Update: I called Erica “a millionaire entrepreneur” in this interview, but she corrected me, clarifying that while she did sell her hosting company for $1.1 million when she was 26, she is not a millionaire. Buying companies is more complicated than buying a candy bar in which you get a whole candy bar for cash up front. She’s still damned impressive, but some people are pedants, so consider it disclosed!

Erica inspires me and many others with her story of how she became a millionaire entrepreneur by age 26. Her effort to enlighten readers as well as build new successful businesses like rank high for keywords continue to impress today.

What Erica shares in this interview is gold. Everything from the traits you need to be a successful entrepreneur, to learning when to pivot, to how and when to find a cofounder, and even how to woo investors. You don’t want to miss this.

Click below to listen, or scroll for a complete transcript!

Erica Douglass Audio Interview, Success in Vulnerability

Transcript Contents

  1. Traits of Successful People
  2. Transparency Contributes to Success
  3. Strength in Vulnerability (Grow Your Company Fast)
  4. Keep on Failing
  5. When to Pivot (Market Research)
  6. Value of a Cofounder
  7. Where to find a Cofounder
  8. How to Get Money from an Investor (Failing Fast)
  9. Focus or Fail

Pete Michaud: Hi, this is Pete Michaud from PeteMichaud.com and today I’m talking to the lovely and talented Ms. Erica Douglass, who sold her first company for $1.1 million when she was 26, right Erica?

Erica Douglass: Yes.

PM: When she was 26. And then started her successful business blog WhooshTraffic. It seems like everything she touches turns to gold, and maybe today we’ll find out why. Erica, thank you so much for being here.

ED: Thank you.

PM: Great, so something I am always intensely curious about is what factors separate people who are consistently successful from those who struggle. So I want to start by asking you: what traits or habits do you attribute our continuing success to?

ED: I think success comes down to a couple of different qualities. The first thing is you’ve gotta be really persistent. I see too many people give up so quickly. They go do a business for a month or two, it doesn’t make them their million dollars, then they go do something else for a couple months, and before they know it several years have passed, and they’re still not getting anywhere with their business and they’re still trying all these new things.

I mean, it took my hosting company 3+ years of me running it to achieve a six figure annual income, and that was company revenue, not my personal salary either. I was basically living on a subsistence wage. Not very much. I lived with roommates, and made ends meet just barely, and had credit card debt and all that good stuff… ok, not so good stuff [laughs].

PM: [laughs] All that bad stuff. No but in a way it is good stuff though, because being willing to go into that sort of bad situation made you able to preserve and have the tenacity you needed to succeed, right?

ED: Right, I was just talking about this with a friend last night actually. I think every successful entrepreneur had this point in their life where they have to make a decision. And they have to succeed, and the only other option is to go home and live with your parents which is a terrible option for a lot of people, including me. I mean, I love my parents, but I don’t want to live with them.

PM: Right, or go back and get a job at Acme.

ED: Right, well in my case I started my company during Silicon Valley’s hugest recession during 2001. So it was really a terrible time to start a business, it was really a terrible time to be in Silicon Valley, there were no jobs. So I basically had to make it work. And I think every entrepreneur who’s been successful faces that reality, where you either have to succeed, or the alternative is living out on the street or living on somebody’s couch, or going back to live with your parents. None of which seems particularly appealing. And it’s having that strength within yourself to be able to, at that decision point, say I’m going to make this business successful, and I will succeed. And just making that decision that you will make it is a huge difference.

PM: Right, so what you’re telling me is that the pressure kind of makes you hungry, and that hunger drives you through the difficult part.

ED: Absolutely.

PM: it interesting how sticking with it is a big part of it for you. And I’m always impressed by how consistently you deliver value on your blog, Erica.biz, and I’m guessing that you also did the same–even though I wasn’t a customer with you at your hosting company—I’m guessing you were also good at consistently delivering value to your hosting customers.

In addition to that, one aspect of your writing that I really have always admired and that I think sets you apart is your ability to be authentic and transparent.

ED: Yeah.

PM: About your struggles and emotions, and I’m wondering what led down this path of making yourself able to be vulnerable that way?

