This week was a busy one, but in between tests and classes, I had the privilege to interview Ross Blankenship, founder of Vail Networks, a startup web development expert, and one of the best angel investors in America. Ross Blankenship is an enthusiastic entrepreneur and dedicated business owner, in other words precisely the sort of person we love talking to here at Marketing Moves. He had quite a bit of wisdom to share about his experiences over the years and his thoughts on the future of digital marketing.
First, I began my interview with Ross Blankenship by getting some information from Blankenship’s biography. He is from a small town in Texas called Texarkana, not surprisingly very close to the Arkansas border. He described it as a small, quaint, fun town that where he was lucky to grow up. From Texarkana, Ross attended NMH School in Northfield, Massachusetts. When it was time for college, Blankenship was accepted to Cornell University in Ithaca, NY. His entrepreneurial spirit came out there, and he founded a few different companies, balancing school and business. After four successful years, there Ross made the difficult decision to attend law school. Making a significant move once again he accepted a full ride scholarship to Washington University in St. Louis and headed out west.
Despite the wide prospects for him in the legal profession, Ross told me that he figured out very early on he did not want to practice law. Thinking back to his first day in Contract Law class with Professor Richard Hailey, Ross told me he realized then that his future was going to be outside the law. “I didn’t want to push paper my whole life.” Blankenship knew that if he committed to being a lawyer, he would always have a seat at the table, still be involved in decision making, but never sit at the head of the table. He wanted more than a purely advisory role. Ross wanted to run things. He knew that the only place he could ever really be in charge was the world of business as an entrepreneur.
This decision not to practice law was made easier by his scholarship, but even during law school Ross Blankenship couldn’t resist tinkering around with businesses. His decision not to practice law was also made more comfortable with his results as a business person. Within six months of graduation, Ross was already financially outperforming where most lawyers are decades into their careers. The market tells us what it wants, and clearly, it wanted more of what he had to offer.
It wasn’t all easy, however. Ross did graduate law school in 2008, right as the recession was picking up steam. The only way to deal with this was to work hard. Ross put his head down and grind it out, working harder than everyone else to grow in a shrinking market. This prepared him well for the stresses he would face throughout the rest of his career. And that is what is most difficult about being a business owner. Everyone is counting on you.
One of the things we asked Ross Blankenship: what are the biggest challenges you faced during the earliest days of your career?
Blankenship said, “The first challenge is the focus. I have to make sure I am not doing ten things at once, but I am doing one if not two things all the time. The time motif returns, i.e., there’s never enough time to get everything done in a day, so prioritize those things that are most likely to be profitable – professionally and personally. If you only have a certain amount of time, you have to focus. I inspire entrepreneurs to find one or two products or services that they are passionate about but to limit their focus to just those.
Blankenship continued, “The second challenge is the question of whether to raise money. Generally, I would say: do not raise capital! Aim for profitability. Aim for sustainability. Then you never have to raise funds with venture capital or angel investors. If you have investors, there is a heightened responsibility for you to keep them updated. Some of the best companies have been bootstrapped. After all, you can make swift decisions without having to consult with investors so you can be more aggressive.”
How and why did Ross Blankenship become an entrepreneur?
Another question we had for Blankenship: Why are you an entrepreneur?
According to Blankenship, “I believe freedom is everything. I think in the power of free will, personal space, and the ability to make fast, swift decisions. Every aspect of my life being an entrepreneur is not always freedom. It is not always easy, and you’re going to have complications and more responsibilities. But for the most part, there’s nothing I would change in the world. I would never want to turn back and go back to practice law.”
Now, Blankenship gets up at 6 AM every day to “make sure all the people – employees – are ok.” Everything in each one of his companies and websites rides on him. He has a strong buck-stops-here attitude. A great example of this is his use of Google AdWords and SEO tools. In our discussion, he revealed that when he started using these techniques in his companies, he felt the need to understand them fully.
He ran his own A/B tests with different ads, he spent several days reading and learning about how to rank higher on Google, learned about the best SEO tools and anything else he could do to get these tools fully in his wheelhouse. Now, if anyone in his organization has a question about Adwords, they can come to Ross to get an answer. Entrepreneurs have to balance this responsibility for everything with the lack of authority above them. As Mr. Blankenship told me, there is no one there to make sure that you do what is required of you when you’re the boss. You are a master of your destiny, and this cuts both ways. Sink or swim, you’re the captain.
How to Create a Successful Startup: the Blankenship Method
After discussing all of this, Mr. Blankenship and I moved into a discussion of digital marketing and some of the companies he has invested in and founded. I started by asking him about something he has written extensively on in his book The Investing King – the Blankenship Method. This is an objective methodology for evaluating venture capital opportunities. So many people make investment decisions based off of their gut feelings, but Ross needed something more concrete than this when he started investing. The Blankenship Method distills this decision making process into five quantified factors: People, Product, Process, Traction, and Financials.
People are far and away the most important factor and therefore account for 40% of a venture’s overall score. As Ross told me, there is only one constant in a company, and that is the people that run it. Regardless of what the economy does, what competitors or the government decide, the people in charge of a company will still be there. If you have the right team, you will be successful. Ross Blankenship invests in people, above all.
