How I Built This with Guy Raz - Groupon and Descript: Andrew Mason

Episode Date: September 9, 2024

Andrew Mason was a 27-year-old with a degree in music when he co-founded one of the fastest growing companies of all time: Groupon. Its deep discounts on everything from sushi rolls to plastic surgery soon became a ubiquitous part of life in cities across the world. In 2011, just three years after launching, Groupon had the largest internet IPO since Google, with a valuation of $12.7 billion.But people began to complain that Andrew was not up to the role of CEO: he was quirky and unpredictable, and unable to navigate the company’s rocket-ship growth and the surge of copycats that threatened it. Soon, Groupon’s revenue slumped, and Andrew was fired from the company he’d started. But like many of the best entrepreneurs, he learned from his failure. Today, Andrew runs a new startup, an audio and video editing platform called Descript. In fact, we use Descript to make this show! This episode was produced by Chris Maccini with music by Ramtin Arablouei.Edited by Neva Grant, with research from Kathrine Sypher. Our audio engineers were Maggie Luthar and Robert Rodriguez.You can follow HIBT on X & Instagram, and email us at [e-mail]. Sign up for Guy’s free newsletter at guyraz.comSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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importantly, fun. It's 100% free. And to sign up, just visit gairoz.com. That's g-u-y-r-r-z.com. You said, fire me. And they did. Yeah, for sure. I owned up to it publicly about what happened and, you know, went home that night and sat on the couch by myself and ate pizza. Later on, my exact team came over and we all got drunk together. But it was such a release, like knowing that this thing that I'd been fighting against for so long, doing whatever I could to keep this company going, that that chapter of my life was over. And really, like, never for a second taking a moment to contemplate what an alternative future would look like. Yeah. Like, I had just no idea what was next.

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz and on the show today How Andrew Mason took the idea of collective action And turned it into Groupon, the fastest growing company of its time And what happened after he was forced to leave it At least once a week I get an email or comment on social media That reads something like this

Hey Guy, why don't you do episodes about companies that failed And call it how I failed this So to all of you collect Thank you for your suggestion, and here's my answer. Our show is about failure. Every single episode is filled with mistakes and setbacks and crises that almost tanked the business. Why so much failure? Well, because it's how we learn.

You've heard the aphorism, failure is the greatest teacher. I literally have that written on a Post-it note stuck to my computer screen that I'm looking at right now. Now, the thing about failure, especially catastrophic failure, is that it requires a really special kind of person willing to talk about it, particularly in front of millions of people. Because essentially what you're saying to them is, don't do what I did. It's a hard thing to do, and it's also an act of generosity, which is what Andrew Mason is about to do in today's episode. At one time, his face was on the cover of Forbes magazine with a headline, The Fastest Growing Company Ever. At the time, Andrew was 29 years old, and his company, Groupon, was one of the hottest startups in the world.

Now, many of you know how Groupon operated. It would offer different deals that, for example, might get you three ice cream cones for the price of one, or a facial for 75% off the normal price. At one point, Groupon entertained acquisition offers from both Yahoo and Google offers in the billions of dollars. At its height, it was valued at roughly $12.5 billion. But just as it had a spectacular rise, it had an even more spectacular crash. Two years after that Forbes cover, CNBC named Andrew Mason, America's worst CEO of the year. But what's probably even more interesting than the rise and fall of Groupon is how the idea even came about because Groupon wasn't Andrew's first idea.

In fact, he spent more than two years working on another business that never got traction. That is, until he made a pivot that would lead to Groupon. The other thing to know is that the lessons Andrew learned at Groupon would help him evolve as a leader. In fact, today he runs another startup called Discretion. which is a popular audio and video editing platform. As for Andrew, he grew up in a suburb of Pittsburgh. His dad was in the jewelry business. His mom was a photographer.

And as a kid, Andrew had a particularly strong interest in both computers and business. In 1995 or so, when I was a freshman or a sophomore in high school, and the internet was starting to take off, I started to think that maybe I could make websites. Like I had made some using Microsoft front page at home and thought this might be a way that I could do something that I really love to do and get paid a bunch of money for it. And then I remember, I came to school one day and this kid, Chris Gorski, had sold a website to a dentist for $400. And just to show you how entrepreneurs sometimes have incredibly little vision, I remember thinking, well, I guess he's cornered that market. You know, no more opportunity for people to build websites. And that was actually, like, weirdly, like, a deterrent for me to get into computer science more seriously.

But I always had that part of me that was writing code, making stuff on a more, like, amateurish level. Got it. Okay. So you, I guess you end up going to Northwestern for college. And this is in the late 90s. And you first studied engineering, but you first studied engineering, but you. you ended up actually changing your major to music. Was that what you thought you wanted to pursue as a career, like music or music engineering or something like that?

Yeah, I always loved music. I played in bands through college, went to college for material science engineering, gave it a year and a half before I realized that I just wanted to do music full-time. And engineering was kind of a geeky, techy way to be close to it and be in the general aura of the kind of music that I wanted to do. Right. And after you graduate, you did find some work as an audio engineer. But it sounds like maybe you thought that that wasn't the path you should be taking. Like maybe you should do something, quote unquote, more serious, right? go work for a company.

And so I guess you also got a job doing computer tech for like a printing company in Chicago, right? Yeah. So I put out an ad to be a computer consultant for people, like an Apple specialist that was helping people like set up their printer and get their camera working. And I started out as a consultant who is writing reports for Microsoft SQL server. And that's how I got into that situation. Okay.

