Success Starts at the End of Your Comfort ZoneㅣChartmetric, Sung M. Cho

Speaker 0:00 It was definitely a tough decision. I had some shares plus stock options that were being vested. So if I waited longer, yeah, yeah, I could have made more money from those stock options, and it was a sizable amount of money, uh, I could have made, but I couldn't wait longer. In the end, I was approaching 30. Wanted to start my own company in Silicon Valley someday. It's now or never. So I decided. I remember, uh, going to this cafe in San Francisco, so I went there, opened my laptop, 8:00, 9:00 AM in the morning, I sat down, and I got lost. Nobody was looking for me. Nobody. When I was working at Oracle, I had, like, 50 emails waiting for me every morning, but, uh, after several months after quitting and when I dropped my idea, there were only a couple, like, spam emails. [laughs] Even those spam emails, I, I felt thankful for. At least someone cares about me by something stupid.

Speaker 1:05 Hello, I'm Sung Cho, founder and CEO at Chartmetric. Chartmetric is a data analytics tool for the music industry professionals. We have all the major labels as our customers, plus tech companies, and we have hit $7 million in annual recurring revenue. Before I founded Chartmetric, I was a first engineer at a mobile game company called Gamevil, which is now billion-dollar company. I went to study, uh, MBA at UCLA, joined Oracle as a product manager, and yeah, I, I started this company. It was not my original intention to join a startup, frankly speaking. I was a student. I loved learning more about computer science. That's when I met the founders at Gamevil. It was about game programming, which just sounded fun. I joined as a first employee and started building computer games. Later, the company decided to focus on mobile games, so I managed the mobile game department or division. It was a, like, ever since, the company kept growing, and I managed the engineering team, which was only, like, two or three people in the beginning. Over time, it grew to 50 or more people. And also the company was growing fast. I was able to take risks, try different things. It was one of a kind experience, uh, to join a startup at its early stage. So it was definitely a tough decision. If I waited longer, yeah, yeah, I could have made more money from those stock options, but wanted to start my own company in Silicon Valley someday. It's now or never, so

Speaker 2:50 I decided. I joined a big tech company, uh, after graduating from business school. Oracle has offices everywhere, and e- in every city, every major city you go, there is a building, Oracle building. So it was a great feeling to be part of this huge 100,000 people family. But at the same time, what stifled me, it felt like this company is so mature, and once customers sign with Oracle, after that, those clients have to pay monthly fees. To me, it seemed like it was, in a bad way, tax collection agency. I remember that the company was generating roughly $1 billion in cash profit per month. It was incredible. That provided, like, comfort. Uh, after working for s- five to six years, someday I could just get by by working only for, like, four hours, that was enough, and go home, and still I made money. So Oracle is famous for acquiring big companies, uh, make- making big bets, and they are so good at that. They purchase these companies and bring the innovations from run- from the outside. So as an insider, maybe I should have felt proud that, oh, our company is buying other companies. But, uh, no, that's not how I felt. Innovations are happening outside, outside of this company, so if I stay here longer, I may have less and less chance of participating in those cool innovations. If you succeed, then you can be proud of this for the rest of your life. So that's what I wanted in my life, that pride. So

Speaker 4:35 what I realized was when you start a company, I think the three things have to match. You have to feel passionate about solving this problem. You have to be good at this. You have to have some skills to help solve the problem. You need to find some people who are good at that. But in many cases, it's so difficult to find ideas that matches, that can have, satisfies these conditions. So that's what I wanted to be careful about and then wanted to find the right one, but it was hard. So I, I dropped every idea. After several months after quitting and when I dropped my idea, I got lost. I had absolutely nothing to do. Some sort of depression hit me. I remember that feeling. I called a friend, uh, asked him, you know, like, "How did you feel when you started?" And he said one thing. "Hey, Sung, uh, I've been there. I know exactly how you feel. I've seen many people who have felt that way, so my advice is just move forward only one step per day." 'Cause because that was an advice from someone I trusted and then someone who have done this and who made it, I really took it to my heart. That also relieved some stress and burden out of me, uh, 'cause I didn't have to make 10 steps forward, uh, per day. The, I was, I wanted to make, like, huge steps per day, but I, I couldn't. From, from there, uh, I just decided to go one step at a time, and that's what I have been doing for the last seven, eight years, yeah, ever since starting a company.

