with original CEO of Rotten Tomatoes Patrick Lee

On today’s show, we sit down with Patrick Lee, the co-founder and former CEO of Rotten Tomatoes, a leading entertainment website focused on movie reviews and news. It is one of the top 800 most visited sites in the world. Patrick is now heavily involved with helping early-stage companies, advising companies such as Casetify, Credder, DNArt Inc., Instaread, Kiwi Campus, Leo AR, Magnesium Film, Oishii, WePloy, and Zeuss Technologies. He is a current or former mentor at SOSV, Berkeley SkyDeck, Blue Startups, Founder Institute, Mentorbox, Berkeley LAUNCH Startup Accelerator and was the executive Producer of “The Heavenly Kings”, directed by Daniel Wu (Best New Director, 2007 Hong Kong Film Awards).

In this episode, you’ll learn:

• The story behind one of the most popular websites in the world, Rotten Tomatoes!
• What it was really like to manage a startup during and after the stock market crash in 2000
• What it is like when the company you built is acquired
• Features that make a great accelerator program
• The future for online streaming platforms

We would like to give a special thanks to Alan Tien for connecting us with Patrick Lee. Without Alan, this interview would not have been possible.

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Books and Resources

• Connect with Patrick Lee on LinkedIn
• More about Patrick’s first company, DesignReactor
• Book Patrick for Speaking Engagements

CONNECT WITH SHAWN:

https://linktr.ee/ShawnflynnSV

• Shawn Flynn’s Twitter Account
• Shawn Flynn’s LinkedIn Account
• Silicon Valley LinkedIn Group Account
• Shawn Flynn’s Facebook Account
• Email Shawn@thesiliconvalleypodcast.com

Disclaimer to the Transcripts:

The transcript was generated using an Artificial Intelligence program and then scanned over; we would like to thank you in advance for understanding that there might be some inaccuracies.  While reading, one might also notice that there are times were the sentences are not grammatically correct and due to changes in advertisements, the time stamps do not always align with the show.  We are keeping the text as true to the interview as possible and hope that the transcript can be used for a reference in conjunction with the Podcast audio. Thank you and enjoy.

Intro 00:00

You’re listening to The Silicon Valley Podcast.

Shawn Flynn 00:02

We have the honor today to sit down with Patrick Lee, who’s the co-founder and former CEO of Rotten Tomatoes, a leading entertainment website focused on movie reviews and news, and one of the top 800 most trafficked websites in the world. We hear the story behind Rotten Tomatoes. What was it like to have a company during the stock market crash of 2000? What does a founder go through when the company that he built gets acquired? And what is the future of online streaming platforms? We cover this and more in today’s episode. Stay tuned.

Intro 00:37

Welcome to the Silicon Valley Podcast with your host Shawn Flynn who interviews famous Entrepreneurs, Venture Capitalists and Leaders in Tech. Learn their secrets and see tomorrow’s world today.

Shawn Flynn 01:01

I’d like to welcome our guest today, Patrick Lee, the founder of Rotten Tomatoes. Patrick, thank you for taking the time today to be a guest here on Silicon Valley.

Patrick Lee 01:09

Thanks for having me, Shawn.

Shawn Flynn 01:11

Now, Patrick, can you talk about the formation of Rotten Tomatoes and what was going on at that time?

Patrick Lee 01:19

So before Rotten Tomatoes, I had a web design firm called Design Reactor that I co-founded with my CTO, Stephen Wang.  Rotten Tomatoes was actually created by my other co-founder, Senh Duong. He was our creative director at Design Reactors. Senh was such a huge movie buff and he was a huge Jackie Chan fan. And basically, when Rush Hour came around, he wanted to know what everyone was saying about it. So, he went out and came up with this idea of gathering all the reviews in one place, similar to a newspaper ad for a movie. It would look like a movie poster, with quotes all over it, except those quotes will always be good. So Senh’s idea was like, what if I take all the quotes from professional critics only, good and bad, and put them in one place?” And that’s kind of how Rotten Tomatoes was born.

Patrick Lee 02:06

We were hosting the site for him for about a year. And during that time, you know, he’s putting a lot of time into it on the side, and it was kind of affecting his work. And we were like, “We don’t know if it makes sense for you putting so much time into this.” But after that year, we kind of came around. And there’s a couple things, like Roger Ebert wrote an article for a magazine, pointing out his favorite movie sites and Rotten Tomatoes is one of them. And also, in Pixar, they released “A Bug’s Life.” We saw a big spike in traffic on Rotten Tomatoes, and it was coming from Pixar. So, we were like, “Hey, if Pixar is using this, if Roger Ebert using this, maybe there’s something there.” Then we went out. I went and raised a million for it. We took our design team, you know, 25 people, move them all over to focus on Rotten Tomatoes, and we started running that as a business.

Shawn Flynn 02:53

This was in January of 2000. Your company must have then gone into kind of a hyper-growth at that point. Can you kind of talk about that?

