutely. Absolutely. So I'm really optimistic about consumer. There's a whole new blue ocean of opportunity of things you can build that you couldn't build a year ago.
Turner Novak:
I kind of wanted to spend a bunch of time talking about Anchor, the journey, starting the company, take us inside, all that kind of stuff. Going back to the early days, maybe pre Anchor, what was the audio space and maybe the podcasting space kind of back before you even started the company, before you even started thinking about the problem?
Mike Mignano:
So I think still today in 2024, most of what people listen to in audio is music. Music still makes up the vast, vast majority of consumption hours of audio content. Audiobooks are a growing medium, and podcasts, still a growing medium.
But back then when we started the company, we initially started thinking about starting the company in 2014, so 10 years ago, and podcasts were kind of just gaining popularity. But that's really when podcasts really took shape was around the era of the iPod. Steve Jobs famously talked about podcasts and his introduction of the iPod and talking about how you could take your favorite radio shows along with you, download them to your iPod, much like you could download music.
Turner Novak:
That was in the announcement?
Mike Mignano:
I believe it was either in the initial announcement or one of the initial announcements for sure, but they never really caught on, caught on with the masses, right? There was definitely excitement about it, and I think if you look back to Silicon Valley lore, there was some very famous VCs who took big bets on podcasting in the late part of the first decade of the 2000s, and it never really panned out. And so around 2014, what I mentioned when we were thinking more and more about this, my co-founder, Nir Zicherman, and I, we had gotten into podcasts really just like everyone else. After the Anchor thing happened, I would have people come up to me and be like, "Oh, you must know all of the niche podcasts and you must have great recommendations for what I can listen to?" And I'm like, yeah, but I actually got into podcasts by listening to Serial, just like 90% of the world at that time.
Turner Novak:
Serial was the Taylor Swift of podcasts back 10 years ago, right? It was just the biggest thing. Yeah.
Mike Mignano:
It was the biggest thing. I mean, it was really groundbreaking, I think in terms of a narrative structure and storytelling and investigative journalism. It was really powerful. Did you listen to it at the time?
Turner Novak:
I didn't listen to it, but I know that it exists. I mean that's saying something with how powerful it was.
Mike Mignano:
It was incredible. It was incredible. And for me it was definitely a gateway drug and I started listening to other things. I got really into, I'm into sports, I'm into pop culture, so I was really into the Grantland network. Grantland was Bill Simmons's Media company inside of ESPN before he did The Ringer. I loved all that stuff. I liked listening to things like the StartUp podcast because I was building a startup at the time. I don't know if you remember that one from Gimlet?
Turner Novak:
I do not.
Mike Mignano:
Another awesome one you should listen to. So I got in a podcast just like everyone else, but the difference was my co-founder, Nir, and I, we had just worked for a couple of years at a company called Aviary, which had the mission of democratizing creativity through a mobile app for photo editing, similar to the type of thing that was happening inside of Instagram. We offered a mobile photo editing SDK, and the whole product philosophy around that was that anyone should be able to be creative, anyone should be able to take and edit and share photos even if you weren't inherently talented or you didn't know anything about photography. And so when we started getting into podcasts, the two of us, we tried making podcasts ourselves and it was hard. We had to have the expensive microphone and you had to learn how to edit audio in Garage Band or whatever. Audacity.
Turner Novak:
Yeah, I've used that way back in the day.
Mike Mignano:
And coming from just building scaled consumer mobile products for photo editing, we were like, why can't this be done on mobile? And if this could be done on mobile, why couldn't everyone do this? Right? Why couldn't anyone make a podcast? It was one of those things that seemed kind of obvious, but the more and more we looked into it, we were just like, yeah, no one's really tried this yet. That's weird.
Now, naturally at the time, first time entrepreneur, first time founder, I think our ideas and our vision for the product maybe weren't as sharp as they could be, and we definitely went down some wrong paths. The company actually started more as a social audio network than a podcasting platform because I think we thought that the way to democratize a form of media was to do it via social network, much like Twitter and Facebook did for writing and Instagram did for photography. That was the wrong decision for a number of reasons.
But anyway, to answer your question, podcasting was sort of a niche medium and it was just starting to take off in terms of popularity. There were maybe a couple hundred thousand podcasts that had ever been created. Spotify did not have podcasts in the Spotify app yet. It was really like Apple podcasts and a couple of indie podcast players.
Turner Novak:
I used to listen on SoundCloud. The podcast I remember I listened to was called BiggerPockets. It was about real estate investing and it was just how do you get started in real estate investing? I just graduated college and I was buying my first house and I wanted it to be an investment property eventually. So I was just learning the ropes, how do you invest in real estate? And it was a really good podcast. I just had a bunch of real estate investors on. It's just like when you listen to a startup podcast, you have founders and investors on. It was the same thing. And yeah, I think I... I don't even remember how I got new episodes. I think it was on their forum or something. Or maybe they showed up in the SoundCloud app or on the website. I can't even remember.
Mike Mignano:
I remember when SoundCloud had a big podcasting presence, yeah, for sure. That was one of the platforms we thought about distributing to in the early days for sure. But yeah, I mean it wasn't popular. It wasn't a big deal, podcasting,
Turner Novak:
And there was kind of this concept that doesn't really exist... I guess it kind of exists, but it's kind of been abstracted away, this concept of RSS was like the backbone of podcasts. Can you kind of explain what that is for people who've never heard that before and why it was so important in podcasts?
Mike Mignano:
So the way that podcasts got distributed, and still to this day get distributed to a good chunk of the podcast listening platforms, I think including Apple Podcasts, was all via RSS. Now, RSS was a standard of content distribution. It is a standard of content distribution on the internet. Really mostly I got its origins, or its traction, I would say, with blogs, right? So I'm sure you remember the days of Google Reader and a Feedburner and all these products that basically ingested RSS feeds that were getting spun off of blogs, and you could use it to aggregate blog posts and news articles of things you wanted to read. Well, podcasts leveraged, and again, still to this day, leveraged RSS for distribution of podcast content.
And so to publish a podcast, what you had to do was first you had to record it, like we're doing now. Then you had to go and host the audio files on a file hosting service, and the biggest one, or one of the biggest ones back then was Libsyn, which is still around. You had to pay to store the files, which even in 2014 to us seemed kind of crazy because we had free storage on Dropbox and Google Drive, thousands of gigabytes for free in terms of storage, but for some reason in podcasting, you had to pay 20 bucks a month to store a couple hundred megabytes.
Turner Novak:
Wow. Yeah, that's huge.
Mike Mignano:
Yeah, it was crazy. So you would store your files on one of these services and once you uploaded your files, it would take them and it would organize them into an RSS feed. And then you would take that RSS feed and you would manually copy and paste the URL and you would paste it into all of the different consumption platforms, backend admins like Apple Podcasts, Podcast Connect. You'd have to go and you'd have to set up a new podcast paste in your RSS feed. Apple would ingest it, they would take a few days to approve it and then boom, you'd appear in the Apple Podcast.
Turner Novak:
Wow, that's annoying. Couple days to approve? That kills all type of iteration speed.
