 Okay, we are live. Hello, Internet and humans that are watching this. Welcome to another awesome Google Plus Hangout where we talk about small empires. We're joined with, or joined by Alexis Ohanian, who is the co-founder of Reddit and the host of the show Small Empires, and along with Stephen Greenwood and Kirk Larson, who I've introduced many times, they are the people that make the show happen. Six times. Only six. Only six. Sorry. But this is season two, so yeah. Anyway, so this week, for those that have seen the episode, Small Empire went to August, which makes a smart lock, which was also designed by Yves Behar, who is a super awesome well-known designer. Guys, if you want to talk about the episode or sort of say how it went and that kind of thing, because we are not, we don't have anyone from the company today, unfortunately, but we do have the people that made the episode. Yes, and we'll be fielding questions with the hashtag SmallEmpires on Twitter too, so you can get at us. That's me. I'm doing an impersonation of you asking those questions. We should also provide some context. We're actually on the road shooting still. So I'm in New York in Verge's office, and they are out somewhere in the country. In an up-close location. If anybody can figure it out. Where was that? Bonus points. So, August, talk about August's smart lock after you shove that grilled cheese into your face. So, what do you want to talk about, August? So basically, we kind of had some trepidation about doing an episode about San Francisco. I didn't want to do it. It was too obvious a thing for us, right? We thought that the season is about showcasing communities that aren't commonly maybe known by a lot of people for startups. And so we were hesitant to go to San Francisco, but at the same time we really wanted to do a company that, in a space that we hadn't covered before. And hardware was one of those things that a lot of people have been asking us for, and we had been talking about doing for a long time. So we found a great hardware company, August Smart Lock. And they're what, like two years old now? Less than that? Yeah, I think around two. Year and change. How many employees are there at August? How many what? Employees do they have? 30 to 40, right? 30 to 40. That's tiny. They're based in downtown San Francisco. Right next to Ubisoft. I actually, I showed screenshots of those Assassin's Creed glitches through the windows at Ubisoft. So what was really cool is when we discovered August, they have a unique story because a guy who has started a couple companies and kind of been through the wringer on the software side, had some success, had some other ones that maybe weren't as successful, decided that he wanted to get into hardware to solve a problem that he was facing personally. And basically he went out and teamed up with Yves Bihar as a co-founder to come together and both share the equity of this company that they would set out to launch together. Do you know how that happened? Because you've got to be sort of someone to walk up to a designer of that caliber and say, hey, design my product for me. But Jason actually, he was the CEO of a couple of really successful companies and used some of the money from one of his, like one of the salesmen of his companies to start a thing called Founders Row. Oh, I did see that. It's in the video. Kind of like just like a place for founders of like startups to hang out. And so he pitched the idea for August inside of Founders Row and a bunch of people were like, hey, that's cool. And Yves was like, yeah, let's do it together. So Yves was part of Founders Row? Part of Founders Row, but he sort of got the momentum from the Founders Row thing and he and Eve had really hit it off at a previous conference. And so they just got to talking. When Jason was like, Jason basically came to Eve and was like, I want to fix keys somehow. And Eve was like, all right, let's do it. Jason already had the backing or at least the support of the other folks at Founders Row. Let's see. What's Rondo, Ryan Manning edited part of this episode. Do you guys know the story that I'm about to tell? Stephen, have you heard what he said? So right before he sits down to edit, he has all the footage ready to go. And he says he gets a call from his girlfriend that she was locked out of their apartment. Okay. All the way home, lets her in the apartment, comes back to the office, starts editing the video. And it's like, what the hell is this? Yeah. That's coincidental. Really, really crazy that that happened. So yeah, that's a cool aside. I think some of the problems that they're trying to solve are pretty interesting because they, a lot of what they were talking about is that people might need to let other people into their home for a certain window of time, right? So maybe you have a dog walk or you have a house cleaner