Fragmob Revolutionizing the Direct Sales Industry

Interview with the Co-Founders of Fragmob: Jade Charles, CEO, and Jonathan Shapiro, President & CFO

In this interview with Jade Charles and Jonathan Shapiro, the co-founders of Fragmob we discuss their entrepreneurial journey and how Fragmob is revolutionizing the direct sales, or multi-level marketing, industry.  Fragmob gives direct sales people a fun and innovative way to be more efficient and more productive using an application that resides on their smartphone.  Although the app is easy to use by non-technical people, it has a backend that is very powerful and uses information from the user’s behavior to provide feedback about what activities are most effective.

Jade Charles, CEO of Fragmob, and is responsible for the innovation and architecture of the Fragmob platform, along with the mobile and social strategy. He is considered an expert in all mobile development technologies and online social psychology. In addition to Fragmob, Jade was recently responsible for various celebrity social networks such as Jessica Biel’s Make the Difference Network and Bode Miller’s SkiSpace.com. Which is clearly very cool! Prior to Fragmob, Jade served as CTO of TextAmerica where he was solely responsible for the development of the first hosted mobile photo sharing service in the world as featured in TIME Magazine. Jade Charles attended the University of Hawaii School of Electrical Engineering where he played Division I Football before starting his first company at age 19.

Jonathan is the President, and CFO of Fragmob.  Jonathan has had extensive experience in operations, professional investment, and advisory. He has dedicated his career to growing people, building teams, and strengthening organizations as well as mentoring many founders to help them grow their businesses into successful ventures. He was previously a Partner at private equity firm Ropart Asset Management. Jonathan has served as CFO and is currently an active board member of several software and service firms. He began working at Franchise Mortgage Acceptance Company evaluating corporate loans. He then joined UBS Investment Bank, advising corporate clients in Mergers and Acquisitions and Consumer Products & Retail in both New York and London.

Jonathan received an MBA from Columbia Business School and an MBA from London Business School. He received an MS in Accounting from the Lubin School of Business at Pace where he attended on scholarship. Jonathan graduated Magna Cum Laude and Phi Beta Kappa from Rutgers College, completing a BS in Computer Science in three years. Jonathan is a Chartered Financial Analyst and a licensed CPA.

I met the Fragmob team at a San Diego Cool Companies event, and they have also been awarded The Inc. 50 Best Workplaces award in 2016, a Red Herring North America Finalist 100, and the San Diego Business Journal Best Places to Work Award in 2016.  I’ll be closely monitoring Fragmob’s progess, and they are indeed a very cool company.  Here is our full interview:

Fragmob

Patrick:     This is Patrick Henry, the CEO of Quest Fusion, with The Real Deal…What Matters. Today we’re here with Jade Charles and Jonathan Shapiro, the co-founders of Fragmob.

Jade is the CEO and responsible for the innovation and architecture of the Fragmob platform along with the mobile and social strategy. He’s considered an expert in mobile development technologies and online social psychology. In addition to Fragmob, Jade was recently responsible for various celebrity social networks such as Jessica Biel’s Make the Difference Network. That’s Justin Timberlake’s wife?

Jade:         I believe they’re exes at this point.

Patrick:     He’s also responsible for Bode Miller’s SkiSpace.com. Bode Miller is definitely a cool Olympic skier guy. Prior to Fragmob, Jade served as the chief technical officer at Text America where he was solely responsible for the development of the first hosted mobile photo sharing service in the world as featured in Time magazine.

                  Jade Charles attended the University of Hawaii School of Electrical Engineering where he played Division One Football before starting his first company at age 19.

Jonathan is the President and Chief Financial Officer of Fragmob. Jonathan has extensive business experience in operations, professional investment and advisory roles. He has dedicated his career to growing people, building teams and strengthening organizations as well as mentoring many founders to help them grow their businesses into successful ventures. That’s similar to what I do now.

He was previously a partner at a private equity firm, Ropart Asset Management. Jonathan has served as Chief Financial Officer and is currently an active board member of several software and service firms.

Jonathan received his MBA from Columbia Business School and MBA from the London Business School. He received his Master of Science in Accounting from the Lubin School of Business at Pace where he attended on scholarship. Jonathan graduated Magna Cum Laude and Phi Beta Kappa from Rutgers College in New Jersey completing a B.S. in Computer Science in three years. Wow, that’s impressive Jonathan. Jonathan is a chartered financial analyst and a licensed C.P.A.