Patrick Lee 03:03

We actually didn’t have any kind of hyper-growth. When we raised in January 2000, the internet bubble burst two months later. And we actually had a cut from 25 people down to seven, over the course of a year. The problem with the bubble burst was not only that people couldn’t raise money anymore, but most internet sites were reliant on ad revenue, that ad revenue was mostly coming from other internet sites. And so, people couldn’t make more money because these internet sites didn’t have the money to buy the ads anymore. So, when you cut up all the funding and cut out revenue, these businesses are going out, like closing left and right. I think we identified about 100 competitors or potential competitors when we first started. Pretty much within a year, I think like 90% of them were out of business. So, it’s like a pretty tough time. And it was like the opposite of hyper-growth. We were just trying to stay alive.

Shawn Flynn 03:56

So then how did you keep your team together in that atmosphere?

Patrick Lee 04:00

Well, even…  We tried to run everything like a family. Even when we knew we had a cut, we told people what was going on. So, they all knew. The accelerated vesting for folks that had to leave, we told them also to start looking for something. And we kept everyone employed until they found work elsewhere. So, they didn’t have any kind of gap. We ended up with seven. At seven, we still weren’t even breakeven. And even at seven, everyone took at least a 30% pay cut, myself and our marketing person, Paul, went to zero. But we felt that if we went below seven, that we wouldn’t be able run it as a real business. We tried to just communicate everything with everyone. And even afterwards, you know, we did what we could to try and help people find jobs, and still had everyone kind of keep in touch with each other, even when they weren’t able to stay on with our company.

Shawn Flynn 04:48

So then what was the final decision to sell the company?

Patrick Lee 04:53

We were getting offers. We sold in 2004, and we’ve been getting offers before then. But they were like 10 cents on a dollar, 25 cents on a dollar. You know, we felt like we’re not going to sell anything less than our post money valuation. So, we had raised a million on a five million pre, so it was a six million post. So, we’re like, we’re not selling for less than six, just because we want to get our investors their money back. And that was a bar we set for ourselves. When we finally got an offer from IGN Entertainment above that six million number, then we actually went back and talked to investors, and everyone was okay with it. And we just kind of negotiated from there. I think we ended up selling for 10, which isn’t a huge number. But back then, you know, everything else our investors invested in tech went to zero. So, for us to even be around and for them to make some money off of their investment was actually, I think pretty hard at that time.

Shawn Flynn 05:48

The conversations between the acquirer and the acquiree, what does that kind of look like? Is it just, “Here’s an offer?” And then that’s it? Or is there a lot of negotiation, investment bankers involved? How does it work?

Patrick Lee 05:59

I wouldn’t say I’m an expert or anything, especially back then, that was the first time anything like that ever happened. We felt that the numbers seem so low that maybe it didn’t make sense to get a banker. Looking back, I don’t know if that was the best decision. I reached out to our connections to try to get some competitive offers. So, we had other groups like CNET, which owns Game Spot, we talked to Hollywood.com, I think there was another one. And so, we talked to like three or four different companies, offers that were in the same ballpark. But we felt IGN made more sense. With IGN, we went back and kind of negotiated a little bit. They raised it to 10 million, but they wanted us to sign a no-shop agreement, meaning we couldn’t talk to other people for I think it was like six months. So, we did that.

Patrick Lee 06:48

You know, looking back, I think one of the big, kind of mistakes that I made was that myself and my two co-founders, Stephen and Senh, we’re all pretty introverted. We’re all just happily working on the product, just trying to survive. We didn’t have much of a network. Like we didn’t know almost anyone. I look at that as a lot of that was my fault, you know, being the CEO. And so, when this happens, when we had a chance to sell. If we had a better group of folks to advise us, we might have known better, like, “Should we sell? Is this the right time to sell? How to sell? Should we get a banker?” Getting more competitive offers, all of that process. And we kind of just winged it but based on no actual experience in doing it. And so, I think it was okay but looking back. No… I think we definitely could have done a better job of optimizing around that, and that was my mistake.

Shawn Flynn 07:43

After the papers were signed and the company was transferred over, what were the next steps?

Patrick Lee 07:50

Most of the team ended up having to be in a, like a two-year contract to stay on board after the sale. I actually negotiated to not have that. So, I went immediately to China to try and do another startup. I was just interested in doing other things. In the year afterwards, IGN sold to News Corp. And as a result, because of that sale, people weren’t locked in anymore. And so, at that point, my old CTO, Stephen, moved over to China as well to join me in doing the startup that I was working on over there. And so, for me, outside of a couple meetings, during the negotiation, like maybe for the next couple of weeks afterwards, we go into kind of coordinate on stuff. And then afterwards, it was just like, headed off. And I moved on to my next thing.

Shawn Flynn 08:43

You’re a serial entrepreneur, you’ve done quite a few things. Can you talk about some of the things you’ve done since then?