Mike Mignano:
Well, that's for the first time you want to get listed, and then every time you publish an episode, it would just flow through, but to be listed the first time, you had to wait for approval, similar to the app store when you submit a new app to the app store. But it was all powered by RSS. RSS was the standard that organized the files and the metadata around the podcast and got adopted by all these platforms for distribution.
Turner Novak:
Okay. So RSS sounds, from what you've said so far, pretty good, gives you distribution anywhere you want. Were there any downsides to it? I think I've heard you talk about these before, but what were some of the downsides of RSS?
Mike Mignano:
The distribution thing is a great point. I mean, it's amazing, the fact that everyone has adopted this standard because it means all you have to do is publish to this standard and you could get distribution on any of these platforms, many of which have many millions of listeners listening on them. That's the upside.
The downside with this standard, and frankly any other standard, is once there's enough adoption of the thing, there's this inertia that happens and it becomes very, very difficult to change the standard if you want to make any changes to the standard. Changing the standard in a vacuum really doesn't affect the entire ecosystem. It only affects where the change is being made.
And so if you want to add a new field to the RSS feed to support some new feature inside of podcasting, the only way that's going to get adopted at scale is if every platform gets together and agrees that they should adopt this new field, right? Apple Podcasts and Spotify and SoundCloud, for your point, and Amazon or whoever. And so you just end up with sort of a stagnation of features and innovation.
And that's kind of the trade-off I would say. It's not a good thing or a bad thing. I mean, it can be a good thing or a bad thing, I guess. But for the medium of podcasting, which I think was already highly inaccessible because of the limitations of the technology and the software, I think it made it more inaccessible, in my opinion.
I know this is a somewhat controversial opinion because people love RSS. And I love RSS as well for the reasons we mentioned, but a lot of people have for many years talked about the limited amount of data you get back when you publish a podcast or the fact that it's not interactive or the monetization, it's all manual through host-read ads, all these things really stem from the limitations of RSS.
Turner Novak:
Yeah, it kind of reminds me of maybe some analogies, if you think about video and audio, so you have TV and radio back in the day or maybe things like print, things like that, when the internet came around, it made a lot of those a lot easier to monetize, essentially. You think about Facebook does, I forget what... I mean, there's like $100 billion in revenue. It might not be the exact number, but insane. It's bigger than the newspaper industry was.
You think about how big is YouTube, all these streaming platforms that are adopting advertising, they're going to pass TV eventually, but then when you compare radio with podcasts and just the size of the markets, radio still, it's like $30, $40 billion, something like that. And I think podcast is like $2 billion or something. It just has not taken off in the same sense of some of these other mediums.
So it's a super interesting point of... And me as having a podcast, it is pretty hard to make money. You basically just need to get big enough to the point where you can have someone say, "Hey, cool. I have no idea who's actually listening to this and no idea if anything's working." Because we can't really do much attribution built into the platforms. You maybe have to do a custom code. "I'll give you X dollars per episode." And it's just like how you used to do an influencer type post on social media, or you used to do advertising in the newspaper.
Mike Mignano:
Or a radio ad.
Turner Novak:
Yeah. Or a radio ad, yeah.
Mike Mignano:
Which is so the opposite to the way advertising works on video right now, right? Because all streaming and it all exists within mostly one platform, YouTube, which by the way is the downside to innovating on formats. So I'm talking about how RSS is limiting. Really the answer to that, or normally the way that that gets broken is by a single platform gaining massive market share and then innovating outside of the format on their own standard, their own format. And that's usually when you start to see huge leaps and jumps in terms of functionality and data.
The drawback to that obviously is then you end up with one or two or a small few of platforms that control an entire market, and obviously that has all these downstream implications around sort of customer choice. That's why I said there's no right or wrong answer here. It's just sort of the reality that RSS, as amazing as it has been for distribution, is also the same thing that I think has led to a lot of the stagnant innovation that has taken place in podcasting.
Turner Novak:
And then going a little bit deeper on the Anchor story, you mentioned something. You didn't actually do podcasting to start. You were doing more of a social product. Do you remember the first couple of weeks, months of starting to work on this, what were those like and how did you come up with that first idea?
Mike Mignano:
I think we first started working on this, before we even quit our jobs and we were just doing it sort of nights and weekends, and we had never started companies before, so we had a certain level of naivete to us. When you haven't done a startup, you kind of don't know what's possible and what's not possible. And also the other thing is neither of us were really trained in what we were doing at the time. So I was designing the initial app and my co-founder, Nir, was coding it, he was building an iOS app and he had never done that before. So neither of us had ever really done this before. And so it was all white space and it was a lot of fun.
Yeah, again, I think we felt like if we really want... And this sort of goes to the point around RSS. I think we both felt like if we really want to innovate on podcasting, we have to have our own format. The whole thing has to exist within our app. It can't distribute to other platforms. And so basically it was like we were designing an audio experience from the ground up as if podcasting had never existed. It was like, what does it look like if every day people get to record and share audio with each other and listen to it and interact with it? And that was a lot of fun.
We had this really strong product value around making everything audio first. And what we meant by that was all of these interactions of listening and responding and interacting with audio or the content, much like you would on a social network, we wanted it all to be able to happen when the phone was in your pocket, right? Because when you're listening to audio, you're not staring at a screen, you're walking around with headphones in your ears. So we were coming up with all these clever features around to, to like a piece of content, you just tap on the back of your phone when it's in your pocket, and the accelerometer will recognize that.
Turner Novak:
Yeah, that's pretty cool.
Mike Mignano:
All sorts of stuff like that. Or to record a piece of content. We had this feature that a lot of people liked where you wouldn't have pull out your phone, go into the app, go into the record screen, you just have to go into the app and hold the phone up to your ear like you were talking on the telephone, and we would pick up the sensor by the phone, we would recognize that, know you're trying to record, and we would just start recording. So just little things like that.
Turner Novak:
And this was all pre AirPods, right? This was 2015? Summer of 2015?
Mike Mignano:
2015, that's right. Yeah, yeah, yeah. So it was a lot of fun because we were just inventing all these new features and ideas that, yeah, I mean maybe quickly fast forwarding, a lot of these things never really panned out, but it was fun just to be able to try things.
The other thing is, the two of us, I think, because we had never really done this before, we weren't too precious about what we were shipping to people. And so we were shipping things really, really quickly and getting feedback in real time. And that became sort of this core value of the company just to move really, really fast. And that was exhilarating, just shipping things as fast as humanly possible, getting real time feedback from our small growing beta community and then either scrapping something or doubling down on it.
So yeah, it was a social network. I mean, the first version of Anchor was, in many ways, more like the Instagram of audio than it was a podcasting platform. And people really liked it. I mean, our beta community in those early days loved it. And this was all before we launched, before we had raised a real round of funding, we'd raised a tiny bit of funding, but people really loved it. And I think people felt like it was novel and unique because all of the other social apps that were at the time were either photo social networks or video social networks. Snapchat stories had recently come out and people were really obsessed with the stories format.
Turner Novak:
Vine was probably in its heyday, right?
