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DAVID LIU: We put together this deck. We practiced this presentation. We go through this whole dog-and-pony, talk about what we're planning on doing and what we were going to build. And he looks up, and he says, this has got to be the worst business plan I've ever seen. (Laughter) And the air just got sucked out of the room.
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GUY RAZ, HOST:
From NPR, it's HOW I BUILT THIS, a show about innovators, entrepreneurs, idealists and the stories behind the movements they built.
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RAZ: I'm Guy Raz. And on today's show - how one couple's disastrous wedding inspired their business, The Knot - the No. 1 wedding planning site in the U.S.
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RAZ: Right now I've got three wedding invitations hanging on my fridge. And I sometimes wonder about the people behind those cards, the six people who are probably freaking out right now - the caterers, the flowers, the bridesmaids, the groomsmen, the venue, the hotel discount for guests, the hair, the makeup, the photographer, the - I'm going to stop here because I'm starting to get stressed out, and I'm already married. By the way, fun fact - the average wedding - the average wedding in the U.S. - now costs $35,000, and the planning for it takes between nine months and a year. So my advice - elope. And if that's not an option, you will probably at some point make your way to theknot.com. It's a multimedia platform that helps you plan your wedding. And it's a big business.
The Knot is the center of a media group now valued at more than half a billion dollars, which is all the more remarkable because at one point during the dot-com bust, The Knot stock price fell to 26 cents. But we'll get to that a little later. When founders Carley Roney and David Liu started The Knot in the late 1990s, it was more like a chat room. It was a place people could pop into and type in all caps, is anyone else freaking out about their wedding planning? Well, today, The Knot says it's used by 80 percent of all couples planning a wedding, which is also remarkable because David and Carley's wedding was kind of a disaster. They actually met briefly when they were both undergrads at NYU in the 1980s. They were both in the same film program, but it wasn't exactly love at first sight.
CARLEY RONEY: Well, David was a senior, and I was a freshman. And we didn't really talk during it because I thought...
LIU: We might've exchanged two sentences in the entire year.
RAZ: Wow, in the entire year?
RONEY: ...Because he looked like kind of a supersenior snob to me.
RAZ: Did you - but, David, did you notice Carley at that...
LIU: Oh, yeah. I had a crush on her.
RAZ: You did already at that point?
LIU: Oh, yeah.
RAZ: But nothing ever came of it. So after college, Carley and David went their separate ways. David got a job working at a startup in Philadelphia where he made video yearbooks for high schools. And Carley was a script reader for a movie director in New York. But a few years later in the early '90s, they both happened to be invited to a Christmas party by a former NYU professor.
RONEY: And I remember, like, looking across at this group of people and thinking, like, who's that guy with the ponytail. Why does he looks so familiar?
RAZ: You had a ponytail?
RAZ: So you're, like - I don't know - your late 20s, David, at this point.
RAZ: ...Kind of just - you're like, I'll show up at this party and...
LIU: Well, actually, I remember the doorbell ringing and hearing Carley's voice, and I immediately remembered her.
LIU: Then she walked in and made a beeline for the vodka.
RAZ: And went up to you and said, hey, handsome.
RONEY: Well, what's funny is we ended up...
LIU: We pretended that there was a project to work on together.
RONEY: Yeah. We were like, we should talk about this more. Maybe we could do - work on something together. And so we both left the party with the premise of being back in touch.
RAZ: But clearly, there was interest beyond - I mean, right? Or was it just super earnest, like, you thought, yeah, let's collaborate.
RONEY: No, it was totally a ruse.
LIU: No, there was interest.
RAZ: OK. It was a ruse. OK. I got you.
RONEY: It was a ruse.
LIU: Yeah. We had our first date in February. We moved in together in June. We were married in July.
RAZ: Oh, my gosh, you've jumped through this story so fast.
RAZ: You've gone from ponytail...
RAZ: ...At the party to being married, like, seven months later.
RONEY: Yeah. Well, it was - the irony that - one of the starting ironies of the story is that, you know, I have divorced parents. I never thought I was getting married. I didn't believe in marriage. I thought people just - sort of like Jean-Paul Sartre and Simone de Beauvoir, it would be better to just be in love with someone maybe, but have your own home just in case. And then I met this guy, and I'm like, this is kind of amazing. He's so amazing. He lived in Philadelphia at the time, and I actually then moved right to D.C. at that time to work on a project at the Smithsonian. And so we started this, like, long-distance romance between Philadelphia and D.C. And I don't know if it was, like, something in the air or it was just, like, mad, true love. But one time we're sitting there, and we were talking about taking a trip to Hong Kong. And I said, oh, you want to get married in Hong Kong? Just, like, out of the blue. I don't even know what I was thinking.
LIU: And I was like, sure.
RONEY: And he said sure. And I was like, OK, then, let's get married.
RAZ: Wow. So you go to your parents, Carley, and you say, you know that guy David I've been telling you about? Yeah, we're getting married.
RONEY: Well, what's funnier is, like, I haven't told you about this guy David...
RAZ: Oh, I see. OK.
RONEY: ...But by the way, we're getting married. You might want to meet him prior to the wedding.
RAZ: And did they say, Carley, this is crazy; this is not going to work; this is not how marriages last?
LIU: That's exactly what they said.
RONEY: That is exactly what they said. And, in fact, turns out - and I never knew this - they had sort of had a whirlwind romance and gotten married very quickly and ended up divorced. So this was just, like, their biggest fears playing out in front of them and, you know, because you're, you know, like young and smitten. And you're like, you just don't understand, Mom and Dad.
RAZ: So you guys get married. And how's the wedding? What's the wedding like?
RONEY: So we were trying to look back at why it was that we picked a date of July...
LIU: In D.C.
RONEY: In D.C.
RAZ: In Washington, D.C., which - where I am. And it is a horrendously oppressive time of the year. July in Washington, D.C., is a time when people leave.
LIU: Yes. On a rooftop outside.
RAZ: On a rooftop outside in July in Washington, D.C. This is going to be your wedding day.
RONEY: And really, how hard can it be? You're literally throwing a party for 80 people. Like, what do we need? We need, like, a location. We really didn't have a place in mind, but we figured we could find once we sent out the invitations...
