The following is a transcript of Targetable CEO Vladimir Edelman’s interview with School for Startups, a syndicated radio show sponsored by the U.S. Small Business Administration. Vlad spoke with School for Startups host Jim Beach.
Access the full audio of the February 21 episode here or read the abridged transcript below:
[00:00:04] From the AM-FM 24/7 Radio Network, broadcasting from AM and FM stations around the country, welcome to the Small Business Administration’s award-winning School Startups radio: When we think small business and entrepreneurship. Here’s your host, Jim Beach.
JIM BEACH [00:00:31] Hello, everyone. Welcome to another exciting edition of School for Startups or Radio. It's Friday, the 21st of February, and we have a fantastic show for you today.
[Editor’s Note: Vlad Edelman is the third of three guests. We’re cutting right to his section]
JB [00:28:45] We are back. And as always, we are very appreciative that you are with us. I'm excited to introduce you now to Vlad Edelman. He is the CEO and founder of a couple of companies. Today, we're going to talk about his newest one called Targetable, which is using machine learning to automate social campaigns for restaurants. That sounds cool. He has 20 employees – pretty large – and is projecting $3 million in sales this year. Had another company in a similar space called HEROFi, which was also marketing automation. Pretty cool. Vlad, welcome to the show. How are you doing today?
VLAD EDELMAN [00:29:29] I'm doing great, Jim. Thanks for having me.
JB [00:29:31] All right. So the first thing I don't understand is why do we need machine learning for a social campaign for a restaurant? A campaign for a restaurant is easy. Lobster on Tuesday, french fries, the special of the day you blast out.
How hard is that?
VE [00:29:51] Well, it's gotten a lot harder in the age of social media and enormously fragmented consumer attention. Right? So when you had that kind of lobster on Tuesday, especially back in the day, you were talking to a mostly consolidated audience. You can blast that out through your penny saver value pack radio or a local TV station. And the reality is that the consumer you're trying to find and get into your restaurant on a Tuesday is now getting ahead with hundreds and hundreds of offers, not just from restaurants, but for things to do as friends and entertainment and everything else. And so not only does your offer need to be more compelling than it's ever been, but it has to be at the right time and to the right person. And so what we figured out – and by the way, you mentioned two companies, HEROFi and Targetable, there's only really one company.
The product is called Targetable. We have a holding company called HEROFi. Just to clear that up. But it's a good Segway to the fact that when we started this company five years ago, we really started working with large customers, large chains like Buffalo Wild Wings (with thirteen hundred locations) – a great example. They asked us at the point where we were kind of a digital consultancy/product development firm how can we help restaurants become more digital, become more social, become more connected to the customer? And when Buffalo Wild Wings came to us, they said very simply, hey, we've grown very, very fast. And the original concept of that restaurant was “your neighborhood sports bar.” As in, “Hey, come on down. It's comfortable.” A little like Cheers. You know, where everybody knows your name. And as they got bigger, they lost a lot of their connection to the to the local customer. With sports, you've got so many ways of connecting with locals through fandom and everything else. But they were too big and too monolithic. And so they came to us and said, hey, make us more connected, make us more relevant to customers in Cleveland versus customers in Des Moines versus San Francisco, et cetera. And, one of the projects that we created for them, which eventually kind of turned into Targetable or was one of the initial ideas behind Targetable, was essentially this concept of watching Win, which was us taking in live data from live sports feeds. And so when something would happen with a local sports team, something would happen in the restaurant.
And so a great example of that would be if you're sitting in a Minneapolis Buffalo Wild Wings and the Vikings have scored a touchdown or a safety or anything else, that's exciting. Everything in the restaurant automatically goes 15 percent off. Diners buy one, get one free beer. And that promotion and that infrastructure and that ability to react instantaneously to something that happens, switch over the appeal. All of their digital signage announced that deal. And then fifteen minutes after that, put it all back to normal. That's a great example of what you can do to promote and to create connectivity between a local constituency and in a restaurant that happens to be serving it in a geographic location. So that is called experience. I literally anticipated and got to think it was double sales of that product during the 15 minutes.