I met the Fragmob team at a San Diego venture group event called Cool Companies. These guys are definitely a cool company. They’ve been awarded The Inc. 50 Best Workplaces Award in 2016, a Red Herring North America Finalist 100, and the San Diego Business Journal Best Places to Work Award in 2016. Welcome, Jade and Jonathan.

Jade:         Thank you.

Jonathan:  Thank you.

Patrick:     How did you guys decide to go into business together and come up with the idea of Fragmob?

Jonathan:  Jade and I had worked at previous businesses before. I had worked in a drug sales company helping grow it from an investment perspective. We spun off the technology, and Jade was our lead technology person to help run that.

                  With both of those companies, we eventually sold it to a software firm that focused on direct sales. Jade’s technology was key in that sale. We eventually sold that to a much larger company.

In one of our direct sales companies, their CEO had an idea to create a mobile offering. There was none existing in the industry. Jade was given the challenge to create a mobile offering for direct sales multilevel marketing companies. He was able to do that. That started in 2010.

In 2011 after the first beta was successful, we created a company and got our first contract. That’s when Jade and I really started to take off.

Patrick:     Do you guys market directly to the direct sales people or to the organizations or both? How does that work?

Jade:         It typically goes to the organizations themselves. They’re the ones that make most of the decisions.

Patrick:     This is like an Avon, Amway or anyone that does direct sales and multilevel marketing type of stuff?

Jade:         It’s kind of ironic because the end use is actually the independent rep. We’re selling a different group on the technology for a different group of people who will use it.

Patrick:     Explain that to me because I’m not following it.

Jade:         Each of these companies have a field that they call it. It’s a group of independent sales people.

Patrick:     These are independent contractors. They get paid on 1099s. They have a parent company that basically provides the product or the service.

Jade:         Correct. The important part of that 1099 is that they are not full-time employees. They’re the field. They’re kind of this separate entity, so to speak.

They don’t make the decisions on what solutions they get if corporate is involved. Corporate makes those decisions. We talk to them and try to convince them that our stuff is the best.

Patrick:     This is kind of part of your franchise fee, so to speak. I pay up to the parent organization. They provide me a set of tools. You guys want to be with the parent company so that the tools come down to the sales people that way.

Jade:         Exactly right.

Jonathan:  There’s two methods. One is that we work with corporate, and we charge them per user per month for every sales rep that uses our software. Another model is that we still work with corporate, but we charge the rep directly through Google Play or iTunes stores.

Patrick:     It’s a subscription model one way or the other. You either aggregate it at the corporate level, or the individuals do it. You get a few that way.

Jonathan:  Correct.

Patrick:     Basically this is one of those companies where the original business idea is actually the same thing you guys are doing now, or has the business model changed over time?

Jade:         Generally speaking, it stayed the same. We’re a solutions provider for sales reps. Direct sales has a pretty big chunk of sales reps.

We’re looking into other industries like real estate, insurance and things like that. We’re looking into any industries that have the same properties as the direct sales space.

It all starts with that independent rep. Although we have gone into other industries, most of our business is done in direct sales. That’s been the case since 2011.

Patrick:     In the direct sales market there are these multiple verticals. Have you found a common set of things that are associated with all of those verticals, or do you customize and tailor the product for certain verticals?

Jade:         It’s funny. You don’t understand the nuance in those verticals until you’re deep into it. There are generally three that kind of pan out.

We’ve mastered one of them which is the multilevel marketing aspect. That is, I want to recruit you or sell you a product. Then you go under me, and you can sell product, too. I get commissions based on what you do.

Party plan is kind of another vertical that we’re toying with at the moment. It’s similar but slightly different. This is more the Tupperware party model. Everyone come to my house, wink wink, and I’m going to sell you some stuff. That’s party plan. Our tools are more on the MLM side right now, but we’re gradually getting these other verticals.

Patrick:     The tool does allow you to not only keep track of your direct interactions, but everyone that is in your pyramid, so to speak.

Jonathan:  I would use the word “tree,” but absolutely. There are some very big commonalities. Regardless of whether it’s party plan or multilevel marketing, the demographic is these are not full-time sales reps as Jade was alluding to before. These are not people that earn a salary. They earn what they keep end.

Our apps are made for the average person. We make it really fun and intuitive. That’s where Jade’s expertise is. He focuses on how someone would use this from a mobile behavior to drive some type of action.