LIU: Which were - the invitations were postcards from the National Zoo that had pictures of pandas on them.
LIU: And it said...
RONEY: You're really making us sound crazy.
RAZ: And it said, what? Just show up in Washington, D.C., on this date. We'll give you details when you arrive?
LIU: Exactly. It said July 10, location TBD.
RAZ: OK. Gotcha.
RONEY: But it was all, you know, kind of in the spirit of, like, we're just going to throw this fun party. And, you know, our actual community around us pulled together, and that was the fun part about it. My aunts who lived nearby were like, we're going to go get flowers at the farmer's market. Another aunt of mine was like, I have a friend who live - who has - there's a rooftop on the top of her building, which is a block away from your home. And then there was this Peruvian restaurant near us that we knew kind of served fun tapas and paella. So we went and asked them. I mean, we really just figured it out...
RONEY: ...And over the course of three weeks. And it sounded - at this point, I'm kind of loving it. Like, it's like the first original, DIY, rooftop, you know, edgy wedding - alternate wedding. And the only problem was is that, you know, you still watched the news those days to find the weather. And we sort of turned on the news on the Wednesday before and saw the weather chart, which included...
LIU: It was 108, 109, 112. It was climbing.
RONEY: It was going to be 111 degrees on our wedding day.
RAZ: What? A hundred and eleven degrees?
RONEY: The story just gets worse from there. It's boiling hot. Our guests look like they're dying. We had, you know, booked this venue. The venue's air conditioning had broken from trying to get the place cool...
RAZ: Oh, wow.
RONEY: ...And as we said, it was, like, a beautiful Peruvian place. And because, you know, we have a flair for the dramatic, I thought that the most incredible thing would be if, instead of serving the paella that we were serving behind the scenes, if they would bring out the paella...
RAZ: Oh yeah.
RONEY: ...And kind of walk it through the room.
RAZ: The giant plate of paella, right?
RAZ: Great idea...
LIU: Clams and mussels.
RONEY: So my only horrifying part...
RONEY: ...Of my wedding day was turning - looking up and seeing my grandmother's face as they walked this steaming plate of paella by her. I mean, she was just horrified. The crowd...
LIU: (Laughter) Everyone's already drenched in sweat.
RONEY: ...Drenched in sweat and this steaming, fishy - I mean, it was like, oh, my God. This is such a colossal disaster. Everyone is so completely uncomfortable. There's no air conditioning.
RAZ: And, really, everybody just wants snow cones.
LIU: (Laughter) Exactly.
RONEY: Everyone wants the hell out of there is what they want. And we walked away from that evening being like, oh, my God. I never want to do anything related to weddings ever again. What a crazy industry. Why isn't it easier? Why isn't there a place to find this information? I just...
RONEY: Yeah. It was exactly all the things we thought would be horrible about planning a wedding were. And so we slammed the door and never wanted to think about it again.
RAZ: So 1993 - you are married. You move in - you're living together in Washington, D.C. What are you guys doing at that point in your life? You're still at Smithsonian, Carley?
RONEY: We finished the project. We all moved back to New York.
LIU: Back to New York, right.
RAZ: To New York. OK.
LIU: Start grad school.
RAZ: Start grad school, right. So you start working on your ideas and projects and...
LIU: So in the very first semester, I'm taking this class on interactive media. And this new technology that was going to transform the world was CD-ROMs.
RAZ: Yes. Yes. They were going to transform...
RAZ: ...The world. They were.
LIU: And we started noodling on this idea that this project that Carley had been working on all summer was going to be the largest - single largest collection of Smithsonian objects collected from all the different museums - and was being brought to Japan and was going to talk about American history. And we said, that's such a shame that the American audience will never get to see this. Why don't we see if the Smithsonian will hire us to produce the sort of epic American history disc? You know, it has the Dizzy Gillespie's trumpet and the ruby slippers and the Apollo space capsule and, you know, all the work is already done. We can just, you know, scan it and put it in and some animations, music, and we have a CD-ROM. And we pitch the Smithsonian, and they thought it was an awesome idea. We thought they had a budget. And they said, great, you guys - if you can find someone who can pay for it, you can do it.
RONEY: Which is already far-fetched...
LIU: Right. It was outlandish.
RONEY: ...That the Smithsonian would agree to have two people who know nothing about anything...
LIU: Right. And we walked into the Egghead Software store and started pulling CD-ROMs off the shelf and writing down the names of the publishers and started faxing proposals to people.
LIU: And we had this one group out in Portland, Ore. - called us up immediately said, we're doing edutainment desks. This is right in the center of our bull's eye - an American history disc with the Smithsonian brand. They flew out, took us to Smith & Wollensky for a big steak dinner. And at the dinner, the guy writes on a cocktail napkin, one gold master American history CD-ROM, Smithsonian content, $100,000 budget, six-month delivery date, sign here.
RAZ: What? Wait.
RAZ: You guys still have no experience. You just pitched this half-baked idea to the Smithsonian. You then fax this half-baked idea blindly to a bunch of publishers. And they - this one company bites.
LIU: Yeah. And we actually said, can we go to the bar area to discuss this for a second? And we go in there - we're like, is this binding? Is this a real contract? What happens? And we just said, you know what? Whatever. Let's just go - let's just sign it. And we went in. We signed it. And the guy turns to us and says, you know what? You know this is not a binding contract. We said we assumed so. And he said, but this was a test. This was just a test to see if you guys had the chutzpah to actually sign this napkin. And he said, let's do it.
RAZ: Wow. So you get this money, and you start working on this project right away?
RONEY: I mean, that was it. We, like, basically founded a business. We used all of our film school experience, actually. We were suddenly, like, oh, good.
LIU: We were producers. Yeah.
RONEY: We had writers and...
LIU: And we literally hired all my classmates.
LIU: Everyone said, we're on board. I mean, you know, we were all in school for this. And then suddenly to be able to create a commercial product with the Smithsonian brand was exciting.
RAZ: So you deliver this to the Smithsonian, and then they make this CD-ROM available in their shops and stuff.