Well, in fact, we drove such substantial returns for them, which I can't get into the exact details because they're a publicly traded company. But, you know, the reality is we lifted double digit lift in check sizes, which is a critical restaurant benchmark. We raised the frequency of people coming. We raised how often they came back. Because when you think about it, what is that? That is a loyalty program, essentially, that is linked to a physical location instead of a particular person. And so, if you walk into that restaurant at that time, you're not sure what might happen. But, it'll be more fun to watch the game in their location than any other raid when you're choosing between locations, and even your own, man cave in your garage where you have a gazillion inch TV now and don't really need to go to a restaurant to see it in the hotel.
That idea and a couple of others like that eventually became us sitting down a year and a half ago and saying, OK, we're working with these large chains where what we're doing is really helping. We've really learned how local restaurants operate, how local retail operates. We're working with Westfield Malls, working with Subway, working with MGM Resorts. And so we decided to essentially – one of the hardest things I've ever done as an entrepreneur – take a couple of quarters off, meaning we essentially shut down our HEROFi business, our agency business, to build an on-demand business. We decided what we've always wanted to build was a SaaS platform product, something that anybody can use, something that has much higher margins than this fairly work-intensive consultancy/ad agency that we had. What have we done for customers that's worked? And so Targetable is one of those very rare startups and very rare software products that's benefited from us operating in our industry for almost four years, before we took all that data and all of that knowhow and put it into a product called Targetable, which is essentially a virtualized ad agency. Targetable does everything an ad agency would do for you for not even a tenth of the price, but one hundredth of the price.
JB [00:36:42] Excellent. So it is real. It's 100 percent real. What about this? You can get it.
VE [00:36:56] Not only can it do that, but in reality, what it can do is take real photos and take a real copy and create real digital ads instantaneously. And what's amazing is literally this is the only product in the world that does what it does, which is when you log on, when a customer logs on to Targetable, within the first two to maybe five minutes, they're looking at their first real digital social ad.
But they're not just looking at an ad that's been kind of slapped together with a bunch of random creativity. What's interesting about the product is all we need to know is your physical location, which is why we ask customers to log in with Facebook. The platform itself has access to and provides terabytes and terabytes of data and information to the intelligence of the system, meaning we're tracking weather, traffic, demographics, all sorts of other things that influence decisions that are relevant to a business that operates in the physical world. And so as soon as we know our customers look, then we can start to make ads for them that are also self-aware because we know what type of environment it's operating in. And so the ad that gets created, even though that moment is the stupidest the system will ever be, that first ad when it sees the customer for the first time, it's the start of a race. It hasn't met that sentiment before, but it now knows the location and a sentiment and already that advertising will be so much better and so much more focused, optimized and targeted than an ad produced by an ad agency that would take 90 days and they’d bill you thousands, if not tens of thousands of dollars.
Instead, within minutes of engaging with Targetable and for anywhere between $99 and $299 a month, which is what we bill, you've got ads that you can publish instantly to Facebook, Instagram and so forth. So it really enables a small business. It really enables anybody, really, with the operating mechanics of a restaurant whose margins are fairly low. It allows them to have the same level of data, access to data and the same levels of optimization and targeting as Proctor & Gamble gets from their giant ad agencies that they've paid millions of dollars to every month. And that's what's really unique about Targetable, which is it brings the power of data and brings the power of relevant advertising to anybody who wants to pay at least $99 bucks to get it.
JB [00:39:56] Does it have to only be restaurants, Vlad? I want it. Can I sort it out? First of all, you would have to just make the software available to me in some business other than a restaurant, which is easier.
VE [00:40:07] Well, look, I mean, we've worked with a lot of different retail. The reason that we focus on restaurants is really a self-created limitation. I mean, one of the things that I've learned – this is my fourth startup – is you really have to have a target.
JB [00:40:29] You've got to have a target. Yeah.
VE [00:40:30] And look, we're 20 people. That sounds like a lot. It's nothing, right? I mean, the reality is we always have, 100 percent fewer people than we need. And so what we decided to do is – look, I spent the last 10 years of my career in the restaurant technology business. Before that, I was a media marketing. But, that's where we got so much experience and it helped us really target this product. Now, does it work for all retail? Absolutely. You know, we already have people signing up on www.targetable.com that are clothing boutiques and nail salons and anybody else. That's a small business that wants the power of highly targeted, highly effective digital marketing at their fingertips for a couple of hundred bucks a month. Absolutely. It's just some of the templates and some of the creativity and the way the system works is optimized towards restaurants. But we fully expect to expand beyond restaurants before the end of the year, most likely.