Make it easy for them. Tell them what to do. Make it a game. Set some minor goals. How do you get this salesperson to accomplish the goals that they want to achieve, but they’re not? There’s not tools there right now. They’re using the web and paper right now.

Patrick:     Even a lot of the traditional CRMs, customer relationship management tools, you have to be somewhat tech savvy at least in my experience. I’m a relatively technical guy. Even with some of them, they’re pretty difficult. The mobile versions of those pretty much suck.

Has that been your focus? Is there a web based version of your tool? Is it just mobile? How does that work?

Jade:         We focus on mobile for exactly that reason. We happen to be in an industry that, technologically speaking, is kind of slow. It’s funny because if you zoom all the way back and think about the late 80s and early 90s, you had to be an engineer to use a computer. Then Steve Jobs messed that up. He said, “We have to focus on this usability thing so that anyone can use a computer.”

                  Even that can be further broken up into web usability and mobile usability. Where we are now is that people think that mobile usability and web usability are relatively the same thing and they’re not.

Patrick:     They’re totally different.

Jade:         Correct. We focus on not only the mobile tool, but the behavior that you’re doing while you’re on a phone versus a computer. All of the tools reflect that behavior. If someone says, “Oh yeah, you can work at the beach,” and they imply that you have to bring your laptop to the beach, then that’s not really what they’re talking about.

They’re talking about being able to enjoy the beach and still get work done. That’s very different being on a mobile device versus being on a laptop or, frankly, in front of a computer.

Patrick:     Everything associated with user interface is very different. Just the fact that you have the touchscreen in terms of user interaction is completely different.

                  In addition to QuestFusion, Amanda and I have this lifestyle blog, www.sandiegolifestyleblog.com. On the mobile version of the site, we had this bar at the top. When I showed it to my friends, they were trying to stream over it, and it didn’t do that. It wasn’t set up that way.

We eventually got it fixed. The mobile site has customization and optimization over what’s available on the desktop version of the site just because of the way people interact with it. I’m sure you guys have many more things that you do that are really important there.

Jonathan:  If you think about it, these are part-time people that can’t afford the expense of web tools or an app that would normally be at salesforce.com or something that corporate would pay for. We need to be able to tailor it so that it looks like the company. We white label our apps.

We make it fun and intuitive for the sales rep. It has to be at an attractive price point where they are willing to say, “Okay, I’ll take a try on it,” so that they can get higher sales productivity. That’s been one of the challenges that we’ve been meeting.

Patrick:     Your ultimate user is the multilevel marketing salesperson, but you’ve got the corporate level. It’s kind of a multilevel sell for yourselves.

Jonathan:  It’s a two tier sale.

Patrick:     You have to sell both the end user as well as the corporate. You get the corporate stamp of approval. They’re going to give the branded version of your white label product out to their sales force, but not everyone is necessarily going to use it.

Jonathan:  That’s correct. Then we get paid on adoption per user per month. Regardless of who is paying for it, we still need to sign up with corporate to use their marketing assets. For example, this is Avon. This is branded this way with these kinds of colors.

Patrick:     With the big corporate level clients, do they want to customize and optimize the feature set? Is it here is the off-the-shelf features, and there’s great leverage of your product across multiple verticals?

Jade:         Good question. We’ve been dealing with that from day one.

Patrick:     I’m sure you have.

Jade:         We’ve gone through a lot. We spent literally millions of dollars figuring this out. To answer your question, yes the corporate always has their input. They always want it this way and highly customized. Most of the time, they’re not quite up to speed in terms of the difference in usability and what the most effective thing to do is given a situation that the sales rep is in.

                  What they’re typically thinking about is, “We need to sell everything. We need to make as much money as possible. We need to get all the information in this app. We need to give them all the tools that they need.” It’s kind of this dump of features.

We say, “No, that’s not how it works. You’re going to overwhelm them.” We pull based on our experience on how to get people to actually use this. It’s great that you want all this value and customization. If they’re not using it, then all of that stuff is kind of worthless.

We have an off-the-shelf package. We have three packages that are catered to best practices in terms of what we think maximizes productivity based on a mobile experience. It’s not sales overall or based on something else. We have to have that fight pretty much every single time we talk to someone.

Patrick:     If you end up developing a feature, then are you able to have that available to all users outside of that particular customer vertical? Have you guys been able to successfully accomplish that?

