October 1, 2018

Groupon's Andrew Mason: Pt. 1, The Rise

by Without Fail

When Andrew Mason started Groupon 10 years ago he was in his mid-20s, fresh out of grad school, and running a company for the first time ever. Within 2 years Groupon was called the fastest growing company in history. 

And then just as rapidly and just as dramatically, its fortunes changed. This dream rise, the nightmare fall, all in this incredibly short time-span, it’s like a startup fable. But it actually happened. To a real guy!

In part one of this two-part conversation, Andrew talks with Alex about Groupon’s rise. How it started as a website designed for something completely different, what it felt like when it finally caught on and started to grow, and Andrew’s own conflicted feelings about being a CEO. 

Without Fail is hosted by Alex Blumberg. It is produced by Sarah Platt and edited by Alex Blumberg, Devon Taylor and Nazanin Rafsanjani. Special thanks to Ben Bergman.

Peter Leonard mixed the episode. Music by Bobby Lord. 

Transcript

ALEX: Hi, I’m Alex Blumberg and a couple years ago my wife Nazanin and I left our good stable jobs to go work full time at a startup ...  Gimlet Media. A podcasting company. The podcasting company bringing you this very podcast. 


And Gimlet wasn’t just any startup. It was a startup that I and my cofounder Matt had started. And  when Nazanin joined the team early on, she and I essentially went all in. Gimlet was our only bet. It had to work. 

 

And four years in we’re doing pretty well. Over 100 employees, a brand new office. 


But the anxiety hasn’t gone away. If anything, it’s gotten worse.


<<ALEX: What are you doing?

NAZANIN:  I’m looking at pictures of the British Royal Family.  

ALEX: What time is it? 

NAZANIN: Its...2:44 

ALEX: in the morning 

NAZANIN: Yes

ALEX: You can’t sleep?

NAZANIN: Can’t sleep.

ALEX: Me neither.>>


ALEX: This sadly isn’t unusual for us. To be kept awake in the middle of the night, by one anxiety or another.


<<ALEX: Why can’t you sleep? 

NAZ I can’t sleep because I…I just yeah. I’m just tired of thinking about Gimlet.

ALEX: This sucks.

NAZ Yeah it’s horrible. 

ALEX: I wake up and I’m like wide awake. I don’t know what I think I keep thinking oh we’re going to get to a place where it doesn’t feel that way. And we’re not.

NAZ: No. We are never going to not be up in the middle of the night.>>


ALEX: Because, success and failure, they’re not as far apart as people think. They are always right next to each other. It’s hard, when you are in the middle of it to tell which direction you are headed. To tell which decisions you’re stressing about in the middle of the night are the right ones. And, that’s the thing, not only are you kept awake by whatever it is that’s keeping you awake, but also by the thought that, maybe there’s this other thing that should be keeping me awake that I haven’t even thought about yet.


The longer Gimlet continues, the bigger it gets, the more I found myself craving advice from people who’ve traveled this path before me. Other people who’ve set out to try something hard, and who’ve succeeded, and who’ve failed, who can share with me what they’ve learned along the way. 


And so, you know, I run a podcasting company. So, I decided to do it as a podcast. 


And that is why we are here. This is very first episode of a new show we’re calling Without Fail. 


A podcast where I interview, entrepreneurs, athletes, artists, visionaries of all kinds - people who have tried to do something hard and succeeded  … or failed. We talk about all of it, and  what they have learned along the way. I’m kicking things off with this 10 episode season. If you all like it, then we’ll keep it going. If you don’t, we’ll add it to the big pile of failures that keeps us awake at night. But I hope you like it. I’ve enjoyed doing it so far.