LIU: Well - so the publisher was actually very aggressive about getting the disc out. And, you know, no one was really making any money on CD-ROMs. And pretty quickly, we realized that this was not going to be the medium that was going to change everything. But this publisher managed to get the CD-ROM OEM bundled with every one of the early iMacs.
RAZ: Oh, wow.
LIU: So if you bought the - one of those iMacs, you got our disc. And as a result, you know, we got maybe a - I think it was, like, a dollar per disc that was actually distributed. So it became a windfall for us.
RONEY: Yeah, no. So millions of these discs.
LIU: These discs went out.
RONEY: They were sort of one of the top-grossing discs of all time because it got bundled.
LIU: With the iMac.
RONEY: It was such an easy win. And that was the - yeah, that turned out to be the sort of launch of our company.
RAZ: So you walked - you walked out of the project with, like, some cash to play with.
RONEY: Enough cash to keep the people...
RONEY: ...That we had hired around. At least, I think, the like...
LIU: I dropped out of grad school because, suddenly, I realized, whoa, we have this company now. And we're going to work on the next project. And we were a little digital media studio.
RONEY: But in the middle of this - working on this project together, one of the four of - like one of the four of us - two - our two...
RONEY: ...Friends, Michael and Rob - they sort of said, hey, guys, don't you think we should be thinking about - you know, we work well together. Do you think we should be thinking about something - doing something that isn't work-for-hire for somebody else?
RAZ: Like, something that was yours that you guys would own.
LIU: Right. We started brainstorming. What can we build? You know, because our vision was now to create this multi-branded, multi-platform content studio. And we started looking at the different categories. And we said, you know, sports, news, entertainment - that's all of them.
RAZ: Like what were you doing? You were, like, brainstorming...
RONEY: Right. And that's what's funny. Like the later story makes it sound like it was all, like, and then...
RONEY: ...On her - after her horrible experience planning her wedding, the idea was birthed. And in reality, what happened is that Michael, actually, was like, hey, this guy friend of mine - he wants to do, like, this online shopping thing and something, like, related to, like, registry. And maybe we should do something in weddings. And I think David and I looked like we'd, like, seen a ghost. Like oh, my God.
LIU: Right. No way.
RAZ: Weddings suck.
RONEY: Jesus, do you anything about the wedding? Well, they suck. Like, completely disaggregated. Like, the industry is old fashioned. And then, of course, you have that moment when you're like, right. It's a disaster. And it would completely and fundamentally change if you introduced technology to it.
LIU: You know, there was not an MBA between the four of us. You know, we're talking about four film grads. So our research was going to the magazine store and pulling different categories like, you know, Bridal, Travel, Epicurean. And we looked at these wedding magazines, like, wow, they're huge. Look, they're 400 pages.
RAZ: Just to - just to sort of understand, like, you decide that you want to do something in content, and weddings was probably the way to go. But what would it be like a - I mean, this is like '96, '97. I mean, a website, a message board...
LIU: Yeah. This is '95.
LIU: So there was no websites.
RAZ: So what was it going to be - like, a way for people to just list their services?
RONEY: So we were content people. So we thought the best place to start would be putting incredible, like, fresh content on the Internet. And the only way...
RAZ: Like, here's a cool idea for your wedding.
RONEY: And so the only way I would agree to do this - the one who was, suddenly - I was looked at immediately like, you're the woman. You're - got to be interested in weddings. So I was like, the only way I am touching this is if we do something really, really different. Like, the reason we didn't access any of the information that was out there when we were planning our wedding is because it was written for people who were completely - had a different worldview than me. I did not dream about my wedding every day from my - when I was born. I did not - I wasn't marrying in a traditional way. I mean, I have, like, an intercultural marriage with divorced parents. I mean, every problem there could be in a wedding was in my wedding. And those magazines made you feel like crap.
RONEY: They wanted you to quit your job, sit with your mommy, having bonbons and dream up your big day. And calling it your big day...
RAZ: Your big day.
RONEY: ...That just wasn't my thing.
LIU: I think - I think we...
RONEY: And none of my friends, either, were that way. Like, all the women I know were, like, it was - you know, it was the - at this point, it's, like, the '90s. You're hip. You're forward-looking. You care about fashion. And there's, like, a whole, like - it's just - it's such a different movement among young people. And that wasn't reflected at all. It was like the industry that had been left behind. Our whole, overall attitude and the reason why we called it The Knot was that we wanted our brand to be very, like, alternative and differentiated and not be, you know, the kind of traditional, cookie-cutter, these are the rules way to plan a wedding. We wanted it to be like, dare to do it differently.
LIU: And, you know, if you looked at the landscape, you know, Brides magazine had been around for 50 years, Modern Bride for 35 years. Martha Stewart was, like, a hot thing that'd been around for 10 years. And we didn't know which way to attack that. And we suddenly realized, based on, you know - also Carley's, you know, belief in the differentiation of our brand - that we would be become weddings for the real world. And we defined that as interracial couples, interdenominational couples, same-sex couples...
RONEY: Hipster couples.
LIU: Right. You're pregnant. You already have babies. You're divorced. You know, second marriages - all the stuff that we knew that the traditional media companies couldn't touch. You know, these are the marginal areas, and we're going to own - we're going to declare ownership of those.
RONEY: We also had a really big sense of humor. We wanted to be irreverent because we thought that that was sort of attitudinal. And if you wanted to talk to brides and grooms, not their mothers, you needed a new voice.
RAZ: Yeah. So I'm trying to understand. If you were to describe this to your grandmother who was appalled at the paella at your wedding...
RAZ: ...Would you have said, so, Grandma, we're making basically a magazine, but it's going to be in the computer, in the Internet? Was - is that a fair description of how you were thinking about it?
RONEY: There were, yeah, two components. One, it was like the world's coolest wedding magazine mixed with a community.
RONEY: And that community...
LIU: Remember, this was on AOL. So we launched on AOL.
RAZ: AOL had, like, these message boards and these chat rooms...
LIU: Chat rooms.
RAZ: ...And, like, sites. So it was a - it was - you partnered with AOL to start this up?
LIU: Well, they provided the seed financing.
