#277: Down Dating – Part 1 – Created, Sold and Bought Back Again

Colin Hodge created a dating app the took off and got a lot of attention. He just did expect to buy it back after he sold it.

Dave Young:

Welcome to The Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Travis Crawford HVAC Ad]

Stephen Semple:

Hey, it’s Stephen Semple here and I have with us, we’ve given Dave Young a bit of a break, and I have with us Colin Hodge, who is the founder of… It’s such an interesting story. So he’s a founder of a dating app. We’re going to talk a little bit more about that dating app. He grew it, sold it, bought it back. Again, one of those really crazy stories. And I actually remember, we talked quite a while ago and I remember that we squeezed in this call, literally, I was traveling into downtown Toronto and I pulled off off the road at one spot to do this telephone call.

And it was literally one of those ones where I think three or four minutes into the call, I was like, “Oh, this is such a good story. We have to talk about this.” And Colin, you’re also a bestselling author, so you’ve got a book out. Let’s explore what happened because it’s, again, one of those build it, sell it, buy it back stories, which I always love.

Colin Hodge:

I’m so happy to hear that, Stephen. Thank you for having me, and I hope your listeners enjoy it as much as you did in our initial call. It was an absolutely crazy journey starting this company, getting international attention, what felt like overnight and being on the front of every webpage, getting on national TV in the US, and then eventually selling the company and buying it back. So I’m happy to walk through all that stuff and hopefully there’s some good lessons in here for other builders out there.

Stephen Semple:

I’m sure there will be. So tell me about the starting of the dating app, how you got this started and what was the inspiration for starting that? That’s not something that everybody wakes up in the morning going, “I’m going to do a dating app.”

Colin Hodge:

Like most founders, I had the problem myself first and I went on a few bad dates and one was just incredibly insufferably bad. I won’t go into that, but suffice it to say that it endangered my physical health. Let’s just put it that way.

Stephen Semple:

Wow.

Colin Hodge:

After that, I knew I could do better, right? I knew I could do better. I was always very curious about sociology and psychology. Why are we attracted to the people we are? How do dating rules work? How do you learn how to date? How do you even make friends? All these things about social dynamics that I was curious from a young age.

I really, during my early 20s, started to look into it more. And then by my mid to late 20s and I had these dating issues, it all came together and it became clear to me, this is what I should start. I should try this because I could tell you right that back then, nothing else, nobody else was doing a good job at it. So I figured why not me? Why can’t I do better?

Stephen Semple:

And the dating app that you built again was called…?

Colin Hodge:

So my first one, and it completely failed the first one that I made, I called it Heard About You. And the idea was I thought, okay, one of the best ways to meet people is if you have a mutual friend in common, so you have some shared interest potentially, you have people you can vet them with. And while that might work as a way to meet people, it was not a motivating enough factor for all the parties that you need to be involved.

And so I pretty quickly, within about a year, year and a half, figured out that model wasn’t going to work. And what I realized, frankly, during a very drunken night when I was confessing and just blurting out all my fears about my startup failing and all that stuff, was that the key element that everybody was dancing around in the dating industry but afraid to really voice, was this idea that you couldn’t really be honest with what you wanted in dating. In fact, a lot of people were just saying dating is so fake, all the profiles feel fake. You have to basically lie your way to get a date. And when you do, people show up, they look different, they act different than they were online.

So I said, okay, there’s honesty missing here and what is more powerful than the human need for that intimacy, that connection? And being a youngish drunk guy, some other guys in the office, we came up with something that was very scandalous. The name we came up with and the concept was Bang with Friends. The idea behind it, as it might sound like, is it was a Facebook app and you could figure out, you could secretly figure out, which of your Facebook friends wanted to bang you, wanted to have casual hookup with you. And when you did, we let you both know if you both reciprocated, but if you didn’t, it was a secret. And that lit the world on fire for my 15 minutes of fame, took off, and it was the beginning of what is now my successful casual dating app, but under a different name.

Stephen Semple:

I do have to give you credit on one thing is I love when people decide to just lean into that controversy. The Bang with Friends put it right out there, got that attention, and look, a lot of people would’ve been afraid to do something like that, but that was the first iteration. I seem to remember it did fairly well. Now, did you shut it down and then just roll it into the next idea? How did that transition happen?

Colin Hodge:

So that got us off the ground. That got us some investment, that got us some initial traction. It helped me build a team around it, and it really helped me to figure out what it is to actually create something from scratch, get attention in a hyper-competitive industry like the dating industry and start to build that critical mass.

But pretty quickly we realized the name was limited and the concept was limited, so we pivoted it into a new brand, a new app called Down. And the whole idea with Down is, are you down? Are you down for whatever? Are you down for casual? Are you down for a date? All these things, it’s very versatile and it really allowed us to evolve who we were as a company to just keep that element of people being really honest with what they want, but leaving some of that, maybe that controversy behind.