So you basically, essentially after college, you end up working for this company. And from what I understand while you're there, you come up with this idea for like a website. This is around like 2005 or six that I guess would look at policy ideas, big ideas like health care or the Iraq War. Tell me what the, like, what was this idea? What did you want to do? Yeah, so I was, I guess, 23 when the U.S. invaded Iraq. And that was a pretty formative experience for me. It was the first kind of political event that I really paid close attention to.

And to me, the problem was that you have, I mean, it's really, not that different than what we're dealing with today, which is that you have people on one side of the conversation, having conversations in their spaces. And then you have people on the other side of the conversation, having their conversation in completely different spaces. And they don't overlap. And they're not hearing each other. And so the idea was that policy tree would take all of the arguments that are being made in all the different locations and aggregate them wiki style. So it would create this argumentation flow chart that would start with something like we should invade a rock. And then flowing from that in green bubbles would be the arguments that support that parent argument. And then red bubbles would be the ones that refute it.

And then other arguments and counter arguments would flow from there. But the hope was that it would be that solving our policy issues would be as straightforward as just laying the facts out for people. Of course. Yeah. There was a little naivete there. I mean, no brainer. We can solve everything by just giving everybody facts. So, all right, so you're working on this website.

And in fact, you decide to go to public policy school to develop this thing. Yeah, that's right. Okay, but then something happens. You get approached by someone who will become a key player in the story, this guy, Eric, Eric Lovkovsky. And he owns the printing company that you're working at. But I guess he hears about this website. you're doing and comes to you with an offer? What was it? What happened?

So after I'd been in school for just under a quarter, he called me up one day. And he had heard about another idea for a website that I'd had that later became known as the point. And I think his business instincts didn't know what to do with something like policy tree. He got a little bit more excited about the point. and he was like, you should drop out of school and come build this company. I'll give you a million bucks in funding to do it. And I'll help you along the way with the resources and whatever you need. So I was like, that sounds pretty good.

And, you know, a couple weeks later, I was back up in River West working on the point. Okay. Okay. So let's talk about the point. What was this idea you had that Eric wanted to put a million dollars behind? It was designed to solve the problems of collective action. All of these situations where the people want something to be a certain way, but they need a way to organize to actually bring it about and make it happen. And I'd been thinking about, like, consumerist use cases.

Like, we're all mad that the cable company won't let us. get alacart channels or things like that, but also organizing actions for social change. And the idea was that you would determine some kind of a tipping point, hence the name the point, of participation or funds that would be needed before people would actually commit to the action. So it might be something like we're all going to switch to a competing telephone company unless you do this once we hit 50,000 members or something like that. And reading about this, I saw that there were definitely some interesting ideas. Like, I think at one point you were suggesting, like, maybe people could build a glass dome over Chicago to protect it from the cold winter? This idea is indicative of what a terrible idea the point was.

It was like this academic theory that sounded like a good idea. But then when we actually started doing it, all of the use cases required such, they were few and far between or they required a ridiculous number of people. So there was no like, how do you get from here to there part of the story? Yeah. And yeah, that was like one that we came up with that got us some attention was to try to raise enough money because there was a financial component to this too where people could commit money. Was this, by the way, was this inspired by the Sims? episode, where they build a dome over Springfield? Or did that come back?

I mean, was that inspired by your idea? I don't, I wouldn't go that far. I think it's just inspired by common sense if you live in Chicago for any time. Fair enough. Fair enough. So, all right. So you, but how much traction did this thing get? I mean, were you getting, I mean, you were getting media attention for this because

I've read contemporaneous articles about this. So how many, like, were tens of thousands of people going to this site and just contributing? Not a lot of traction. Like we would get stuff on there. The kind of traction we did get was usually unwanted. I remember at some point we ended up getting a lot of excitement among the juggalo community. Like there were a bunch of insane clown posse fans. I forgot about the juggalo's.

Yeah. They're real. They dress up as clowns. Yeah, it's quite a moment when you realize that maybe that the most, value that your dream project is providing to the world is enabling juggalo's, you know? I hope that jugglers listening do not feel like we are ridiculing them. I think we're in solidarity with the juggalo's here. Okay. So, you have this million dollars, and I imagine that, you know, that money is running out because you're not bringing any money in, right?

Yeah. And I remember it was getting tense with Eric and my other investors. How many other investors were there? There was Eric and then there was NEA, new enterprise associates. Right. And so how much money total did you bring in? Do you remember? So after the initial a million, I think we raised 4.8 from NIA or 4 million or something like that. Yeah. Wow. I mean, whof. Okay. So you were, that the heat was on because I you're just burning through cash. And they're saying to you, hey, what's going on?

What's the plan here? Yeah, what's the plan? Yeah. And I think a little more clear-eyed person might have just given up at that point. Yeah. But for better or worse, I've always had a hard time doing that. Any time that I've ultimately pivoted, it's only after doing absolutely every last thing I can possibly imagine, probably holding on a little bit. bit too long to the original thing. And so what ultimately ended up happening was one of the ways

that people were using the point was this idea of collective buying. There'd been a little movement in China that we read about where people were going into local businesses and seeing if they can negotiate TVs at a discount if 20 people buy them at the same time. Yep. So basically we had this idea that was largely inspired by a site called Woot. Woot was this deal a day email where they would sell one product a day at a deep discount. And we thought, why don't we take that idea and use that to organize a local deal per day? And it was get your Groupon.com.