Over the course of the season I’ve had a chance to have incredibly candid conversations with all sort of people -- entrepreneurs like Caterina Fake, co-founder of Flickr, who says when Yahoo wanted to buy the company...she didn’t want to sell:


<<CATERINA: We did a phone call and I remember saying you know Shutterfly is preparing to go public. And I said I don't see why we couldn't be on that same path. And I remember they laughed. The investors laughed like no this Flickr thing will never be like that. I kind of felt outnumbered.>>


ALEX: I’ve talked to athletes like Andre Iguodala of the world champion basketball team the Golden State Warriors, a team he joined even though it meant going from a starter to coming off the bench:  


<<ANDRE: People always say how’d you sacrifice being a superstar to being a sixth man? I always say listen man, you might be engineer in the backroom, you don’t understand the impact that you have on the company. End of the day we’re all gonna win.>>


ALEX: And, I talk to visionaries trying to solve some of the worlds most vexing problems, like giving every student in America access to high-speed internet: 


<<ALEX: So we went from 4 million students having access to 40. That’s almost 90 percent of students in America now. And that’s basically all because of you.

EVAN: Well I wouldn’t say it’s all because of me.

ALEX: I know you wouldn’t.

EVAN: There’s a lot of people who made this happen.

ALEX: There’s a lot of people, but none of them got the ball rolling. Like if you hadn’t gone on this mission a while ago, I think it’s safe to say we wouldn’t be anywhere close to where we are today.

EVAN: Yeah, I think that’s fair.>>


ALEX: And today for our very first episode I’m going to share a conversation that I had been wanting to have for years. It’s a conversation with Andrew Mason, the founder of a company called Groupon. 


<<NEWS TAPE: It’s one of the fastest growing companies the Internet has ever seen. Combining ... and recession era … all at a click of a mouse. >>


ALEX: Mason started Groupon 10 years ago when he was in his mid-20s. And every element that you imagine in a typical startup story, Groupon did it bigger. Mason was a first time founder, who before starting the company had been a grad student Public Policy, and yet within two years it was earning 100s of millions a month in revenue and was valued at several billion dollars. It was called the fastest growing company in history. It grew faster than apple. Faster than Facebook. Faster than Google. 


And then just as rapidly. And just as dramatically. It’s fortunes changed.


This dream rise, the nightmare fall, all in this incredibly short time-span. It’s almost like the comic book version of a startup story. Larger than life. A startup fable. But it wasn’t a fable. It actually happened. To a real guy!


I met Andrew Mason in 2013, in the aftermath of all this. He was starting a new company involving audio. I, with my co-founder, was starting Gimlet, the podcasting company producing this very podcast that you are listening to right now.  So we were both involved in audio we got to know each other a bit. He eventually became an angel investor in Gimlet. But, we never really talked about his experience at Groupon. Never that is, until a couple of months ago, when I sat down with him in a studio in San Francisco, where I used this very podcast as an excuse to get him to tell me his whole story: 


Alex: This is like for me very exciting because I always wanted to ask all the questions that I'm about to ask you which is like sort of like you've had this crazy experience experience with Groupon. It happened at a very, at like a time that I can't even imagine in my life like when I was 20. I was like when I was in my 20s I was incapable of doing anything let alone running a 10000 employee company. 


Andrew:  I mean the whole experience now seems like this like fever dream that almost happened to someone else. 


In the end, Andrew and I talked for over two hours. And our conversation was so candid, so interesting that we’re actually turning it into a two-parter. The next two episodes we’ll be featuring this conversation with Andrew Mason. And this episode has some strong language so you might not want to listen with kids around. 


Alex: And so let me just start I want to start at the beginning like I want to start in 2006. In 2006 you were not an entrepreneur. You were in school right. 

    

Andrew: Yeah I had gone back to. I'd gone back to grad school. I got a scholarship in public policy at the University of Chicago. So I went back there. I got about three months into it before someone that I had worked for previously called me up and said Hey why don't you drop out of school and I'll give you a million bucks to come and start this thing. 


Alex: What?? So that's pretty crazy 


Andrew: Yeah. 


Andrew: I was in Chicago. I wasn't aware of the entrepreneurial Silicon Valley technology culture. So the idea that you would go out and someone would just give you money was completely foreign to me. 


Alex: Yeah.


