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Stephen Phillips: Engineered For Success

Stephen Phillips: Engineered For Success

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Rolling Stone magazine, not the place you’d expect to find the story of a software engineer who grew up on a horse stud outside Charters Towers, and yet this is exactly where Stephen Phillips found himself.

This begs the question – how did this software engineer from regional North Queensland get his story in one of the world’s most prestigious magazines?

“Up until I was about 35 I’d built sites for banks, retailers and real estate agents, and many crappy ideas for start-ups, but I’d never last more than two years at any job,” Stephen said.

“I had no money, I had nothing. Then I met Melanie, who I ended up marrying, and she was a lot like me.

“I remember we’d reached a point where we were in our mid-30s, sitting around the kitchen table, and we had this moment of clarity – as you do about this time of your life, when you have no money and a $500,000 mortgage and you’re working in some job you don’t like for $60k, and you’re thinking, ‘how do people do this?’

“We looked at our successful friends and they had all worked for big companies and just sucked it up for a decade; we both just couldn’t do that. We had to start our own company so that we could define the culture and do the things that we enjoy.”

The couple combined Melanie’s design talents with Stephen’s programming experience to develop ‘Plugger’, which, in 2005, “was like Google News for Australia before Google News.”

“The news was dominated by three major players and there was no independent site for blogs,” Stephen explains.

“We got to about 10,000 users, and we hadn’t seen anything like that – these people were paying to have the news delivered to them.”

“One of the cool things about having 15 jobs in 10 years is that you meet a lot of really cool people,” says Stephen. One of those cool people was Scott Moorhead the Creative Director of ‘Wotif’ in Brisbane, who informed Stephen that his boss was about to leave Wotif and wanted to invest in start-ups.

This was the start of a meeting that would change his life. Stephen met with Graeme Wood, an entrepreneur and philanthropist who had started Wotif in 2001 and had made millions before resigning as Chairman. The two clicked straight away and it wasn’t long before Stephen had secured Graeme as his business partner and mentor.

“I remember at the end of our initial lunch meeting he said, ‘Look I think we’re very similar. You’re a lot like me, except you’re not very successful. I think I can help you with that. Let’s be business partners. How much money do you need to really scale this business?’”

The next step was building a team of half a dozen of the best minds in sales, mathematics, programming and design, who then holed up in a room together working on the site for 12 months before they were nominated for a Telstra internet award for best news site in Australia against ABC, News Limited and Fairfax.

They won.

“What came out of that was another function where I was talking about this technology we’d developed, which was essentially machine learning with social media, very early on,” Stephen said. “I was always interested in this idea that there’s wisdom in crowds – that, if we could monitor crowds, we could learn what their tastes are.

“The biggest hit inside this Plugger that we’d built, was the ability to monitor the news overnight and predict what the stock market would do tomorrow.”

Following the function, a music label rep approached Stephen with a problem the music industry was facing:

Everyone is stealing our music!

The challenge from them was, “Could you work out a way to tell us who the hottest new bands in the world are?” With this in place, Stephen and the team went to work.

Their first idea was to track popular torrents (which music was being stolen the most).

“We thought we were just doing this to see if it would work,” Stephen said. “We had no idea this thing would go so big”.

“I remember we woke up on the Friday morning and all of a sudden there we were, on the cover of Billboard magazine and TechCrunch, and all these big American tech sites. TechCrunch, which was the start-up zeitgeist of the day, said, ‘This is the Billboard of the new generation,’ that this was the ‘real’ chart – it was no longer based on sales. It was unreal.”

“On Monday morning I went in to our Board (of Directors) and said, ‘We did a little experiment over the weekend, and something blew up…’ thinking they’d be really excited.

“They were not excited. They were really unexcited. They thought it was a bad idea. With too much risk.” At the time, the music industry was famous for suing everyone, and Stephen’s Board didn’t want any part of it.

Disappointed, Stephen’s team told the Board they would leave ‘We Are Hunted’, this new music tool, alone and continued to invest another year and $1 million into Plugger, which peaked at 600,000 users.

“We thought, maybe this is it, maybe only 600,000 people in Australia care enough about the news this much and want to track it,” Stephen said. “Then one day out of the blue one of our young designers said, ‘Hey, have you guys seen Hunted?…’”

Although the team had told their Board they would halt the We Are Hunted project, they never actually shut it down. It had been left sitting there, slowly simmering in the background. Unbeknown to them, magic was happening.