ED: Well, you know when I started my blog—I’ve been blogging for quite a while, I actually have blog posts dating on my blog dating back to 2004. It wasn’t until 2007, after I sold my company, that I bought my domain name Erica.biz and starting blogging for an audience as opposed to just my hosting customer and friends. But on my early blog posts I used to write about my personal life. And for me, I’ve always been very open about my personal life, and a lot of people were very surprised and even a little taken aback by it. Like, why would you disclose that your company isn’t as successful as you want it to be?

And I said, well, because someday I’m going to look back on that and really be excited that I wrote about my company when it wasn’t successful. It seems somehow more true to me to write about your company as it’s growing, rather than to write about it only after it’s been successful.

And also some of the things I’ve written about honestly have gotten some amazing responses, and have connected people better to me.

Like the fact that I wrote about my hosting company while I was running the hosting company—this was back before blogging was even a well-known thing—the fact that I was even doing that attracted people to my company, and a lot of people said that I really like the fact that you’re talking about the business and I like following your business’s success. It makes people feel like they’re involved.

I like to analyze why things are popular, and the psychology behind it. The most popular show on TV right now is American Idol and I can tell you the reason why it’s popular is that the music industry for so many years has seemed like it has some sort of gate keepers that determined success, and we don’t really know who those gatekeepers are, they’re kind of these invisible figures with hands behind the scenes that control which music artist make it and which ones don’t. American idol brings control into the hands of the voters. If a person is playing good music but they don’t get the votes, they don’t move on. And the reason American Idol is so popular, and so many artists from American idol have gone on to become #1 hits is because we feel like we have a say in their popularity, and we feel like we contributed somehow to their success, even though our biggest contribution is probably a text message saying “vote” to 5 digit number. It still makes us feel like we’re a part of their success.

PM: Right, so it’s transparent and I guess the equivalent to the text message would maybe be a blog comment.

ED: Exactly.

PM: Or an e-mail reply or something.

ED: Exactly. And my blog readers feel like somehow their either contributing to my success or they are sharing in it somehow, and it’s really a powerful thing.

PM: Yeah I completely agree, and that’s been my experience reading you and I try to do that myself. But I’m wondering why is it that if it’s such a powerful thing to be vulnerable, why is it so rare in other business bloggers?

ED: [laughs] I think it’s because it’s an ego thing. You don’t want to admit when you messed up. It’s really hard, sometimes when I want to talk about something I really messed up on or something. It can be difficult because a lot of times there are other people involved, so how do you say “my team screwed this up” or “a partner that I worked with screwed this up,” because you don’t necessarily want to shine a bad spotlight on anybody else, and it’s sometimes difficult to know where that line is. So what I try to do is make all the screw up stories as personal as possible. I talk about my screw ups from the story and the lesson they gave me and I try to remove the focus from the other people or other parties involved in the situation.

PM: Right. I guess it would be ideal if everyone had your same mindset, like it’s a growth opportunity to be able to say “hey I screwed up, and here’s how I screwed up, and here’s how I‘m not going to screw up again.” A lot of people don’t feel that way, and I’m wondering, do you think that your willingness to expose yourself to that kind of risk has been big a factor in your business success? Not only in your blogging, but in your business success as well?

ED: Yeah, I absolutely do. People identify with the companies that I start because of my blog and my brand. I mean, when I started WhooshTraffic I didn’t expect it to grow so quickly because I thought: ok, I know SEO is a big market , but we’re in a niche of that market, you we backlink build from other sites to our clients websites, and it’s a niche of the SEO market. I didn’t want to start one of those all-encompassing SEO agency sort of things where we do your design, and your development, and your this, and your that, and the marketing—it’s very heavy feeling to me. I wanted to start a really light, agile company that just did one thing, and did it really well, and as we grow we can expand into other service areas.

But I can tell you, five months after we launched the company, it’s already pushing five figures a month in revenue. And I’ve been very open about that too, and we’ve done zero marketing for the site, no ads, no anything like that. We’re starting to market now, but the cool thing is that the blog community and the people that I knew, my network, made that possible. It made us grow to the point where we’re profitable now and now we can start real marketing campaigns, but we can pay for those marketing campaigns out of revenue, so that’s been pretty amazing.

PM: Yeah, that’s huge. And I’ve actually been watching you, and I’ve been really proud of you. I always love it when people that I kind of know are totally killing it, so I’m really, really happy for you.

ED: Thank you.

PM: You’re welcome. I think though that you’ve been so successful that many beginners in not only writing but business as well, kind of feel intimidated when they hear your story. Like, hey I was 4 years old when I made my first billion, or whatever.