JB [00:41:31] All right. Let's go backwards now and start over, Vlad. So we know that it's a spin off.
VE [00:41:48] Really?
VE I'm a father. I'm my own publicist. So, I mean, I blame myself for that one. Yes.
JB [00:41:55] Tell us about it.
VE [00:41:57] Yes. We already spoke to where the idea came from.
JB Did you fund internally in the business and then grow it as an individual product or did you pop it out? Talk to us a little bit about the entrepreneurship behind it.
JB [00:42:10] It sounds like you create a lot of designers marketing and stuff, too.
VE [00:42:15] Well, so the interesting thing is, as I said before, this is my fourth startup. And so, my business partner and I decided to start HEROFi, whose product is Targetable. And you're right, that is confusing. So let's just call it Targetable. We decided to start Targetable five years ago. He had done two startups, I'd done four startups. One of the things that we decided is, let's try to make all new mistakes. Let's try not to repeat the mistakes of our past and things that didn't work in our other startups or mistakes that we had made and wanted to learn from.
So we started this company in a really interesting way. So we decided to, first of all, bootstrap this company brand (and bootstrap, for lack of a better term, means that you’re basically broke for a very long time, but what it really means is you started without external funding). And the reason we wanted to do that is twofold: One is we didn't want to waste a whole bunch of money, go off into the ether or some garage in Palo Alto, tinker with software with a lot of assumptions of what customers might want. And then jerk the sheet off of it in two years and say, “Ta-Da! Here is this cardboard plane that we build for the restaurant industry.” Well, your chances of being right when you do that are substantially less because you're not talking to customers. You're not in the market day in and day out fixing problems. And so no matter how knowledgeable you are about the market, it's a whole thing to nail. One of the things we learned from our own experience is, hey, when you force yourself to eat what you kill as a bootstrap or you force yourself to sell something to a customer that they're willing to buy, not just give away as R&D or as a trial, because you're sitting on 20 million bucks of venture capital and you don't really care that much if you have revenue on day one, well, then we really care. Because we wouldn't be able to pay our rent and we wouldn't be able to pay our bills or anybody else if we couldn't sell what we what we needed to sell. And so we put ourselves purposely in a situation where we wanted to make sure that we were building something that customers were willing to pay for.
Second of all, we wanted to make sure that we were running the company in a fiscal way in the tightest way possible. And I'll tell you a little story why we did this. When I started my first company, I was 28; it was called Filter Media. And today it's Braitling Partners, actually. It's one of the largest interactive television consultancies in the world. Great company. You know, I started with a couple of business partners, but I was really young and I was really unexperienced. And still I had a lot more in terms of ideas and ambition than I did in terms of know-how. What I decided to do straight out of the gate was rent space in the Chelsea District of New York. You know, put really fancy furniture in there because customers needed to see that we were there and real and operating. And long story short, within three months of starting Filter, we were burning something like a hundred thousand dollars a month without a single dollar in customer revenue. And that experience was so traumatic to me, ultimately of having to borrow money from your parents to make your rent and to tell your wife that you left you a very high paying job to do a startup that is bleeding money left and right. I eventually fixed it, but it left me with a feeling in my gut that I never wanted to feel again. That feeling of “I can't make payroll” or “I can't make my rent,” et cetera. And so we wanted to instill that level of fiscal diligence in this company and we wanted to instill a level of product diligence. So we started Targetable as a bootstrap in order to build a product that customers wanted to buy and to create a company that was very, very tightly run. And we did that. And out of that came the experiences that helped inform a platform that, when it launched on October 1st, is now selling absolutely off the shelves because we knew what problem we wanted to solve. And we sold it to customers over and over and over again before we went out and raised millions of dollars to them, put all of that together into a software platform, and launched it.
And I can't recommend that methodology, whether you do it for four years like we did, or whether you do it for six months – the methodology of putting yourself often in a corner that forces you to do the right things, even when you don't necessarily want to, is enormously powerful in terms of creating value and enterprise value for the company.