“We hadn’t touched this thing in 12 months and when we checked it, we had half a million users,” Stephen said.

“We’d put all this time and money into news, which we’d grown 10 per cent, and here was Hunted that had trebled in size with no effort”.

After coming clean to the Board and trying to figure out how to promote the app without being sued (the Board’s main hesitation in the first place), MTV invited Stephen to New York to meet with their executives.

“Because we were running in stealth, no press, no nothing, there was all this mystery around who we were.” Stephen said. “I remember walking into the MTV head office in the States and there was 100 people waiting for me; there were cheers and autographs, and we (Dad and I) were like, ‘What the hell?’”

After seeing all the hype in New York, Stephen rang his team and said “grab your stuff, we’re moving to New York”. Part of the team relocated their families to the big apple, where they built up the app to a staggering three million users with a team of 10 people.

There they were, working for Sony in the end, but by the 5-year mark Stephen says “We’d run out of money. One of the flaws in this grand plan was that nobody was paying to use this thing. Even though we were growing, we couldn’t work out how to make anyone pay.

After 6 months in New York City Stephen received a call from a guy called Kevin who worked with Twitter who was interested in meeting his team. After fielding calls from Microsoft (three months before X-Box music came out) and multiple calls from Google, Stephen was wary.

“I was on my way to finalise new funding for the company when Kevin called again saying he was in New York and still wanted to meet,’ Stephen explains. “We sat down and the first thing Kevin said was ‘We’ve been tracking you for a year, we love everything you do. We want you to come and run music at Twitter for us.’ And I was like, ‘Yeah, ok, that sounds great, let’s do that,’ and that was it.”

Stephen spent three years at Twitter, two years in the product team deciding what to build and how to make it better, and the last year in mergers and acquisitions, where his role was to acquire other companies.

“I worked for six months on one deal, which was to go and buy SoundCloud, which at the time would have been the biggest acquisition in music history,” Stephen said. The deal fell through in the end, wisely squashed by Twitter’s board, but by this point Stephen was already back in Australia. “My time working for someone else was over,” he said.

After returning to Australia and meeting up with Graeme again, the duo delved into a new project ‘Mawson Ventures’, with the intention of investing in talented young engineers.

“We couldn’t help but wonder ‘why were we good at this so late?’ Maybe there were young people out there in their early twenties who we should help,” Stephen said.

“So, for the last two and a half years we’ve been trying to do that.”

Stephen found himself in the shoes of his original mentor, Graeme, when he found Mawson’s first candidate, Adam Hibble. Together they set out to build the best team of talent possible to create ‘Popgun’ – an Artificial Intelligence (AI) model that can create original pop songs.

After forming Popgun, the team ended up back in America in accelerator ‘Techstars’ and went on to meet with Vinod Khosla – founder of Sun Microsystems in Silicon Valley (worth a cool $2 billion) who invested in the company.

“I said to him, ‘Why do you want to invest in this?’ and he said, ‘Can I be honest? I’ve actually made a bet with a friend of mine that an AI will have a top 40 music hit by 2022, so, I’m investing in AI music,’” Stephen laughs.

“Why these things happen like that, who knows, but that’s how these guys operate sometimes. “Some of them have a billion dollars that they have to invest every two years, and it’s really hard to invest a billion dollars, so in the end they do some crazy stuff, and do a bet that just feels right.”

Stephen’s advice for the next generation of start-ups? “Kids should be making stuff, they should be building things. That’s what they should be focused on. Pick any problem, there’s problems everywhere, and if you can solve one of those, if you can give a tech demo that shows the world we understand this problem and here’s how to fix it, they can be worth millions of dollars. There’s a limit to how far hustle gets you unless you actually have something that makes you unique. What I really like about the Californian education system is they’re forcing kids to make stuff. Not just to study and learn, but actually make stuff. We need to get kids making things, not consuming things. As a parent you should be letting your kids access technology and use it to make stuff. These are skills they’re going to need, the tools will change, but they have to lean to make stuff, not be consumers. The question is, can I imagine something and then make it real?” In Stephen’s case, yes, he can.

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