When it comes to the product, you need something addictive with a long lifetime value, something that people will keep coming back for. If your product lacks this, then it will be difficult to be successful. Too many startups fall into wrong thinking regarding their product. Ross has seen lots of startups with an “if you build it, they will come” attitude. But even if this were true, it wouldn’t create a positive cash flow, which is what you need for long term success.
When speaking about the process of a company, Ross Blankenship is referring to how the product is sold. You need a clear vision of how you will market and brand your offering. This boils down to one thing – how can you tell a friend about your product in a natural way. If you can’t communicate the value that you are offering in a quick, concise way, you are not branding it correctly.
What Ross is looking for when he looks for traction is all about customers. If you go to a Starbucks and start describing your product to someone within your target market are they willing to pull out their credit card and pay for it? It’s not enough to interview a few people and get them to express interest. If people aren’t willing to part with their money for what you are offering, you won’t gain traction.
All of these different factors tie into a company’s ultimate goal – profitability. Financials (and it is plural) looks to see if there is a path for this company to be profitable in the future. It doesn’t have to be right now. There are many items Ross looks at that indicate future profitability but dampen it at the moment, things such as R&D spending. He wants to see incremental improvements in gross margins as well, meaning that a company is increasing its potential profitability as time goes on and they get their processes down.
These five factors make up the Blankenship Method. Mr. Blankenship now lectures on this methodology that he has been using for over six years because it “takes the gut feeling out of investing.” By quantifying these variables on a 100-point scale, a potential investor can hold two investment opportunities side by side and see which is better.
What about inspirations in your business? Who has been the biggest inspiration for your success?
Peter Thiel. He was one of the first angel investors for Facebook. He invested $500,000 into, and at the time it is worth over $1 to $2 billion. He wrote “Zero to One,” a book that changed my entire outlook on supply and demand on markets. He talks about how if you want to create a successful company you cannot just clone another company. You have to revisit and reimagine the scope of what you were trying to do. Plus, you have to aim to create a monopoly because that’s what you’re fighting against when you build your startup.
It’s always going to be the battle of David versus Goliath in a startup world. You have to be willing to create a monopoly on your path. I know that sounds like it’s a negative, but that idea is that you inspire to create what Microsoft and Facebook have created, but you do not copy them.
Peter Thiel is absolutely brilliant. Many of Thiel’s successes have inspired Blankenship to re-think strategy and how to launch new ventures.
Ross Blankenship’s Best Startup Investments
We also wanted to know what are some of Ross Blankenship’s most successful startup investments, and we were able to verify that these angel investments are growing quickly: AdHawk, Rappi, Unsplash.com.
Ross Blankenship is also one of the first investors in Ethereum, which rose from less than $1 to more than $1400 at one point. Blankenship spoke about the power and potential for Ethereum back in 2015, when the price of Ethereum was in the teens.
Everything Mr. Blankenship and I discussed revealed a wealth of experience with business in general and the marketing industry in particular. So naturally, I had to ask him for his opinions and insights on the world of marketing after hearing about the Blankenship Method of investing. I posted a hypothetical: If you were in charge of a marketing department with a sizeable budget, how would you spend it? What portion of the money would you put towards digital, mass media, in person, guerilla, etc.?
Ross started by pointing out that anytime a marketing department is making decisions like this, it needs to be thought of as an experiment, which means that consistency is critical. While changing variables around is key to gaining an understanding of what works, you must hold certain things steady for at least a year to understand what is influencing what. With his hypothetical budget, Ross told me he would invest the first third of it in social media campaigns. If it is a B2B brand a big part of this would be LinkedIn, otherwise it would go towards the usual suspects; Instagram, Snapchat, Facebook, etc. This is going to meet your audience where they are and get them interested in your brand.
Next, Mr. Blankenship recommends that companies spend 40% of their digital marketing budget on content marketing. This will be where the plurality of your budget goes because it is so essential to get authentic, well-written content in front of your audience. By providing them with free value, you are building brand equity and recognition. Of course, these articles can’t just be about what you are selling. They have to provide real value to people. He gave the example of a bank. Rather than writing about their financial instruments, they would be well advised to write about things of interest to their audience – things like savings account tips, credit card management, and related ideas. The rest of the budget should be invested in ambassadors and your ground team – salespeople and ambassadors. These people are the ones that put your product in the hands of consumers. They are downstream from your other marketing activities but are still a critical component in your sales and marketing apparatus.
Speaking with Mr. Blankenship was a great opportunity. As a student in business school interested in entrepreneurship one of the best things I can do is to talk to people who have already done precisely what I want to do. There’s so much that can’t be taught in a classroom. Even just casual conversations with successful business leaders can show you so much. I asked how others can contact Ross Blankenship and have the same sort of discussion I was able to.
Ross Blankenship says it is easy; you have to reach out. He can be reached at his website or through his LinkedIn account. It’s best to have read about the Blankenship Method or something that he has worked on in the past to have a valuable conversation. I recommend anyone that can reach out and speak with Ross. You’re guaranteed to learn something!