Get your Groupon. Yeah, because Groupon was taken, which is another kind of funny. story, but using a lot of the technology that we built for, like the e-commerce back end for the point in order to get it going. And from having the idea to actually launching the thing took 30 days. Okay, so you make this pivot over the course of a month and get your Groupon, like get your freak on. It's a great name, Groupon, coupon. The idea was from the beginning, it was clear. It was like, let's find deals. for people and then they can bid on it. And so who did you approach to work with you? Because this is,

I mean, this is 2008. This is not like something that businesses would, I mean, it would just be unusual, right? To go to a business and say, hey, well, you offer a service for half of what you normally charge, we'll guarantee you that like X number of people will take you up on it. And then you'll introduce your business to a whole bunch of new people. Like, how did you even start? The other interesting context here is that we were in a recession. And businesses were struggling at the time and looking for anything they could find to get ahead and get customers in the door. And so we tried everything. Like we tried anyone that would talk to us, we would try to pitch them to get on group on.

Obviously, we were going kind of door to door in the local businesses in Chicago, calling to places that we loved. But we were also just trying like random e-commerce places because we weren't getting a lot of bites at first. We weren't getting a lot of interest. And we just wanted to see if we could convince anybody to run a deal. Ultimately, the first business that ran on Groupon was a pizza shop. We offered $20 of value in pizza costs $10. So people are saving 50%. And we had to sell 20 in order to hit the so-called tipping point.

and actually have the deal become real. It's so smart because if you bid $10 for a meal at this pizza place or maybe five, and you know they need 19 other people, you're going to call your friends and be like, do this. Let's all go. It's five bucks for pizza. Yeah. And like 50% off something really cool to do that's available for one day. The value is self-evident.

So that's part of why it was able to grow so quickly is just the word of mouth. Now, later we had the opposite problem. the life of Groupon, which is that we sold way too many. Yeah. But in the early days, it was part of the fun for people. It was part of what created community and excitement and made people feel like they were part of what you might call it a movement almost. Yeah. So you had this, okay, so you went to this pizza place.

And what did you say to them? You said, we'll just split. Like, we'll do this. We'll set this up. If you honor these, you know, we'll split the profits. with you, we'll do like a percentage. Like you'll get, let's just say it's $10 a ticket and they sell to 20 tickets. You guys get $100 and they get $100?

Well, we didn't take that much at first. We might have taken, if we're $10 a unit, we might have taken a dollar, if anything, in those first deals. As we did it more and we started to see the value that these businesses were getting out of it and started to realize that this is basically a form of advertising for them. Then we got to the point where we were taking as much as 50%. All right. So you start this thing, and this is in the middle of a recession.

And initially you started in Chicago. How quickly did you start to see some traction? In retrospect, it was fairly quickly, having a few of these startups under my belt now and having some perspective on what normal feels like. Yeah. It was not normal. It was very fast. So it was maybe like a month or two of very intense experimentation, trying a bunch of different things. And then, like, I remember a breakout deal was the first time we ran a sushi restaurant and got like 500 people to sign up and blew through the 300 person limit.

Now, you were just advertising this on the website initially or were you also email. Did you have email lists? So a big part of the model was building these email lists where everyone who signed up would automatically be added to an email list. And then they would get one of these emails every single morning. Wow. Okay. And it became like a ritual for a lot of people. Yeah. I wouldn't go so far as to say that they organize their lives around it.

But it was like a meaningful thing. You wake up and you have your coffee and you read your daily group on. So, okay. Let's just break down some of the challenges that you must have faced. So first of all, you had a couple people just doing deals, right, with local businesses, and how would they find, who would they go to? Like, did you guys sit around and say, you know, we should do like, I don't know, spas or we should do, you know, escape rooms or like, how are you thinking of what kind of things to offer and who to what businesses to approach? Oh, that was the fun part. The more exotic, the offer, the more excited we were to give it a try.

We were using these discounts as a excuse for people, kind of a catalyst to get out of the house, try new experiences, do things that they maybe otherwise wouldn't have done. So sensory deprivation tank center, awesome. You know, let's put it on there. There was a tour of the childhood sites of Michael Jackson to Gary, Indiana. Like, let's see if we can give people a big enough deal that they're going to go out and have that experience. because it's going to be something, you know, they'll remember that day. I mean, here's, what's so fascinating to me is that, like, you make this pivot to what becomes Groupon, and it's just like a rocket ship. I mean, to the point whereby, like, March or April of 2009, you're getting ready to go, you know, to expand to other cities.

and Boston was the first place you expand to. Just tell me, what do you remember about what was going through your, like, what was your life like? Did it just go from like, you know, zero to a thousand in terms of the pressure, in terms of the pace, in terms of like fires all going on all around you, just, you know, dealing with all kinds of craziness? It was exhilarating. All I did was work. It was mostly great and surreal, in so many ways surreal, because it really had this feeling of like we just have a tiger by the tail. Like this thing is its own force of nature,

and we are just trying to hold on and bear witness to what's happening and maybe steer it to the degree that we have some control along the way. But then the emergence of what became literally thousands of Groupon clones added intensity to it because we felt like we had to stay ahead. Maybe that's not right. Maybe that was just fear. There was certainly a fair amount of that mixed into the surrealness of the whole thing where it feels like is this really happening.

but we couldn't slow down. When we come back in just a moment, Andrew battles the Groupon clones and then sees his own company get so big that he starts to lose control over it. Stay with us, I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This.

I'm Guy Raz. So it's 2009, and Groupon has been so successful in Chicago that it's expanded to Boston, But when it does, it encounters a familiar problem, people with the same idea. I can still, like, vividly remember the first time we learned about a copycat. One of our local sales reps had gone into a business and reported back, like, they said that I'd already, we'd already been here and to leave them alone. But I've never been to this business before. It was really weird.

And then they went back and they got the flyer. that this business had left with them. And it was called, like, we deal or something like that. It was the first time we'd ever heard of a Groupon clone that we just ran into because they were in Boston, too, starting to sell. And the clones really had an effect on me emotionally. I hated them. I really was angry about people just wholesale copying the business,

because I had come up as a musician. In the music world, we called that plagiarism. I think now with some distance from it and having a few more of these under my belt, I have much more of an appreciation of how, you know, the mark that you make in business isn't the idea. It's about the execution. But at the time, it really bothered me.