Patrick Lee 08:52

Sure. So, when I went to China, I was basically trying to do something a little bit like Yelp, merchant ratings and reviews. I joined my friend that I had done my first company with, and they built a system where they actually had card readers that they would put into stores. That was like a loyalty program. So, people could go and get a card that they could then go to these different stores. And when they bought something, they would swipe it. And it would help track their purchases, to take that information to then have better loyalty to give them, you know, discounts, to send rewards, and other things so the shop can have a better idea of their customers and have more interactions with those customers. And the customers could get discounts and bonuses and things like that for patronizing those shops. It didn’t totally work. We found that in China, the merchants would take the machines and accept the cards, but they didn’t really want to swipe because they were afraid of it being tracked. One because I think they didn’t really want to pay all the fees less. Or two, they were worried… A lot of businesses were done in cash. And they’re worried that, you know, if the government ever sees our servers, they would find out that maybe these merchants weren’t reporting everything.

Patrick Lee 10:07

Afterwards, I went to Hong Kong for six years. I was doing a startup; they’re called Alive Not Dead. And basically, it was like Myspace for Asia. I was working with celebrities and artists over there, like Jet Li and Jackie Chan. And it was pretty good. We co-founded it with some actors, based out of Hong Kong. This one actor Daniel Wu, who was like, pretty well known back then, and even more so now. And it was good. We put some of our own money and eventually raise a little bit of money. But ultimately, you know, we are trying to do this right in 2007 and 2008. Everything crashed. We couldn’t raise kind of when we had momentum. And so, it was a little bit difficult.

Shawn Flynn 10:51

What’s the aftermath of it?

Patrick Lee 10:54

Yeah, so we did the official site for Jet Li for gently, the official site for Jackie Chan. We had very similar friends working with Jet to actually get in with him when he was coming through to do “Lethal Weapon 4” in the States. I studied the same martial art that he did, and I was a huge fan. And we, you know, a friend actually drove down to LA to go to a comic convention there because he was signing autographs. And we got there, we had some friends that knew him, and his publicist was there. And I was like, “Hey, does he have a website?” And he’s like, “No.” And we basically did the same thing that we did with Disney. Go and get in with him. And he actually referred us to Warner Brothers because he was doing “Romeo Must Die,” where we should make a website for. It looks very, very dated now, but at the time, I thought it was pretty cool.

Patrick Lee 11:42

So, we were doing the stuff in Hong Kong, working with these different celebrities. And it was really cool. It was an interesting time. There was a lot of entertainment stuff going on in Hong Kong, there was this transition to China, because the market in China was growing very rapidly. I mean, even now it’s like, it’s huge now that the movie industry in China, movies like “Aqua Man,” I think the box office in China was bigger than in the States for the opening weekend, which was crazy. And so, there was a lot of transition for these actors in Hong Kong, you know, do we make movies in Hong Kong? Do we make them in China? And more and more. I mean, to this day, a lot more of the work starts coming from China. And a lot of the main, I think big actors all went back to China, like you don’t even see them making films here. And that’s an interesting story. I think around the time when Hong Kong was getting handed back to China, the triads were very involved, this was in the 90s.

The triads were very involved with filmmaking in Hong Kong. There was money to be made there. And they were essentially trying to force actors to do films, a lot of times with no script, like they’d figure out the story along the way. And that’s when you saw some of these big actors doing like 10 movies or more in a year, which is crazy. And it was so bad, that, you know, like Jet Li, for instance, he told us a story where they wanted him to make a movie. And he said, “No”. And they killed his manager at a restaurant. And I think Jet had to escape out the window from the bathroom just to get out. And then soon after, a lot of the big stars in Hong Kong moved all to Canada or to the States. That’s when you started noticing all these like Hong Kong actors in Hollywood, you know, Michelle Yeoh, or Jet Li and all his movies, or Jackie Chan with “Rush Hour.” In China, in fact, he came out for a while with “Bulletproof Monk” and some of these other films he did. And I think a lot of it was just, they’re all just getting out of Hong Kong, because it just got too bad with all of the triad influence. And I think later on, because China got so big, there wasn’t as much money to be made in film over in Hong Kong. And so, it’s kind of… The triad influence I think, died down. And then a lot of the artists kind of went back. Now, it’s all China.

Shawn Flynn 14:02

And are your social media sites still up?

Patrick Lee 14:06

I think it’s just bearish, like a shell of its former self. We sold it to another group to get our money back to our investors. We didn’t really make any money from it. But then that group, I think, had some problems. So as far as I know, I think it’s not really active anymore, unfortunately. It was fun running it. I met a lot of interesting people. And what’s really interesting now is because of all the stuff with like “Crazy Rich Asians,” and there’s a, like, a much bigger movement in the States, or more, you know, Asian projects, that a lot of the people I knew from running the social network in Hong Kong are now the ones that are in these films. And they were just starting out back then.