ALEX: So, quick context. Before Andrew had gone to grad school he’d been doing a bunch of stuff. He’d been playing in band, he was a musician. And he had also gotten into tech, making money on the side building websites for people. He liked the website work, but he’d never considered making a career out of it. Until this call. See the guy on the phone, offering Andrew a million dollars, was a billionaire businessman named Eric Lefkosfky. Before Andrew had gone to grad school to figure out what he wanted to do, he had worked for Eric, building websites. They’d become friendly, and Andrew had mentioned this idea to Eric of a website he wanted to build. The idea struck Eric as a good one, or at least, a better way for young Andrew to spend his time than reading academic tracts on political theory. 


Alex: So Eric calls you and says I’ll give you a million dollars to start, to start what?


Andrew: The idea was this website called The Point dot com which was simply a way to say I'll do something but only if a critical mass of other people do it with me. I had a bad experience with a cable company. I was like pissed off that I couldn't just get out carte cable channels or something dumb like that. Yeah. And I was like whoa it would be great if there was a website where I could get together with enough other people that together we would create a rational financial incentive for them to listen to us and we'll say we'll all switch to a competitor unless you unless you do what we want. 


Alex: Right. And so you're thinking to yourself like I'm an individual young man with no money they're not going to pay attention to me. But if I can sort of collectively organize like a collection of consumers then perhaps we'll have some clout. 


Andrew: Yeah and the thing that you do could be taking some kind of an action. It could also be it could also be raising money. So we'll all donate to a cause but only when we, when we hit a certain tipping point of funding. 


Andrew: I had this I had this vision of building a complete platform for solving the world's collective action problems that included a social network and private messaging and handling. You know this abstract model that would handle every kind of campaign for organizing people that one could imagine. 


Alex: So it's like sort of like Kickstarter and Facebook and Move-On-org and Groupon all sort of combined to one platform. 


Andrew: Yes exactly.


Alex: All right. So you start The Point and it’s mostly political things and stuff like that.


Andrew: Yeah.


Alex: How did it go? 


Andrew: I had no idea what I was doing. I remember in the early days like we would buy a bunch of books on like academic books on collective action. And me and a couple of the people that were working there were just like sit around and read 


Alex: What were the books what books were you reading?


Andrew: Who's that famous community organizer Saul Alinsky. Yes Saul Alinsky. Like stuff like that. 


Alex: You were reading Rules for Radicals. 


Andrew: Yeah yeah yeah. 

    

Alex: OK. So you're sitting in your in... And how many employees do you have at that point?


Andrew: Steady state for The Point was maybe like five to seven employees something like that developers and a couple community manager type people.


Alex: How was it going. What were you. What were you hoping for and what was actually happening. 


Andrew: So, because it was so abstract once we launched it nobody knew what to do with it. 


Alex: Right. 


Andrew: Even we didn't know what to do with it. Like I would go on. I remember going on NPR and doing an interview and they'd ask for an example of a campaign that you were organizing and the campaign we gave was a campaign to raise like a billion dollars to build a dome over Chicago to protect it from the cold in the winter. And for me it was like a you know a good like thought piece on how you might apply the model and that's cool but we didn't have any really good actual examples of things that people could could do with it 


Alex: Right .


Andrew: Now eventually that started to happen people on their own started coming up with some interesting ideas. And and one of those was was this group purchasing thing people would start campaigns to get 10 people together to buy something at a discount but only if those 10 people get together and 


Alex: And do you remember the first time you noticed that on the site 


Andrew: It wasn't like it wasn't this kind of like getting hit on the head with an apple kind of moments where that moment you see it you're like Eureka. This is going to be a multibillion dollar business right. Well you know in many ways it was that it always felt like kind of the dumbest and least inspiring application of the model compared to what we imagined it being used for which was power to the people


Alex: Domes over of Chicago. (laughter)


Alex: Yeah.  What what led to like just going all in on the group buying?


Andrew: Desperation. It was basically we had been at it for I think about 9 months or maybe a little bit less than that. And Eric and our other investors were looking at this. There was no growth. And they were saying this isn't going to work. So and there was a risk of losing our funding actually pulling the money away. 


Alex: And when you say there was a risk of losing, was that something Eric told you? 


Andrew: Yes.


Alex: What did he say?