I think one of the reasons it really bothered me is that I knew that the proliferation of clones was undermining the foundation of the business. business model. The business model was based on scarcity. It was based on the novelty of one of these things existing per day in a city. And when you have 50 different groupons in Chicago, all offering a bunch of different things, on any given day, you have your choice of three spas, you have your choice of 10 different restaurants. And it becomes a de facto marketplace. Yeah. The business model falls apart. Businesses no longer get value out of it because you don't get the same kind of repeat

customer usage. I mean, you saw that happening early on, but meantime, you were still growing. I mean, I'm curious, like, as you're on this riding this rocket ship, you're going from a guy who, like, just graduated a couple years earlier to, you know, to all of a sudden running a business at its first year does 14 million revenue, year two, over 300 million in revenue. And probably just the staff is growing geometrically. Just tell me how did you even know what to do? I mean, again, like you're smart guy and, you know, and competent, but you didn't have any training or experience as a leader or a manager.

It really, right? I mean, how did you manage doing that? At first I had people like Eric, my co-founder, that were mentors to me and taught me what they could teach me about how to handle it. As I built a team, I ended up learning a lot from the people that worked for me that had way more experience than I did and really relied on that. And when you're a founder, you just have this, you just get a free pass on a lot of stuff. I guess you bring something to the table or people just assume that you're stuck there or something like that. And they're willing to give you some slack and understand that part of your role is going to be growing in the job. And I think as long as you show that you are growing in the job as you go, as long as people see that capacity for growth and that you're getting better over time, then you can keep people believing in your ability to rise to the occasion.

How did you, it seems like you managed this growth in, I don't, I want to say unusual ways, but, but in ways that almost kind of tried to minimize it. Like I read a story about how at a certain point, you know, like Forbes or some magazine had you guys on the cover like a year and a half in. And it was like the fastest growing company of all time. and you kind of made a joke out of it. Can you tell me the story? Because it's kind of important that I think for people to hear what you did. Yeah, so Forbes had me and Groupon on the cover as the fastest growing company in history was the headline. This is like a year and a half in.

Yeah. And we took that cover. We framed it. We put it in the lobby of the office. And then we surrounded it with similar. covers about web van and Netscape and other famous rise and falls. I think the idea was to give us some, have some humility, but I guess the way I've always processed stuff is to have a sense of humor about the things that we're afraid of.

And that's what was going on. We just never wanted to become full of ourselves. think that's, just remember that smart people have been in this situation in the past, people smarter than us. And the story doesn't always end the way that it's going now. That Forbes piece comes out in 2010. And I imagine that while you're just growing and exploding in growth, there's a lot of pressure, probably from investors, but maybe even from you to just get to every city possible. Because this wasn't a business that you could. just run from Chicago, right? You actually had to be in cities all over the United States and even the

world to establish relationships with small businesses so you could offer these coupons, these groupons. That's right. So Chicago took us six months to feel like we really had our ski legs and we knew what we were doing there. The next move after that was Boston. It took us three months before we felt like, okay, we've got this and now we know how to do cities remotely. And then our next city was, I think, Washington, D.C. And we just figured out this playbook. And I remember getting guidance from an investor is just like, look, now that you've got the playbook, just work backwards from 500 cities. What does your org look like there?

You know that's where you're headed. Even if you can't comprehend it, like, emotionally, that is where this is going. So that's what we did. We just kind of worked backwards and put together a game plan and put our heads down and executed. I mean, it is kind of remarkable, right? You launched this in the fall of 2008. In April of 2010, you raised around at $1.3 billion valuation. I mean, it's just mind-boggling how quickly this happened.

I mean, did you anticipate any of this? Did you think, you know, this is really going to take off? Like when you when you started this thing in 2008, did you think this is just going to crush it? Millennials are going to love this. Everyone is just going to gather around this. It's going to be this huge thing. I think it's like you believe it. You know that it can happen, but you never really totally believe that it's happening because of what you said, how unusual it is.

And you're kind of always pinching yourself and saying, is this real? By the end, towards the end of 2010, you're in 88 U.S. cities, 22 countries. I mean, it's crazy expansion. That same year, you guys get approached by Yahoo with an acquisition offer. And it was no joke. I mean, it was like $2, $3 billion offer. Tell me how that went down. Tell me what you remember about that coming in. This was coming when we were just riding high. Everything was going incredibly well. Growth was just happening accidentally. And then all of a sudden, Yahoo comes along. And my perception of Yahoo at the time was it was a place where great companies go to die. There were a bunch of products that I really loved that got acquired by Yahoo.

that just were never the same afterwards and eventually got shut down. So you had this perception of Yahoo as this kind of not really a cool place. But still, I mean, two or three billion dollars, it's a lot of cash. There's an arrogance in that, isn't there? Like, just thinking about it now, like for sure. As much as I like to say that we were trying to keep ourselves humble, I think, like, the mindset that I displayed in how I thought about Yahoo reflected a kind of entitlement that was developing there maybe.

But I think like we just weren't ready to end the journey there. It felt like the path ahead of being an independent company felt so much more interesting to see how far we could take this thing. From what I understand, I mean, part of it was, from what I read, you just, the Yahoo folks just rubbed you the wrong way, which is totally fair. But at the same time, you had a, you know, you had a duty to your board and, and, and, you your investors to explore this. And so this might not be exactly how it happened,

but from what I understand, you guys reached out to Google to say, hey, we got this offer. Are you interested in making a counteroffer? Is that sort of how it went down? I think that's about right. While we were talking to Yahoo, one way or the other, Google got wind and came along. And that was more exciting.