 And now they’re really big, like, the actor who played the groom in “Crazy Rich Asians,” the guy who got married, he was on our site and I saw him after the movie, and he was saying, “Yeah, when you were doing Alive Not Dead, I was just starting out. I even went to Hong Kong one time, and you met up with me, and you were kind of giving me advice on getting into the industry.” And I was like, “Really, I don’t really remember that.” But I did have his contact info in my phone, which meant I definitely had met him before. Yeah, and there’s a number of cases where folks back then and now, either in China or in the States, they’re doing much better and it’s amazing to see. So even though our site isn’t around, I still have a lot of like contacts and friendships that I made from during that time that are still carrying into today.

Patrick Lee 15:34

And then the last project I did, the company I did was back in the Bay Area. It was a mobile gaming company. I did it with my friend, a different friend for my first company. And we were making synchronous multiplayer games for mobile. So, for iOS and Android, we ended up launching a game, I think it was pretty well made. The metrics weren’t there. We just couldn’t make enough per user relative to how much it costs to acquire users. And so, after a couple months, I decided to just kind of move on. So, after that I’ve just been taking a break, seeing friends and family, doing a lot of speaking. And right now, I’m actually volunteering as a mentor for an accelerator in Hawaii, just kind of working with startups, advising startups and figuring out what’s next.

Shawn Flynn 16:22

Can you talk about how the accelerator programs in Hawaii are different or similar to the accelerator programs that might be here in Silicon Valley?

Patrick Lee 16:33

In Silicon Valley, and specifically something like Y Combinator, I mean, like Y Combinator is the biggest and best one. And they get, they kind of get first crack at all the startups. So, the ones that go in there, generally, it’s very competitive to get in and the quality is very, very high. I would say after that, there was a bit of a drop off to other places, to other accelerators anywhere in the world. Unless they are very specific to certain themes or whatever. So, like, we’re only food based, or we’re only hardware based or whatever. Those can sometimes still get pretty good startups. I don’t know if those startups would choose them over Y Combinator, but they can get ones in the same range. But otherwise, it’s not that easy. The ones in Hawaii are not bad. They all have a tie back to Hawaii. Yeah, like a Y Combinator or I think Bay Area, it’s just the quality of the competition. Everything is kind of another level. An example I like to give is, you know, you can make a movie anywhere. But if you’re going to try to make Avengers, you need Hollywood. And I think it’s similar for tech when you compare Silicon Valley to anywhere else in the world.

Shawn Flynn 17:40

While you’re mentoring these startups, what is some typical advice that you give them, or that you find yourself most frequently giving them?

 Patrick Lee 17:49

I would say the number one thing I tell startups is to focus. And this is based on my own experience. The ones, the companies where we are really focused, my design firm, which was my second company and Rotten Tomatoes, things just worked. And everything was easier.

And our design firm, actually, before we got focused, we’ve originally started, we weren’t just web design, we were actually 3D design and print design. And we weren’t in the entertainment industry, we were like everything. And it was just a mess. It was super hard and you’re cold calling. And people just don’t know what you are, what you’re doing. And once we said, “You know what, we’re only web design, we’re only entertainment industry,” everything got easier. And actually, we never needed to cold call again after that, because people would just refer, like new clients to us.

Patrick Lee 18:36

The ones where we weren’t focused, which was actually all the companies post Rotten Tomatoes, it just didn’t work. Like when we were trying to do too many features, too many products, it’s just harder. And so, one thing I tell people, when they’re just starting out, is one feature or product, or one category, or one market. Like Rotten Tomatoes was reviews, or movies, in English for the English market. A lot of times what happens with entrepreneurs that I’ve seen is entrepreneurs by nature, believe they can do anything. But as a result of it, they try to do everything. In my opinion, doing everything in the beginning is wrong. And the examples I love to bring up are Amazon. Yeah, they do everything now. But they were selling books in the beginning, Facebook was just at Harvard, Google was just a really simple search. And a lot of folks, they look at what the companies are doing now, and they try to like, match them. And one of the things you see so often in people’s PowerPoints, especially if they’re first-time entrepreneurs, is they’ll have that like little grid, where on one side, it’s like, here’s us, and here’s our competitors. And on the other side, its features and be like, “Hey, this competitor has two features. This one has these three features; this one has these three features. Look at us, we have like, all the way across, dots all the way across all 10 features, we have everything.”

And I’m like, “Really? You know, you’re two people with almost no funding. And you’re trying to out-feature these huge companies, billions of dollars, you know, been around much longer, have raised 10s or hundreds of millions of dollars. And you’re going to out-feature them?” And that’s what we try to do with the company, our company in Hong Kong. Like we were a social network for artists. And we had like photos and videos and blogs, and all kinds of stuff, you could customize the pages. And I mean, it’s very impressive. Stephen did a great job. But a lot of it was my fault. Like we weren’t focused. And you know, then you have things like Twitter, or Instagram, or Snapchat that are literally like one thing. Even YouTube is like one thing, and way better. That’s the advice I give to a lot of startups. And I’m always, especially when they’re early on, I’m always like, do we need this? Do we really need that? Or from a market perspective, like sometimes like, “Hey, we’re going to launch. We’re going to start launching into 20 schools.” I’m like, “Why don’t you just start with one school? Facebook did that. And it worked pretty well for them, versus 20. Why don’t you pick the school that your kids go to, you know, if they’re old enough? Or the school that you go to?” Focus on that one where you have the most heat on the ground, and we have the most connections, and just try to build that out.