or a friend just needs to come stop and get something. You can schedule that in certain windows with certain people and create accounts for your friends and family and stuff so that they have access to your place. So what happens if your phone is dead? That's the first question that came to mind and I'm sure they've addressed it, but I don't know the answer. Their answer is basically, use your key. I mean honestly what they said was like you could either walk to an extra neighbor and have them download August and you could put your access code in or find a charge somewhere or keep your key because you can still, it doesn't change the lock on the front of the door. So you can, that thing opens, that like metal case opens? No, that metal case is on the inside of the house and the front just looks like a normal lock. So people walking down the street don't know that you have this expensive piece of technology on your door. I see, I see. But it's like if you're gonna make the transition to go keyless then you don't want to carry your keys, right? Right, exactly. Yeah, no but they, I mean frankly the answer is use, sorry, you can't use, which is like I can't imagine what another answer would be, you know like. Yeah. Sorry, oops. Go find a charger, go to Starbucks. If there's a battery on the thing and you can pop a charge from it then that would be kind of dope. Or if you could get like an external NFC sticker to put on your phone that didn't require power. Yeah. Yeah. So that's a fail safe. So you guys mentioned this New York Times article that recently came out. I mean we're talking about the company as a whole. Talk about that article. I mean the article is basically like this is really cool, this is a really cool product but it's just like the first version of this product. And so like kind of like what the episode was all about, hardware is really hard and I think it's like, the first iPhone kind of sucked. You know what I mean? Like it was cool and it's a cool staff but it's not quite as good as the other side of the river. And they actually spent a lot of time kind of going back from scratch after they initially started designing the lock because they realized that it needed to be universal, it needed to be able to fit over every type of door lock that's out there. And originally they were just going to, I think their approach was that they were going to have something that you install instead of your existing one. They realized that there was too much friction there and too many people that wouldn't be able to install that in their door so it had to be something that goes on top of existing ones. So like that was one of the big problems that they solved in their first run through and I think they did a pretty good job of that and obviously found a lot of good partners to manufacture the actual hardware in Japan. What was he saying about the motor? Oh yeah the motor was like, it's like for size. It's for like cut through bone you know? Well yeah to be both precise and powerful but in the case of the August lock it's turning a knob. Yeah but he said there's like a hundred something. Yeah it has right because that was an interesting, it's an interesting engineering problem because every door is different. Right. Right depending on how warped it is, depending on the temperature, depending on the lock. The last time you adjusted it, apparently doors can be adjusted. Yeah who knew? So it's like, it's superficially I think the kind of idea that's easy, like the New York Times article is pretty snarky. You almost certainly don't need, unless you run a boarding house or bordello, you almost certainly don't need a digital smart lock to your front door. Nor do you find, oh god, yeah it's like keys are portable, they're durable, they're cheap to replace and everyone understands how to use them. Yay keys. Yeah the New York Times article was very much like a Luddite salvo but it was, there are certain points that are true like personally like the amount of times that I have someone coming in unannounced is twice a year. So like I have like keys. And I love a youth hostel out of my apartment. Right. So I could use it. I could really work. He takes equity stakes in exchange for a founder sleeping on his bed. Sounds like a good business plan. Big idea. I think it'll be really interesting to see five years from now if this, I think it's the kind of product that either really really succeeds or really really doesn't. I think, I personally think that as like batteries and Bluetooth get better, this should, more shit like this should be happening. Yeah it feels like. Yeah it's just like my battery on my phone dies in four hours so I would never, I couldn't do it. Right. And aren't there more competitors, like there are other people that are doing this smart thing. Yeah. Right. Well, I think what makes one, yeah, August is sort