Um, there, like Google was the, the cool company. The cool company. Yeah. And, um, and so we took that pretty seriously and got pretty close to accepting an offer. You guys went pretty far down the road with them. Um, at the same time, you were crushing it. I mean, you guys were doing really well. It, it seemed like, you know, things were trending in the right direction. Honestly, I think even considering the, Google deal at that time was coming from a place of fear. My memory is that, like, we had a board

meeting, and that was a moment to look at the latest numbers and just take in the forest through the trees there of how remarkable what we were building was and how kind of unprecedented the growth was. And I think we all looked at that, and we were like, we just can't sell right now. they reportedly offered about $5 billion to acquire Groupon, but the decision was, hey, we can be bigger. Tell me, did you think at the time? And I know this is hard to talk about. So I appreciate your candor on this because I think it's really important. I mean, sometimes, you know, there are plenty of examples that you can point to where the founder sold too early.

Instagram, right? Instagram is now worth $40, 50, $60 billion, right? And the founder sold it for a billion, which was a lot. But, you know, you could say, hey, what if you held on to it, right? Or there are plenty of examples, right? But did you think at the time, you know, we're the next big tech company? We can be the next Amazon or the next, you know, one of these big tech companies. Absolutely. Yeah, we absolutely had that kind of mentality. We were. looking at Facebook's numbers and saying, okay, it took them this long to get here. Are we on that path? And maybe it could have been, were it not for some execution mistakes that happened after we made that decision? Yeah. There was also, I'll tell you a funny story about it too, how I thought about it. I remember sitting in the board meeting and saying like, look, my calculus on this is like,

say we pass it up, like, what's the downside? risk. What's the worst that can happen? Maybe things really fall apart and the company's worth a couple billion. That's still a lot. That's still a lot more than any of you invested at. And I remember like one of the investors giving me the kind of like kid in the room, you know, pat on the head and saying, Andrew, it doesn't work that way. Like that's not how we think about these things. You know, you don't get to say like $2 billion is better than, you know, the $20 million at which we invested. And that's a lot. win. It still sucks if you could have sold at $5 billion and now you're selling at $2 billion.

Yeah. All right. So you, basically in December of 2010, you turned down this offer from Google. There must have been some rumors going around. I mean, I think there were at the time and articles were being written. So you had to announce this to the staff at Groupon that you were not going to be acquired. And how did they react to that? Were people relieved? Were they happy? Were they like, woo-hoo? Or what do you remember?

This isn't going to make any sense. The announcement was so bizarre in other ways that I can't remember how people actually felt. I don't even know if people knew how they felt because of the weird performance that we put on. So basically what happened was we had an all-hands meeting at this church down the street from the office. and, you know, the 500 or 1,000 group on employees were in this church. And I came up to this stage. I said, hey, I have a special announcement. In this point, employees didn't know what was going on.

There had been some stuff leaked, but nothing, nobody really knew for sure. It was all just speculation. And I said, hey, I want to introduce someone joining me on the stage is Carol Bartz, the CEO of Yahoo. And we had hired this woman to plays an actress of Carol Barts. So weird. Okay. And she came up and she goes, hey, what's up? F tards, except she didn't say F.

She said the whole word. I'm super excited to own you all. I got pizzas out in the front room. Let's get going, building this thing together. And then everyone eventually realized it was a joke. but we did that to kind of prank our employees. And that was it. Like, I don't even know if we talked about the fact that we hadn't sold.

It was just like onward. Yeah. So once you made the decision not to sell, I mean, now the board and the investors knew that, you know, you could have gotten $5 billion. So I'm assuming there was some pressure slash desire to quickly go public. Did that, was that something that you also wanted to do? That was basically part of the agreement with the board. So as soon as we passed on that, it was kind of like off to the races with doing an IPO. Okay.

So that's fast, right? It's like two years, a little over two years after you launch to file for an IPO. I mean, and by the time you filed, you had 7,000. employees, 80 million subscribers. You know, you'd grown really quickly. But then at this point, you have to put all your cards on the table. All your books are open. Everyone can see the, you know, the inner workings of the business. And you started to take a lot of heat for your business model. Yeah, so this was really, I think, the biggest turning point was when you file your S-1, you have this 90-day quiet period where... You can't talk at all. To the media to

anybody. That's right. And all of a sudden to be in the situation where we were getting criticized for some of the financial metrics that we put in the S-1, some people were really dunking on the sustainability of the business model. And we were, we were getting criticized. And we were, We mostly just had to keep our mouth shut and not respond to it. And not only was it painful, like, as a coping mechanism, you almost have to train yourself to not care. Yeah. And lose that sensitivity to public opinion. And there's a real, like, sadness that comes with that.

Okay, but you did go public. You go public in November of 2011. And despite all of that, just... Despite all of the negative press, it was the biggest internet IPO since Google in 2004. It was a massive success, $12.5 billion valuation at the end of the trading day. That's right. Yeah. And it rose from there. But the skepticism never went away. The noise never went away. and the tax that it created on running the company, both in terms of managing employee morale,

and just doing all of the stuff that you have to do when you are a public company was so high, and we were still such a young company, that it made it difficult to do that at the same time as we were operating the business and trying to find the next version of the business model. Right. So you're focused on all these.

putting out all these fires in the previous several months, but meantime, the business starts to lose market share because all these competitors. Yeah, it wasn't so much that there were other people that were gaining market share as it was as the growth was slowing. I mean, a big part of our story was trying to evolve the model. So that was building like a real-time deals marketplace where we would have smaller deals that would pop up as you're walking down the street in the mobile app that was doing things like loyalty programs at businesses.