RAZ: How did you even get to AOL?
LIU: So Michael...
RONEY: Friend of a friend of a friend.
LIU: Exactly. So Michael, our rainmaker co-founder, had an in and managed to get us an audience with Ted Leonsis...
LIU: ...Who was running the greenhouse and was making investments.
LIU: And I remember we put together this deck. We practiced the presentation. Carley, Michael and Rob were, like, the marketing and presentation geniuses. And we'd rent our little car, drive down to Vienna, Va. And we had this audience with Ted. And we go through this whole dog and pony, talk about the - what we're planning on doing and what we're going to build. And he looks up, and he says, this has got to be the worst business plan I've ever seen.
LIU: And we were - you just - the air just got sucked out of the room.
RAZ: By the way, how did you propose to make money off of this in that - in that plan?
LIU: Well, we hadn't gone to that point yet (laughter).
LIU: So - but he basically said - he was like, look. Wait a minute, what's the lifetime value of - I mean, how long is an average engagement? And we said, you know, 9 to 13 months. And he said, so your average lifetime value of your customer is 9 to 13 months. How do you ever plan on recouping any of your marketing costs in nine months? This is impossible.
RONEY: Right. If your audience churns 100 percent every year, you never - if you do your job right, and they find the right person, you will never have them as a customer again.
LIU: Right. To this day, I credit our co-founder Rob, who stood up and said, you know, we're going to sell advertising. And Ted looks at us and says, there's no advertising on AOL.
RONEY: There's no advertising on the Internet.
LIU: And we said, well, we plan on selling it. And...
RAZ: But how would he - if there was no advertising - no advertisers allowed on AOL partner sites?
RONEY: It's just no one had done it.
RAZ: No one had done it.
LIU: No one had done it.
LIU: Yeah. There was no IAB. There were no banners. It was, you know, all basically a subscription business. And Ted looks at us kind of funny. And then he picks up the - you know, the Brides magazine we brought as sort of like the...
RONEY: Show and tell.
LIU: ...Show and tell. And I still remember. He picks it up, brings it to his nose and flips through the pages. He goes, I don't know anything about this industry, but I smell money. He goes, let's fund them.
LIU: So we - in 90 seconds, we went from the worst business idea he had ever heard to - you know what? - let's give these guys a chance.
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RAZ: When we come back, how David and Carley launched The Knot, watched its value skyrocket with the dot-com boom and then fall to rock bottom with the crash. Stay with us. I'm Guy Raz, and you're listening to HOW I BUILT THIS from NPR.
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RAZ: Hey. Welcome back to HOW I BUILT THIS from NPR. I'm Guy Raz. So in 1996, when Carley Roney and David Liu pitched their idea for The Knot, the big wigs at AOL wound up giving them a pretty hefty amount of cash.
LIU: We got our seed financing - about 1.6 million. I think it was their largest investment at that time, too, in any content partners.
RONEY: Ironically, though, like, it isn't really that much money if you have to buy computers for $7,000 each desktop or...
LIU: Right. And, you know, there was no such thing as open source software. So we were paying software licenses. You know, there was no WeWork, so we had to find an office to rent...
RAZ: In New York.
LIU: I mean - in New York.
RAZ: What were you doing to build the site?
LIU: We wanted to make sure that the audience came to our site would see something fresh and new every day. So we treated this like a daily publication, like a newspaper. We had 10 content channels. They had to be fresh content and, you know, distributed every single day.
RAZ: What do you mean 10 content channels? You'd go to the site, and there's, like, 10 tabs?
RONEY: Right. There's, like, planning and fashion and bridesmaids and...
LIU: The Great Escape was the honeymoon...
RONEY: Yeah, honeymoon channel. So a lot of it was just producing and publishing content constantly.
RAZ: And who did you get to write that content?
RONEY: I have this connection to a group of fun - really fun young writers. They were the people who wrote for Sassy magazine - so really strong attitude. We had men and women.
LIU: All had great sense of humor.
RONEY: Really good senses of humor. And we had that they - you know, my litmus test is if they would never, ever, ever write for a wedding magazine, then they could write for me. The other key piece of it, though, was really understanding - and this we didn't know going into it - but really realizing how important the community was, and managing the community, and building out the kind of platform of the different message boards and how to create connections between people. And that is where the sort of explosive - what - you know, sort of the early concept of, like, a social network - right? - how you crowdsource amazing information.
LIU: And that's where AOL was the perfect training ground for that because the key sort of gravitational center of all this stuff were in their chat rooms.
LIU: And, you know, these chat rooms you had to try to turn into these thriving, continuous conversations. And we all had to man the chat rooms. We had aliases. Like, mine was Anya (ph). And I would sit in this chat room, waiting for people to show up. And most people tend to just lurk. They wanted to hear and - read other people's conversations. And you had to try to figure out a way to get people engaged and get them to participate. And so I always had this one thing that I would write. And to get people started, I would say, my fiance forced me to buy a dress two sizes too small and said, if I can't fit in the dress on the day of the wedding, to not show up.
RAZ: You would just make this up.
LIU: I would make this up.
RAZ: You just make up these...
RONEY: David was the only one - I want to say that this was unsanctioned.
RAZ: But you had to, like - you had to spur a conversation.
LIU: But it would - and boy, was that the fire starter. The room would explode. Everyone who was lurking would jump in.
RAZ: You were a troll. You were an early Internet troll.
LIU: (Laughter) Exactly. Well, and I could slowly then back away, and that room would just keep going for hours, and hours and hours.
RAZ: I bet. They were like...
RONEY: Either that, or you drop mother-in-law. Mother - the word mother-in-law always gets a chat room going.
RONEY: ...And - or, you know, misbehaving bridesmaids. It's just all about, like, putting the theme in play and...
LIU: But what it did was it taught us to listen to our audience.
RAZ: Yeah. Did - was it - was the site making money pretty fast through, you know, those AOL subscription dollars?
RAZ: No, OK, right.
RONEY: Well, if you think about the Internet at the time, which was, I mean, mostly men...