Mike Mignano:
Yeah. Vine was still around. And I think people were just drawn to this novel audio first experience, which they hadn't really seen before. Even people that weren't into podcasts. It was just like, what is this weird audio social network? So I think there was a certain allure to the novelty of that.
Turner Novak:
What advice would you have to somebody else who wants to set up a tight-knit beta community, iterate fast? What were some of the things you think you did right there? Or maybe mistakes that you'd advise people not to do if they wanted to do something like that?
Mike Mignano:
One of the things we did was I think we were pretty shameless about trying to get all of our friends and family in, and that took a hurdle. We had to get over a little bit. Where are we going to get these users? Oh, well, we don't want to bother our friends and family with our silly little app that we're doing. But I think at a certain point we just leaned into it and we sort of brought everyone in our lives along on the journey with us.
We got all the people that I think cared about us most in our lives, invested in the journey. We sent lots of updates to people, lots of personal one-on-one emails. We really brought everyone along. That was really, really helpful and I think offered a little bit of a spark that had a little bit of a network effect with people then outside of our immediate social circle, bringing people in.
We also took every opportunity we could to kind of demo the product in person for people that we hadn't met. Betaworks was, and still is a big part of the New York City startup community, and we had a friend that worked there and she offered to let us demo there. And so we would go in there and demo, and every time we did that, we'd get people that weren't our friends trying the app and they would tell their friends. And I think just by being out there and promoting it and getting it in front of people, before we knew it, we had this little organic community of people in New York City that were excited by what we were building and trying it and just brute forced it. And I think the fact that we were so vocal and we were so in touch with everyone in the beta community and we were shipping so fast that feedback loop, I think only further endeared people and brought them in and sort of made them fans of what we were doing. You hear people on Twitter talk about building in public and that whole thing. We very much adopted that ethos and that mentality, and I think it worked to our advantage.
Turner Novak:
So you started building this when you were still at?
Mike Mignano:
Adobe.
Turner Novak:
Yeah, Aviary was acquired by Adobe?
Mike Mignano:
That's right. So we started doing it nights and weekends, and this was before we had raised any money. This was early 2015, and that was a little bit of a nerve wracking experience because you hear, I don't know, maybe we had heard horror stories about you can't really work on a startup while you're at another company. What's property of the company? What's property of you? I think we were watching Silicon Valley, the TV show at the time, and I think there was an episode about what was that big tech company owning Pied Pipe? I don't know.
Turner Novak:
Cooley's, the company?
Mike Mignano:
Yeah. So we were really, really thoughtful around, we're never going to talk about this during business hours. We're never going to talk about this at work. We're never going to write a line of code during work hours. It's only going to be late nights, early mornings, weekends, clear separation of church and state. And we got pretty far doing that. But more and more we found ourselves trying to find more time, how can we invest more in this? This is working, the beta community's into it. How can we invest more and more time?
And ultimately we realized the only way to invest more time was to get rid of our day jobs. And so that was the moment where it was like, Hey, we could either abandon this and move on, or if we want to see if there's anything here, we got to quit our jobs. It's the choice we got.
Turner Novak:
So what came first, I know you raised a small round, I think from Betaworks. What came first? Raising a little bit of money or quitting or in between? How did you do that that first time going through that process?
Mike Mignano:
We had heard from friends and mentors and things that raising a proper round of funding is a full-time job. And now having done it a few times and now being on the other side, I agree, it is a full-time job. It's not something you can do while you're working a day job. So we're sort of faced with this question of, well, do we quit our jobs and get rid of the safety net and then go raise funding? Or how do we do this? Neither of us were in a position that we could afford to not work.
I mentioned a few minutes ago that we had demoed at Betaworks where our friend Maya was working at the time, Maya Prohovnik. We went, we demoed there, and John Borthwick, the CEO of Betaworks, came up to us and said, "Hey..." he and Matt Hartman, another partner at Betaworks at the time, they came up to us and they said, "Hey, we've been thinking about audio. We really believe in this space, and if you want to talk about maybe raising some capital from us, let's talk."
So we went in there and we talked to them and we basically explained to them, we do plan to go raise a round of funding, but it's not really something we can do while we're working our jobs. And so we're trying to figure out the sequencing, and they made us a really compelling offer, which was, "Hey, how about we write you this tiny little check right now at a really favorable valuation to you. You don't have to do anything else. You don't need to go raise any more money. Quit your jobs, come work out of our office for a few months. While you're working out of our office, you can go prepare for another round of funding and then you'll have the time to go invest in that Betaworks to take in the capital you need to give this a real shot."
So that's what we did. We did the deal with Betaworks. That enabled us to go put in our notice at Adobe. And a few weeks later we showed up at the Betaworks office and just started working on Anchor full time.
Turner Novak:
So that period, was this early summer?
Mike Mignano:
Yeah, you've done your research. I think that was July or August, 2015.
Turner Novak:
Okay. And then you were in the "lab", you were cooking, I think those were the words you used earlier, or you were working on this. At what point did you actually launch the product? I think it was, you raised a proper round, a proper pre-seed round before you launched. Am I remembering that right?
Mike Mignano:
Yeah, that's right. So we spent, let's call it close to three months, trying to get the beta in better shape and just something that we felt proud to demo and go pitch to a bunch of VCs at the same time, Betaworks was a huge help in making a bunch of introductions to VCs both in New York and the Bay Area. And I would say after doing that for about two months, we're like, we're going to go raise a couple million bucks, go do this.
And I think at that point, the product was in really good shape. It was still a small beta community. It wasn't live for the public. But there were people in it, people were making content and it was nice, it was a nice prototype. Now on the other side, oftentimes you see pitches where there's no product. This was more on the spectrum of this thing was pretty baked and you could see what it might become. And we were fortunate to have those introductions from Betaworks, like I mentioned.
And so right before the end of the three months that we were working at Betaworks, we went out to Silicon Valley and we sort of did the classic, compressed everything to one or two weeks, try to cram the meetings in as tightly packed as possible. I was actually on crutches at the time because I had had an injury that I had to get a surgery for. And so that complicated the process a little bit because it wasn't really easy to move around. So Nir, my co-founder, I'm forever grateful. I mean, he had to, in the airport, push me around at a wheelchair. It was a lot, there was a lot going on in our lives at the moment.
But we did it, we went up to Silicon Valley. And we took a bunch of meetings in New York and we ended up raising, I forget what the total amount was, but it was something just under maybe $2 million bucks from a number of great firms Eniac in New York, SV Angel, great group of angels, really great group of people who were super supportive. And that's what enabled us to then go out and confidently the product a few months later.
Turner Novak:
And then how did you decide when to launch/ when you're running a beta like this, any key factors you'd consider?
Mike Mignano:
So this was a social network and I think it was really important to us that we had density in the graph of people using it and also the content. We didn't want anyone to show up in the app and it to be a ghost town and there'd be no content. So we spent a lot of time in the beta trying to come up with all these ways to manufacture activity and content to a critical mass that would give us the confidence to go and launch.
