You know that nagging feeling you get when you’re shopping online and see an empty coupon code box? It’s that feeling that someone somewhere is getting a deal, but that someone is not you. Ryan Hudson was tired of seeing that empty box and searching tirelessly for coupon codes, only to came up empty-handed. He knew there had to be a better way.
In just six weeks, he created a browser extension that would take the hassle out of endless online searches, which often lead to dead ends. With Honey, users to get the best deals on items ranging from food and household goods to electronics and clothing. Despite ups and downs—it took about 3 years for the company to be profitable and amass a substantial following—Hudson and his business partner George Ruan, persevered.
Earlier this year, PayPal announced they were acquiring Honey, largely for its ability to give its customers a better retail experience. But Hudson is hardly ready to sit back and relax.
CSQ caught up with Hudson, just as the sale was closing, to discuss his path to success and hear what’s next.
Describe the lightbulb moment that created a company worth $4B?
I was a self-taught computer programmer who grew up learning on a TI-82 calculator in math class. I was always playing around on it and seeing what was possible and what technology could do. I had been looking into the Chrome webstore to see what Google was doing with extensions, and I saw a fun place to build products. When it came to shopping online, I realized how tedious the process was to search for a coupon code. You’d spend a bunch of time searching for a code, and then not end up finding a valid one, but yet you never really knew if you had exhausted the search. I thought it would be great to automate this somehow. Browser extensions were a great platform to see if it were possible.
I spent about six weeks creating the extension, and then we launched in October, 2012, just before the holidays. We got great feedback and immediately knew this was something special. We were making it easier for people who were already looking for discounts, while also reaching an entirely new user who was never looking for them in the first place.
You weren’t the first to launch a coupon-sourcing product, though. What was innovative and different about your approach?
At the time, all of the new entrepreneurial focus was going into new platforms and apps. People who were thinking about how to make shopping better were looking to do it on mobile phone—we were doing it on a desktop, which was un-fundable. Investors weren’t looking to throw money at innovations in that space. They figured that anything to be invented there had already been invented.
We decided to go there anyway. I knew from my own experience that there was a need. We were helping people save money and by doing less work. There’s an inherently awesome experience in finding money unexpectedly. Our users loved it and would share their anecdotes of saving money with friends, which meant that our base was growing without us really even fueling it.
Once our user base had grown to a few hundred thousand in 2014, we were able to raise a small note from investors. We then hired a head of partnerships in 2015 who had experience working with retailers and that turned it into a business, not just a tool.
Consumers use Honey because we help give them the confidence they need to checkout, savings or no savings. Retailers work with Honey because of the confidence we give consumers helps them reduce cart abandonment and cross-site shopping, which in turn results in incremental users and sales. We now have 10K+ merchant partners through affiliate networks and also have strong direct relationships.
You studied engineering at Cornell and then got your MBA at MIT. How did education play a role in your success?
I wasn’t necessarily a great student. I liked learning things I was interested in, and when that overlapped with the curriculum, I was good. If not, then I wasn’t. I went to business school before it became unpopular for people in startups to get an MBA. It was more about applying business thinking to technology.
MIT has a great entrepreneurship program with a tech focus. That experience in my mid-20s got me working in venture capital, which allowed me to see behind the curtain. My first job out of school was with Forrester Research, looking at market trends and the future of technology. It was a broad set of tech-founded industries. It was an investment in myself to learn and be in that spot.
Who else was on your team in the early days?
George [Ruan] and I started it with a few people who we could get to help us on the side. We strapped on a tiny amount of personal investment and money from our parents and stretched that as far as humanly possible. We paid ourselves nothing and convinced our friends to work for free. That lasted a long time, and I eventually ran out of money and had to work for another company for about a year, doing Honey on the side.
Our first offices were in a super sublet in the auto-body district of Pasadena. We had a couple of desks and a glass table that we’d also use for lunch. We’d get interns wherever we could. It was as scrappy and bare bones as you can imagine.
About four years ago, we figured out how to make it a revenue-generating company. We’ve doubled our employee count every year. We’re at about 370 employees now, and we started 2019 with 200 employees. The year before, we had 100, and 50 and 20 employees in the years before that. It’s been a pretty wild journey.
How has Honey evolved since its early days?
In the beginning, we didn’t have Honey members, just users. There was no concept of creating an account, all you had to was download the extension and use it. Then we started building retailer relationships and started getting revenue. This allowed us to build out additional features and we evolved into more of a membership model. However, you can still download and use the browser extension without creating an account, or you can join as a member and take advantage of Honey’s other features, like Honey Gold, our loyalty program that gives you rewards on top of coupons.
We rescaled our idea of users verses members. Initially, no one registered. There was no concept of creating an account. However, we reached enough people where we had enough credibility with retailers that we could tell them about our user tool and that by working with us, it would improve their retail. We had proven that and had revenue. That lead to member growth. We then launched other things like the Honey Gold Loyalty program, which gives cash back on top of coupons, as well a flywheel on top of Facebooks ads…things like that.
We only just launched our app last year. We knew to build a successful app it was going to take a lot of time, so we didn’t have one for a long time. We focused on building one thing well: an extension. Then we started thinking what we could do for mobile app, which is designed to help our users shop wherever they want to be and know that they still have the best experience.
In a lot of ways, the app took seven years to create, but some things are only possible because of what we learned from browser extension. I joke that the app took seven years, but really, it took seven years. People are still shopping on their desktops, but now there’s a new platform where existing users can also use their mobile devices. I wouldn’t say there’s been a shift in the way people use Honey—it’s more of a growth. Our goal is to support all kinds of shopping.
Still, people assume Honey is just a coupon, but what we’ve proven in the last seven years is that it’s really just a better way for people to buy, whether it’s on a desktop or a mobile phone. People know and love us for the coupons, but we offer so much more like Honey Gold, Drop List, and there are lots of tools to manage the eComm experience.
What have you learned about marketing and branding a tech company?
First of all, you have to have word of mouth. You need people who are going to say to themselves, “Wow, this is amazing. I need to tell everyone I know!” That message was amplified with us, and our users let people know that we exist and we deliver.
In terms of branding, “Honey” was just a great name for us. I had started a bunch of tech companies in the past, and you can try to come up with a name that makes sense for weeks. We stumbled upon Honey, though. It’s sweet, positive, fun, has playful connotations…there are puns. It just clicked.
What have you learned from your struggles along the way?
That a company has to be in a constant state of learning to come up with growth and success. There’s always going to be chaos, but it has to be trusted and controlled. I’ve learned that when it comes to hiring, we need people who can thrive in that environment and believe in the future. They have to be comfortable with things not being predictable and know that we’re all in this together.
We also want our employees to be in a place where they can grow and stretch. We do a lot of things to support our employees and achieve their growth. For instance, there’s lots of training, but it comes down to the mindset. We try to get people who always ask “why,” then “why” again, and “why” again. Teaching that mindset is linked to people who are intrinsically linked to working better. I hesitate to use the word “fail,” but it’s important to fail comfortably and grow from it.
You just got purchased by PayPal for $4B. What has that process been like?
From the beginning, the goal was to build something important and really have an impact on our members. We never intended to sell. This is not an exit. We’re still going to be leading Honey and its growth. We spent months talking to the PayPal team about how our mission to make money fair for everyone aligns with their mission to democratize financial services. We’re really excited to be working together to make it a reality.