RONEY: ...Even - and AOL was probably the most women of any place on the Internet, and still, that was mostly men. And then people getting married, since there're only 2 million of them in America at any given point in time, you're starting to, like, get down to a very small set of people who could even potentially be our customers. But I think in those first weeks, I remember our, like, monthly visitor count...
LIU: Like, 15,000.
RONEY: I think it was 7,000. And we were like, 7,000 out of 2 million Americans. Like, we've got a long way to go. What we really had to do was go out - our first hire was a salesperson.
RAZ: Yeah, you needed advertising.
RONEY: We needed advertising.
LIU: In fact, one of our first advertisers - in fact, I think she may have been a first advertiser - was Nicole Miller. And she had this bridesmaids dress line that was cute, and she wanted to be market it as something that you could wear again. And Nicole came to our office. And I remember we were showing her the little pieces of art that we had created that were, essentially, the first banners. You know, they were little buttons that would sit on the site. And, you know, Rob would explain to her, hey, you know, people can click on this. And she said, well, what will my buttons do? And we realize that she didn't have a website to link to. And he said very quickly, well, they'll link to a catalog of dresses that we'll build for you. And she was like, oh, my God, that's amazing. And, you know, we were basically selling links and buttons and clicks that were leading to other places that we had to suddenly create for the advertisers.
RAZ: Which, the - I mean, for the advertisers, was this new, shiny thing that they didn't understand. And they were like, well, these guys understand it. But I have to assume that the ad rates at that time weren't that high, right? They weren't paying that much money at that time. Or were they?
LIU: They weren't. I think our first-year total revenues were maybe 70,000.
RONEY: Yeah, $70,000. I remember, like, $71,000.
RAZ: So you could not - I mean, the 1.6 million, was - that money was burning quickly.
LIU: It was almost gone, we were rapidly running out of money. And what saved us was we had found a amazing book agent, Chris Tomasino. And our - you know, remember our aspirations was always to create these multibranded platform. And she actually managed to get a bidding war from multiple publishers on a three-book deal for The Knot.
RAZ: And that money - actually, the infusion of cash - saved The Knot at that time.
LIU: We lived off of that advance for probably a year and a half.
RAZ: What was the advance?
LIU: Three hundred and fifty thousand dollars.
RAZ: For three books.
RAZ: And so you put that back into the company, but then you had to write books. You had to write 3 damn books.
RONEY: You're telling me.
LIU: Well, Carley - we had just had our first baby. And so Carley literally came back from maternity leave of all of maybe three weeks. And I still - the image I still have of her is, like, breastfeeding our daughter while furiously typing away at the computer because we had to deliver the first manuscript at a certain time.
RAZ: Ugh, just sounds miserable. Wait, and did...
RONEY: I'm getting hives listening to this - my own story.
RAZ: Did you go to investors? Did you think, we need to go to, like, private equity people or, you know, venture capitalists and try to get some money?
LIU: We hadn't thought about it yet. We were trying to think of other ways that we could make money...
RONEY: We could make money.
LIU: ...And build the business. And we had this idea and we said, you know, the thing the brides seemed to be really vexed about is this whole registry process.
LIU: Isn't there a way to, like, completely reinvent that and create an online gift registry where they could register for anything they want?
RONEY: You're like, imagine, you're not picking the gift anyway, so why couldn't you just, like, buy it on the Internet?
LIU: And we said this has got to be the thing we do. And that actually prompted us to go try to raise money to build the first online gift registry.
RONEY: So remember, this is 1997. And so when we act...
LIU: We just launched a website in July.
RONEY: Right. When we act like it's super mind-blowing to think of an online gift registry, you have to remember that, like, nobody even really bought anything on the Internet yet.
RAZ: And so how did you - what did you do? How were you going to make that a reality?
LIU: We needed to raise money.
RONEY: Yeah. That sort of became extremely clear because no one had online gift registries yet or, really, there was no way to do it. We actually realized that to do this, we would have to get the inventory ourselves.
RONEY: At that time, our bride count, or whatever we call it, our member count was really growing in a very significant way. And word of mouth was our only way we were marketing.
LIU: We didn't spend any money advertising.
RONEY: No, but like brides who discovered us - and this I think was a lot about our brand and our attitude. Like once you found us, you wanted to tell anyone you knew who was getting married about us. And so we were growing in that way like wildfire. People really were very, like, loyal and excited about the brand, but it still wasn't the way to make money.
RAZ: So when you took the concept of the registry to potential investors, what did they say?
LIU: It was a really long slog. I mean, it was hard to raise money for anything that was female centric in the digital space. And the fact that a large component of our business would now be predicated on e-commerce on top of advertising, you know, the first question people said was like they're not going to give you a credit card number, things like that. You know, people are too paranoid about that. They're not going to register. They're not going - you know, and I think we probably were marketing for almost a year before we came across these venture capitalists out in the West Coast that said, you know what? This is really interesting and I think, you know, we're going to take a flyer on this.
RAZ: How much money did you guys raise?
LIU: Three million. We launched the registry and...
RAZ: Was it on The Knot - was like the theknot.com/registry?
LIU: Yes, exactly. And we...
RONEY: New tab.
LIU: New tab. And we suddenly saw within, I think, three or four months, we had close to 150,000 couples registered in our registry. Put that into context, that's more than what Bloomingdale's was registering back then.
RAZ: Wow. So 150,000 people registered within the first few months. How did they even know about the registry?
LIU: This is actually the critical thing where Carley was the secret weapon. Carley became the person who, when we published our first book, suddenly appeared on the "Today" show, suddenly - and became sort of the kind of...
RAZ: The wedding lifestyle kind of guru.
RONEY: Meanwhile, not telling the world word one about my actual wedding day. I remember the first time I was on TV a friend of mine was like, I was at your wedding.
RONEY: I was like, shh.
RAZ: And all of a sudden you're a wedding guru? So were you profitable at that point or were you still...
LIU: No, we were bleeding, we were bleeding.
RAZ: How were you funding this?
LIU: The $3 million, we made that last, but we were - we essentially were looking to raise another round, and within a year, we raised another $15 million.
RONEY: Also, no one in our office had Aeron chairs. Like, everything was Ikea or hand-me-down or - I mean, we didn't - we sort of - that whole culture of the Internet companies now...