Jade:         Yes. If it passes our product vetting process, then it gets built into our roadmap.

Patrick:     It gets built into your base product.

Jade:         Yes.

Patrick:     You don’t have any feature exclusivity that you have to offer, so you basically leverage this into your overall product.

Jade:         Currently that is the way it’s set up. At one point we did offer an exclusive product or feature, but they had to pay for it. That has since expired.

Patrick:     As a time based exclusivity, it wasn’t in perpetuity.

Jade:         Correct.

Jonathan:  If you think about the life cycle of a company, we’ve paid those prices. We started off with one client. Then we started having a number of additional clients. It was very similar code basis, but each of them had differences.

Adding a feature was actually a little bit different for each of those different companies. Then we said, “Alright, let’s do our actual infrastructure investment.” Now we’ve single code based across our companies.

Patrick:     Is there an app as well as a backend or cloud based hosting portion of the product?

Jade:         Of the three major components of it, only two are visible. You have the FragDS platform, which is kind of this big brain that everything kind of stems from. Then you have the portal, which is a website that is a set of tools for the corporate client to use to configure settings based on what they want the app to be. That’s basically a website of tools.

                  Then there’s the app itself, the white label branded app. It’s for the end user or sales rep. They’re the ones consuming the app. They’re the ones actually using it.

Patrick:     Does this tie in with fulfillment? For example, I’m managing my customers, but now they want to buy lipstick. It shoots it back up to corporate and ties into the fulfillment system on the corporate side?

Jade:         Yes. We start off as just a group of engineers. That’s our core competency. We build software. Based on the package that you get, we have this integration phase. We say, “We can hook you up with mobile shopping, and you don’t have to change the way that you do business.”

                  Most of these CIOs have been around for 20 or 30 years sometimes. They look at an outsourced company and say, “You’re going to come in and make me look bad. You’re going to disrupt things. You don’t know how we do business.”

We say, “Don’t even worry about that. We’ll just integrate into you. Any order coming in follows exactly your process so that you guys don’t skip a beat. Anything mobile, we’ll handle that on the usability side and get people to actually make the sale.”

Patrick:     You basically tie in with whatever type of shopping cart capability they have from a fulfillment standpoint. It’s not purely a CRM per se. It actually ties in with the other systems.

Jade:         Correct.

Patrick:     That’s incredible because obviously that builds in switching costs. People get used to that on the user side. On the infrastructure side this is something that’s excellent for you guys for sure.

                  Tell me about your ideal client. Is there a specific demographic? Do you focus on just millennials or baby boomers? Does it go across the board including men and women? Is there anything that you tie into there? Is there no target demographic that exists out there?

Jonathan:  For the industry as a whole, the average age is 46 and 82% female. There’s a certain demographic that we will be going after. It also depends on the industry. Coffee might be a higher percentage male. If it’s jewelry or some type of creams or a parallel, then it might be almost exclusively female. We target a lot of our marketing toward that.

                  We also have to understand who the decision makers are in each of the different corporates. There’s marketing materials for the CIOs, CFOs, Chief Sales Officers and so on.

Patrick:     We talked about the CRM. How big is the market for a product like this?

Jade:         That’s interesting. How big is the market? There were $184 billion on last count. They keep pretty decent numbers. It’s growing. The number that we look at is the 100 million potential sales reps around the world.

Patrick:     There’s 100 million direct sales people worldwide.

Jonathan:  There are $184 billion in sales that is generated by those 100 million people. If you added up Tupperware, Amway, Avon, Herbalife, Pampered Chef and all of those companies, then it would be $184 billion dollars. That’s across many different industries including services, financial products and Primerica.

Patrick:     The service market for you guys is the number of users, times the monthly subscription rate if you had 100% penetration.

Jonathan:  We estimate $6 billion.

Patrick:     It’s a multi-billion-dollar market.

Jonathan:  It’s $5.00 per user per month. That’s $60 per month times 100 million people is $6 billion.

Patrick:     That’s awesome. What’s the competitive landscape look like for this space specifically around mobile? There are a lot of CRMs out there, but you guys are doing quite a bit more than that, and you’re mobile focused.

Jade:         There are two things. Our biggest competitors are the in-house guys. That means they developed everything in house in their own technology department. It’s a tricky sell to come in and say, “Look, we can do this better than you.” That’s what you’re trying to say.

