The Transcript

How to Make Your Business a Painkiller, Not a Vitamin

Jonny Nastor: This is Rainmaker.FM, the digital marketing podcast network. It s built on the Rainmaker Platform, which empowers you to build your own digital marketing and sales platform. Start your free 14-day trial at HacktheEntrepreneur.com/Rainmaker.

Voiceover: Welcome to Hack the Entrepreneur, the show which reveals the fears, habits, and inner battles behind big-name entrepreneurs and those on their way to joining them. Now here is your host, Jon Nastor.

Jonny Nastor: Welcome back to another episode of Hack the Entrepreneur. Thank you so much for joining me today. I m your host, Jon Nastor, but you can call me Jonny.

My guest today is a brilliant technology entrepreneur with incredibly lofty goals for himself and his business. He s the founder and CEO of Freelancer.com, a global online freelancing and crowdsourcing marketplace, but this is in no way his first entrepreneurial venture. To date, Freelancer.com has acquired 18 outside companies to add to its arsenal, with Escrow.com being the most recent. My guest has received countless awards for technology, social influence, as well as entrepreneurship.

Now, let s hack Matt Barrie.

Let s take a moment to thank our sponsor, FreshBooks, beautifully designed and brilliantly laid-out and simple cloud accounting software made specifically for small business owners like you and me. Your business is going online, and so should your cloud accounting software. You will know that your data is safe, secure, and always backed up to multiple data centers so you will never lose it and you will always have it if your tax auditor comes knocking.

Stay on top of your business with a clear picture of its financial health. Try FreshBooks free today. Go to FreshBooks.com/Hack and enter Hack the Entrepreneur in the How did you hear about us? section.

We are back with another episode of Hack the Entrepreneur, and today we have an extra-special guest.

Matt, welcome to the show.

Matt Barrie: Thank you for having me.

Jonny Nastor: Absolutely, my pleasure, Matt. Let s jump straight into this. Matt, as an entrepreneur, can you tell me, what is the one thing that you do that you feel has been the biggest contributor to your successes so far?

Why Matt Needed Talent to Thrive (and Your Business Does Too)

Matt Barrie: Running a fast-growing technology company, probably if I could distill it down to one thing, it s like being the coach on an all-star football team. It s all about getting the right talent into your company, motivating that talent, incentivizing that talent, and really driving it and training it up. I think I ve been very lucky with this company, and companies in the past as well, but particularly with Freelancer, to attract really A-grade talent to the team — people, obviously, who are smarter than me, more capable.

Really, my job is to give them confidence and encouragement, put them in the right positions, incentivize them, and really help this all-star team drive the business to the next level: unlock resource contention, do resource allocation, and make it easy for that talent to really, really thrive.

Jonny Nastor: Where did you acquire this skill and this knowledge that you needed to be this coach? Not everybody goes into business with that forethought.

Matt Barrie: I think it s something that s really just come about. If I think back to when I went down the path of being an entrepreneur, I think fundamentally, I discovered I was unemployable at a very early age. So if I wanted to have a decent life and do things I wanted to do, I had to create a job rather than take a job. To do that, it s pretty tough to do that by yourself. Even though I had at some point, in the past, thought, Oh, I wonder if you could run a business as an online entrepreneur, just sitting at home with an online virtual workforce and actually not hiring any physical staff.

The Benefit of Hiring Smarter, Better, and More Experienced People than Yourself

Matt Barrie: It got to a point where I did need to hire people, and really, the best way that you as a CEO can improve yourself is just attracting great people around you who are smarter and more capable. Really, they re the guys that drive the business. I mean if you hire A s, that will attract other A s. You can throw them incredibly tough problems, and those problems will get solved. If you hire B s, they ll attract C s.

So really, my philosophy is to hire the best people I can possibly find and afford. Over time, you build up a collection of really, really talented people, and that will attract more and more talented people.

Jonny Nastor: That s excellent. Is it hard to hire people that you feel are possibly smarter than you in their field and to be like, Well, I m the CEO, though, and the founder of this company, you know what I mean? Is it ever hard on the ego in that way? Because I know people that never want to hire somebody that will outshine them and make them not look like they are, but you seem to be the exact opposite.