We wanted to evolve Groupon to be something that wasn't just this dying daily deals model. And so we had kind of like a dual problem, which is growth was slowing. But at the same time, we were just having a hard time having a predictable business, like understanding what was going to happen in the next quarter. We're not a subscription business. It's harder to understand what's going to happen, especially when you're completely turning over the inventory of your website every single day with completely new stuff.

So I think we were like difficult for Wall Street who really values predictability and being able to say this is how we think we're going to do this quarter. And the fact that we just got that wrong so many times, led to a lack of trust. You started to hear from small businesses also that they would try Groupon and they would get overwhelmed with people who would just come in for that one event, clean them out and never come back. And that actually, for many businesses, it didn't end up working out well. When you started to hear businesses say that, what was your reaction? I mean, we'd feel bad, obviously.

And the way we responded was to try to understand it better. I think, like, for sure, there are businesses that lost money on Groupon. It's a little tricky because it's this new form of advertising, basically. Businesses lose money on advertising all the time. And I think because it's this novel thing and there's a company like us that's The symbol of it, the plane crashes tend to get a lot of attention, but most people still love their experience with Groupon. All right. I guess about a year after the IPO, you get some worse than expected quarterly earnings report, and the stock hits like $2.76. sense. Did you start to feel the pressure of the declining revenue? Did you, or did you, were there

people explicitly, whether they're investors or Wall Street, you know, investors saying to you, hey, you've got to do something here. Like, you're not, you're not managing this correctly. Mostly where that showed up was with my co-founder, Eric, where as long as the company was growing, we really complimented each other well and got along for the most part. It was only when growth started to slow that our differences in different points of view about things started to come into relief. That tension started to build between you and Eric. Yeah, we just had like different ideas about the direction to take the business. And, I mean, when did you feel like,

Maybe you aren't the right person to keep leading the business. Honestly, I only ever felt that way at the point where I felt like my public credibility after having missed a number of quarters was no longer intact. And I just had to get out of the way and that hopefully a new face would give Group on a chance for a new start. It was never like I didn't think I could do it. And maybe I should have felt that way. But I didn't. It's hard.

It's hard to, it's a form of like giving up on your baby, you know, and it really felt that way. So at the end of that Q3 in 2012, I think the board said to you, look, we're going to give you another chance. Turn it around for the next quarter and we're good to go. But I think around that time or maybe shortly after you decided. that you probably wanted to find somebody to take over a CEO? I decided that because the board gave me one more chance, which was very generous of them. It would have been totally reasonable for them to say,

like, you're out of credibility at this point and you've got to go. But they wanted to give me a chance for one more quarter. And then, like, a couple days later, my CFO and I were meeting with investors in Barcelona or Madrid or something like that when we got a call from our French office. that there was some, like, air in the spreadsheet they were using to track stuff, and we were going to miss our number in France the next quarter by $10 million. Immediately at that moment, I knew we were going to miss our quarter. And at that point, I was like, okay, let's figure out who can take it from here,

because it's not going to be me. I can't do what I said I was going to do for the board. So you presented this, I think, to the board. You said, hey, this is my plan. Mm-hmm. How did they respond? Because, I mean, by February of 2013, Groupon was still valued at $3 billion. I mean, down from $12.5 billion, so not great.

But, you know, this happens. There's plenty of examples of companies that this has happened to in the last five years. So, you know, but so you come to the board at the next quarterly meeting to say, hey, this is the plan. I want to step aside. And what do they say? That's right. My memory of this is that I came to them and I said, we're getting ready to do our earnings call.

I'm prepared to announce that I'm transitioning out and we're kicking off a process to find a new CEO. I've already got an executive recruiter going on the search. And they were like, thank you very much. But I think we're just going to make Eric the CEO for now. and I mentioned earlier that we didn't have a same vision on where to take the business, so I wasn't super into that idea. And I was like, you can do that, but you'll have to fire me.

And they said, don't do that, Andrew. It'll be the worst, like a terrible decision you'll regret it for the rest of your life. They wanted you to voluntarily step aside so they could say, Andrew has, you know, decided us to resign and, you know, to seek opportunities and we wish him well. He was an amazing, blah, blah, blah, the usual thing when people are, quote, unquote, you know, they decide to step down or step away and retire. Anybody that's, like, looked at one of those, you can see it a mile away. It's like so obvious. This wasn't this person's choice.

And for me, it felt like it was going to be that tenfold. Like, who are we kidding here, folks, with me saying that I've made the decision? So that just never sat well with me, and I kind of decided to go with the root of just embracing getting fired. You said, fire me, and they did. Yeah, for sure. And I owned up to it publicly about what happened and, you know, went home that night and sat on the couch by myself. and ate pizza. Later on, my exec team came over and

we all got drunk together. And that was that. Four and a half years. And this thing you built, but of course, when you go public, or, you know, when you've got investors who control the majority of the company,

you know, you can be fired. That happens. I mean, it's, but it must be an emotional experience. Oh, yeah. It's very emotional. I was, like, crying on my way from the boardroom to the elevator leaving the office. It was, but it was such a release. Like, some of it was just that, you know, it was, um, it was like knowing that this thing that I'd been fighting against for so long, keeping, doing whatever I could to keep this company going, that that chapter of my life was over. And really, like, never for a second taking a moment to contemplate what an alternative future would look like. Yeah. I had just no idea what was next. When we come back in just a moment, Andrew launches a new business that does not get off the ground, but in the process discovers another idea that does. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz.