And I would say we did an okay job of that. But I remember there was a time where Nir and I kind of looked at each other and we thought to ourselves, we could be doing this forever. We're never going to be satisfied with the amount of content in this app. And so we just have to launch and whatever happens, happens. Let the chips fall where they may. But that was a scary decision. I mean, there was nothing really... There was no proof that we would launch this thing and there would be enough content and enough activity in it that it would matter. It was almost like a little bit of a last ditch thing. It was like at a certain point we just got to get this thing out there.
Turner Novak:
So how did you switch from not knowing really if it was going to work? What'd you do?
Mike Mignano:
We just decided to go for it. And I think because we felt like we wanted there to be content, we took a different approach than I think a lot of people take, which is... And I don't know if this is the right approach, but it's the approach we took. We decided to go for the splashy launch. We're going to line up press, we're going to write this big manifesto, we're going to get all of our investors shouting it from the rooftops. We're going to get the beta community, which is now probably in the hundreds or maybe a thousand people, we're going to get them all talking about it. We kind of pulled out all the stops and we said, maybe that will get us content. If enough people talk about this thing, maybe that'll get us content.
And so we lined all that up. We packaged up sort of the funding news because we had some notable investors around the table and the story of the app, and we got a journalist to agree to write about it. And then we literally, by hand, emailed every single person in the beta community, not a mass email. We felt like if we really want these people to get invested in this launch and support it, we have to reach out to everyone by hand. I remember over the course of a couple of days, we probably manually emailed close to a thousand people.
Turner Novak:
Geez. Is that just like you have a message, it's like you copy paste and you may be like, "Hey Mike, it was great catching up last week," and then copy paste, "Check out Anchor," or whatever, "We just launched?" Yeah.
Mike Mignano:
Yeah, we personalized all of them. But yes, it was something along those lines where we're copy pasting a certain thing and we're giving them clear actions of things we would like their help with, promoting it, tweeting about it up, voting us on Product Hunt, all that stuff. And in terms of making a splash, it worked. It was crazy. It was unlike anything.
Turner Novak:
It was February, 2016, March, 2016?
Mike Mignano:
That's right. And it was shocking to us how much activity it generated in the app. We went from having this really hacky backend where we could sort of view the content and moderate it. And on any given day, maybe there was five pieces of content in there. And we flipped the switch and overnight there was just thousands and thousands and thousands of pieces of content.
Turner Novak:
So you probably used to listen to every single piece of content, I'm assuming, and then it probably pretty quick was like, we can't even stay on top of this anymore?
Mike Mignano:
Yeah, it was crazy. And the thing about Anchor, that first version again, it was a social network, is you could record a piece of content and then anyone could reply to a piece of content with their voice and it made these almost threaded voice conversations that you could listen to. So I'd listen to Turner say something for two minutes, then Mike might reply, then Nir ear might reply and you just in line sort of listen to this. Remember audio first, you just tap play at the top and it just goes through.
Turner Novak:
Auto plays all the threads.
Mike Mignano:
Just auto plays, yeah, everything. Almost sounded like a sort of jerky kind of start and stop kind of podcast, in a way. And there were so many conversations happening in this... To your point, we couldn't listen to everything, but all of a sudden there was a community, there was people talking. It was fascinating to see. It was almost like a bit of a social experiment, probably similar to the way the Clubhouse guys felt when they first launched that. And it just went nuts. All of a sudden there's people on this thing that weren't a day ago.
Turner Novak:
It's got to be awesome though, just people using what you made and people caring about it. I mean, we just talked, you spent the past year part-time and all your free time, and then full time because you didn't even have enough free time to work on it, just putting your heart into this thing and people used it. I mean, that doesn't happen that often. That's got to feel amazing?
Mike Mignano:
It was cool. It was really cool. It was exhilarating, it was stressful, it was fun. It was disorienting. It was hard to know what to do next.
Turner Novak:
And this was, just based on timeline, right around South by Southwest too. And you guys were kind of like... Usually there's a product that encapsulates South by, and you were the product that year.
Mike Mignano:
Yeah, exactly. That was crazy. It was very disorienting because we had never done this before and we were definitely naive and we go from, like I said, having a couple hundred or whatever people in the community to, a few days later, we've got every investor in Silicon Valley reaching out. We've got celebrities on the app. We've got celebrities trying to get in touch with us to invest in it. We've got big companies calling up to ask to acquire us, just all of this madness. And it was hard to really know what to do.
One of our investors was like, "You guys should go raise more money." And again, I had never done this before, so my instinct was, really? That we just raised money. We've got 18 months of runway, whatever. And the advice was, well, no, you should spend it now. You've got all this activity, you should double down, you should lean in. And the flip side, I had other investors saying, "No, no, no, no, no. You should not raise money. You should wait until the data settles and you can find out if you actually have something here. You don't want to get ahead of your skis."
I would say in hindsight, we kind of did a little bit of both, and I think that was maybe a mistake. I think we should have either decidedly said, we're going to go raise, we're going to raise fast, we're going to get it. We're going to get the money in or we're going to not, we're just going to shut down all those conversations and go heads down and just keep working. We kind of did one of these sort of in-between where we're sort of working and I'm taking investor meetings a little bit here and there, so it ended up taking a little bit longer than it should have.
And the reason I say it was a little bit of a mistake is just because a big believer in when you're raising, you're raising and you should acknowledge that because the time that you're spending raising money, you're not really working on product, if you're a product oriented CEO, which I was, or you're working on product and you're just heads down. And so I was kind of doing both and we had a small team at the time, so it was definitely a bit distracting.
But anyway, we got it done. Fortunately Accel took a bet on us, even though it was very, very much unproven and frankly after the hype and the excitement of the launch died down, it was pretty easy to see that, as exciting as the launch had been, the app was really not working, it was not retentive. There was a lot of excitement and I think people were attracted to the novelty of the product, but it wasn't retaining users. It was a little bit of a mirage clouded by the fact that we had done this kind of splashy, hyped up launch that attracted a lot of attention.
Turner Novak:
Going back, would you do the hyped up launch again?
Mike Mignano:
I don't know. It's hard to say no. It's hard to say I wouldn't because I think all of the things we did, even though sort of in a micro sense, maybe they were wrong or mistakes, in the macro sense, I can also point to a lot of the mistakes that we made and point to how they led to things that unlocked some new phase of the business.
For example, if we hadn't done that splashy launch, we probably wouldn't have been able to raise that subsequent round of funding. If we hadn't raised that subsequent round of funding, I think it would've been really hard for us to pivot when we realized the product wasn't working. If we hadn't pivoted, maybe we'd be dead. So on an individual decision basis, it's hard to say I wouldn't do anything again because ultimately things did work out.
I mean, even just the decision to build a social network for audio. In hindsight, it seems kind of crazy and frankly kind of dumb. Now knowing what I know now, I am pretty bearish on the notion that a social network for audio can work at all.
But as I mentioned to you, Silicon Valley was pretty anti podcasts when we went out to raise capital because again, it had been tried, it didn't work. If we went into VC offices on Sandhill Road pitching where we ultimately landed for Anchor, which worked by the way, which found product market fit and grew exponentially really quickly, I don't think we could have gotten that funded. But because we got kind of the dumb thing funded, it afforded us the capital and the runway and the space to go and try maybe the more pragmatic thing which ended up working for us. Does that make sense?