Stephen Semple:

And that’s interesting because the whole idea of the name Down is kind of interesting because are you down for is part of our lingo, right? It’s part of the zeitgeist out there of how we speak. So that’s kind of interesting that that’s where the name came from. And I could also see, `strikes me that Bang with Friends, not only was there a limitation because of the name, it also strikes me there was a bit of a limitation because of the format because anytime there’s these two pieces, it’s probably harder to build that community than you would’ve had with Down.

Colin Hodge:

Exactly. Yeah. So you need so many elements to go your way to go right in an industry that is two-sided like a dating app. So you need those two people to want to match, you need them to want to match around the same time. And we’re talking within usually minutes of each other because if somebody waits, comes on the next day, that other person might be gone by then. And then you also need them to be hyper local, very close to each other in most cases, not all, but most cases that people want to meet somebody near them.

So all these things together add on top of it, are they attracted to each other? Are they looking for the same sorts of things? Do their personalities match? There’s just so much here and it’s frankly just such a hard matching problem, much harder than any marketplace like Uber or selling goods on eBay or Facebook Marketplace. It’s such a hard industry and pivoting to Down allowed us to really hone in on, all right, our niche is casual and very honest, and we try to just replicate that throughout the marketing and throughout the product.

So yeah, you’re honest with your intentions, but you’re also honest about what you look like. We verify 100% of every profile to make sure that you look like your photos and you’re a live person, not any recording, right? We add certain elements so you can express exactly who you are and we try to coach you through being a more honest person in the app. So it’s really been a really good pivot for us, but of course, being that controversial at the start helped us to at least get off the ground.

Stephen Semple:

To put in perspective, how successful is Down? How many users do we have? Where is it sitting in the world today?

Colin Hodge:

Yeah. So I always tell people, you probably haven’t heard of us, but don’t worry, we’re a top 10 dating app in the US. So what does that mean? That means we have almost 18 million users. We are gaining millions every year. We have grown about 50% every year since I bought the company back in 2018. And frankly, unlike most companies, we are independently owned, and that means that we can chase the positive metrics that align with our users’ happiness and success.

So our top thing is not revenue, it’s not even market share, frankly. It’s every year are we growing how successful our users are in matching with other people, in liking what we’re bringing with the app and further defining and refining what do we stand for? What are we bringing to the world? Because we realize if we want to build that long-term empire, if we want to build that long-term success, we have to please our users for the long-term. We can’t just be focused on the next quarter.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Using Stories To Sell]

Dave Young:

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.

Stephen Semple:

So I got a couple questions I want to sort of dial back. So you started the first business and then it rolled into Down and you built up Down. So tell me what happened around the sale of Down. What was the impetus to sell it? Who purchased it? What all happened there?

Colin Hodge:

So I was approached by some investment bankers about two years into the project, and they saw the worldwide attention we got, the traction, that we raised money, but not too much money, and they started to shop us around. We talked to all of the major players in the industry and even some social app companies outside of dating and got a few offers, but frankly, none of them were very attractive. And where I left it was…

Stephen Semple:

But you were actively shopping it though?

Colin Hodge:

They were shopping it and that frankly didn’t go where we wanted it to. So the offers we got ended up being mostly kind of acquihire style where they probably would’ve shut down the app and let go of some or all of the workforce, not ideal, just kept a few key players. Even the ones that wanted the whole team, they were very hesitant about really paying out much money. And so it would be a long earn out. And I decided, you know what? I don’t need to sell it yet. I’m going to quit living in the US, frankly. I’m going to save money and travel and go to cheap places and run this solo from… I ran it from a cafe in Guatemala for the first three months.

So that’s sort of massive pivot from a loft in San Francisco in the heart of Silicon Valley to running it from a cafe that barely had internet in Guatemala. And what I realized during that was I needed to double down on that value that we were creating. So reinvent the app, reinvent our marketing and figure out how can we start to deliver value for our users. And when I did, that’s when within a year and a half after I had discovered how to grow organically and how to make the app good enough that people started to come back and started to get more matches, that’s when the real acquisition interest appeared in 2016, a year or so later.

Stephen Semple:

All right, cool. And who ended up acquiring it?

Colin Hodge:

So a dating app from Singapore. They approached me first for investment, they’re called Paktor, and they approached for investment and then through further meetings and talks, their CEO and founder realized he wanted to acquire us and have me drive all of their organic growth and everything under their umbrella.

And so they acquired the company. I moved to Asia, started to run their labs for them and grew a bunch of other apps with them as well. And Down survived, kept running under that bigger umbrella, and thankfully I was able to take a little break from Down, let another team run it for a bit and focus on making a framework that could work across lots of different companies, not just one.

Stephen Semple:

Okay. So they purchased you, you’re then still running it and involved with it under the umbrella of the other one. What led to the buying it back? This part I always love. I always love the sell of the buyback.