Matt Barrie: Look, I think, as a manager, it s your greatest failing when you try and build a moat around you and try and be the smartest guy in the room. Obviously, we have 420 staff in the business, and over time, there have been people who have gotten themselves into certain positions and not wanted to hire people who are more experienced and more capable. What ultimately happens is that their job function breaks down, because you can fake it for a while, but at some point, you become the bottleneck and a critical point of failure, and that becomes immediately obvious to the entire organization.

You have to be practical and pragmatic. This technology industry is growing so rapidly, and things are changing so quickly, that it is absolutely impossible to be an expert in every field. I m 41 years old. Even at the age of 41, there s a lot of inertia that you have because you ve been trained up with old technologies, old ways, et cetera in the past.

I make a comment: I only work with PhDs: poor, hungry, and driven. You get some of these fresh grads coming out of school, and they don t have all the baggage or the inertia of the old ways of doing things. They re trained up in some really modern, new technologies. You just need to be on the cutting edge now to really drive a business like this.

Jonny Nastor: I love that: poor, hungry, driven. Let s go back a couple of minutes to how you said, early on, you realized you were unemployable and you could not work for somebody else. Could you take us back to that time and when you realized this about yourself, Matt?

When He Realized That He Was Unemployable

Matt Barrie: My background is that I did engineering and computer science at Sydney University, and I was fortunate to go to Stanford in 97 and 98 and did a masters in electrical engineering. All throughout university, I had run little businesses on the side. I didn t really think of myself as an entrepreneur. I did things I liked to do, but then I had some traditional jobs as I did graduate, working for more corporate-style companies.

I like to move quickly, and I like to question authority and ask, Why are we doing it this way? Isn t there a better way of doing things? Sometimes, when you re part of a corporate bureaucracy, that doesn t always get looked at in the right way. I found both myself rejecting the system and the system rejecting me. I thought to myself, Well, gee, I need to create my own destiny here.

The great thing about being an entrepreneur today with technology is that you get to create your future. You get to imagine these amazing things and make them real and then try to make the world a better place through building great products and great services. So I think it s a pretty magical time to be an entrepreneur, and as I went down the path of doing my own thing, I really loved it and enjoyed it. You can take your mind to wherever you want to take it and work around really, really great people that you want to work with.

I tell you what: I hate weekends. I hate it when you go home. It s like, Okay, what am I going to do? Maybe go down to the pub or whatever, but I love coming to the office and the buzz of being around really smart, excited people doing amazing things because it s a great learning experience. I think a lot of people that work for Freelance.com feel the same way. They come to work, and they love it, because you re around amazing people doing amazing things.

At the moment, it s 10:30 p.m. here on a Thursday night. There s about a dozen people who are sitting about 10 meters away from me. I told them to be very quiet. They re talking about work and different things we could do with the business and so forth. It s a pretty amazing place.

Jonny Nastor: It is. So correct me if I m wrong, but was your first business, major business, Sensory Networks?

Matt Barrie: Yeah, that s what you would classify as my first major business, yeah.

Jonny Nastor: Did you do businesses before that?

Matt Barrie: I did, but they re all little attempts at start-ups and so forth, so Sensory was the first real one. We went out there, and in that business, we built integrated circuits for high-performance scanning of network traffic.

It s an incredibly complicated product. The technology today actually runs at about 180 gigabytes per second, and we built that using a field-programmable gate arrays that we put on a card, like a graphics card. Just like you think of graphics accelerator on a graphics card, this is an accelerator for scanning network traffic at high speeds. It was useful for things like firewalls and security appliances and so forth. We supplied that technology to people like LG and McAfee and so on.

Jonny Nastor: That seemed like a logical progression because of electrical engineering, obviously.

Matt Barrie: That s right.

Jonny Nastor: Right?

Matt Barrie: That s right, and I think this is a classic entrepreneurial mistake. I d graduated from Stanford. I had studied security over many years. I actually had a little consulting business in security that I started back while I was at university back in Sydney, so it had been 1994 or 1995 so very, very early days in the security space — and I studied VLSI design and computer architecture at Stanford.