 Shawn Flynn 21:26

Patrick, can you talk about that design firm that you were working at? Or that you founded before Rotten Tomatoes?

 Patrick Lee 21:34

Sure. So, when I was talking about focus, I mentioned before that we were originally doing web design, 3D design, print design for anyone. We quickly realized 3D didn’t make sense, because, you know, we would need all the computers in our office rendering the entire night to make like one little change. So is this, wasn’t, this is in the mid-90s, I think we were still on something like 40s 60s really old computers. Same thing with print. With print, we are still working with pretty big files to have the print quality be good enough. And you’d have to go and submit it to get printed, you know, two weeks in advance to then see if the colors from the printed work matched what you saw on the screen. And so, it just wasn’t very fast. Back then, with web design pages, like 100-K would be a huge heavy page, like typically, they weren’t even 20 or 30-K or single page. And so that was something that you could work with pretty quickly on a website. And we could make a change. A client could request a change, we could have it up in like five minutes. So, it just made sense to go into web.

Patrick Lee 22:48

And then in terms of the kind of clients we had, it was a really cool story we had with Disney Channel, where we are doing a lot of work for like tech companies before. And one of the people we were working with, he was like, my daughter works for Disney. And this is a tech site. And he was like, “Why don’t you come to Comtech in Vegas? I can make intros to other tech companies like motherboard manufacturers, stuff like that, that might be interested in hiring you guys. But you can also meet my daughter who is working at Disney Channel on the website.” And so, we went, we met her. And she was like, “We just fired our lead developer. What do you have to show us?” And what happened was the lead developer, basically, they had some disgruntled engineer who put a curse word in on one of the pages and it made a past couple levels of QA and somehow went live. And that was it. Like you can’t do that with Disney, they were immediately canned. Our problem was we had nothing that we could show to Disney, that would make sense in our portfolio.

Nothing anywhere close. And so, when we went back that weekend, I called up… it was about a dozen friends, some in our company, but a lot that weren’t working for us. But they were just friends and who were good at art or engineering. And I’m like, “Look, we really need to make something to show to Disney, because we don’t have anything on our portfolio.” So, we went to their website, we went and looked on Disney Channel and their schedule to see what movies were coming up. They didn’t have a website board; they didn’t have one for Mighty Ducks too. So, we went to Blockbuster, rented the movie, we all watched it, did like a little pizza party. And then afterwards, we went and split up the workload. And we went and built a fully functioning site for them. The cast, crew, filmography, bios, photos, everything. We even had two working flash games. One of them was basically ice hockey, you know, Pong. We sent it over after one weekend and I wrote to her and I’m like, “Look, we don’t have anything on portfolio that matches. But we made this to show you what we can do.” And she was just like, “Oh my god, like, there’s no possible way you could have built this in advance of meeting me.” Like, so she knew we made it in one weekend. It was pretty good quality. It didn’t exactly match Disney’s style.

So, they didn’t buy that. But they ended up buying the two games from us. And they sent over a huge style guide so we could redo it to match, and they paid us. At the time we’re doing like, you know, $500, $1,000 websites, because we were just straight out of school. They paid us $12,500 for the two games total. And it was just a whole another level of what we’ve been doing before. And from that they just kept giving us more and more proposals that we would, you know, RFPs that we’d have to go and pitch on. Well, we just got more and more work from them to a point where they gave us a million-dollar contract after things like two years, for a whole year of maintenance. We were building like all these games for them, and actually became their lead developer for Disney Channel. And they helped refer and bring us into ABC and Warner Brothers and all these other places. And it literally came from that.

Patrick Lee 25:58

And there were similar stories, or other companies we’ve worked with, and with Rotten Tomatoes, but it was just this kind of like, we didn’t have anything to show. But we just worked our butts off. And with our design firm, and it’s something I tell the folks for, you know, for enterprise sales, because this is probably the closest I ever got to enterprise sales was when you get in, just do the best job you can. Really, really make sure that that customer loves you, from your customer support and service, to the quality of the work, to every interaction they have with you. Because if they love you, they’ll refer you and your chances of closing the next company through a referral versus a cold call. It’s like I don’t even know, it’s probably like 10 to one, always trying to get referrals. And same thing with consumers. Rotten Tomatoes, how many people found out about it, because someone else told them. And when you have a great product or great service, clients and customers will tell other people, and that’s when you know you really have a product market fit. And you don’t even have to like bribe them or give them any other incentive to tell someone else other than make a great product. And I guess that’s another piece of advice I would give to any founders out there.