LIU: No foosball tables, no free snacks.
RONEY: No foosball tables, no catered lunches, you know, you were lucky if you got a pizza.
RAZ: Were you guys nervous at all? I mean, you had a kid and eventually you'd have two more, but at that point, you had a kid. You were not making any money because you were just funding this company, so you guys are probably earning...
RONEY: No, no, I think we made $35,000 a year if I remember correctly, which seemed kind of unfair and exorbitant. Like, we shouldn't be taking this money.
RAZ: I mean, did you guys ever have conversations, you know, at night where you were like, I don't know if this is going to work? Maybe we should just, like - I don't know. Maybe I should go to law school or something. Like did you ever - or were you totally confident this was going to work out?
LIU: I don't think we felt we had an option, you know? When - we had BFA's (laughter). We were unemployable, so we had to make this thing work.
RAZ: So by this point, you guys - you've got the gift registry going and things seem to be humming along, I guess. And then in 2000, you decided to take the company public on the Nasdaq, so I'm assuming this was to raise more cash.
LIU: Yeah. So in '99, we actually had just raised money to build out and flesh out the registry. We raised $15 million and literally a week later, we're approached by bankers who said the window's going to close, you need to go public. And we were - you know, we had fresh money in the bank, and I couldn't understand why there was such urgency, but we took their advice fortunately and within, I think, seven months of that meeting, we were going public. So that was December 2, 1999, we go public. The entire Internet world collapses four months later.
RONEY: And we were really lucky to have that additional $35 million.
RAZ: So when you went public, it raised $35 million more.
RAZ: And then four months later is the dot-com crash. Does that do anything to your stock price?
LIU: We never had the super spiky jump, and we didn't have the super cataclysmic crash. It just, over the course of a year and a half, went from $20 and settled down to 26 cents.
RAZ: Twenty-six cents. So people lost their shirts on this.
RAZ: Presumably, you guys had a lot of shares, too.
LIU: Oh, yeah. We were not allowed to sell. I mean, you know, we were locked up. And by the time the six-month lockup had released, you know, we - and honestly, we were all so - we were way too loyal and dedicated. We did not want there to be any indication that the founders had lost faith. And so we were going to hold on to the bloody end.
RAZ: But, I mean, the optics of going from $20 to 26 cents over a year and a half must've been rough. I mean, there must've been market analysts and people even in the industry who were saying, this company is not going to last.
LIU: Oh, it was horrific. We had our competitors faxing our stock charts to our advertisers saying look what's happening. They're going out of business.
LIU: Do you really want to give them your money?
RAZ: Wow. And did that in any way affect, you know, how much money you had to use? Like, did you fire people? Did you use to lay people off at that time or could you still kind of plug along?
LIU: We never had layoffs. We were always - we were able to downsize through attrition. But we never formally had to lay people off, in part, because we were always running relatively lean. And there were people who panicked and basically sort of got out.
RONEY: Yeah, I think the biggest challenge was controlling the, like, psychology of your team...
RAZ: I bet.
RONEY: ...Who they didn't understand. Your advertisers didn't understand the distinction between your growing revenue and how that had nothing to do with your - a stock price. I mean, it is kind of illogical.
RAZ: Most people don't understand it.
RONEY: No, exactly. So between your young staff, who also is looking like remember of those options that I got? They're underwater by about $9. Or - and our - and advertisers. So there was so much emotion control. I think that was the hardest part - keep people focused. And it was exhausting. And also you do go home at night and you're, like, remember when we were actually going to walk away from this business (laughter) with, you know, $30 million together and now we have, like, $300,000? It doesn't seem worth it. It doesn't seem worth - there were definitely moments where we feel, like, exhausted.
LIU: Right. The low point was the summer of 2001 where the stock dropped below a dollar for over 90 days. You get delisted.
RAZ: Nasdaq delisted you.
LIU: Yeah, we got delisted.
RAZ: You're no longer in the newspaper.
LIU: No, exactly (laughter). And, you know, we had to do down to....
RONEY: It's a fine concept to begin with but...
LIU: ...D.C. and beg Nasdaq to reconsider. And they - and I still remember there was a little tribunal. You make your case and then this old gentleman looks over and says I'm sorry, you know, we're still going to have to delist you. But you have a great little business. Don't let it fail (laughter). Then he walked out the door.
RAZ: What does it mean when you get delisted? You're still a stock, right?
LIU: You're still a stock. You're trading in the bulletin boards. But the key difference is now the major funds are no longer allowed to hold your stock. So...
RAZ: If you are delisted, you cannot - the big funds are not going to invest in you.
LIU: Yeah, the fidelities. And the - and unfortunately, you know, that's where a lot of the volume and the support comes from with public stocks. And so the moment we got delisted, 2 million shares just automatically gets injected into the system. And that's when the stock just really cratered. We went down from, like, 90 cents to that 26 cents in matter of minutes.
RAZ: And to be listed on Nasdaq, you have to be above a dollar for a certain number of months.
LIU: To get relisted, you have to be above $5 for 180 days without institutional support.
RAZ: And so, essentially, once you're delisted, it's almost impossible to presumably get back on there because you'd have to convince people, individuals, to buy shares, right?
LIU: Exactly. So - in fact, I spent the next three years going to dentist investor club meetings at the back of The Red Lion Inn, going to small cap, you know, conferences, drumming up retail support to try to get the stock relisted.
RAZ: Because that was the only way you could increase the share price.
RAZ: So you had to get individual investors to just buy shares?
LIU: Yeah (laughter). Exactly. We had to...
RONEY: Thank you, dentists of America (laughter).
RAZ: That just sounds so grueling.
LIU: It was. And I think, you know, it...
RONEY: I think that's when you put on, like, 25 pounds, too.
LIU: (Laughter) Well, I had this one meeting with a competitor. And I think - he said these fatal words that sort of propelled this thing forward. They saw this as an opportunity to acquire us. And they said, listen. You have a broken IPO. We should just put these companies together. You know, 70-30 their way. We can, you know, repackage it and go publicly again in three years.
RAZ: You were offered - this was - another company offered to buy you out.