Why Your Business Needs to Be a Painkiller, Not a Vitamin

Matt Barrie: I came out and was really more in love with the technology than I was thinking about, Am I solving a problem? And every company needs to be solving a problem, and that problem better be a painkiller rather than a vitamin. Because vitamins, we d all love to buy and we d love to take, but we forget. If I ve got pain, if I ve got toothache, I want to pay for a painkiller immediately. I want it now. So that company was really a solution looking for a problem.

We had some theories that networks are getting faster and faster, so you need to be able to look deeper and deeper into the network and understand what s going on in the network, so therefore, you d need an accelerator, et cetera. But there were a number of issues with that particular company in terms of building gigabyte-scanning technology in a world back in 2001 where there s no gigabyte networks being deployed. So it was way too early for the market.

Then, fundamentally, the way in which we sold the technology, we sold it OEM because we were not confident in doing an enterprise sales team, being fresh graduates out of engineering programs. We thought maybe a VP engineering-to-VP engineering sale would be something that we d be more comfortable doing. We chose to sell the technology piecemeal as an OEM chip or a card that goes inside the piece of equipment, but unfortunately, that business model was a squeeze play. The vendors are not really going to increase the cost of their product, so the ultimate customer didn t incorporate the technology.

Some other component inside that box has to give, and ultimately, we re battling the Intel chip, which was not a winning strategy. That s a financial loss-making strategy. It certainly was a massive learning experience for me. The business actually ultimately did sell to Intel, and ultimately, we went from a hardware model to a software model, and in fact, the software ends up running faster than the hardware due to really smart things that some of the guys did with the cache.

But our business has been acquired by Intel, and ultimately it s in a better place. When you re supplying OEMs to the big guys and you re trying to sell to a Cisco or a Juniper or what have you, they re not going to buy from a startup, but they ll certainly buy from Intel.

Yeah, that was a classic learning experience. I think that was my trial by fire in the real world of entrepreneurship, where anyone can hold the rudder when the sea is calm, but when the proverbial really hits the fan, that s when you really do learn. That business was six years of great people, great technology. We had business model failure. We had market failure, being too early to market. We had very troublesome investors that were at each other s throats, and if not, they were at our throats.

It was a loss-making business for its entire life because the business model of the hardware business is an incredibly difficult business to build. That s why all the VCs today really focus on software companies and apps in particular, or online market places and things like that. Because you need one copy of the software, website. With inventory, you re not making any money because you can t sell anything. If you ve got too much, it s depreciating on the shelf pretty quickly, and you ve got to tie up a lot of capital.

That was a business where I really did learn a tremendous amount, and that really paved the path for what came next, which was Freelancer.

Jonny Nastor: Yeah, I love that: painkiller, not a vitamin.

Matt Barrie: Yeah.

Jonny Nastor: It s such a crucial difference.

Matt Barrie: Or even better, you want a narcotic, right? You get them hooked. So something like Uber, when you use the service once, not only does it serve a real pain, it s just so addictive that if I try and stop using the product, I have withdrawal symptoms.

Jonny Nastor: I love that. But it was interesting, because I thought that Sensory Networks was your first venture into creating and founding a company, but you said that there was a bunch before it that never made it or never took off?

Matt Barrie: Yeah, there were a bunch before that. Either I was not the original founder — I was brought in — or ideas were not scalable ideas for service-orientated businesses, or the market wasn t right or things like that. All the common mistakes you make in your first and second companies. The good thing is, if you fail fast, you can learn quickly and then move on, but Sensory was the one where I really had a great team and great technology and persevered for six years.

Jonny Nastor: Wow.

Matt Barrie: Ultimately, that business ran from 2001 to about 2013 and sold to Intel, so I left in about 2006.

Jonny Nastor: Yeah, I was just wondering how you come out of university, and you maybe do some security consulting. You get a corporate job at one point, and then all of a sudden, you go into founding a company that ends up getting acquired by Intel. It s a big gap, I thought there was there.

I was like, What is the mindset of coming out of college? Becoming a consultant — that makes sense. That s a natural...