ED: [laughs]

PM: So maybe it seems to them that you have some kind of magic that they can’t possibly reproduce. So I’m curious, have you ever had a false start on a business or project that didn’t work out, and did you learn anything from that?

ED: Yeah absolutely, if you go back through my blog archives, after I sold my business I wanted to start a new business. The first thing I wanted to do was take a year off because I felt like that was really important. Of course I didn’t take the year fully off, because about 3 months after I sold my business, I started Erica.biz and I was blogging. But back then my blog wasn’t very big, it wasn’t nearly a full time job, and it was just a couple hours a week.

But I got to the point where I was exhausted all the time, and I realized that I wasn’t really taking some time off. Then I started considering that maybe this wasn’t a psychological exhaustion that would be solved that would be solved by me selling my business. When I was still running my hosting company I was tired a lot. And everybody just told me, ok you just gotta stop working so much, it’s just because you’re working so hard. Well it actually turned out that I had celiac disease, which is an auto immune disease where your body can’t digest the protein found in wheat which is called gluten. So you have to go on a special diet which is a gluten free diet, and even then you don’t heal right away.

But it wasn’t until late 2009 that I was actually diagnosed with celiac disease so I doing all these different thing in 2008/2009, you’ll see all these sites that I wanted to start that never really got off the ground, including the main site which was called Inspiring Innovators which was designed to be an interview series with successful entrepreneurs, and it was going to be a membership site where I could do webinars with the customers and things like that. A great business idea, in fact I’m encouraging one of my friends to do the exact same business idea.

PM: Sure, it sounds like mixergy.com.

ED: Exactly, and this is before mixergy.com.

PM: Right.

ED: So it was definitely something that I really wanted to explore but I was so sick all the time that I couldn’t get the site up, and I couldn’t get the interviews done because I was exhausted. So that was a real issue and so that site never really came to fruition, so if you go back through my blog archives, you’ll see some posts where I wrote: oh I’m so excited, it’s going to be launched next month, etc, etc. Well it launched and we did even have a few paying customers, but it never really got off the ground.

And actually Alexa’s API data, which is a unique way to measure blogs against each other. We had all sorts of things planned for that site—I’ll spare you the 20 page business plan, but that didn’t come to fruition either.

We actually launched that site, got some traction and we got some members, and then I did a promotion for a product that was all about building these little niche websites, and my readers really wanted to know how to rank these niche sites in search engines. And this was going on at the same time we were launching, bestblogs.net was what it’s called, if you go there now it just redirects to WhooshTraffic. But I paid $500 something dollars for bestblogs.net domain name too, so there was definitely investment involved. And of course I paid Parnel to work on the site, he’s been paid full time for nearly a year now, since mid 2010.

So I had all this invested in it, and then my list was e-mailing me, well you just promoted this great product on how to create niche sites, so now we want to know how to rank our niche sites in Google, and I thought ohhh… I actually know how to do that. That’s something I know how to do a lot of. I really get it. I really know how to do that: I’ve been in SEO since 1997, so SEO is something I’m super, super familiar with.

So I sent out an e-mail to just the people who had bought the product. There were about 300 of them, I think. And I said, can you do this quick 5 minutes survey for me? And at least 70 or 80 people filled it in in the first couple of days, so we had a good idea of what was going on. And I asked, wold you pay for a site that just did interviews and webinars and stuff, and 30% of the people said yes they would pay for that, and I said would you pay for a site where we build the backlinks to your site for you? And like 70% of the people said yes to that, I thought: this is it. I told Parnel at that point—it was July 2010—and I said Parnel, I think we gotta pivot, [laughs]. The word pivot was just coming into swing then—there was a big thing about pivoting your startups. And I said I think we’ve gotta stop the community site—not that the community site was a bad idea, not that it even wasn’t going to make money, it was just that our trajectory to make money for that site was like a year, and our trajectory for WhooshTraffic—to make money was like 3 months.

PM: Yeah, you know what I love about that is that I encourage people to just do something. Do something and it doesn’t matter if you fail, because you’ll learn something and you’ll meet people, and you’ll be in a better position to do your next thing. And thing I love about what you just said is that you did something, and it could’ve worked out fine, but it actually didn’t turn out to be the thing that you wanted to do, the WhooshTraffic if you hadn’t undertaken the previous project.