Colin Hodge:

Oh man. It’s such a great story because it’s one of those things where in the moment you feel like it’s actually really bad news and then you take a look and you sober up and you’re like, “Oh my God, this is an amazing opportunity. Why didn’t I see that?” So it’s one lesson I learned, whenever you get bad news or you feel like the world is crashing down around you, you need to look for the opportunity there because there’s usually some hidden opportunity, if not a big lesson for you to learn along the way.

And what happened was that Paktor and my company Down, that umbrella company within a year of me joining them started to merge with another company and that one wanted to IPO in the US from Asia. The problem was nobody knew any of their brands in America and they’re trying to IPO there and sell investors on it. So the bankers, they came from Deutsche Bank and some others, they were looking through the assets and they’re like, “Huh, this company called Down is like five, 7% of your revenue, but it used to be called Bang with Friends.” And they’re like, “That’s going to be a problem. We can’t tell investors that their only American product is a company that was a casual hookup app.”

So they panicked and sold it off in about three days in a fire sale. I found out pretty much after the fire sale happened. It went to a former engineer that they employed before. And I just so happened by a twist of fate had played a soccer tournament with him about a month before that and we won the tournament and he was happy with me. And so I approached him, I said, “Man, what are you going to do with Down?” And he said, “Honestly, it’s not making as much money as my others, so I was just going to let it sit for a few months.”

And I said, “Have you looked at the metrics because this thing’s going to die in a few months?” And that’s when he said, “All right, maybe there’s something to this deal that I’m missing,” and let me in to come diagnose what happened. And through that, I negotiated the buyback from him at actually the same price that he got it at. So I took it off his hands, revived it with my best friend, and the rest is history.

Stephen Semple:

That’s amazing. And how many people do you have now working at Down?

Colin Hodge:

We have about 30 people. About 20 of them are full-time and we’re an all remote team except a tiny office we have in Taipei, which is pretty much voluntarily hybrid.

Stephen Semple:

Cool. It’s always interesting these cycles. But one thing I do really like that you said, and I think it’s a really important lesson, and it’s one that can be really missed I think by a lot of people, and it’s hard when there’s this bad news, the stopping and looking for the opportunity. I’m in a coaching program called the Strategic Coach, and it was formed by a guy by the name of Dan Sullivan. And I remember Dan telling an early story of his origin of the Strategic Coach. He had a different consulting practice and it was doing all sorts of work with government and politicians, and a particular thing happened that almost wiped the business out, just one of those pivots that occurs.

And he and his wife Babs went on vacation. They said, “This is terrible. Go on vacation.” Always in the back of my mind, because I was much younger then when I first started with that program, I went, “That’s nuts. Who goes on vacation when the world is crumbling around you?” And I’ve since come to learn it was probably one of the best things you could do because it’s hard when you’re in that panic moment to think. Take that deep breath, clear your brain, and actually think about the world differently. And the origins of this unbelievably successful company that he built, the Strategic Coach, came from that moment. When they sat down, they went, “Okay, this is done. This is crumbling. What do we do instead?” But I think it’s hard. So how did you do it? In that moment of bad news, what did you do that allowed you to think about the opportunity and change that mindset?

Colin Hodge:

I love that example because it’s basically the deliberate process of making that calm in the storm. How do you find the calm in the storm so that when everything is swirling around you and you feel all that stress and pressure to make a decision or make a move or whatever the stressful situation is, how do you find your calm? And one of the great ways I think is to take yourself to a different environment, somewhere probably more peaceful and relaxing, like a vacation.

I also really like to lean on journaling. So anytime that I put pen to paper, I find it really helps my mind find clarity to really look at things, really this comes from behavioral psychology, it employs our slower, more logical part of our brain where we’re deliberate about the process. And plugging into that by putting pen to paper and writing out, for instance, I’m feeling this about the deal and here are the pros that I’m seeing, here are the cons I’m seeing of the deal, here are the second order effects that I can imagine happening with all the options. That is so super useful and helps you create that calm in the storm.

And then the last thing that I did, I totally did that and frankly, I did it a few times, so one time was not enough when this happened, as you might imagine. But then the second thing is lean on your trusted confidants, your friends who you know will not bullshit you. They’re not going to just tell you what you want to hear. You empower them to tell you their truthful opinion based on what they know about you, based on what they know about the situation. And that gives you that outside perspective and oftentimes grounding that you need, even from people who are not in business, who are not in the startup world or business world because they help to identify, “Hey, you’ve said a lot, this certain aspect of your lifestyle is important to you. Is that still important to you because I’m not seeing it in this option you’re talking about?”

You don’t need somebody who’s in business to see that. You need a friend, somebody who knows you personally, who you can trust to tell you the truth and no bullshit answer. So lean on those people as well. Do the journaling and potentially change your environment if you can. And it’ll allow you to create that calm in the storm that is so much better for making decisions.

Speaker 5:

Oh no, no.

Speaker 6:

What?

Speaker 5:

I was enjoying this episode.

Speaker 6:

Don’t worry. Part two’s coming next week.

Speaker 5:

It better.

Dave Young:

Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.