LIU: Yeah, and he said because you're delisted...
LIU: ...And getting relisted is like carrying a gorilla up 30 flights of stairs. It's impossible. It's too hard. And I remember the day we got relisted in 2005, I was dying to send him a postcard with a big gorilla on it saying 30 flights delivered. Take that.
RAZ: So it - four years you're off the Nasdaq. That's a long time. I'm trying to figure out why you didn't just cut your losses and say, we're still young, you know, we can still kind of try something else out. This is not going to be the way that we're going to make a sustainable life.
LIU: I think it was because we were never doing this for the money. No.
RAZ: Well - but you had kids. You needed - at a certain point, you need to have some money.
LIU: Yeah. But I think it was the work. I - we were launching a TV show. We were launching, you know, a national magazine. There were so many really exciting things that we were building. You know, The Nest came, The Bump came and...
RAZ: The Nest and The Bump were, like, the next iterations. The Nest, obviously, about - as in if anyone knows, about your home...
RAZ: ...And The Bump about babies, children.
RONEY: Yeah. Our audience have been begging us for years to take them beyond the wedding day. And we - you know, people on our staff who had, like, grown beyond the wedding phase and we all had babies. They all wanted to launch it. So it's just seemed incredibly fun. There was so much more to do. We always said to each other, like, if this ever becomes, like, super boring, we should get out. I mean, we're not particularly, like, planner people anyway. We didn't think about our future. We were just thinking, like, six months in advance.
LIU: Right. We never thought the word exit. Exit wasn't a part of our vocabulary.
RAZ: I mean, you get relisted in '05. You then launch The Nest and The Bump as part of the whole sort of media empire. You're working on a bunch of different projects. At what point did you guys feel like, OK, we've turned a corner, like, we are - we're going to be OK, not we're going to be more than OK?
LIU: I'm not sure we're there yet.
RONEY: No, I think once we were like, profitable. Our - it's like Sisyphus.
RONEY: Like, you keep thinking you're ahead and then all of a sudden the boulder seems really heavy and you're going backwards.
RONEY: And you have to keep pushing again. But...
LIU: I mean, in 2006 and '07, we wound up - we bought WeddingChannel. There was unbelievable sort of frothy expectations on what that acquisition was going to net us. And the stock hits $32. We have a billion-dollar market cap and, you know, then precipitates the next, you know, minor nuclear winter where the stock starts declining again because you just can't live up to those expectations. And then 2008 happens. And it's the Great Recession.
RAZ: And does - where does the stock price go at that point?
LIU: Our stock actually held up relatively well. I think, you know, most media companies were down 20 percent.
LIU: We grew 5 percent. You know, we actually grew that year because a lot of the marketers realized that the only people who were going to continue to spend money during this Great Recession are our brides and grooms. Weddings were truly recession proof.
RAZ: What do you think it is about your personalities that work so well together? Because you guys went through such intense emotional highs and lows building this business. So what do you think it was about the other person in the relationship that made it work?
RONEY: This is where you declare your love of me...
RONEY: ...And how amazing I am (laughter).
RAZ: This is the romance moment.
LIU: Exactly. You know, I think we were ultimately so different as people. I wouldn't say that we necessarily worked well together, but we were incredibly complementary. Where there is no overlap, there's less conflict. And when there was overlap, oh, my God. It was like World War III.
RONEY: Like, the two of us were both incredibly bullheaded. There are really distinct differences. Like, David can kind of look up, look ahead and think of something, like, really bold and strategic way down the road. And then I can grab that ball really quickly, believe in it. Like, I'm not a naysayer so I'm like, OK, you want to do that. And then I figure out how to get that thing done.
RAZ: When you think about the fact that you both have bachelor's degrees in fine arts (laughter) and you met, you know, a long time ago and you probably were never going to, had you pursued a traditional path, never really going to make a whole lot of money. The fact that you built a company that's now, I guess, worth close to half a billion dollars, does it seem like a dream? Does it seem, like, weird? Or now that you look back on it, do you think, yeah, OK, that makes sense, we were going to do this?
LIU: It's surreal. I mean, at one point someone said do you realize 700 families are gainfully employed because of what you've built? And then, you know, they can send their kids to college and buy homes and actually thrive. And there's a great sense of satisfaction to that.
LIU: I think the - you know, the company has always been just this extension of our family. And we - there's a great deal of pride in having been able to build something that is sustainable and can continue to grow that way.
RONEY: So we never really cared that much about money.
RONEY: But I can tell you not being worried about money...
RAZ: Is different.
RONEY: ...That is the truth.
RONEY: Like that is what I'm so grateful for. It is.
LIU: I still panic but (laughter)...
RONEY: Yeah, but that's more like a personality kind of, you know...
RONEY: Disorder (laughter).
RAZ: You know, out of all the people I've interviewed, I think more than anybody else, your business really reflects the progression of your adult lives. And what I love about it is you clearly did all these very imperfectly. Like, your wedding was kind of a disaster and then, you know, you kind of struggled with kids because you were busy or you didn't probably do everything that all the perfect parents were doing. And all these companies that you started reflect all the things that you've done in your lives.
RONEY: And I think almost even, you know, more to that point, our whole set of brands kind of celebrated the imperfect. I think what appealed to people is that we were like, there is no perfect.
RAZ: Although there are some parents who do seem perfect.
RONEY: I'm not friends with any of them (laughter).
LIU: No, I'm - in fact, when I picked up Carley from the hospital with our daughter for the first time...
RONEY: I really don't want you to tell them. No, no, go ahead.
LIU: ...In our used Honda, we - our friend had come to help. And we had, you know, Havana in the little car seat in the back. And as we're driving back from Mount Sinai, our friend asks...
RONEY: If we stop at a stoplight and there's, like, a CVS...
LIU: Duane Reade.
RONEY: ...Or a Duane Reade outside the window, she's like so you have all the things you need - right? - like diapers. We were like, right, diapers.
LIU: (Laughter) We were about to...
RONEY: Just like David...
LIU: ...We were about to bring home a newborn (laughter) and...
RONEY: ...Pull over.
LIU: ...We didn't have anything back home.
