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A struggling dad built an app to buy his kids cheaper pizza ' and now his company has 5 million downloads and $40 million

Published by Business Insider on Fri, 17 Nov 2017


Ryan Hudson is the cofounder of Honey, a browser extension that tracks prices and finds online coupons.Honey got off to a rocky start, unable to persuade investors of its value.Today,Honey's browser extension has been downloaded over 5 million times, the team just crossed 100 people, and investors have provided over $40 million.Over five years ago,Ryan Hudson went online to order a pizzadinner for histwo kids, who were then under 6 years old.He really wished he had a coupon.Money was tight for the serial entrepreneur, and cost-saving measures were nothing new: He had recently called up every one of his utility providers, from his cable company to his internet provider, to cut $200 from his bills every month."That's part of why I was in a couponing mindset when I was buying that pizza," Hudson told Business Insider. "I thought, there's probably a coupon that could save me $1, and that matters right now."That night, after the kids went to bed, he put together a prototype for a browser extension that could help solve his problem. In October 2012, the MIT-trained entrepreneur, along with co-founder George Ruan,used that prototype to buildand launchHoney, a web browser extension that automatically finds and surfaces coupons when a user is online shopping.For two and a half years, Hudson and hisRuan bootstrapped their app, unable to convince investors to put money into a desktop browser extension as consumer interest moved to mobile. In 2013, Hudson ran out of money, and took a day job as a product manager at an ad tech company to pay the bills."I worked there for a year and learned a lot about the ad tech industry and building products at massive scale," he said,"but I also learned that in my core, I'm still an entrepreneur, and I like to build things. Even whenI was there, it was gnawing at me thatI wasn't trying to figure out to make this Honey thing work."As Hudson stepped back and Ruan continued working with a skeleton crew, userscontinued to gravitateto Honey, based on the recommendations of friendsand a leaked Reddit post from one ofits beta testers. In the failed startups that preceded Honeyover the course of Hudson's career, he said, "nothing had ever clicked, but to have something consumers clearly loved that was growing organically by word of mouth because people actually loved the product, I knew that there was something there."When Honey starting growing, it moved fastToday,Honey's browser extension has been downloaded over 5 million times onChrome, Safari, and Firefox and the team just crossed 100 people.The extensionautomatically finds and applies coupons at more than 21,000 stores, andmembers can earn rewards at more than 3,700 of those. Honey has savedits users67% of whom are millennials over $170 million from coupon code discounts this year so far.The LA Times reported in October that Honeyhas raised over $40 million in funding, including $26 million that went unreported in a March SeriesCround. Hudson says Honey is currently profitable, but does not disclose revenue.Honey isn't just the coupon codes anymore: The app partners with retailers to provide coupons and offer "Honey Gold"its version of 1%-2% cash backon verified purchases. In addition to scouring the internet for coupons during checkout (you can see how that works in a previous Business Insider article) and providing Honey Gold, it has also added features such as a price-comparison element between different seller on Amazon, a "Drop List" that tracks price changes on Amazonin November, this feature will be expandedto retailers includingTarget, Loft, Saks, and Macy'sand a travel element that offers discounted prices for hotel stays. It has a 4.8 out of 5 stars in the Chrome store.Honey has so far chosen not to monetize its product everywhere it couldfor instance, Hudson pointed out, a price-comparison toolbar "would monetize insanely well" but it makes for an annoying consumer experience. Honey provides the Amazon Drop List featurewithout monetization, although it has affiliate relationships with some of the sites included on its expanded Drop List. Because thefounders consideruser experience paramount, "there are a lot of things that would make money in the short term that we don't do," he said.The trick was appealing to retailers along with consumersHoney's driving force, thanks to Hudson's cofounder Ruan, has been consumer psychology. "For two and half years we couldn't figure it out, and we couldn't make money," Hudson said.But eventually, the co-founders realized that the service was just as beneficial to retailers as to shoppers: "We take a consumer who wants to check out and give them the confidence to do so," he said. "Prior to usingHoney you see a coupon code box and think there's probably a deal out there somewhere, and you open a tab and search codes and start clicking on links,and in that process, you never get a definitive answer it's hard to do an exhaustive search. WhatHoney does is takes that consumer in checkout flow who wants to buy and says, 'Hey, we just tested all these codes and we picked out one that works.' It's like winning the lottery, and it makes consumers more likely to interact."One of the app'smorecounterintuitivefindings is that even when there isn't a coupon that works available, the shopper is still more likely to buy after running the codes through the appthey're seeking the validation of knowing they tried.Honeywillkeep going at full-tiltWhen asked for advice for other entrepreneurs, Hudson said it's crucial to manage your own psychology during the roller coaster ride that is a startup."Everything is going to be infinitely harder than you expect," he said.He's seen people paralyzed by the knowledge that something isn't working, but instead of addressing it head-on, they bury that fact. "Fundraising almost forces you to do this in a lot of ways, where you're highlighting the potential and drinking your ownoptimismKool-Aid," he continued."That's greatin selling investors, getting people to join the company, andbuilding enthusiasmfor what you're doing, but the tricky part is balancing it with reality, and deciding what to focus on as a result of that reality."Hudson will continue to go all-in on Honey, the startup he could stop thinking about even when he wasn't working on it. "The fear has always been don't f--- it up, because this is something special," he said. "This is the company that can matter to the world. It's almost an obligation and a responsibility to do it right."SEE ALSO:Entrepreneurs should wait as long as possible to raise money, says a VC who's invested in over 20 companiesJoin the conversation about this storyNOW WATCH: How to get the most money and perks if you get bumped from a flight
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