Patrick:     There are a lot of that age there and then here for those that know that term.

Jade:         That’s been the biggest one, from a competition standpoint. Our other competitors have a history of web tools and things like that. Anyone who becomes a competitor is getting into mobile. We found that most of them just partner with us.

Patrick:     These are other CRMs?

Jade:         They are other technology providers for the space.

Patrick:     It could be a variety. Other than CRM providers, what are the other types of providers that would be in this kind of space?

Jade:         Genealogy is the software that calculates commissions based on that tree structure. Every direct sales company needs that technology whether it’s outsourced or in house.

That’s a fragmented industry, which is part of why our name is what it is. We go out and we integrate into all of those and bring it all together.

Patrick:     Is there a standard API that you interface with there, or is there a lot of customization on that, too?

Jade:         That has been where most of our time, money and resources have gone into. We have to understand how to connect with these existing providers. We have to make sure that these new products that we have that are mobile only work with that.

                  If we spend two months integrating into one provider, then they have their standard APIs that they’re used to. If you go to the next guy, then it will be a completely different standard. There are no shortcuts through that one. That’s a bunch of hard work.

Patrick:     Have you partitioned the market and said, “These are the big ones. We’re going to go after the big ones first?”

Jade:         Yes. We partner with pretty much all the major ones.

Patrick:     That’s great. What are some of the mobile app features? How do they help the end user or direct sales person?

Jonathan:  Think about who the average person is. It’s someone who wants to make a little extra money on the side. I’ve never sold anything before. I got interested. All of a sudden, I’m a sales rep, but I have no sales experience.

One of our tools helps you become more productive. Maybe it has steps. Comp plans are very complicated. Maybe the first step is to learn about your product. Then we have a video library that teaches you about your product or service. Then you finish your first app, and you get a little dopamine.

You’re on to step two. Maybe I learn how to sell to a customer and watch a video about that. Maybe three is that you go and play a game called prospector, which is one of our features. It grabs all the contacts from your phone and you play a game like Tinder. If it’s a hot prospect, then you swipe right. If it’s a cold prospect, then you swipe left. Then you follow up with them and call them.

You can send them any type of media. You can say, “Hey, this belt goes with all these different types of occasions, or “Here’s someone losing weight. Maybe you could do that, too.” You follow up with them.

Then if you want to sell someone, you can use a product. Whatever country you happen to be in, we tell you by the company. If you’re in Germany, maybe I can tell you the products in Germany and in Euros. It’s stuff like that. It makes you a much better sales person.

Eventually you hire someone to be a sales rep that works for you. We have management tools also. Remember, I have no management experience because I’m doing this part-time. How do you contact the people underneath you so that you can see the dashboards of everyone who works for you?

I can see what their KPI, key performance indicators, are. You can actually see how they’ve been playing the game. How many people have they sorted? How many people do they have that are hot? How many people have they followed up with? How many people have they contacted?

If you have five minutes to work your business, then who are the most important people that you should be contacting? Our algorithms will look into your downline and tell you that this person is the closest to becoming a director. Contact this person. Most people will contact their friend.

It really just helps them make it really easy. Play a game. It’s really fun. Get into our app. Do something. Then get out of our app so that you can make some more money.

Patrick:     This gets into your whole tagline of instigating action. It’s more than just a tracking tool. It is also somewhat of a virtual coach so to speak at least in terms of a sales coach.

Jonathan:  Absolutely. Let’s say that I contacted you and sent you a video to watch. When you watch the video, I get pinged. It says, “Patrick watched the video.” I’m going to then contact you and say, “Hey, did you like it? Would you be interested in buying the product? Do you want to learn more?”

Patrick:     What I think about sales is that you need to learn the product, the market and sales skills. Are you guys involved in all aspects of that? What kind of features do you provide? Do you have other things that are integrated by third parties that come into your solution? How does that work?

Jade:         Typically, they have their own compensation plan. The compensation plans are very complex. We can make reference to a video game. That’s how complex they are. We build the software to make that video game.

                  We work with the company to understand their comp plan. That’s where we develop those steps that Jonathan was talking about.

Once those steps are locked in, now it’s just a matter of how to progress through the plan. That’s what it becomes. That comp plan has been set by the company a long time ago. It’s up to us to translate that into actionable items.

Patrick:     Do you guys integrate with really rudimentary serums like a MailChimp or something like that? How does follow up occur when you have these follow up action items?