ED: Exactly. And I feel strongly that—Parnel and I have been such great cofounders, and we’ve become best friends too, he and his girlfriend and I hang out a lot, and we live like ten minutes from each other. So I feel very strongly that that working relationship was really meant to be. I think the bestblogs.net wasn’t a bad idea but the real key with that idea was to help me find Parnel right when he needed to find work that paid him, and right when I needed a programmer or somebody to turn my ideas into reality. So we really hit it off right away, and we’ve been working together ever since, and it’s been absolutely fantastic.

It’s funny, I never really wanted a cofounder. I always thought I could just hire people because I have the money, I could use seed capital. But I have to tell you, it’s been a much better relationship to have a cofounder than it would be to just have people working for me. And especially the fact that I could throw it some seed money myself—I’ve put about $50 or $60,000 into WhooshTraffic of my own money, that has not recouped in terms of my salary yet, but will probably recoup by the end of 2011, in terms of my salary. So it’s a good payback for me.

PM: Right, that’s a great return on investment. And I’m curious, a lot of people face this situation—a lot of nontechnical people face this situation where they’re deciding, should I hire someone on odesk and hope for the best, or should I find a technical cofounder, or—they’re looking different options. And I’m wondering, where did you meet him? How did you connect with him?

ED: Ok, there’s a great question, I love that question. I think that’s so important because there are so many people out there who want to know, how do I find a cofounder? Should I get a cofounder? That’s been something that’s been on my blog to-do list to write for a long time, and it’s probably something I should talk about—let me write that down actually.

PM: See, if you hadn’t have done this interview, you wouldn’t have been reminded to write that down.

ED: That’s right!

PM: And it’s going to be your next blockbuster post.

ED: It is!

PM: Synergy.

ED: How to find a cofounder. Or not find a cofounder. And originally I did find somebody from odesk to do what I call a working comp of the bestblogs site where I hired a designer and developer from odesk both, and we got the site up and looking good. I wireframed it, and then I scanned the wireframe in. I literally wrote it out with pen and paper, scanned it in, showed them what I wanted, and they turned it into reality. But the problem with hiring someone on odesk, although it was cheap, and although I think if you just need a mockup, a prototype, to send to investors or to show to your 3 Fs—family, friends, and fools [laughs]. If you just need a mockup, I think odesk is definitely the way to go. If you want a long-term relationship with someone who’s going to do projects with you, I think you consider hiring someone full time or getting a cofounder. And I think you need to pay them. That’s really important. Parnel couldn’t work for free because he didn’t have, you know, a bajillion dollars saved up. He’s young, so that’s totally reasonable. So I paid him a salary to begin with, and that’s where you’d going to want to either consider investors or in my case I had the money, so I just paid him outright. But that’s key.

PM: Right, it’s key. And I’m curious, you had the money, and you say you could get investors, but for a lot of people investors seem alien and out of reach, so what do you suggest to people who are listening right now who maybe don’t have the kind of platform that you have—how do they connect with the kind of investors that would make it possible for them to pay somebody?

ED: That’s a tough question to ask me because I’ve actually never had an investor in any of my companies before.

PM: [laughs] Ok, so maybe you’re not the right person, but if you have any insight… because you go to a lot of conferences and that sort of thing.

ED: I think what you have to have to get investors, as an investor—although, I don’t invest in companies, disclaimer—but I do a lot of analysis of why I would or wouldn’t invest in a company because I just think that’s going to be valuable later for me, as well for the company owners who contact me and ask me, hey can you invest in my company—to which I always say no, by the way, because I don’t do that. But I also look at their business model. What investors really want to see is they first of all really want to see a good team, so you have a little bit of a cat and mouse game. You have to find a good programmer, but to get the programmer you’ve got to get investors so it’s a little bit of the chicken or the egg problem.

But the second thing they want to see is an idea that actually has traction, and in my particular case, if I was investing in any companies, I wouldn’t necessarily invest in companies where the modus operandi is to get as many eyeballs as possible into your website, and then we’ll figure out how to make money. I really, really hate that model personally. I’m more of a B2B type of person. I think the B2b model is very, very simplistic, because either people are paying you or people are not paying you. If people are paying you, you’ve got something. If they are not paying you, you’ve got a problem. [laughs]

So for me, I would want to invest in that type of company, just because first of all it’s what I know, it’s where I’ve been. I’ve never started a consumer internet company, or been part of a successful consumer internet company. I’ve always either worked for or started business to business companies. And secondly you can see pretty quickly whether it’s going to have traction or not. If it’s not going to get traction—if nobody’s paying… you set up the buy button, you send it out to your list, and nobody bites, nobody buys anything, then you know you have a situation where you’ve gotta pivot.