of the most beautiful and it seems like the most designed. So that usually. They're definitely going the nest route. I was just going to say, it reminds me a lot about the nest. And I think Jason even said that he had, he talked to Tony and he spent time with those type of people and when seeing the advice for how to approach the company. And I mean I think the device is really cool. It feels really nice. Yeah, it looks like just a thick nest. Yeah, yeah basically. So we're kind of at that point with the smart home where I think a lot of people are still trying to figure out what is going to catch and what is just unnecessary. Yeah. Because we're at this point where we can start putting chips into everything, right. We can make everything connected. Right. Do we need to have everything connected? We need to be done. Yeah. But it's interesting that you mentioned NFC before because the new iPhones and plenty of Android phones have NFC in it already. So you know like. So it's like it's far away. Right. So does this company make money? Are they selling units? What's the deal? They've sold a good group of units. I mean we obviously they're privately owned so they're making money but it seems like. They're in Apple stores. That was a huge win for them was to get featured in the online and the retail stores in Apple. And I know that they're definitely working hard to keep up with demand. Sounds like it. Okay. Sounds like it. I mean hardware is hard, right? That's like the whole thing. That's the fun. Yeah that was the fun of the episode. I was really proud of it. So on that note, let's ask Alexis then. What do you see with people that are approaching hardware and what do you try to tell them? To manage expectations for your consumers. That would be the biggest one. And we see you know, one of the seminal huge hardware campaigns went through what I see as Pebble. And though they did end up shipping, it was the biggest Kickstarter to date at that point, though they did end up shipping late, I think by and large their customers were very happy with the product. We're now entering a weird space where like, you know, I mean you saw that you've got things like the smart watch which require a ton of good software and good hardware. Then you also see things like the, what was that cooler called? Which is the new most popular Kickstarter campaign. The coolest cooler. What the hell was it? It's a cooler with like a fucking Bluetooth speaker and a blender. So it's like those little radios that are in hotels that have the iPod attachment that doesn't work on iPods anymore? Yes. And this cooler campaign a year ago failed miserably, didn't hit its goal, came up with a much better video, this is all booted, and blew away Kickstarter. $13 million and they asked for $50 grand. Yeah, $13 million. And actually the idea of having a good video influence the way that your company bears is a theme that will arise later in the season. So I think we're at a really interesting point where like, we'll see companies like Pebble, very early stage, very ambitious founders who want to fucking invent the smart watch and create, and you're able to create a new market. Then you see others, like no offense to the cooler company, but like, I mean these are all solved problems. They're just putting them all together. Right. And I don't begrudge them for their success. So we're seeing this whole range and August is somewhere in the middle here, and for anyone aspiring to do this kind of a hardware of making things in this company, it's a really seductive time. You can make an amazing video, raise hundreds of thousands if not millions of dollars, but still need to fucking deliver on it. Right, and then they have nothing to show if you don't deliver a fucking product. Plus a lot of money. Kickstarter is this money for you. Yeah, and I think we're going to see, over the next couple of years, we're going to see the fallout of some campaigns doing extremely well and satisfying, and some failing miserably. And I don't think, at the end of the day, it is buyer beware. That's also not much to give out to the world. It is how things go. It's just now the hype cycle is built, and it's great, but it's built ahead of time before you've necessarily demonstrated you can build it. I've invested in hardware companies that failed miserably. I invested in a precursor to the Jawbone called Wakemate, which was really ambitious, really cool, but failed miserably because they didn't get the hardware right, and they didn't spend enough time doing the diligence overseas, and they were just recent college kids who can do it. It's just a lot easier when you're only dealing with software because your failure points are a sight crashing. They're not catching on fire. Or someone getting injured. Yeah, there's a whole other level of responsibility. Or creating a cast, a dime old cast