Jade:         This is the engineer in me coming out. We can integrate with anything as long as they allow that. We have a number of partners that we integrate with. Not all of them are direct sales oriented.

                  We have partners like Deductr, which does tax stuff. If you want to write off your trips or something like that, then they keep track of that. We do have integrations into tax calculation and shipping calculation. When you say rudimentary, that’s immediately what I think.

We have some that are already done. Generally speaking, we are open to integrating into everything as long as it makes sense from a product roadmap perspective. That is what we do.

Jonathan:  Another example is that in some countries you’re required to sign a piece of paper when you want to become a sales rep. In January we partnered with DocuSign. Now we have the ability to integrate with them as well.

Patrick:     That’s cool. Let’s say you guys are really massively successful, and you become the person that other people are coming to. Do you have a standard API where other people can integrate with your stuff? How is that working?

Jade:         Good question. Our newest feature that’s still in development will have APIs for incoming. We ran a prototype years ago that was fairly successful. We’re revisiting that.

With most of our stuff now we do have APIs, but they’re all highly regulated from a “how do we connect to your system and make sure that your system is working alongside of us” standpoint. Those are largely customized based on what the business need is going to be.

The more important point is that we like doing integrations. It’s most of what we do. The question that I think you’re asking is, “Do you integrate? What is the level of integration that you guys are willing to do?” The answer is, pretty much everything as long as it makes sense.    

Patrick:     There’s that part of the plus. From a scalability standpoint, ultimately you guys want to get to the point where it’s simple if people are coming to you. You can give them the documentation so that you’re not having to do custom development with every single guy that’s out there.

                  Now you have to do it because you’re the small guy integrating with the big guys. If you become the bigger guy, then it would be good where you had something where they could easily integrate with you.

Jade:         We’ve actually talked about that. We haven’t quite gotten out of the woods of integrating with the majors yet. We’re not those big guys yet. That idea has been discussed.

This is going to get a little technical here, but bear with me. Usually we say, “What are your APIs because we need to connect to you?” We’re still going to be connecting to them.

We have to build almost this inverse API. We’re going to be making these calls with these properties. You have to build the receptacle for that request. It’s kind of this backwards thing. It’s not typically how you build out APIs.

It’s going to take some thought in terms of how to execute on that. Technically it’s very doable, but how do you explain this to a potential vendor that’s going to connect to you? It gets a little more tricky than just a standard API.

Patrick:     You’re enabling different features that didn’t exist before, so those API calls might not be available.

Jade:         Yes, and the calls are backwards. We’re not pulling from your system. We’re building something that’s going to pull from a hypothetical system that you’re going to build. It’s an interesting problem.

Patrick:     There is good news. My engineers say, “This is really hard.” I say, “That’s great because once it’s done then it’s going to be really impossible for anyone else to do it.”

Jade:         That’s a great comforter.

Jonathan:  Like you said, switching cost as well.

Patrick:     We know how you guys make money. It’s a subscription based service. Where are you guys at on revenue and profitability? Can you talk about that? Are you still in the process of raising more money?

Jonathan:  We are. We’re approaching $4 million in annualized run rate right now. We’re expecting that to grow another 25% to 30% this year. Then it will grow quite fast over the next couple of years.

                  Right now we are raising a couple of million dollars. This year in 2016 we’ve really brought down the cost curve. In December it cost us 12 engineering man weeks to launch a client. Last week it took us an hour.

We’ve had trouble in the past just keeping up with sales demand. Now that we’ve brought that cost down, we’ll be able to introduce new pricing. Our sales pipeline is increasing dramatically. We’ll be able to execute upon that and then raise more capital next year.

Patrick:     You’re hitting key milestones and benchmarks where you are creating value for the company. That’s really awesome. How are you guys disrupting the technology landscape in the space? This obviously sounds like a highly innovative solution. Talk a little bit about that.

Jade:         Technology at large is constantly being disrupted. That’s almost by definition what technology is. In the space specifically, it really is that transformation from web tools to mobile.

                  In the industry, there are two kinds of major sales pitches that they have. One is free time and work at the beach or from anywhere you want. The second is that you can be a successful business person.

The people who are successful have a component of mentorship that comes along with that. You mentioned that earlier. It’s not different in direct sales. If you come in and you have a mentor, then regardless of the tools, you’ll probably do really well.