Turner Novak:
Yeah, I mean it makes a lot of sense, especially based on... I think we talked about this a little bit beforehand and some of the stuff I've read that you've written, totally. I mean, being a VC, you see how it works. I think there's some truth to it is like you need growth. Startups need growth to survive. If you stop growing or you lose your momentum for too long.
I mean, maybe there can be times where you're figuring things out, but you need momentum and you need growth in a macro big picture sense. And even minutely on the day to day, you need to feel like you're moving forward. So I can totally see that, of if you're going to have periods of less growth or you just stop for a little bit, the momentum shuts down, you need a balance sheet... you need something to kind of shock absorb. So it does make a lot of sense.
Mike Mignano:
The thing that I think it's made me realize now, especially as a VC, is when you're betting on an early stage team, you probably shouldn't get too attached to the product. I think it's sharpened my thinking around what matters most at the earliest stages, seed stage as an example. I've come from a place, especially as a product builder, I think I'm naturally drawn to towards products or ideas.
But I think the longer I do this, the more I've sort of oscillated to the other side of teams and sort of surface areas. If a really compelling team is building in a surface area that is also really compelling, there's a certain level of confidence you just need to have that they're going to figure out the right product and that the current product they're working on, having done this myself, there's a pretty good chance it's not going to work. And so the confidence to know that they can find the thing that will work is what's more important, I think, than the initial idea.
Turner Novak:
So I didn't think I was going to ask this question because it's a little bit off-topic, but it feels like a good point to ask it. What do you think makes a good product founder? If you're sitting there as a VC, this is your thought process of like, hey, this product might not work, but I'm making a bet on the founder or this team. What are you typically looking for? Maybe the soft skills or maybe there's quantitative things?
Mike Mignano:
Yeah, I'm definitely looking for a strong point of view about the future. The future of maybe a certain market, not necessarily a prescriptive point of view, but kind of like I believe the world is going in this direction. I believe the world is headed like this, and if we were to run the clock forward, the world might look something like this. And so I think it's important to be building something over here.
I think what's maybe the counter signal to that is X product will be the solution to Y problem. I think founders, from what I've seen, the best founders have a point of view about the world, but are very flexible in how they get there. There's a determinism to end up at some future state, but a looseness around how I think that's really important. I don't know if you feel similarly?
I also think people that are not super precious about what they build is important. And that doesn't mean low quality. I think that means a very high willingness to be wrong and thus also a very high willingness to take many, many shots on goal really quickly to get to the right answer.
I mentioned a thing about us as we were shipping really, really fast. We didn't necessarily have religion about that early on, but now looking back and in hindsight I think it was critical. You mentioned having the balance sheet to absorb some shock. I think the way that you make that balance sheet last even longer is you do more with it, and the way you do more with it I think is you make really fast... I think you make fast, but thoughtful decisions early on and you put yourself out there more. I think every time you put yourself out there, you put a product into the world, you learn something. And every time you learn, you make a better quality decision the next time. So I'm really a fan of product-oriented teams that are willing to put stuff out there and fail.
Turner Novak:
Tying back to Anchor, you put this product out, these were your work, it was clear it probably wasn't going to work. What happened next? A ton of excitement. Everyone knew about you guys. People had tried it. How did you go forward when you're like, okay, this probably isn't going to work. What did you do?
Mike Mignano:
So one of the clear things we saw in the data as the months went on was that people wanted to create audio. That was a pretty cool learning. We were like, wow, people want to be here and they want to put themselves out there into the world.
Turner Novak:
And that was the initial thesis, right, we want to make it easier to just create audio content?
Mike Mignano:
Yeah, but people didn't want to listen to this stuff. This stuff was not compelling to listen to. And what was tough about that is there was a lot of inertia in the company moving in the direction of continuing to support this product. We hired an Android engineer to build... We had iOS at launch, but then we brought on this amazing Android engineer to start building out the Android version. He was heads down pouring months into building the Android version. But we realized this thing, that people didn't want to listen to this. This tool and this sort of structure of the network is not conducive to people actually listening to this content. And so not only that, we just raised around a funding from an investor that took a bet on the product that we had out there in the world. Fortunately, I think that investor probably knew something that I didn't at the time, which is what I just said a few minutes ago, that the initial product's probably going to change.
Turner Novak:
Yeah, I think, was that Brian O'Malley?
Mike Mignano:
Yeah, that was Brian at Accel and hugely supportive investor. And I think after looking at the initial data for a while and kind of constantly trying to get back to that initial launch spark, we realized we got to rethink this thing. And the way that we thought to rethink it was we need to invest in the tools. This audio, people want to make it, it's not that good.
So what can we do with the tools to make the audio good? That's the power of technology and mobile tools that democratize creativity. We need to lean into them. So we scrapped the app, we made a conscious decision that we're going to shut this thing down, we're going to rebuild it with a new format and new tools for creativity.
Turner Novak:
So did you keep it going and kind of sunset new features? Or did you just close it?
Mike Mignano:
We kept it going. We kept it going, but we stopped shipping things. The community started to get cranky. They were like, "What the hell? This app's a ghost town. No new features are coming. What are you guys doing?" Fortunately, we had a great sort of community manager and great person doing marketing stuff on the team and continued to invest in the community despite the products, not really innovating or moving forward while we were working on this new format that really leaned into new creative tools. And we launched that, that version two almost exactly a year later.
Turner Novak:
Yeah, I think you've mentioned you had three months of runway left.
Mike Mignano:
That was later.
Turner Novak:
Oh, interesting. Okay. So you launched the creative tools. How many months of runway did you have left at that point? Do you remember?
Mike Mignano:
I don't remember the exact amount, but I'll get to, I think the point you're talking about. We launched the second version of the app, and I mean it was again, kind of like you said, we poured our hearts and soul into this thing and we launched it and it kind of blew up again.
Turner Novak:
Was there any hype building or it just blew up?
Mike Mignano:
We did once again, I think do the press and we sort of unveiled the new Anchor. And I think again, people were like, wow. And the funny thing was, you mentioned South by Southwest, I think it once again hit right around South by Southwest. People were talking about it, people were writing about it. There was a lot of love. The community thought it was a great upgrade, and immediately we saw the quality get better. We were like, wow, this content's good.
Turner Novak:
And what was the update again, or the that launch?
Mike Mignano:
Yeah, so there were a couple of things. On the creation side, we added all these tools for editing, adding background music, adding little interludes, features that you could record with people remotely so you could have almost like these collaborative conversations, all these things just to make the substance of the content better. And the other thing is we changed the format from a two-minute audio file to almost like more of a story where the narrative could just keep going on and on. You could just keep adding to this, which meant that the length of the content got much longer. And funny thing is we started to listen to this audio and think, wow, this is a lot better. Sounds like a podcast.
Turner Novak:
Was it still inside of the app? There was no RSS?