Shawn Flynn 27:16

And were you scared at all that you just had that one client, Disney Channel, and if they pulled the cord and didn’t want to work with you anymore, that what you’re building, your team could just kind of evaporate?

 Patrick Lee 27:28

It was definitely scary, especially early on when they were our major client. I mean, even to the end, they were our biggest client. We were always, you know, using our work with them in our portfolio, to try to leverage it, to get additional lead. I mean, we’re getting other leads into other companies. And it was something we tried really hard to keep doing, because we didn’t want to be you know, 100% of revenues from one single client. And we did manage to get it to a point where I think it was like, only 50%, which is still a huge number. But it was one thing that we wanted to try to expand out from and part of our decision to jump over to Rotten Tomatoes. Also was we’re like, we want to do one that is our own site, not building for other people. And that we can rely on and of ourselves and grow revenue that way rather than a project by project.

Shawn Flynn 28:20

What was that conversation like with these big corporations that you had partnerships with at that point, when you decided to go full time to Rotten Tomatoes?

Patrick Lee 28:29

We transitioned to another group, and then still a good chunk of our team for the next six months or so was kind of working on both. Yeah, the clients obviously preferred working with us, because we were there transitioning over. It wasn’t just like a sudden jump, like they were able to get comfortable with the new group that was taking over.

 Shawn Flynn 28:52

What were some of the comments, maybe your friends and family have given you when you decided to go full steam, all-in on Rotten Tomatoes?

Patrick Lee 29:02

Most of the comments came when I first decided to leave school to do my first startup, which was selling computer systems and components. I had done two years of school at Berkeley, then left and convinced three other friends to leave to do that first company. That’s mostly when my mom especially was like, “Please. I don’t mind you doing a startup. Please graduate first. So, they have something to fall back on.” And I was like, “No, I got to do this”. And actually, when I was doing my second company, the design firm with Stephen, his uncle and my mom, actually, were the ones who gave us a loan to be able to start that. I think it was a total of 30,000. And you know, when we got the Disney contract, we were able to pay back a good chunk of it, like almost immediately. That was more of those early ones, it was more when we were getting more feedback. When we did Rotten Tomatoes, you know, no one in our family knew what Rotten Tomatoes was. So, they didn’t really have an opinion, and it was a trip. Like by then, we were already running our companies for a couple years. And I think people were just like, “Okay, these kids are going to just continue running companies.” And so, it wasn’t an issue at that transition point. But as more when we first left school.

 Shawn Flynn 30:06

You’re the good influence on all your buddies there.

 Patrick Lee 30:10

Yeah, yeah. Well, actually, of the four of us that left, three of us are still doing a startup. Well, actually, no, my old co-founder Lial is now is in venture. But we continue to do startups for a long time afterwards for 20 years. When we left, other people saw us doing it, and they left. I mean, it’s much less scary to make the jump when you’ve seen other people around you make the jump. And I think that’s one reason why there is so much startup atmosphere here, because everyone in the Bay Area knows at least one person, if not more, that is doing their own startup. They probably know 10 or 20.

Shawn Flynn 30:44

So, would you recommend then startups to come in here to Silicon Valley? Or would you say it’s okay for them to build the company where they might currently be at, no matter where it is in the world?

Patrick Lee 30:56

Generally, I tell folks to do it where they’re strongest, where their network, their friends, their family, their college or their work. When they already have a network, because most things require you, like if it’s enterprise or something you need to sell, and it’s easier sell again to referrals. If you’re hiring, anything. If you’re raising money, generally, it’s easier through contacts, you already know. A lot of times I do say, yeah, I think you should do it where you are strongest. At the same time, there’s nothing like Silicon Valley, like the ecosystem here, the funding, the talent, all that’s the startup atmosphere is our culture. So, it is very strong. But like, you look at Facebook, they got really big in Harvard, and they expanded to other schools. And then they came to Silicon Valley to kind of make the next step. And I think early on, when you’re just starting, and you’re trying to go from zero to one, do it where you are your strongest. Once you get into that one, and you wanted to get it to 10, or hundred or million, then maybe consider coming out here, but no need to do it when you are just at an idea stage.

Shawn Flynn 32:04

And how important is it to have a rounded team? And what I mean by that is the sales guy, the tech guy, those founders that maybe have different backgrounds or skill sets.