We look at that and say, “Okay. Everyone can’t have a mentor. There’s a large percentage that are kind of left out to fend for themselves. We can use mobile behavior, what people are doing on their mobile device, to replace mentors.” This is your mentor.

That gets that percentage up of who is going to be successful, and who isn’t. That is taking technology and replacing the most valuable thing in the entire industry, which is that mentorship thing. In a way there is a level of disruption, if you will.

Patrick:     There’s some component of machine learning or artificial intelligence where you guys have smart algorithms that are learning about behaviors. It’s giving some predictive analytics that come out of that?

Jade:         We’re working on predictive analytics. I don’t want to pretend that we have Jarvis or anything like that. Yes, there are algorithms to try to predict what you’re thinking.

The sorting of your contacts, for example, is one. The RGO is another component of psychology that we built in there to get people to purchase based on the group. Things like that, yes.

Based on the comp plan that the companies themselves have already set up, that’s really where the gold is. It’s our ability to look at that and say, “Okay, I can create a set of actions for you like that mentor does.”

Patrick:     The comp system is going to incentivize a certain set of behaviors. Basically what you’re doing is leveraging off of that. You say, “Okay, this is how this translates to you Mr. or Mrs. Client.”

Jonathan:  Exactly. Think of it like you were saying as a virtual coach or a virtual mentor. Here are the steps that you need to do. It reminds you to do them.

                  Use some pretty sophisticated algorithms to say, “Here are all the people that work in your organization. Who should you contact and why?”

Give yourself the information beforehand to say, “Contact this person.” Make it really freaking easy. With one button you can see their dashboard. Call them. Text them or whatever.

Patrick:     What are you guys doing to protect your intellectual property? Are you doing a lot of patenting? Is it just trade secrets? Are you copywriting some of your software? What are you doing there?

Jade:         It’s a bit of all of that. We have some patents filed. There are two that are very valuable in our opinion. In terms of enforcing that, that’s a different conversation all together.

                  A lot of it is just barrier to entry stuff. We go through six or eight months of hard core development where we’re thinking how the hell are we even going to get through this? We take comfort that at the end of that, anyone else who comes into this space is going to have to deal with that.

Patrick:     There’s not a learning curve that they leverage off of what you do? They actually have to come in and duplicate what you’ve done.

Jade:         There’s a series of things that they would have to duplicate. Like most software clones, they clone the face or what they see. They don’t understand the reasoning behind it. That’s why they end up as clones and not the real thing.

                  We’re already seeing that. People are copying what they can see publicly and trying to derive what the value is on their own. We got to that for a reason. That’s the part that they can’t really see. That barrier to entry becomes pretty effective.

Patrick:     There is a lot of stuff kind of on the back end that are the smarts and brains around it. Some of it may show in the user interface, but there’s really a lot more to it than that.

Jade:         Absolutely.

Jonathan:  Look at the infrastructure. There is the fact that we’re automating our build process and bringing down the cost of launching these features by having a single source code. Now when we want to make an update of one feature, we’re able to launch and it updates to everyone at the same time.

                  Now our cost of our engineering base is spent on platform and product, not on implementation. We’re just far more efficient with our time use now.

Patrick:     That’s awesome. You’re definitely coming down the learning curve. This October you’re hosting the technology convention in San Diego for direct sales executives. As such a small company, why have you made it a priority to produce such a large event?

Jade:         I’ll speak for myself on this one. Again I think technology is the most important thing in business. I’m an engineer, so you’d expect that out of me.

                  Like I said, I think that direct sales is kind of slow to evolve. Regardless of how big of a company we are, we want to be able to have that group of people come together and talk about these advanced ideas.

These things won’t affect the industry for another 3, 5 or maybe 10 years. We want to get people to talk about technology and understand that this is valuable. They need to think, “I shouldn’t just rely on my successes in the past. I can use this tool, technology at large, to help me with my business and augment what I already have.”

Once you get people thinking about technology, they’re more liable to think about those tools. Therefore, they become more efficient. That’s where we kind of come in and come through in terms of our promise. They won’t’ use it unless they fully believe in what technology can do for them. That’s what this is for.

Patrick:     A lot of it with what you guys are doing, you’ve got to show people that it’s easy to use. We say to ourselves, “Don’t make the customer think. Don’t do that. It makes their head hurt. Make it simple for them. Make it simple so that it’s an easy decision for them to buy.”