Mike Mignano:
Yeah, it was all inside. It was still our own format, but it started to sound like a podcast. And again, I think back to what we talked about earlier, we wanted to innovate on audio. We felt like to do that, we needed to own sort of the format end to end, keep everything internal, but we were like, wow, this is sounding like a podcast. And the users started to note that as well and say, "Hey, I'm making this thing, but nobody wants to download Anchor to listen to the one podcast that only exists on Anchor, but no other platform. What's that about?"
We were pretty adamant that we were not going to listen to this feedback. We were like, that's not what we're doing. We're building our own thing. We want to build this end-to-end closed loop system so that we could innovate and we could ultimately strategically own the entire platform.
Turner Novak:
Which I think is probably a very good strategy if you can get the platform big enough.
Mike Mignano:
Correct. I tend to agree. And so we were shipping new features, incremental things, and we were engaging with the community, doing all the same stuff we did. And I think over time this thing became a sticking point. We started to see once again that the product was not super retentive and it got to the point where one day Nir and I, we sort of looked at each other and we were like, what are we doing here? We are kind of plotting along. We launched this new feature several months ago. It's maybe growing a little bit here and there, but it's not explosive.
And we started to look at the bank account and we started to sort of back into our cash out date and realized that at the latest, we were going to need to go raise a round of funding, I think roughly three months from that point. And we were like, if we continue on this trajectory when we go to do this raise, we're dead. It's just not going to work. We know VCs well enough at this point that this is not a compelling enough story to do the next round.
And so I had been reading a lot of Paul Graham and Startup = Growth was always an article that had resonated with me. And we decided to adopt a similar framework, which in retrospect I call SuperGoals, but really what it was, was as a team, we sat down... we made a conscious decision that we said as a team we would sit down and we said, we need to grow 10% week over week for the next three months.
We have to. In terms of our active creators, we have to, that is the only thing that matters. It does not matter how we get there. And any idea can come from anywhere. As a team, it can come from a new feature, it can come from some sort of crazy marketing initiative, but we're going to meet as a team every single day and we're going to see where we're at along that trajectory.
And if we're not on the trajectory to hit the goal, we're going to do something different tomorrow to get there. And if we miss a week, we don't build 10% from where we ended up, we build on 10% from where we were supposed to be.
Turner Novak:
So you might have to do 13% or 20%. Okay. So SuperGoals, just really quick to make sure we get it all defined. I have it written down if you want me to read it, but what is a SuperGoal? How do you define that?
Mike Mignano:
Basically the way I define a SuperGoal is sort of an existential high stakes forcing function for the entire company, or an entire team. I think if it's a bigger company, you could put it in for a specific team. But in the case of a 12 person startup, it is the only thing that matters. Everyone is responsible for helping hit this and anyone can be responsible for generating the ideas and the actual things needed to go and hit that. It's the only thing that matters. Every other KPI, whatever, it's dropped. That's basically a SuperGoal. And I think the other thing about it, which if you wrote it down, you probably wrote, it has to be time boxed because there needs to be real stakes.
Turner Novak:
Otherwise, you can just be like we didn't reach it, but we'll just try again next year or something.
Mike Mignano:
And everyone has to adopt this. I think oftentimes when you set goals with fixed deadlines, it's like, oh, these are self-imposed. It doesn't matter. So the other thing about a SuperGoal is you really need everyone to buy into it. And so to accomplish this SuperGoal, everyone needed to be aware of the stakes, which was, if we don't hit this, we will not be able to go raise our round and the company will be dead.
Turner Novak:
And you had zero revenue at that point, right?
Mike Mignano:
Yeah, zero revenue. So we did that and everyone adopted this and we said, for the next three months, we have to hit this 10% week-over-week growth goal. And we started meeting on a daily basis and we started generating ideas and we started shipping features and we were having some success, but it felt like it was going to be an uphill battle. And I think somewhere along the way, maybe a month into this of having moderate growth-
Turner Novak:
You still had the app of you need to be inside Anchor?
Mike Mignano:
Yeah, yeah. We started thinking about this thing from the users that we just talked about, which is, hey, maybe we should be distributing off platform. Per your point, seems like a better long-term strategy to be internal to the Anchor app and keep the closed ecosystem. But users really want this and people are making content. We have to pull some of these ideas off the pile and try them. And it was a big philosophical debate inside of the company for, I don't know, maybe a couple of weeks. And we ultimately decided we're going to try this.
So we hunkered down and we spent the next couple of weeks building this whole RSS infrastructure. We didn't have RSS at the time inside the app to go back to the RSS thing. And we basically built a feature where you could take your Anchor station at the time, tap a button, we regenerate RSS feed, and then we would actually go submit it for you. We didn't tell you this, we didn't tell you what was happening, but we would actually go and submit it manually on your behalf. And then once you were approved by Apple or whoever, we would paste your podcast URL inside of our backend. You would get it on the front end. Boom, now you got a podcast.
Turner Novak:
So it was kind of all those problems we talked about in the podcasting space. You were like, all right, let's just go solve as many as we can. Make it as simple as possible. To your point about maybe find founders that have a mission democratize audio, make it easier to create. Tying it all back, that's ultimately what you did. You just made it super easy to create a podcast.
Mike Mignano:
Yeah, that's it. It's so simple.
Turner Novak:
All these two years of just slogging out, probably doing... From a business perspective, I feel like it's economic value, probably more of strategic positioning if you own it end to end. But it was super hard. It was almost impossible. You would've never got there.
Mike Mignano:
I don't think so, again, because I don't even know if it would've gotten funded. Anyway, we shipped that and the moment we shipped that, the growth went insane. You hear these stories about people flipping a switch in the product and then finding product market fit overnight. It was like that. It went from us pushing something on people to them just ripping it out of our hands kind of overnight.
Turner Novak:
So how did you navigate that? What were some of the best decisions or maybe mistakes you made?
Mike Mignano:
Well, we went and we raised the round once it was working.
Turner Novak:
You shipped it. Was there a certain thing in the metrics, like you grew 100% that week and just suddenly it was like, okay, this is-
Mike Mignano:
Yeah, I don't have the numbers in front of me, but yeah, I've looked at the chart and it was going like this and then it went like that and it just kept going. It just never stopped. And there was a feedback loop too... Sorry. There was a viral loop too, because now these podcasts would end up on Apple or whatever and people would say, I did this with Anchor. Other people that wanted to make podcasts now knew that they could come to Anchor and do it. So there was this viral loop that was happening.
Turner Novak:
Did you do anything in the description like podcast created with Anchor?
Mike Mignano:
All that stuff? Yeah, we did all that stuff. And there's a whole strategy and tactic around that.
Turner Novak:
Well, yeah, so anything specifically that you did to unlock and enhance the growth even more?
Mike Mignano:
Well, so first thing is, again, the positioning of the app at this point was still around the social network, but now there was this sort of bolt-on feature that let you sort of distribute if you wanted to take that optional step. Once again, we decided we're going to rebuild the app and we're going to make it all about podcasting. We're going to change everything about the apps and build a web app that it's no longer this audio social network with this bolt-on feature that lets you distribute if you choose to. The whole thing is going to be about producing your podcast and distributing it to Apple and Spotify, et cetera.