PM: Right, either pivot or go back to the drawing board.

ED: Right.

PM: They say “fail fast,” is what the term is in the startup community.

ED: Exactly, and as a potential investor I’d want to see that you have contracts on the table. If you have a customer that saying, hey we’re a head honcho in this industry, and we’re willing to buy your stuff if you can build it for us by this date, that’s what I’d be looking for as an investor. Because if you’ve got it in writing on the table, like we’ll pay you $10,000 a month for this service if you can build it for us by this date, and it has these feature specs, that’s investor gold right there.

So as a potential founder, you need to go out there and make sure—make damn sure—that people are going to buy your stuff. And if possible get it in writing. The more in writing contracts you have, where people have signed on the dotted line, saying yes I will buy this if you build it with these features, then the more likely you are to get an investor.

The worst type of companies to invest in—and this is going to pop a lot of people’s bubbles in their heads—but the worst type of company to invest in are where somebody’s like I’ve got this great idea and if you just give me money, then I can implement it. I would always, as an investor, say heck no to that, because I want to see you go to prototype, and I want to see you going out there. Customer development type things—Steve Blank, if you don’t know who he is, read his books, he’s amazing. Go out there and do your market research, and make sure that you’ve got people, in writing—the bigger the stack of contacts you have, the most likely I will be to give you a check.

PM: Right, and I think I want to emphasize for people listening, that when you say go out there I think you literally mean put on your shoes and walk out your door, and get in your car and go somewhere and talk to people, because e-mail can only take you so far.

ED: Yes, exactly, and you really want people to sign these contracts. And also, if you’re a company founder, you want these people signing the contracts to actually know who you are, so you don’t e-mail them tomorrow, and they go: who is that guy again? So you want them to be able to say, oh that’s this person, we talked about that, I’m really glad you’re starting to build this, and then of course you keep those potential customers in the loop.

And you know that even if they give you a contract not all of them are going to be willing to hand you a check, but that also helps if you go to meet them personally. If you see that their working out of a shack or their garage, and they’re driving an old beater car, and they say they’re going to hand you a $50,000 check, you may be going ehhh… I want to make sure that you’ve got the $50,000 to give me. If they have a nicer office, they’ve been in business a little bit longer, they’ve got some employees, they’ve got some traction, and it’s clear that they have the $50,000 to give you, then it’s going to be a lot easier sell on your part too, so as a founder you want to know that sort of thing about your customers.

PM: Well Erica, do you have anything else you want to add before we wrap it up?

ED: I’d just like to say, as a founder, get as clear on your idea as possible, and go out there and seek customers. And also I would say the biggest mistake I see a lot of early stage founders make is that they want to be everything to everyone. We set up WhooshTraffic as a backlink building service. We are not an agency, we do not design your website, we do not set up your website, we do not rearrange your website for you. When we have customers ask that, we refer out to people we trust who do that sort of thing, but we don’t try to do everything, and I see that as a common mistaken. The problem is that if your company tries to do everything, then it’s not sellable because then you get to the point where you are doing a whole lot of stuff or you have to hire very specialized people. What we do is very sellable because we do one thing and we do it very, very well, and then we provide customers with great technology to track their ranks over time and stuff like that. But our business is infinitely sellable because it’s not required that one of us do all of the high end, specialized work.

PM: Right, and customers can immediately qualify themselves. They know if they have a website and they want to rank high for a particular keyword, they know that they are your potential customer.

ED: That’s it.

PM: But if you can’t explain to them why they are your potential customer then they’re probably not going to give you money.

ED: That’s it.

PM: Yeah, I love it, that’s a perfect thing. Well Erica, it was awesome talking to you, and I really appreciate you taking the time to share your story and experiences. And I hope you stay vulnerable, and hungry, and I wish you success in everything that you do.

ED: Thank you Pete, I appreciate it so much.

PM: Thanks for listening everyone, go rock the world.