Andrew: I mean it was very explicit that that he felt like it might just be better to shut it down and distribute the money back to investors. So we laid a couple of people off to bring our burn rate down to something 40 50 thousand dollars a month. That would give us a little bit of runway and time to experiment and then we just started focusing on wh atever whatever ideas we could. And one of the ideas was group buying and and so the the idea we decided to go with group buying was instead of just having this marketplace to go out and find one deal a day and see if we can see if we can procure that deal ourselves and then email it out to a list of people that would be interested in it. 

And that was the first version of Groupon it was called Get Your Groupon dot com. I think it was the first year because Groupon was taken 


Alex: Groupon was already taken. 


Andrew: Yeah of course Groupon was taken. By some guy in England that some developer that one day imagined building a group coupon site. 


Alex: OK. OK. So what was the first deal that you guys did.. 


Andrew: Ok So we got to the point where we were ready to launch. And we had a couple people that were kind of interested in working but we didn't have anything that was really really great. 


Alex: A couple people, you mean a couple businesses? 


Andrew: A couple of businesses now the first deal we were going to run and this could have been it for Groupon was was called Christie’s Sports Lingerie or something like that. Sports.. Garter belts that were sports themed. 


Alex: And that was your first that was going to be your first one?


Andrew: It was so ridiculous and you have to realize like the whole team was in kind of mood of desperation this point. And so we were like Whatever. Yeah right. Well we got to go. Got to try something. 


Alex: And we and you guys and you guys couldn't get any businesses to sign up like I was like I don't know about this newfangled. 


Andrew: Yeah that was the best that we had. 


Alex: Right. So you're days away from that being your first deal. What happened. 


Andrew: We've got this other deal at Motel Bar which is the bar and pizza place downstairs.

    

Alex: Downstairs from your office?


Andrew: And we sold, I think we sold 20 of those in the first the first day that we ran. And the way that we sold them was by going to the lobby of the office building or standing outside of Motel Bar and handing out little postcards that we had printed. And and I remember sometimes like sitting standing behind people in some of the other office spaces in the building and actually like walking them through signing up and saying you go here every day why would you not get this. And so it took a lot of manual hand-holding. 


Alex: But just to get like 20 20 people to act.. 


Andrew: Every one of those 20 was a labor of love. 


Alex: So when you close that first deal you're like OK we'll do it again tomorrow and the next day and the next day for the rest of our lives. 


When did you when did you realize, oh this is this is working?


Andrew: If I'm remembering correctly there was a sushi place that we ran at some point early on where where we sold maybe 500 groupons and that was like wow. You know this is we're on to something here. 


Alex: So OK the sushi thing starts starts to be the seems like a little bit of some sort of turning point. It sounds like what. What is how are you feeling at that point?


Andrew: It was incredibly intense right because every day we're putting a new deal up. We're trying to figure out how to launch new cities. And I remember I remember like my team and I going to the mat like really fighting it out on what deals we were going to run. You know be it would be like someone would come up and say hey let's do this indoor soccer deal and someone else would be like No that's the dumbest thing people hate. And we were so passionate about it in a way that I mean we were behaving like children. But on the other hand it was it was beautiful to care that much about something in a way that that is difficult to do when it's not your first time. And and and so there was just a ton of passion and we really cared about doing it the right way. 


Coming up after the break, 


Andrew experiences the sincerest form of flattery, and it doesn’t feel good. That’s after these words from our sponsors:


<BREAK>


Welcome back to Without Fail, and my conversation with Andrew Mason, the founder of Groupon. When we left off, Groupon was beginning to grow, looking to expand into other cities:


Andrew: Groupon was six months old we only existed in Chicago. We'd had really limited press but it was going well in Chicago well enough that we had decided to get into another city into Boston and we sent a couple of our people and our team out there to go door to door and try to sign up some businesses. We went into a business and they said Yeah you guys don't be so pushy. You know you were here. You were here a week ago and we told you we'd get back to you and we were like that's not true. We weren't here a week ago. What are you talking about. And they're like yeah you where you left your. You left this flyer with us and they gave us the flyer and it was this. It was I don't remember what they were called at the time. But it was the first groupon clone and they had like literally copied a bunch of the writing on our Web site and from our sales materials. And it was just completely shocking like I was new to business right. I always thought I was going to be a musician and in that world we would call this plagiarism. But in business apparently I was learning it's just called competition. 