Speaker 6:13 After seven years, we are approaching seven million ARR. We have customers such as Universal Music Group, Sony, Warner, uh, these big three labels, as well as tech companies such as Netflix, Facebook, Amazon, as well as Apple Music. They are our customers. Also Pandora radio, which is one of the biggest, uh, streaming services in the United States. After one and a half years, uh, after we got first seed funding, the company was running out of money, and that forced me to prove that this is a product worth paying for. So I don't think we were ready to charge, but I did it anyway 'cause we ran out of money. I could just go back to the investors and raise again. Instead of doing that, I wanted to prove first that there's somebody, there's somebody who may be willing to pay for this product. For a couple of months, I funded the company myself, moving money from my personal, uh, bank account to company account every month. Survived. I just, uh, stayed there and just focused on building the product, making it better and, like, uh, putting that credit card charge module. We did it, and we announced to the users that, "So you can still use the product for free, but it will be limited. If you want full features, then you need to pay ninety-five dollars per month for premium, sixty-five dollars for a standard tier." So we put that pricing there and began, and we made this announcement. I sent an email to beta, uh, testers, which was such a small number, actually. It was [laughs] like hundred people total. I don't think it was really... we're ready, but, uh, anyway, I began, and surprisingly,

Speaker 8:07 think it was the same day. Like, in the morning, we deployed this new version and waited nervously. Will there be anyone, just someone in the world out there, out of these people, who sees the potential, who saw the value and who saw the potential enough to pay for the service, monthly subscriptions, ninety-five dollars or something? Cha-ching, I got a notification that somebody paid nine hundred and fifty dollars, which was one year's worth of subscription. His name was Rene McLean from RPM Group, and I couldn't believe myself. What just happened? Uh, I just wished that someone would pay at least sixty-five, sixty-five dollars. That would ma- have made my day, but somebody paid nine hundred and fifty dollars, and that was the first payment. Uh, it was crazy. It was incredible. I remember, like, jumping around the office, like jumping and dancing, shouting. After 20 seconds of jumping and dancing, I calmed down and, and realized that this could be a mistake. Somebody didn't intend to pay for the full year. Who would? You know? We just put up a, like, a paying, uh, module. Who would commit one year to this startup who didn't prove anything, who didn't show anything, and this startup may disappear the next day? But somebody paid for one year full worth of subscription. So I emailed back right away after preparing myself. You know, even if he says that he... that was a mistake, he wanted a refund, I'll give you a refund. Um, that's fine. And I called him, and he picked up the phone. Yeah. He said he has been using Chartmetric actually as a beta customer for a while, and he saw how fast we were iterating, uh, how fast it was becoming better. Yeah, actually got some value from, from the product. So he, when we announced that we were now becoming a premium service, he wanted to pay. But instead of paying just for one month, he paid. So I asked him, like, "Why?" You know? "Why yearly, annual subscription?" He said... I can never forget this, you know. I, I can never forget what he said. He said, "I'm running, uh, my own agency here in Manhattan. I'm also a business owner. I know how cash is precious in the beginning, so I thought some extra cash could help you, so I decided to give, uh, one year subscription. And, and anyway, I'm going to use, use this product, uh, for next 12 month anyway, so paying for annual subscription is a better deal for me." So that was not a mistake. That was a good news. Plus, somebody trusted me so much that he prepaid for the service, one, for one year, uh, and also, he said that he saw the real value. He could apply this tool and this data onto his business and make some real difference. That was the day when I finally thought that this is gonna work. Yeah. For SaaS companies, it's incredibly difficult to get

Speaker 11:09 those first customers because it means that you have to gain this much trust that they are willing to pay something upfront. That also means that if you, once you get the first customer, it's incredibly important that you really exceed their expectation. This is what I think. So first couple customers, their expectation is, okay, this company or this product is still in early stage. They know that, but they still decided to give their money to you. I was so appreciative of that. Somebody, their trust and belief in me, and they are willing to pay. So my focus was to deliver something not just on time, but ahead of schedule. Then what happens to those first customers was, is, "Wow, I knew that this product was still, like, being baked. It's not a delicious bread yet, but this bread is okay. It's still edible, so I ate that bread. I purchased that bread. Next week, I came back. Guess what? The bread is now much more delicious, but it's still the same price." And you get delighted. Okay, you know, you have this pride. I discovered this bakery among my friends, ahead of, of my friends. Bread was okay in the beginning. But since I paid for that bread, this bread baker used my money to go back and develop the skill further and purchase better flour and better ingredients and came back with even more delicious bread, then I feel like I contributed to the success of the baker. This is the reciprocity that happens and you can, that you can also see more in SaaS business.

