Our interview with Pete Koomen and Dan Siroker, co-founders of Optimizely – a Y Combinator startup

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Recently we managed to catch up with both Pete Koomen and Dan Siroker, Co-Founders of an awesome startup called Optimizely. During the interview Pete and Dan will introduce us to Optimizely while sharing advice abut fund raising and applying to an accelerator program. Optimizely is a graduate of the Y Combinator accelerator program.

Can you tell us what Optimizely is all about?

Pete: Optimizely is all about enabling businesses to make data-driven decisions through simple A/B testing. It’s about turning the conversation in a meeting room from “we think” to “we know.”  The tool we built enables programmers and non programmers to quickly and easily test changes to their web pages against the original and see which variations help achieve their goals, whether they be based in increasing revenue, downloads, sign-ups or any other metric. Our tagline, “A/B testing you’ll actually use,” captures this idea.

How did you come up with the idea for Optimizely?

Dan: Optimizely is the product I wish I had while working as the Director of Analytics for the Obama 2008 campaign. We were using Google Website Optimizer and Omniture Test&Target to A/B test the site but were constantly frustrated with having to spend developer time to implement each test. Deploying the variations required adding little snippets of code for each section throughout our site and relying heavily on technical resources. That said, we still helped raise more than $60 million from A/B testing but unfortunately only ran a small percentage of all the tests we wanted to run. The inspiration for Optimizely sprouted from that experience.  Simply put, we wanted to create a product that enabled anyone to A/B test their website– no technical skills required. With Optimizely, Pete Koomen and I set out to build exactly that – an A/B and Multivariate testing product that would remove the technical hurdles to website optimization and empower the entire world to more easily realize the value of data-driven decision making.

What were some of the challenges that you faced starting a company?

Dan: The first company we started was CarrotSticks, an online math game for kids. One of the bigger challenges we faced with this company was not knowing the core audience we were building for since we weren’t parents, teachers or kids. I think that was a root cause of a lot of the problems we had along the way. Comparing that experience to what we’re doing now with Optimizely, we’re building the product I wish we had in 2008. So the early decisions around what’s important and what’s not have been much easier with Optimizely than with CarrotSticks.

Pete: During that experience we also just learned how valuable it was to really listen to your customers or your potential customers. With CarrotSticks, it took us 8 months to earn our first dollar. With Optimizely, it took us 1 day. The key, we learned, was to stop trusting our own instincts and started listening to our customers.

You took part in the 2010 Y Combinator accelerator program, what difference do you feel being part of an accelerator made to your company?

Dan: I think Y Combinator was a really great opportunity for us to have a focused period of time where all we cared about was building a great product. At the end of Y Combinator, you go through demo day but we knew that those three months were really an opportunity for us to get feedback from Paul Graham, who is undoubtedly the best person to give startup advice in the world. The program was also an opportunity to iterate and be forced to have made progress for every Tuesday night dinner. In fact it was during Y Combinator that we changed our idea from Spreadly, the product we built before Optimizely, to Optimizely. In the second week, we showed Paul an early prototype of Optimizely and he was very enthusiastic. He told us it was “A/B testing for marketers.” At the time I didn’t really understand what he meant by that; I was just thinking about the product I would have wanted in 2008 for anyone on my team to do A/B testing. But it turns out marketers are desperate for this solution as well.

Pete: Paul Graham’s Rolodex is unbelievable. Given how hard it was to raise money the year before, I was just amazed at how easy he made it. Of course it was because we put in a ton of work and effort to make an amazing A/B and multivariate testing tool. Having warm introductions to a ton of great investors was super helpful. For us, we’d been trying and failing for almost a year by the time we entered Y Combinator, it was such a shock to our confidence. It felt like we were making progress again for the first time in a while. Psychologically it was a huge boost for us.

What advice would you give to an entrepreneur looking to get their company into an accelerator program?

Pete: Build as much as you can beforehand. Understand as much as you can about your customers. Show that you’ve talked or sold to as many people as you possibly can before walking into a room and applying. Progress like that is just helpful for building a product in general and also really shows that you’re serious about what you’re doing.

Dan: One of the Y Combinator sayings that captures what Pete said really well is, “build something people want.”  There are many parts to this. First, build something – don’t walk in with just an idea, actually have built something to prove to the partners of Y Combinator that you actually can build something. Also, build something people want. Make sure what you’re building isn’t just yet another cool way to share photos on your phone, rather something a user will want or a company will pay for. If you can prove those two things, then you should have no trouble getting into an accelerator.

What three pieces of advice would you give to an entrepreneur trying to raise their first round of funding?

Dan: You’ll rarely hear no from an investor because they’ll usually either say yes right away because they’re excited or they’ll defer the decision until later. The things that will force an investor to make a decision now versus later are really important. Demo day for us was a forcing function where investors felt they could potentially miss out on a deal, which I think is really important to get them to decide one way or the other. The first check is always the hardest and once you have someone to lead the round it’s really easy to get someone to invest. Hearing a “yes” from investors is great. Hearing a “no” is also great because it saves you time from having to pursue them further.

Pete: Because of our early traction and Paul Graham’s help, we were in a very favourable situation where we had great introductions to investors who suddenly had to compete all at once. If an entrepreneur is not in that situation, one thing they can do is form early relationships with VCs while they’re building out prototypes and getting their earliest customers. Keeping the VCs informed about how things are moving along will hopefully create a situation where they can find that first check early and try to start a competitive situation like we had.

Dan: One of the best times to raise money is when you don’t need to. Investors can smell it if you’re desperate to raise money and will be more reluctant to invest and give you good terms. You have a lot more leverage if you’re in a position where you’re not desperate for money because it makes investors scared that they’re going to miss the deal and forces them to make a decision.

What advice would you like to give to an entrepreneur thinking about writing their first business plan?     

Dan: We never wrote a business plan for any of the companies we ever founded, nor do I think I know anyone in Y Combinator who wrote a business plan before they got there. Now it’s all about traction, users, revenue and growth. Business plans are a relic of the past.

A massive thank you to Pete and Dan for taking the time out of their busy schedule to put down some awesome answers to our questions. We look forward to catching back up with Optimizely early next year to see how things have progressed. In the mean time, check out their site. You can also follow them on twitter!