that is the wrong side. Right, yeah, even just money wise. It costs a lot of money just to make this Jawbone. Alexis, that company you were just talking about didn't have a cool Kickstarter video, nor were they on Kickstarter, were they? No, it was before Kickstarter. Oh, wow. Oh, that's super ambitious then. They did a traditional, I mean, they were ahead of the game. It's just timing is a lot of this stuff. But the good news is as more companies are doing it, they're going to create blueprints for other companies to learn from. The more people that do this, the more examples. Yeah, like Eric Mijakovsky, for instance, the founder of Pebble, he's on the Rolodex for anyone who has a successful hard hardware campaign that they run because they'll do anything to get 20 minutes just to pick his brain so he can tell them, don't use this vendor, don't do this, don't do that. And that knowledge is being spread now. So everyone stands on the shoulders of giants. So that is going to help. But you really, you know, hardware is hard. Hardware is hard. Is it a pun? No, I guess it's just a bad joke. Ironic. Yeah, but it is hard. Hardware is hard. Hardware. You can't really say software is soft because it's not true at all. Yeah. But it's exciting. Yeah. It's a... Alexi? Alexis, yeah. What's up, man? I love your show. We're live on the internet right now. Thanks, man. All right. I love your show, Small Empires. That's what I want. Do you want to play a game with us? Yeah. Come chill, man. All right. You guys want to chill too? Just grab a chair. Yeah. Dude, this is not a plan. This is literally a hangout. Yeah. I'm bad. I'm good. I'm good. How are you? I'm Alexi. I'm good. And this is Sam, back of the verge. You guys are so nice. Hey, guys. So we're everyone watching right now, and the English is awesomeness. I'll give our location a way down. We're on the University of Washington campus. And this is what happens, I guess, when you hang out on the sidewalk. Yeah. You've seen Small Empires. Which one have you seen? I've seen a handful. There will be a quiz. Do you have any questions? Recently I watched Art-Cycle. Oh, right on. First season. Season one, throwback. Yeah. I'm just an entrepreneur, because it's something that I'm really interested in. I just love the show. I'm seeing what people are doing. Oh, that's sweet. I watched Squarespace too recently. Oh, yeah. Great story. Yeah. They've got a business right there. Yeah. For incidents. Yeah. For instant money. Okay, so how did you find out about the show? I had subscribed. Can you hear this, Sam? Yeah, yeah. I had subscribed to the verge just on YouTube. Hey, everybody should subscribe to the verge. Yeah, subscribe to the verge on YouTube, people. You can go to the thing, slash, the verge. I had a technology review, and I saw, you have to watch it. You're like, yeah. This is terrible. I'll watch another one. Nice. Did you know who Alexis was before the show? No, but I knew who Reddit was. Yes. Okay, okay. That's the more I know. All right. Cool. So cool. Wow. What should we – like, what – we have – oh, we're going to get weirded about by that. Damn. What should we change in the show? What do you think would be fun to do? Yeah. Yeah, what's been missing? Yeah. Anything you think we missed? You can tell us it's perfect, too. I don't know. I feel like there's a ton of focus on a lot of, like, coding stuff. Yeah, okay. I don't know. I don't really know a lot about that. It can just be that I'm inexperienced. I think it's a little too insider-y for coding. But that's, like, the only thing, like, I don't – I can't relate to that too much. I feel like I want to kind of – Why don't you start learning how to code? I know. That's the real part. I got to go. So you want to see what – so this got leaked out a couple days ago. A bunch of – this is going to really hurt, okay. A bunch of high schoolers have a Facebook group called High School Hackers. They're all – they're developers. They all, you know, they go to hackfiles together. They go to – maybe it was college. I don't know. Regardless, a bunch of students posted up the internship offers they were getting from tech companies. Oh, yeah. That was insane. The monthly internships from all the tech companies you can think of on Facebook, Google, everything. I believe – You know how much you can pay for a month of being – A lot. Yeah. $7,500 to $8,000 plus housing. Yeah. As an intern. Yeah. As an intern. So like I can't stress – Right? Like learn to fucking code. I can't stress this enough. Learn to code. Yeah. You hear this? The co-founder of Reddit is telling you to learn to code. Listen to this. I was traveling for like five months on a bus telling people to learn how to code. I am – oh, sorry. These are not high schoolers. They are college students. They are college students. They are college students. They are college students. You