Patrick Lee 32:15

I think it’s very important, or just a lot better to have a complementary team. So Senh, who created Rotten Tomatoes, he handled product, Stephen was our CTO, he handled tech, I handled business and fundraising. And that worked a lot because we weren’t stepping on each other’s toes. I’ve seen startups, if you’re going to have a lot of the same in your tech company, maybe engineers, multiple tech founders, because it’s a lot easier for a tech person to learn the business, and a business person to learn how to code, and especially when they’re a little bit older. But otherwise, I suggest being complementary. I’ve seen a lot of startups that are like, “Hey, look at us, we’re three marketing people. No one here knows how to code.” And I was like, oh, that’s possible, but it’s way harder, especially if you’re a tech startup, because you’re going to need then to probably hire a design firm or like hire an engineer to come in and build your stuff. And it’s just not the same when they’re not a founder. First thing I usually tell them is like, try and find a CTO. Again, that’s hard. A co-founder, like having a founder, co-founder is like marriage. You wouldn’t just go to a one date and get married, like, or some people do. But generally, it’s not a good idea. Same thing, you wouldn’t just go to a tech conference, meet someone, try to make them a co-founder. You kind of have to get to know them. That’s why a lot of times you see a lot of these tech startups, their friends from college or high school, there’s so many of them, like a Facebook or Google or whatever, where they’re literally like, in the dorms together or working together on some project in college. And then they decide like, “Hey, let’s do a company.” And that’s what happened with me.

Shawn Flynn 33:56

So, for yourself then on your next adventure, how are you going to go about deciding what that startup will be? Because I’m guessing you’re going to continue doing companies the rest of your life.

Patrick Lee 34:07

Actually, I think I’m probably done doing startups. I mean, it’s hard to say maybe in a couple more years, I’ll have recharged enough. But it’s not easy. It takes up so much time and energy. It can be very stressful, and it’s going up and down. And especially when it’s like flat or declining. It’s like soul killing. And it’s really, really tough. For me at this point, at my age now, I’m just like, I don’t know, if it really makes sense to kind of do another two-to-five-year bet on another startup.

So, with me doing this accelerator, one reason why I wanted to try doing it was I wanted to try working with a lot more startups at once and see how that feels. Because I’ve worked with a lot of startups everywhere. And I advise a bunch, but usually it’s like, you meet with them once every month or two, and just get an update and do a call. There are one or seven companies, I’m meeting each one at least an hour each week, you know, over a course of a couple of months. And one thing I realized is I do like working with startups. Usually with startups, like giving them advice, I’m giving them connections. But where I see myself potentially going is probably going onto the venture side where potentially I can also put in money. And that’s a piece that a lot of startups need. And I think what is next for me is working with the next generation of startups to actually mentor and help bring them along, rather than me trying to do another one by myself.

 Shawn Flynn 35:39

With that being said, are there any regrets about choosing the entrepreneurial life instead of just going corporate job or doing something else?

Patrick Lee 35:49

I’ve never worked corporate. I’ve done part time jobs like early college, and high school. But I’ve never worked in a corporate environment. To be honest, I’m a little nervous about that. My outside point of view of someone who’s ever worked corporate is, you know, director level and down. It’s all Dilbert, and VP and up, it’s all Game of Thrones. And that’s my feeling from what it looks like from the outside. I don’t know if that’s true. So, I don’t really, really see corporate for me. Maybe if it’s the right fit. But also, I don’t see myself going out and doing like five or six or days’ worth of interviews or whatever. If I worked with anyone, it’d be like, I’d want to find someone that really wants to work with me that they picked me out. And they’d sell me on joining them. That’s kind of the direction I see my path taking, and I believe around venture.

 Shawn Flynn 36:43

Are you looking to focus in a certain sector a certain area? Or, as mentioned before, you really like to help in startups in general, would you try to find a VC, or a fund that’s very broad in their investment thesis?

 Patrick Lee 36:59

For my background, the stuff that makes the most sense is consumer, and the intersection of tech and entertainment. So, there’s things that are like, kind of a natural fit for me to look at and be able to judge kind of based more on the idea. I would probably want to talk to all kinds of startups because you just never know. And at least it’s interesting to see what they’re doing and stuff, there might be some that I imagine might be a little bit too far out. In terms of what they’re doing, if it’s like, I don’t know, like food, or something like that, might be like food science, maybe a little bit too far out? I don’t know. It depends on the fund. One area that I do feel super interesting is artificial intelligence and machine learning, AI and ML. I think that is the next wave. When you think about technologies that have kind of changed everything over the last 50 years, it’s been desktop computing, then the internet, then mobile. And each one of those brought in these like giants, I mean. Apple and Microsoft came out of the computing period, and you got the Googles, and Amazon and eBay that came out of the internet. And then with mobile. I mean, you also have things like Facebook, or Uber, Uber couldn’t exist without mobile. So, I think the next wave is artificial intelligence. And from what I’ve seen even, almost every VC I know, like that is one of the top things, if not the top thing they’re all looking at. And so that’s probably one area I want to spend a lot more time looking in. Maybe on things that might be more consumer focused or might be on the intersection of tech and entertainment. I don’t know exactly what that looks like. But I think those are areas I’m thinking about.

Shawn Flynn 38:46

How do you think AI and big data will affect maybe even the movie industry and movie ratings? I mean, Rotten Tomatoes, one of the top 600 websites in the world, the amount of data that site must collect must be amazing.