Andrew: But man it was shocking to see that and if that wasn't shocking enough like then over. There were at some point literally thousands of Groupon clones everyone from Google to Facebook to Amazon had launched the exact same the exact same model and we were going up against all of these people and I hated them like I hated them not just as businesses or as competitors but I hated the people like I would I would find out who the people were and direct beams of hate to them in their lives and hope that nothing but bad things happen to them for the rest of their lives. It just seemed like the worst kind of person to me that would that would just shamelessly copy what you're doing and in order to make a quick buck. 


Alex: So what offended you so much about that?


Andrew: Wouldn't that wouldn't offend you? Is that hard understand why that would be offensive.


Alex: I'm just, I'm asking questions on behalf of the listener. 


Andrew: You know at that point it was kind of like you know my idea it was my thing and. And at that point in my life I took a lot of that was where I got a lot of my satisfaction from having that. And that's the form of impact that I'm having. And I mean it just for for somebody to to and it took a lot of hard work to get there right. 


Alex: It feels like cheating. 


Andrew: Yeah it felt like cheating. It totally felt like cheating Yeah. And it was a very competitive market where we were paying a lot of attention to the competitors that were out there. Our behavior was influenced by the existence of these competitors the way that we did sales the way that we evolved the product because it was so easy. I mean there were a lot of competitors because it was so easy to launch a Groupon clone. You could spin something up and in a couple of months the same way that we did and then you just and now that the model has been validated and there's existence proof and and we were in a situation in the early days where we had a backlog nine months deep of people that wanted to be featured on the site. And and because we were stalwarts about running one deal a day and no more we couldn't serve that demand. So the whole model invited the existence of these competitors to sop up the excess demand there was from these businesses. 


Alex: And did that did this competition...did that drive this push for growth? 


Andrew: Well I think a lot of the growth was was definitely driven by these competitors being out there and realizing that if we didn't do it then they were going to eat our lunch. And it sure would have been that way. I mean it just felt like it felt like this huge opportunity is out there and we need to run as fast as we can to grab it before somebody else does. From when we launched in Chicago it was I think six months before we felt like we had our bearings and we were ready to launch another city. And so it was like March or April of 2009 when we launched our second city Boston. And then and then it was three months before we launched our third city which was either New York or Washington D.C. and then and then we kept on cutting it in half and we got to the point where we would launch a city a month and then two cities a month and then four cities a month and we just came up with this recipe for launching a city and then it just became rinse and repeat. 


<<NEWS FOOTAGE: This Internet company...we’ve been called the fastest growing company ever. So pretty fast>>


 ANDREW: I remember an investor at one point coming to the office when we were 20 or 25 people saying before you blink there's going to be 100 people in here. And I was like 100 people working for me. How does that work. Like how do you how do you manage 100 people you know like I don't know you must have had this experience where one day you wake up and you have hundreds of people working for you and it's kind of working. And people are doing things and they know what to do before before you're in that it's really hard to imagine how something like that couldn't be a complete shit show. 


ALEX: Oh it’s crazy. like we went from 20 to 80 over the course of one year so crazy. And you're you're talking about adding thousands of people over the same time period.


Andrew: Well that's probably the hardest part is actually that kind of 20 to 100. I'd say that's the that's the most disorienting part. 


Alex: Really? Like zero to 100 felt different than 100 to 2000 


Andrew: I mean something like that. Right. Like once you get over a year like kibbutz or whatever. Right. That's that all feels like a process of being reborn. 


Alex: That's so interesting. I think that's just because we don't have we we aren't psychologically capable of grasping large numbers 


Andrew: Well your relationship with with people changes. You start thinking about people the people that work for you differently where you're thinking of each one is an individual human. Now you're just thinking of them is because you know them right you don't. A lot of them you never even see. So it's very different when you can all fit in the same room and there's enough people that you like. Once you cross over to that point where you're like I don't know everybody's name anymore. That's that's a moment where you need to relearn how to do your job right. 