have to be a college student to learn how to code. Yeah. Yeah. But yeah, Cora is $82.50, Pinterest $7,500, Dropbox $8,500. Google is only coming in at $7,000 but they do include a house stipend. Some of them provide moving fees. Yeah. You know what my internship paid me? Not literally $0. Not even $1 that I paid. Yeah. Yeah. So again, learn to code. Okay. There you go. But is there – I know we are actually doing this Hangout talking about a hardware company. Yeah. And why. It's even harder than a software company. Yeah. These people make these really smart locks. When you walk up to your house and their door, the door will open automatically on your phone. Yeah, it's pretty dope. But it's really, really hard to figure out. So is it on – You have to have a different app and then it syncs with your phone. I know it's a crazy thing when you get to those. So what's the part about your career where you're – you have these pitches. So you have these pitches. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. I don't have any stitches yet, but I just really like the idea of being on a smaller team, trying to do something unique in the matters. Like, it's easy to get lost in a big company. Just the sense of purpose and drive, and something you can actually do that might make a difference. It seems a lot more personal, like the creating aspect that you guys showcased in the show a lot. It's just something that really appeals to me. Great. That's the message, right? Yeah, I hope it convinces you. Yeah, in the business school that you go to, they have an entrepreneurship major and minor, so... I'm looking at it. Or, just fuck the business school. Yeah, you were a history major. I was a history major, yeah. So, I'm going to state, I didn't drop out. I was too cowardly. Steve and I both got our degrees before starting the company. Yeah, and then, fucking, one year almost to the day you sold Reddit, I read your page. Wait, what? You sold Reddit right after you graduated college, like within the first year, like a hundred days or something. It was a year and a half later. A whole year and a half. Oh, only a year and a half. It's good. So, stay in school, build something awesome while you're in school, and then sell it. And then you're good. Yeah. Or, just run it for the rest of your life and just hang out and enjoy working on a cool team. That's the best part. Honestly, I think the fact that you get to choose who you work with is so rare. And I had enough jobs growing up working for people and with people who I didn't respect. Keep it real, I'm sorry. I don't know who you are. Like, that's the biggest gift that I feel like... I think that's why Reddit sort of grew into what it was, right? Because you and Steve effectively are Reddit. Like, it is a product. It is your child. And that is team Out. And you guys are good people and the product is humongous and awesome. Steve's Out. That's for sure. You guys should do... I'm just spitballing now. The Verge should do a series. This might be two in the week, so you might hate this. But like, of profiling all these engineers in tech. Because all of the CEOs get all the face time. But all the engineers are the ones who... I know, it's like, who is actually building the product? The CEO is just... It's just like 15 dudes in this really dark little zone. Yeah. But, yeah, I really hope it inspires folks to do cool shit. So you gotta go do it now. And then when we're in season 7... Yeah, season 7. We're all freshmen. Yeah, that's right. Yeah, season 7-ish. We'll still be doing this. Yeah, what are you guys doing in Skid Row? It's secret. These guys can't know. I mean, can't we just give it away for the people that are watching this? Or do you guys not want to do that? Alright, for the people watching this, it's going to be our biggest company that we cover this season. Huge company. Giant empire. Legitimate empire. They've already IPO'd and have over 1100 employees. Their value is $4.7 billion. And they've acquired a handful of companies. A lot of companies. They let you do some creepy shit when you're in your neighbor's house. They're Zillow. And I just Zillowed this restaurant. Yeah, they're the real estate company where you can look up how much any house costs. They recently acquired Trulia, right? Yeah, they're in the process of doing it. But yeah. That'll be episode 9 in a few weeks. Episode 8 is a fun one, but we're not going to tell you what that is. Oh man, if you follow me on Instagram though, you already know what episode 8 is. Building hype. It's good. Follow me on Instagram. On that note, we've got to get back on the road. We've got to keep shooting. We've got some interviews to do. Awesome. Thanks for joining everyone. Bye internet. Internet, we'll see you next week. The next show, go watch Wild Empires. Subscribe to The Verge on YouTube. All that good stuff. Peace.