And once again, that took us a couple months to build. But the beauty of it is once we launched it was all so clear, the positioning of the product, the onboarding, the activation, sort of the funnel that we led you down. It was just we put you on these rails where it was just so obvious what this product was for, who it was for, what it did. And that alone to your question, just really accelerated the growth. The value prop was just undeniable.
But the other thing we did is we started to think about, hey, how can we make this thing grow even faster? And so to your point, we started to do all these things like putting things in the show notes and inserting little audio ads at the end, "Hey, this..." I think Maya or somebody on our team recorded a little thing, "This podcast was made with Anchor. To make your own, go to Anchor.fm."
And so then came the time to monetize, right? Because now a couple months later, fast-forward a year, this product was big, this community was big. We seemingly overnight doubled the amount of podcasters that had ever existed in the world. And every month that passed by, we were increasing the size of the market.
Turner Novak:
How big were you? What was the scale at this point?
Mike Mignano:
Maybe a million creators. I don't know. It depends where we are in the story.
Turner Novak:
That's a lot.
Mike Mignano:
Yeah, this thing got big quick. And we realized that we had an opportunity to monetize podcasts in a way that had never been done before, which was we could bundle them. We could bundle them up and offer advertising across a network of podcasts. Whereas previously, advertising and podcasts had been sort of this one-to-one kind of sales process where an advertiser or an agency reaches out to one podcast, agrees to do a host-read ad, and that's how it happens.
So we could instead build technology where large chunks of users would get a notification on the product and it says, "Hey, Squarespace wants to advertise in your podcast, read this ad, insert it here, and you'll get paid every time that ad gets played." That was our solve to monetization.
Turner Novak:
And just curious, why was that a big deal for somebody who doesn't understand how podcast ads work?
Mike Mignano:
So it was a big deal because, going back to the RSS thing, the data was so limited in podcasts and there was no way to aggregate the data at scale that the only way an advertiser could really figure out what podcasts were worth advertising on was to look at the charts and basically say, what are the biggest podcasts? Those are the ones I want to advertise on. That was how you found the biggest shows.
And so if you were not one of the biggest shows, you would never be able to advertise because there was just not a process that was automatic enough such that you would ever be included in any sort of a deal, let alone the tracking and the accountability of the actual campaign to know if it worked.
And so, I'm exaggerating, but something like maybe only 1% of the podcasters were actually making money and you had all these other people, hundreds of thousands of people that were earning zero. Now, all of them being on our platform, we could effectively monetize the long tail at scale. That was really the bet of... And this is similar to how YouTube ads work or AdSense, it was really just taking that playbook to a medium that was too fragmented to ever really have that in it before this point.
Turner Novak:
And I think you guys did a new SuperGoal, which was every podcast can generate ad revenue, or it was something like that.
Mike Mignano:
When we launched this, we really wanted it to be such that you turn this thing on and you could start making money on day one.
Turner Novak:
Like your very first podcast?
Mike Mignano:
Literally your very first podcast, just any user, we wanted there to basically be a toggle where it's like start making money and you turn that on and from the moment your podcast starts getting played after that, you would make money.
Turner Novak:
So how'd you try to get that to work?
Mike Mignano:
So we went out and we hustled like crazy to get advertisers, and we signed up a number of the big podcast brands that were advertising at the time. And credit to the team for hustling like crazy to do that. It was a motion that was brand new to us. But still when we got just about to the finish line, we didn't have enough advertiser demand to fulfill the goal of getting every podcaster monetized. And the way that we were monetizing this was on a CPM basis, meaning we only paid if a podcast episode got heard.
And so one of our engineers had this genius idea, again, the idea with SuperGoals, everyone's trying to generate ideas to accomplish the goal. It's constantly checking in. Somebody had this brilliant idea that, well, maybe Anchor could be the sponsor because if you really think about it, yeah, it might sound like it's too expensive to say every podcaster gets paid, but we were still kind of small enough on the listening side that in aggregate of all the long tail, it was an amount we could probably afford. And it was also a temporary measure until we brought in enough advertising demand.
Turner Novak:
Yeah, so it was probably just sponsoring one big podcast, but you spread it over the long tail or something like that. And it wasn't permanent, it was just let's just kickstart it?
Mike Mignano:
Exactly. Exactly. So that was the idea.
Turner Novak:
And it was probably an incredible ad for Anchor too. It probably worked so well.
Mike Mignano:
So this goes back to your question from earlier around, what'd you do to drive growth? So we did this idea, and again, it was a brilliant idea. And all the top podcasters got matched with Squarespace or whoever else we had brought on. And the people that didn't qualify for those, they would get matched with Anchor.
And we turned this thing on and we launched the product. The product was a huge hit because all these people could make money that previously hadn't made money before.
But somebody in our team started to notice something in the data. We were tracking all the podcasts that had ads in them. And then we were also able to do sort of this hacky kind of attribution of where the growth of Anchor was coming from, such that we could do a calculation of the CAC for all the different channels we were marketing on, which were very, very few at the time, including this Anchor ad on the Anchor network. And we found that it was this insanely efficient marketing channel.
Turner Novak:
Really? Using your own product basically to market?
Mike Mignano:
Yeah. And it made sense. So if you think about it, imagine you have a... well, you do have a podcast and a host-read ad of you saying to a podcast listener of your podcast, "Hey, I made this podcast with Anchor. Anchor is awesome because it's free. It enables me to make money. I can do it from my phone. It lets me distribute to every platform." It was so authentic because it was all true. It was all true. And there were hundreds of thousands of people saying this.
So if you're a listener to podcasts, you're hearing all these different people basically say the same message. It was the perfect form of brand advertising. And so the efficiency was insane and that pushed the growth up even further such that we were growing like crazy.
Turner Novak:
So it was working. Was there certain revenue? Are you allowed to say, was it couple million in revenue, tens of millions? Or users? What was kind of the-
Mike Mignano:
It was very nascent. And the truth is the way we had oriented the business at the time was really around winning market share of creators. And the other thing that happened right around then was we started to engage in discussions with Spotify to be acquired, which then started to absorb all of my time.
Turner Novak:
I thought it'd be really interesting to kind of take people, as much as we can, inside that process. I think you also mentioned you turned down a Series B offer. I don't know how much you've talked about that before, but can you just talk through just those couple months, what it's like to get acquired, what kind of things you were thinking about and considering, specifically you also probably could have kept going, raised a bunch more money, just take us inside all that?
Mike Mignano:
We were really fortunate that throughout the journey we were building a relationship with Spotify. In fact, Daniel Ek, obviously a very, very busy person, CEO of this massive company. I mean, when Anchor originally launched, the first version, the one that didn't work, yeah, one of the first people to reach out to me to catch up was Daniel Ek, and he was a fan of the product. He saw it I think on Product Hunt or something just like everyone else and was like, "This is cool. You're building something in audio. Let's catch up."
So I was in the really fortunate position of having the opportunity to start building a relationship with him and Spotify from the earliest days, which in hindsight I think is really important. Now having gone through an acquisition, a couple acquisitions, both from the builder side and on the other side, did a few acquisitions on Spotify, that's really important, I think having the runway with a person or a team or a company these are much, fundraising is like a marriage. M&A, probably more so the alignment around vision strategy, it's so, so important.