                  I think it’s the same thing with your guys’ stuff. Once you get it in your hand and start using it, that’s one of the key things. Unfortunately, you can’t do a demo of it. Technology is super powerful, but it’s very easy to use for someone that’s a non-technical person.

Jonathan:  Yes. That’s what’s so powerful about it. To answer the question even further, we didn’t see anyone leading the space as far as technology. It’s very fragmented. It’s one of the reasons that we exist here.

We said, “Let’s take the lead here.” Let’s get all of these technology companies, CIOs and CTOs and get them in the same room. Let’s talk about not just what direct sales is.

Let’s talk about what the best technology is in every industry. How can we get it to work smarter together? The pie is so much bigger when we all work together.

Patrick:     If you can make the sales people even 5% or 10% more efficient, then that’s huge for them in terms of profitability. Let’s shift gears a little bit and talk about entrepreneurship for our audience. We’ve been geeking out here a little bit.

You guys are serial entrepreneurs. What are the key lessons learned, not only with Fragmob, that you guys can share as key insights for the entrepreneur audience out there?

Jade:         For me, no big surprise. Embrace technology. You can get it to do all the things that you don’t want to do. Then you can focus on all the things that only human beings can do. That makes you a more effective person overall.

                  I love arguing. I’ve had arguments with old school successful business people. They look at the past and say, “Look, I’ve been successful without technology. How can you argue with that?”

The reality is that they weren’t as successful as they could have been if they did have the technology. That is my firm position on it. All of my arguments kind of stem from that.

Patrick:     It’s about efficiency and productivity. If you look at why the U.S. economy and probably the global economy has gotten gains in terms of productivity and efficiency, it’s the application of technology to business problems.

                  You have to do it in a very easy to use way. Especially as you start penetrating out of the super technical group and into the broader set of audiences that you guys are going after, you have to make technology much more digestible. You can’t feed a steak to a baby. It’s like you guys are doing something that’s really cool there.

Jade:         I think that’s everyone’s responsibility. If you’re a decision maker, then you do have to make the best decisions you can on how to make your team more productive. Technology is the first answer in that, in my opinion.

                  It’s not just us technologists who need to push this. It’s the executives and people who make the decisions on behalf of other people. They need to say, “Look, this will help you. I’ll show you exactly how.”

Patrick:     That’s awesome. How about you, Jonathan?

Jonathan:  I come back to the mentor aspect of it. Too many people go after business by themselves. If you have a good idea or way to bring the company forward, then write it down first. Discuss it with someone.

Have a mentor that’s not yourself or someone that works for you. It needs to be someone who doesn’t work for your company whether it’s a board of directors, advisory panel or mentors in the industry. Too many people go off for this themselves. That’s been all the difference. Most of the people that I’ve spoken to have a mentor.

Too many people own 60% of the company because they started it. Their boards are ineffective. They run it like a lifestyle business and don’t achieve the growth and performance that they should. Eventually their lunch gets eaten for them.

The second thing is, run as lean as you can for as long as possible. We very much embraced the agile methodology at Fragmob. Get something out that produces revenue. Get something out that works. It doesn’t have to work 100%. Someone will pay money for it. Keep iterating. Keep improving.

That’s with everything about the business whether it’s marketing, financials, technology or your idea. Get something working. The more money you have and the less of a burn you have, the more times you can keep iterating and getting it better.

Patrick:     This has been awesome, guys. I’m really glad you did this.

Jade:         Thanks for having us.

Patrick:     You bet. I’ll try to get down to your technology conference in October. I’m definitely going to track and see how you guys are doing. It sounds like you guys are onto something super exciting here.

Jade:         It’s more than just a nerdfest, by the way. It’s a good time. I can’t promise you’ll stay out of trouble completely.

Patrick:     More incentives keep coming down the pipeline.

Jade:         It’s really fun.

Patrick:     This is Patrick Henry, the CEO of QuestFusion, with The Real Deal…What Matters here with the founders of Fragmob, an exciting company in the direct marketing space. This has been terrific, guys. Thank you so much.

Jade:         Thank you very much.

Fragmob will be holding a Tech Conference in San Diego on October 8-9, 2016.  It should be a terrific event.  Check-out their promo video:

This article originally appeared in QuestFusion.

Patrick Henry
Written by

Patrick Henry, CEO of QuestFusion, former CEO of Entropic Communications, entrepreneur, executive, father, and freelance blogger living the luxury and active lifestyle in San Diego.

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