Wednesday, August 8, 2018
Interview with Dave Fink and Jonathan Neddenriep, Postie
Is there a way you can make direct mail perform more like digital advertising channels? Los Angeles-based Postie (postie.com), backed by Bonfire Ventures and Crosscut Ventures, is applying machine learning and other techniques to direct mail. We spoke with Dave Fink, CEO and co-founder of Posite, and Jonathan Neddenriep, co-founder and CTO of the company, to learn more. Photo: Dave Fink on left, Jonathan Neddenriep on right.
What is Postie?
Dave Fink: Postie is a building a technology platform with a mission of making direct mail marketing behave as easily and dynamically as your favorite, programmatic channels. To make it easier to explain, we come from a part of the world where there's been email, display, retargeting, programmatic, and social advertising, which allows us to heavily leverage data, testing, and optimize real time results, so marketers can make good, informed decisions. Direct mail is similar, in that it has a lot of the components as far as access to interesting data, frequency, and in theory, the opportunity to measure campaign results. However, there just hasn't been the underlying technology to make it possible to pull all of that together. That's what our mission with Postie is today.
What's changed here to allow you to collect this data?
Jonathan Neddenriep: So, the core of what we've built in Postie, is a machine learning stack that ingests who your current customers are, and figures out who across every household in the United States is most likely to become a customer based on that data. We build on those audiences, and find others that look alike. We then allow you to use the print cloud, where we develop, print, and mail pieces very easily. We've taken all of the logistics and headache out of defining a campaign for our customers. Finally, we have a pixel system in the digital world, which lets us do direct attribution to determine what creatives are performing, what audience segments are performing, and feed that back into the engine to refine who is getting our campaigns. We are taking a lot of the modern tools that most digital marketers expect, and we are applying that to an old school industry, which is proving to be a lot of value to people.
What is a print cloud?
Jonathan Neddenriep: Instead of having to go out and negotiate print contracts and acquire your own paper, and for many people in the past even go out and buy your own ink, all these crazy things digital marketers never have to think of, we have a network of printers across the U.S., geographically distributed, who are able to print campaigns very quickly, and insert them into the mail system very quickly. It takes what is traditionally a multi-week process, with many vendors, and compacts that into sometimes less than a day. That distributed print cloud enables a speed of iteration that most marketers would not expect is possible.
Did either of you have experience in the direct mail industry, and why did you pick that to build these systems here?
Dave Fink: Neither Jonathan nor I came from a direct mail background. We think that's really important. If you seen the entrepreneurs that disrupt big categories, they came at it from a very different approach, which is not iterative, but is transformative. Both of us are purely digital. I spent 18 yars, and Jonathan a new less, building quite a few consumer Internet businesses. We've both build marketing technology platforms in emerging digital channels, and also built direct-to-consumer brands who rely heavily on performance marketing and data-driven marketing. That's what led us to decide to reinvent the way marketers engage with direct mail channels, about three years ago. We were working on a portfolio of consumer Internet brands. We woke up and saw the same pattern, over-and-over. The entire market was over-dependent on a single failpoint, which was Facebook. They have this amazing technology, but it's a walled garden, and their ad rates keep on increasing. Companies are looking at diminishing returns, and were finding it more challenging to scale on Facebook. We had to find other, more diverse ways to allocate our resources and grow businesses. In the offline market, while we love TV and radio, those are not very data driven, and don't behave as digital marketers would like. However, direct mail has all of those components. Those three components, include the data, the ability to test and optimize things, and the ability to measure results.
When we first set out to get into marketing for direct mail campaigns, it was brutal. It took 90 days of preparation, it was mistake-laden because everything was getting done off Excel spreadsheets. What's really led us to this path, is we had an a-ha moment to understand how we could use digital technology from the ad serving and marketing automation market, and apply those same strategies and technologies and software to close the loop on direct mail. We found out, pretty rapidly, that it was possible, and not only that with the same level of sophistication, data, and technology.
I understand both of you came out of Science Inc, the startup studio/incubator?
Dave Fink: I was one of the original partners at Sciences, and Jonathan was CTO of the e-commerce staff. Postie was developed after we both left Science, and wasn't incubated there, but our experience helping entrepreneurs build this businesses quickly, and make them scalable over the last six or so years, certainly was advantageous to our personal growth, capability, and network.
So, where's the company now?
Jonathan Neddenriep: We've been live with clients for awhile now. We have quite a few people using the platform, even though it was just publicly launched. We feel like the maturity of what we've built is very robust. It's interesting, because at this point we've already mailed millions of pieces and run tens of thousand campaigns. We've learned many interesting things. Contrary to what I would have expected, and many of our customers would expect, performance is the highest for millenials. the 20- to 30- year old braket. Those are the people who are responding to direct mail with the highest response rates. That's a proof point that this is an important channel that people should be exploring. It's been a year and a half, and it's been great.
Dave Fink: Elaborating beyond the performance and age brackets, the biggest point of accountability we hold ourselves to, is if Postie's technology help a broad set of advertisers and brands achieve performace results similar to their current, best-performing demand creation channels—namely, Facebook. We see, over and over, unquestionable, that CTOs are able to see a return-on-spend (ROS) which is often superior to what their social and non-branded search campaigns deliver. That has been very good for us.
Jonathan and I have been doing this for awhile. We set out on our path with a hypothesis—could we develop a product, technology, and platform that truly makes the direct mail channel behave like a digital channel, and could we deliver results and engagements which keep advertisers ad spending in the channel. We had to be ver mindful to prove that, because, instead of a traditional raise of capital as quickly and fiercely as we could, we self funded this fro the first six- to nine-months. That allows us to not only be razor-focused on the product, and to prove out the product, but it also forced us to be very disciplined in running the business for profit. We've been profitable on a monthly basis since the start, and about a year ago we finally made the decision to partner with two, great local institutional investors, Bonfire Ventures and Crosscut. We also brought on a handful of very strategic angels, all of who had been operations in ancillary spaces, where they could help us accelerate the business. We raised $3.5M in funding in that round, which closed about a year ago. The irony of that, is due to the success of the business, even though we raised that fund to reinvest in our bigger team faster, we still remain profitable today. That's pretty unique in this space.
What has the biggest lesson you've learned so far as entrepreneurs?
Dave Fink: Without a doubt, we made a very conscious decision to hire people who are smarter than you, to build a foundation for our executive team. We've hired people like our head of operations, who had already built and sold a several hundred million dollars a year printing business, and also had the domain expertise unrivaled by none. Our head of client services, head of sales, and our head of data science all come with the highest level of experience and qualifications. I would say, if we had wanted to build this ten years ago, we might have fallen into lots of traps as early entrepreneurs, if we had been less confident we'd been able to manage serious people, hiring people because you think it's easier to manage them, rather than hiring people you can rely on for their expertise. Postie has been a pretty smooth ride so far. It's still new, it still has its set of challenges, but the biggest lesson has been to follow that age-old rule, trying to surround yourself with people who are way smarter than you. We've done that really well, and that's made things a heck of a lot easier for us.
Jonathan Neddenriep: Dave mentioned it earlier, during that early period of bootstrapping, we were self-funded. That means that we were very focused on the fundamentals of the business, if it is a good business, what do margins and pricing look like, and if this was something that if we bring in external capital will actually scale. It was a hard period of financial stress, tryingto bootstrap the company. But, I wouldn't trade that for anything, because it really made us focus on business fundamentals. If we had come up with a big stack of cash before we went through that process, we woul dhave been a lot less disciplined thinking about the business, and it would not be as good of a business.That's my takeaway from the Postie journey so far.
Thanks!