So just five years after launching Groupon, Andrew is out of a job, fired as CEO. And he's also dealing with some unflattering portraits of himself in the media. Actually, I was trying to do some preparation for this interview. I just like remember my life. And I ended up like stumbling across a story that was like about when I got fired. And the first line was great. It was Andrew Mason didn't get fired for his personality, but it certainly didn't help. So I would occasionally do things that were kind of quirky.

Like I remember going to present at a TechCrunch conference, a side project we came up with called GruSpawn that was a dating site for people who had met on their first date using a group on and then gone on to have a baby. and it was a way that they could apply to get a scholarship because we felt like these were Groupon babies and we were responsible for their existence. And I presented this thing wearing bronzer with my hair slicked back like a fancy tech CEO. The whole thing was just like absurd.

It was not real. This was a prank. No, this site was real. Like we had it all ready to go. I mean, look, it's like one of the, I think some of the stuff that I end up doing is kind of on the line, where I'm not even sure if it's real.

Like it's real, but it's also not real, obviously. We just sometimes have these ideas and can't help ourselves. Andrew, you definitely were eccentric. I mean, eccentric isn't maybe the right word, but you definitely did a few things that when they were written about out of context seemed like, you know, wow, that's a little weird. Like, you know, it was reported at the time that you like, put a yoga video together

for your team like in front of a Christmas tree doing yoga and underwear and I get like it's part of that's camaraderie and being funny and stuff but like when it's written about in a standalone article

people might see that and be like who what who is this guy yeah well just to clarify that because that sounds insane the that yoga I did record a bootleg yoga video of me and my underwear in front of the Christmas tree

which is not insane. But it was just like something that I made for fun in my mid-20s and put on YouTube. And I consciously didn't take it off the internet after I became CEO of Groupon. Because I did have that side to me that was just, I guess, people would often call me quirky. Right. Anyway, it was all like good and fun when we were a private company. And then when we became a public company, it was kind of weaponized as a sign that I was like not suited for the job. immature. It didn't make sense to me because it's like I was this way before and I got the company

to that size as the same person. For me, it's like it's just about enjoying the ride. And when those of us that work there come together and talk about working at Groupon, a lot of times they're the things that we remember that weren't going to happen somewhere else. But I think they're some of my favorite memories. So you go, you leave. I mean, you're done. And what is, did you do in the weeks and months after? Did you kind of just, I don't know, go to Europe and kind of think, I know you'd been, you'd just gotten married around that time too, or maybe a year earlier? Yeah, I got married a month before we did the road show and IPOed. We went to Southeast Asia for a month. On the way back, we stopped in San Francisco, decided that was where we were going to live. By the time we got back to Chicago, I think she was pregnant with our first son. And by October of that year of 2013, we were living in San Francisco, getting ready to have her first child.

So when you moved out to the Bay Area, did you know what you were going to do? Because you get, you lose your job in the beginning of 2013. I think by May of that year, you become like a Y Combinator partner or part-time partner there. I mean, that's a nice landing pad to start anew. But did you have a sense that like, okay, I'm going to, now I'm going to come up with my next thing? Yeah, like the white combinator thing was just something to do every couple of weeks go in and talk to some companies. So it was never like part of the career path, but it was like an interesting way to to sink into living in Silicon Valley. I had basically a backlog of ideas for a next company,

like things that had come up over the course of Groupon that was like, ooh, this would be cool, someone should go build this. A lot of it was just like, what the hell am I going to do for the rest of my life? If I can't figure out how to do this again, like I'm 32 or whatever. I got to keep myself busy somehow. This is the only thing I know how to do. I hope I'm good at it. And it's not just a total fluke.

And so I'd always thought that somebody could take audio tours to the next level, especially with mobile devices. Something where you could walk around a city, use the GPS of the phone to create this experience that feels like there's somebody who knows the city really well in your ears, walking alongside you, showing you the place in a way that only they could. So we launched this company called Detour. It was like half a tech company and half a content company where we were making these immersive audio tours. And we ended up creating 30 or 40 different tours in cities around the world. There's actually a lot of people who still come up to me and say it's their favorite app ever, which is cool. But it was incredibly small. Like we just couldn't get traction.

and I was coming from like a Groupon world where we could do these, create this machine for making write-ups. Yeah. And just produce a ton of like pretty good content very quickly. And then as we got into making audio storytelling, as you very well know, it's not that easy. No. And the idea was you would go to a city and there would be a walking tour, but it would be this beautifully produced audio experience.

Yeah, so for example, we have a tour that's narrated by John Perry Barlow of the Grateful Dead, walking you through the tenderloin neighborhood of San Francisco. And he's talking to you. There's sound effects and music coming in and out as you get to the street corner. He says, okay, go ahead and cross the street. I'll wait for you until you get to the other side. And it was almost like a game engine where we had ambience and music playing in the background on different tracks from the, from the narration. And it was responding to where you were going.

The narrator would often guide you into businesses that we had arrangements with. You'd be like, oh, pop into that butcher shop and check out, you know, what they're doing, something like whatever it was. Yeah. We had one with a famous gay rights activist and friend of Harvey Milk that took you through the Castro neighborhood that people would routinely, you know, end the tour in tears from what a moving experience it was. We did a tour of the Brooklyn Bridge with Ken Burns. Wow. It was cool, like, really prestige stuff, if you can say such a thing.

But each one cost us $30,000 to make. And were you financing this yourself? Yes. At this point, I was like, I need a break from investors. Like, I get the role, but I just want to build something. truly great without thinking about anything else other than building something truly great. Yeah. But I guess while you're working on this project, you wind up developing something else, like something that will turn it into the company that you have now, which is Descript.