JB: [00:47:28] I love it. You make a great point and you sell it. That's good stuff. What's your marketing look like today? Now that you’re 20 employees strong and have a whole marketing department, how do you go out there and get those customers?
VE: [00:47:48] Well, we do it one of three ways, so the way that we sell is across three different methodologies. One is really what we call direct rate and direct is classic digital marketing, pay-per-clicks. Get out there and buy the customer wherever they are. And we work with a very good firm that does our media buying firm that really goes out and targets a deal and our customers, they buys media and Facebook-based media on Instagram and YouTube and anywhere else our audiences exist.
And I have to tell you right now, what we're paying for leads is simply unbelievable because it really talks to the market side of this product, but also to the demand and the pent up demand there is for what this product does. But to augment that, we have two other ways that we sell. One is channel sales. And so what we look for is partnerships that can get our product in front of our customer in a lot of different creative ways. And that means, for example, we have a deal with the Florida Restaurant and Lodging Association, FRLA, where they are in the process of selling our product to their constituencies, which consists of tens of thousands of restaurants in the state of Florida. We have California, Texas, Illinois, New York in the pipeline today to do similar deals with. Why? Because they benefit from putting out a really cool product that solves a problem for their membership. While we benefit from the fact that we don't have to spend that money on sales leads and on acquisition costs to get that customer, a different type of channel partner is, for example, any other company that touches our customers.
For example, a good example is Cox Cable. We’re in deep conversations with those guys. I'm going to actually go out to Atlanta next week to see them because they are in the business of solving problems for their customers as well. And they have over 400,000 small businesses in their cable network and 70 percent of those small businesses are restaurants. And so we looked at that and said, hey, Cox has a small business suite of tools that includes everything from, office management to tech support to everything else. But the number one request of their constituency was help with digital marketing. And so when they heard that, they reached out to us and said, hey, would you be interested in having us essentially sell your product to our own customers? And so, of course, now we're working out what that really looks like. But what's really interesting is who else touches our restaurant customers? Cable operators, because they always have television and Wi-Fi in their infrastructure. Providers, electrical providers, food services, you name it. And so, for the channel partnership (part of our business), we really look at how we really find our customer in ways that are more affordable than the direct buying way.
And then the last method is really the classic network sales rate. It's called sounder selling. It's me going out there and using the little charm I have and lack of wit to engage with our customers at conferences, at meetings and everything else. And having spent a decade in this business, my network is good enough that we are onboarding larger chains all the time now. And so, that is a less easily forecastable but very, very substantial part of our business as well. And so, across those three channels, direct channel and enterprise networks selling, we really balanced out our sales activity and marketing activity in a way that allows us to really create a network effect and a geometric growth to the business.
JB [00:51:55] Very impressive, Vlad. I love it. I want it for me. I'm sitting here. You sold me, you know.
VE: Then it just made sense to me all of the different ways that this could work. And again, Tuesday’s for lobster, the sauce you get. It just makes sense.
JB [00:52:34] How do we find out more online? Sign me up for all that stuff, please, sir.
VE: [00:52:40] I’m going to keep it very simple. Go to www.targetable.com and it tells you everything you need to know about how to sign up. I don't want anybody to follow me or to look at me. I am everywhere. You need to find me as Vladimir Edelman. But what I really want you to do is go to www.targetable.com and sign up. It's very low risk. It's month-to- month today. So if you don't like it, you're risking almost nothing. And we have a very simple motto, “If we don't do our job, you don't pay us because we don't want customers who are not successful with www.targetable.com.” So go there. Read up. Look at the case studies. Look at the customers who have used successfully. Think of how you could use a tool as powerful as Targetable to really create tens of thousands of dollars in marketing for you every month, and then check it out and let us know what you think.
JB [00:53:33] Wow. Thank you so very much. Great stuff. Congratulations. We'll have you back here to get an update.
VE [00:53:39] Thank you so much, Dan.
JB [00:53:42] Well, we are out of time. Have a fantastic weekend, everyone. Stay dry, work hard, get some things done for the week ahead. Relax a little. Have a good weekend.
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