Speaker 12:48 Many investors ask me question, uh, "What is your competitive advantage? Why would, uh, those customers come to you instead of going to somewhere else?" Frankly speaking, I never had a really good answer to that. I always struggled. This is something I learned when I was at Gamevil. Everyone focuses on competitive advantage. You wanna become different, so we were. At Gamevil, we wanted to become different, or any other mobile game, uh, developers, so we tried different taste. You know, everyone drinks Coke. You launch, you know, Cherry Coke or Lemon Coke, Vanilla Coke to the market. Do you think people want it? No. Coke is what people want. So that's what I believe about, like, competitions, actually. You're not necessarily trying to build something different. You try to build, build something quite similar or, like, sometimes even same, but if you pursue that vision over a long period, period of time, then someday your product is different. Human psychology, psychology is quite complex. People do not make those decisions based on only one or two things. Price, of course, is a very important factor, so what we did, at least in the beginning, is to offer our service at half of our competitor's price. So that is super visible. We also offer something similar, but our price is lower, then that's, that provides the signals, uh, to people that, "Okay, at least that's a competitive advantage. Let me give it a try. At least it's cheaper. Let me give it a, give it a try." So that's one thing we did in the beginning. Nowadays, our price is no longer half of the price, but we are actually more expensive, but, uh, that was the, the difference. Over time, we kept on building and after seven years, our product is now looking different, of course, and also we have more data than our, any of our competitors, and we have partnerships, so we have now many different ways that looks quite different from our customers.

Speaker 15:06 And there's this one interesting event happened last year, by the way. Competitor called Next Big Sound, when I started this company, it was announced that this company was acquired by Pandora Radio for roughly $50 million. And they got acquired, they kept on innovating. It was a really good product. I learned so much from Next Big Sound. But over time, uh, they decided that Next Big Sound is no longer, uh, going to be their focus and decided to sunset the product so they, they shut down last year. You know what happened? When you go to nextbigsound.com, they

Speaker 15:44 explain why they decided to shut down the service and why, what they decided to focus on, and the last bullet point says, "If you liked us for social data tracking, go to chartmetric.com" So this is my, my formula, by the way, internally in my mind. Uh, when you think about a tool, the price of the tool should be one-tenth of the, the cost that you would have incurred if you did not use this product. That's my belief. Meaning, if we charge $140 per person to someone, that person should at least save $1,400 per month by using our product, then it's the right pricing. If they save only half, like, you know, if you, if they didn't use the product, uh, they have to pay $280, then it's, the product is too expensive. That's just my own yardstick that I have. Are we saving $1,400 worth? Totally. If you did not use Chartmetric, if you try to get this much insight, you probably need to hire an engineer first. Very much like you have to hire an engineer first because you don't wanna write down all these numbers, 1,000 numbers every day, you write down, a human. If you hire someone to do this manually, like, it costs more than 2,000, $3,000 easily. If you hire an engineer, initially you have to spend $10,000 per month until you build something. Easily, the cost of doing this on your own, this is also true for big companies. I'm not talking about, like, two people record label or indi- independent artist. I'm talking about even for big companies, they can easily spend a million dollars if they try to build this on their own, like million dollars per month. So yeah, we, we, uh, that's the justification of our price, and for independent artists, it's actually much lower. We only charge, uh, $20 a month for that.

Speaker 17:48 When you build a SaaS tool or a business, uh, I guess that's important as a founder. Are you willing to put many years of effort into this? Are you ready to do that? Then I think that can work. Long-term vision for me is to see that this product, Chartmetric, becomes an indi- indispensable tool. In the beginning, we began this, uh, service, when we first made this service, it was a vitamin product. You can take it. If you don't take it, it's okay. Nothing happens. Maybe you feel you have a little less energy, but nothing happens really. We became more and more important, an indispensable product over time, but I wouldn't say it's really indispensable yet. There are alternatives, and also even if you don't, uh, use the alternatives, you can still survive in, in this business. There are some other examples in other industries where some businesses or some softwares became indispensable. One such example is Bloomberg. Uh, when you are in finance, not imagine, uh, doing a business without Bloomberg terminal. That was our initial vision, Bloomberg for the music industry was our model, and still it is. That's my goal. That's my dream. Building such a product takes time. In my own clock, any such business for any such, it takes at least 10 years. That's my theory. Nothing important can be built within 10 years. If you think about all these products that you love, you feel like they were born overnight. You feel like, 'cause you only discovered those when they were already successful. After seven years of grinding, you discovered them. Nothing can happen within 10 years at least. That's my belief. 10 years, uh, is the minimum. Uh, it's been seven years, so I have minimum three years more, three more years to go, or even longer. [outro music]