After the break, Andrew tries to relearn how to be a CEO, and starts reading books on the job again. That’s after these words from our sponsors:


<BREAK>


Welcome back to Without Fail and my interview with Andrew Mason - who found himself at the helm of this huge company. Andrew says that he didn’t know how to be CEO of a company like that. So..he looked for some advice: 


Andrew: You just start like reading these bullshit business books like Good to Great. I mean it's a great book. 


Alex: Were you reading those books? 


Andrew: Yeah sure. I mean I was reading everything I could to try to figure out what the fuck was happening to me. And at some point.. what'd you think of Good to Great? 


Alex: I haven't read Good to Great I read it. I read The Hard Thing about Hard Things. 

    

Andrew: It's great. 


Alex: Yeah it's really great. It's a great book. I've read...


Andrew: Art of War 


Alex: No I'm not going to read the Art of War. 


Andrew: That's when you know it's time to hang it up when you read the Art of War. 


Alex: OK so you're reading these business books and you're trying to like be. Well I think there is this thing where all of a sudden you're a CEO and it sort of starts as a joke like ha ha ha I'm a CEO I would say it ironically a lot. And then all of a sudden I'm like No I am 


Andrew: Yeah. 


Alex: And it's like I can't just joke about it anymore because like everybody now is working for me and it's like a bad look. 


Andrew: Yeah totally 


Alex: to be Self-deprecating CEO in front of people. 


Andrew: Yeah I also had a really hard time accepting that. I mean I remember Forbes wrote an article putting us on the cover of Forbes calling us the fastest growing company of all time. 


Andrew: And I hung it up in the lobby of our of our office and I surrounded it with cover articles about like WebVan and 


Alex: Myspace


Andrew: Yeah that were all like the hottest company ever. All these companies that had that had gone under. And it was this kind of like morbid joke that it just came from my discomfort with the insanity of everything that was happening. 


Alex: Right. It sounds like there was like there was a lot of internal conflict for you about your role. Is that true? 


Andrew: Yeah, the conflict was was just like you know you imagine you like like people would ask. People would ask me where did you come up with the idea for Groupon? And I would respond with something insulting like like well I was just out flying a kite one day. Got a little cloudy started to rain and lo' lightning struck the kite the lightning bolt flew down the string into my hands and I thought what if there was a way on the Internet to get 50 percent off local businesses. 


Alex: That's such an asshole response. 


Andrew: I know. But it's such a it's like like the idea there was a lot of on the ride up there was a lot of stuff in the press of trying to kind of deify and turn the turn the CEO into this hero or this genius or something that like I felt like those things but not with Groupon. I didn't want Groupon to be the dumb coupon company. Like that just felt like an act of desperation in order to not have our funding taken away. And it's just funny how these ideas happen to people you know. Like me today I never would have gotten myself in a situation where the conditions for Groupon could have happened. Because it took having an incredibly naive idea which was The Point and messing that up 


Alex: Right 


Andrew: And then figuring out what I could make out of this rubble in order to be in the conditions that would lead me to start Groupon. like I wouldn't have just woken up out of bed one day and say I have this idea for a way to offer deals for local businesses 50 percent off I’m going to go drop-out of college and start that company. 


(MUSIC)

Next episode, part two of my conversation with Andrew Mason. Groupon’s meteoric ride continues, until it all comes crashing down for Andrew:


<<It was just this crazy rocket ship that never really let up until you know later I'm sitting on my couch fired imagining how I could just sit here and order pizza and not move for the rest of my life. >>


That’s next episode of Without Fail.


Without Fail is hosted by me and produced by Sarah Platt. It is edited by Devon Taylor, Nazanin Rafsanjani and me. 


Special thanks to Ben Bergman.


This episode was mixed by Peter Leonard.


Our amazing! theme music that I love so much is by Bobby Lord.


If you enjoyed this show, and you want to hear more, subscribe on Apple podcasts or wherever you listen, leave us a review. It really helps. And tell all your friends. Tell them!


We’ll be back next episode. Thanks for listening.