And this came out of a problem that you were having, right? Like transcribing the interviews that you were using to produce the audio tours. Yeah. When we started the business, like, our idea was we're going to hire great radio producers to create the first wave of these tours. So when they got their interviews transcribed, they would do it with humans. And people were just starting to experiment with using automated services for this. I'm sure you remember. Yep.

And we saw this technology developing, and we were like, we could just build. a audio editor where instead of working with this kind of heavyweight timeline, we could just make it work like a doc, like a word processor, the one tool that everybody knows how to use and just has this natural intuition around. So we started poking around, and we found this fella who had been getting his PhD at Berkeley in exactly this kind of thing. He'd been doing exactly exactly this kind of research. And we said, hey, why don't you come over here and see if you can turn this into a product?

And this can be the tool that we'll use inside of detour in order to build the tours. So, I mean, the idea would be that anybody, because most people who don't know about audio editing, essentially, like we're talking now, and then it appears as like a waveform, right? And then you just have this program that you use and you start to kind of chop up these waveforms.

But this would be like a word document, and instead of chopping up waveforms, you would just literally like edit out words like you do in a word document, but that would also edit the audio. Right, exactly. And it was so fun to work on. How do you graft the conventions of a timeline onto a document in a way that feels like you just couldn't imagine it working any other way?

So cool, such a fun puzzle. Yeah. It's starting to remind me of going from the point to Groupon, right? I mean, this took a little bit longer, four years. But you must have gotten to a point with detour where you realize this is just not going to work. There's no revenue coming in, no significant revenue. For sure. And so at what point did you say, let's make a pivot? You know, let's focus on this other thing, this feature that we're kind of looking into. So after a while, like it was obvious that detour wasn't going anywhere. We tried everything we could think of. On the other hand, we had Descript, which was obviously solving a problem for people. Like, we had people using it.

Everybody saw the potential. And even as we're doing this, like, the funny thing is, like, in the back of my mind, I'm like, this is, like, incredibly irresponsible to be, like, we're nowhere close to product market fit. for one super complicated product. And now we're starting to think about building an audio word processor. This is exactly what I'm trying to teach people not to do when I'm counseling them at Y Combinator. But it was actually like one of the moments where it was maybe really useful to be funding the thing myself because no one could tell me how stupid it was. Yeah.

What we weren't sure about was like how big is the market on that? Podcasting was going through a golden age, but at the same time, you didn't see a lot of technology companies in Silicon Valley building podcasting software. And as we talked to investors, there just wasn't a lot of enthusiasm about it. So we were like, is this an audio editing tool or is this a narrative media editing tool? Like, do these ideas apply just as much to video as they do to audio? And that was what became the pitch for Descript when we decided to spin it out. And so all kinds of different content creators are using it. Podcasters, marketing teams who are using it to make their YouTube content.

And when we've really just been able to thrive off of reimagining the audio video editor, the way you would build it if you were building it from scratch in, you know, 2024. What, like, how do you measure success? Like, when do you, you know, with Groupon, there was an IPO and there were all different milestones. You've learned a lot from that, obviously, as we've, as we've heard. How do you know, you know, that you're on the right track with the script?

I feel much calmer about that than I ever did with Groupon because, you know, it's been such a different kind of company to build. This one has been so slow and methodical. Like, we started working on it as part of detour almost 10 years ago. And the investment that we've made in that over this long period of time makes us feel like we've built something pretty special and it feels like a much more resilient organization. Andrew, when you think about where you got to,

you know, where you are and how it started and how it's been going. I mean, you had, you know, despite the challenges with Groupon, it was, it had a huge cultural impact. It was a really big deal for a long time and certainly is worth remembering at its height. And now, of course, to script, how much of where you got to now do you attribute to just the sheer work and how much do you attribute to the luck or the timing of it? So in between Groupon and Detour, I recorded an album of motivational business music. Yes, I knew about that. We didn't have time to talk about it, but yes, please, go on. The idea was to take sincerely useful business concepts, but marry them with schlocky, derivative rock music in a way where the combination was just completely unlistenable. As part of that, I did a photo shoot for the album.

where I made these cards of Andrew, like the visionary business CEO, and it says, I don't believe in luck. That's the quote. Yeah. Because I just think it's so silly. Like, like, come on. I think there's like, like, I don't know, maybe Jeff Bezos and a handful of people where it almost like doesn't matter what circumstance could have shown up in their life. Like they were going to end up being a super successful billionaire. Yeah. For the rest of us, it's a, it's a mix of preparation. And opportunity and luck for sure. So, Andrew, I have one last question for you. And I know you've been asked this a lot.

And I'm sure it's never fun to be asked. But if you had, if you had to do it again, do you think you might have sold Groupon, like when you had the chance? It's a weird question, right? Like, think about what that implies. I like my life. I love my kids. I also like the failure. I mean, everything that I've done that's been any form of success has not been the obvious thing from the start.

Like, you end up finding it in the rubble of some mess that you've created. And I like that part of my story. I like how I grew from it. Of course, like, if you're in that situation again and you knew that that was where things were going to go, you would run away from that pain and go a different path. But I've lived through it and it's okay. Like, I'm a happy person who really likes my life and feel like that makes me a richer person. That's Andrew Mason, co-founder of Groupon and founder of Descript. By the way, remember how Andrew talked about that album of motivational business songs that he made right after he got fired from Groupon?

The songs he described as useful business concepts married to schlucky and derivative rock music? Well, for better or for worse? Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of. the show, and as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at gairozz.com or at Substack. This episode was produced by Chris Messini with music composed by Ramtinor of Louis. It was edited by Neva Grant with research assistants from Catherine Seifer. Our engineers were Maggie Luthor

and Robert Rodriguez. Our production staff also includes Alex Chung, Carla Astevez, J.C. Howard, Sam Paulson, Devin Schwartz, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.