So we were building that relationship with Spotify for a very long time and, without revealing too much, we had discussed the opportunity of merging a couple times before, but this moment sort of after the sponsorships launch became a lot realer. I had gotten to know Gustav Soderstrom, who's now one of the co-presidents of Spotify and chief product officer, chief technology officer.
And much like with Daniel, a lot of alignment around the future of audio and being able to innovate on podcasting in many of the ways that we talked about earlier in the conversation, you and me. And it seemed like if our mission was really to democratize audio and the more and more we talked to Spotify and understood what their plan was, it really felt like that was the best way to do it.
And so yeah, to your question, could we have kept going? Yes. We had this offer on the table from one of our insiders, actually, I won't reveal who because I don't know if this person wants me to. But we had a very generous offer on the table, but we were also looking at the landscape and looking around at the things we needed and looking at the direction things were going and it was not clear that it would work if we kept going. And it was very clear that we would accomplish our mission if we sold.
Turner Novak:
Yeah, because almost like Spotify had that network that you were going to probably have to try and build. It closed that piece. It's almost like you let it go, but then by joining Spotify it's like, okay, well they did that for us almost.
Mike Mignano:
Exactly. And If you follow the trajectory of the product and the strategy post-acquisition, I mean, I thought we were growing when we sold, but the growth, I mean, reached heights I never could have imagined pre-acquisition.
And the other thing was we just saw what a lot of the other players were doing, namely one company in particular, which will be left unnamed, but I'm sure people could figure out who it was. And not only was that company not investing in podcasting similarly to Spotify, it was pretty clear that this company was going to make things much harder for us in a way that would've really jeopardized the company and the product offering. So joining up at Spotify was a way to avoid that.
And frankly now in hindsight, I think if you just look at sort of the M&A activity and podcasting over the past couple of years and kind of the market, it feels like Spotify has kind of accomplished their mission in terms of podcasting. And it also feels like the opportunity for podcasting startups has changed quite a bit. And so I often do think to myself, yeah, maybe we could have kept going, the growth trajectory was straight up into the right. But I also think in hindsight, the timing probably couldn't have been more perfect, although we couldn't have known that at the time.
Turner Novak:
I think I saw public numbers, it was something like $130 to $160 million was the amount of the acquisition. But it seems like a pretty good outcome at the end of the day for employees, investors, and then for Spotify too, it seems like it's a good place to end up.
Mike Mignano:
Yeah, I mean I won't comment on the number. Want to be respectful to the many agreements I signed when we sold. But no, look, I mean, I think given the small amount of capital that we raised, yeah, it was a great outcome for everyone.
We know some of our earlier funds, I think it was very, very material to those funds. I think one or two funds that returned the fund. Our employees, nothing makes me happier than seeing great people get rewarded. And some of our earliest employees really had an amazing outcome. Obviously it was life-changing for my co-founder and me in ways that we never could have imagined when we started this thing. Going back to earlier parts of this conversation, just being super naive about what we were building and what challenges we would face, it was all very, very surreal.
And yes, for Spotify, if you play it out and you think about what's happened since, I think Spotify is sort of undeniably the podcast champion, of course now as the medium has shifted to being more about video, YouTube is obviously also a big player. But Spotify had 0% market share only few years ago, and Apple had all of it, and it's kind of... Now Spotify is the market leader. So it worked out and it was an incredible experience.
Turner Novak:
It seems like some people were questioning Spotify's podcasts and I think their earnings came out, by the time this gets published, maybe about a month ago, most recent earnings, seems like Spotify did pretty well on podcasts.
What would you say Spotify did well just in terms of how they navigated the whole podcast spending up? Seems like people are using, it seems like it's working. Positive gross margins I think is what I saw in the last earnings. I didn't actually read them yet, but it seems like it's working.
Mike Mignano:
To win podcasting from being at zero on podcasting to then needing to win it. You needed to do a bunch of upfront work, right? First of all, you needed to get a bunch of listeners to now switch their behaviors to Spotify. And to do that, you needed the biggest shows in the world. You can't go from having 0% market share to being the market leader and not have Joe Rogan or Serial or Call Her Daddy. And so-
Turner Novak:
My podcast is not going to do that for Spotify. I'm have like a couple thousand listeners.
Mike Mignano:
Same with mine. Same with mine. So you need to have the biggest shows in the world, and to do that, they had to pay.
The other thing is if you want to build a really robust and healthy and growing business on top of podcasting, you do need to upgrade the infrastructure. Back to the point we talked about at the beginning of the podcast around RSS and the limitations and the limitations that had on advertising. There is a lot of upfront work that goes into that.
And I actually think, even though there has been much written over the past year about Spotify's pullback and all of this, I have sort of an opposite point of view, which is there were a bunch of upfront investments that needed to be made to bring the listeners over, to upgrade the infrastructure. And now as someone external to the company looking at the earnings, just like it seems like the fruits of the labor are starting to emerge.
Turner Novak:
Yeah, they were investments.
Mike Mignano:
Yeah, exactly. And so I actually... And I'm biased, I was there, I was a big part of that whole journey and that strategy, but my perspective is that it worked. And it required a big investment, but now it's starting to pay off.
Turner Novak:
And it seems like video is kind of the next frontier of podcasts. Is that fair to say?
Mike Mignano:
For sure. And so that was a big thing that my team worked on when I was there, and I believe continues to work on, was adding videos to podcasts and Spotify and upgrading all the creator platform to make sure that that can be supported.
And again, maybe this goes back to your first question about what's the future of podcast moving forward. I think that does bring Spotify into new territory and it introduces new competitors, right? YouTube, obviously the biggest player in terms of UGC video content. And now by podcasting being a visual medium, which I think actually had a lot to do with the pandemic and the fact that a lot of in-person podcasts went to being remote and people using remote software, like Riverside, which we're using now, a lot of podcasts are upgraded to video, which meant that they now started to distribute their podcasts on YouTube.
And so now we move from a place where podcasts, for many years, was largely an audio first medium to one where it's kind of, if you don't have a video, you're kind of at a disadvantage. And so yeah, it should be interesting to see where things go from here. I mean, I'm obviously bullish on AI and all the things that AI can do for podcasts. It's been fun to see platforms like Spotify experiment with localization. I'm sure you've seen some of the things around-
Turner Novak:
The dubbing?
Mike Mignano:
Yeah, you can listen to it in any language. I think there's a ton of opportunity there. And obviously clips have become a big part of the podcast game, taking your podcast, cutting it into clips, using AI for wider distribution on platforms like TikTok.
Turner Novak:
It's so hard to grow a podcast. It's like the hardest thing to grow.
Mike Mignano:
But that's going to get better too, also due to AI, right? AI and machine learning completely change the way we all discover music content. It's hard to imagine how it won't have a similar impact on how we discover podcast content.
Turner Novak:
Yeah. Well, this has been an amazing conversation. Thank you for taking so much time.
Mike Mignano:
It's been a blast. Thanks so much Turner.
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