RONEY: There were three diapers in the kit that they give you at the hospital. We're going to be fine.
LIU: Oh, my God. I think it also made us good businesspeople...
LIU: ...Because I think we never walked around with a hubris and notion that we knew better. And that the process of discovery and the process of learning had - was constant and...
RONEY: And a team effort.
LIU: Yeah. And I think, you know, we would never be in a position to say, oh, my God, we know exactly how things in a wedding should be done or how things in pregnancy should be done. We learned it, you know, by the seat of our pants. And we embrace the people who are courageous enough to do that as well.
RAZ: And you didn't - I mean, a lot of entrepreneurs will have, like, a spouse who will, you know, teach music lessons on the side or, you know, will be a schoolteacher or a lawyer or have some kind of income coming in. Like, you guys did not have a plan B because you're both in this.
LIU: No, this was the high-wire act.
RONEY: Yeah, although I think back, like, I would've hated to be married to an entrepreneur and not be one.
RONEY: One, you, like, never see them.
RONEY: And they're just totally stressed out all the time. And I think that it was, like, super, super stressful and, like, really dangerous and painful and complicated in so many ways. And it was the most romantic, amazing, exciting, exhilarating thing on the other side. I mean, it was literally both. Like, you're building something from scratch, and it was, like, the early days, you know, so it was so exciting. And you're in the thick of it, and you're hiring these people. I mean, it was something so exciting to be doing it together.
RAZ: Carley Roney and David Liu, founders of The Knot. Since 2011, they've expanded their lifestyles empire. It's now called the XO Group, and it includes a site about pregnancy called The Bump, one about home decor called The Nest, and a website called How He Asked, which is a marriage proposal planner. Who knew? In 2014, David and Carley both stepped down from the day-to-day running of XO, which means more time for the kids, for hanging out with friends and never, according to Carley, ever serving paella. And please do stick around because in just a moment, we're going to hear from you about the things you're building.
(SOUNDBITE OF MUSIC)
RAZ: Hey, thanks so much for sticking around because it's time now for How You Built That. And you may want to turn up the volume on your device for just a second because I want to play this sound for you. It's kind of subtle, but I think you'll know what it is.
(SOUNDBITE OF NEEDLE SCRATCHING ON VINYL)
RAZ: OK, a needle scratching on vinyl, which is kind of a cool sound, right? It's full of romance and anticipation, especially if you grew up with it and even if you didn't.
MIKE DIXON: I started being really interested in records when I was a kid. I would go through my parents' record collections and play Herb Alpert or Creedence Clearwater Revival.
RAZ: And this was in the late 1980s when Mike Dixon was growing up in Wichita Falls, Texas.
DIXON: And I just was always fascinated with the fact that you had to really interact with the music in a physical way, to pull the record out of the sleeve, put it on the turntable and play it.
RAZ: As Mike got older, he started hanging out in clubs and recording some of his friends' bands. And a lot of them wanted to put their songs on vinyl because, as we've already established, vinyl is kind of cool. But to cut a vinyl record at a legitimate pressing plant is expensive.
DIXON: Your general investment was about $2,000 dollars. And if you couldn't sell 500 copies, you were definitely not going to break even.
RAZ: But around this time, Mike discovered that if you just want to do a really limited run of records - like, say, 20 or 30 - you can learn to do it yourself with something called a record lathe.
DIXON: A record lathe basically looks like a large turntable. And the needle is vibrating as the disc turns underneath it, and the sound wave is etched into the disk.
RAZ: And you would have seen these old record lathes in recording studios or radio stations in the 1940s and '50s. And you can still find them, usually in a dusty attic or, of course, on eBay.
DIXON: I got really obsessed with the machines. I bought every one that I could find. And eventually, I had so many machines I was having bands from out of town come over to my kitchen and cut records straight to the lathes in the other room.
(SOUNDBITE OF MUSIC)
DIXON: The drummer would be right next to the sink. The guitar player and bass player would be next to the refrigerator. And I would be cutting the records while they played the song.
RAZ: Anyway, this is all happening in Olympia, Wash., in 2010, 2011. And I should mention that in real life, Mike was teaching high school. But he's also got this vinyl record label going. And eventually, he moves out of the kitchen, and into a studio and then into the world to small events and pop-up festivals where he uses his portable record lathes to cut vinyl on the spot. And then in 2012, Mike and his partner got a phone call.
DIXON: We got a call from Converse about cutting records for a band called The xx at their Coachella VIP party.
RAZ: Right. So Coachella - huge. The xx - also pretty huge. And suddenly, Mike and his partner, Kris, are at this big party with two record lathes making vinyl dubs of Jamie xx for, like, 200 people.
DIXON: The attendees would go and listen to some samples. And they'd say, I want this song on the A-side; I want this song on the B-side. And then we would cut it for them right there. And then they walk away with a disc that they can take home and play and show their friends.
RAZ: And after that event...
DIXON: We had a ton of people that said, hey, I want this at my party; I need this at my activation or at my festival.
RAZ: And that's how Mike launched Mobile Vinyl Recorders. He quit his teaching job. He moved to Tucson, Ariz., and now he and Kris do about one event a month making vinyl record dubs at festivals, parties, even weddings. They've been making about a quarter of a million dollars in revenue doing quite possibly the coolest job ever.
DIXON: It's something that I fell into. And yeah, I can't imagine having a cooler job either.
RAZ: You can find out more about Mobile Vinyl Recorders at our Facebook page. And, of course, if you want to tell us your story, go to build.npr.org. We love hearing what you're up to. And thanks for listening to the show this week. If you want to find out more or hear previous episodes, you can go to howibuiltthis.npr.org. Please also subscribe to our show at Apple Podcasts or however you get your podcasts. You can also write us. That's firstname.lastname@example.org. You can tweet us - @howibuiltthis. Our show is produced this week by Rachel Faulkner. Ramtin Arablouei composed the music. Thanks also to Neva Grant, Sanaz Meshkinpour, Thomas Lu and Jeff Rogers. Our intern is Nour Coudsi. I'm Guy Raz, and you've been listening to HOW I BUILT THIS from NPR.
(SOUNDBITE OF MUSIC)
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