Patrick Lee 39:00

So, I think in general, with big data and AI, it’s like, recommendations are like a super obvious low hanging fruit to improve on. And Netflix, for instance, has spent a lot of effort around getting really good AI teams to try to see if they can improve Netflix’s recommendation system more. One thing I always wanted with Rotten Tomatoes that we never had the resources to do when we were running it was what I called critics matching, which was if you let users go in and put in their own reviews for movies, that you could then cross reference that against what critics are saying and what users are saying, to try to find, essentially, like a pool of critics and users that are very similar to you in taste. And what they choose to see and how they rate it in the future. It would be essentially a customized tomato meter for you. That would be more accurate than all critics, or all users, or all friends. And I still think, I mean, these days, it makes more sense than ever to be able to do something like that. I think anything that requires taste, that would be super useful. So not just movies, but music, games, books, food, like any anything that has a taste requirement, I think you can use if you have the data, you can use AI to try to essentially customize things for you.

 Shawn Flynn 40:19

Now looking at Rotten Tomatoes over the last 20 years that it’s been in existence, are you looking at it going, “I’m the father of that. I like how it’s developed”? Or is it more of a critical aspect going? Like, “I would tweak this right. Tweak that if I could.”

 Patrick Lee 40:35

I think myself and the other founding team members, look at Rotten Tomatoes is one, we’re just super, super happy that it’s still around. I’ve had a lot of friends that have sold their companies, and within two or three years, they don’t exist. And within a few years after that, no one’s ever heard of those companies, you know, they might have sold it for a lot more than us, like literally 10-x or more 20-x. That still has happened. And so, for us, we’re just super happy it’s around, if anything, it’s continued to grow since we sold it. And it’s really, you know, for us, we are trying to save people time and money from not seeing a bad movie. And over the almost 21 years, I’m pretty sure we’ve saved a lot of hours and a lot of dollars from people, you know, avoiding things that might have been a waste of their time. Yeah, I mean, it’s like looking… it’s like a kid. And I guess Rotten Tomatoes is now like, I guess even not even a teenager or a young adult. And so, there are areas that I’m like, I still think they could improve. But it’s not like, oh, they’re messing it up. I think in general, everyone who’s owned it, has done a good job of keeping it going.

But there’s areas like you know, critics matching, I think it would be great. Another thing I was recommending to them, because I’m still in touch with some folks was basically how I see things like Netflix, you have Apple, Hulu, YouTube Red, Amazon, Disney are about to break out, Warner Brothers, they’re all going to have their own subscription services around content. They’re basically going to be the new cable channels. And if they are, what’s the new TV Guide, and I actually think, like something like Rotten Tomatoes could be that. They do cover movies, they cover TV shows, but I think if you really, really nailed it, maybe even have some kind of schedule and not necessarily schedule. But more like, if here’s the thing you’re interested in seeing, here are the two or three or five platforms you can find it on. Or it’s not on any platform, oh, here’s where you could buy it. And I think with something like Netflix, they’re great in recommendations. But Netflix is only going to tell you what else to see on Netflix, there’s not going to be like, “Oh, you like this, well watch this on Amazon.” Like that’ll never happen. But I could see something like Rotten Tomatoes that kind of cross all of those different services, and potentially have like, a single queue that you could save things that you wanted to see. And, and a view using that queue rather than right now, you have to make a queue for each different service. Just some random ideas. It’s not even like nitpicking. But I think there’s still ways around Rotten Tomatoes because it continues to grow.

 Shawn Flynn 43:09

And how is it when you hear people in Hollywood actually critique Rotten Tomatoes going, “Our movie failed or didn’t have the launch, it should have, because of some reviews on that site”?

Patrick Lee 43:19

I think, yeah, Rotten Tomatoes definitely can affect things a lot more than when we ran it. And people used it. But now I think, especially the younger generation, the biggest issue right now is there’s so much content, there’s so many demands on a person’s time. Movies don’t just compete against other movies, they compete against video games, and music and all these other things that people now really will take ratings and use them to save themselves again, like time and money. And you do that with Yelp, you do that with Amazon, when you’re buying a product, like you’re not going to go buy something with a two-star rating and 1000 reviews on Amazon. Like you probably shouldn’t, right? So, people do that. And with Hollywood, it’s tough. I would say especially if you’re like right below fresh, you know, 60% is fresh, if you’re 59%. Yeah, that’s, that’s tough, because that 1% probably could make a pretty big difference in your box office. End of the day, I would say try to make better movies. Like if you can test it earlier, you know. And also, the other thing I would say is, critics are one rating system that we have, but there’s also the ability to see what the users are saying. And you’ll see times when there’s… I’ve seen ones where there’s more than 50% gap between what the critics are saying and what the users are saying. There are folks that will look at both. Like I actually tend, that my tastes tend to match critic users more than the critics. And I’m like a big sci-fi fantasy comic book nerd. And I like the summer blockbuster movies. So ideally, you look at all the ratings or reviews, but usually the one that is like, out there advertised, is the critics rating. Yeah, I mean, there really isn’t much a studio can do after the fact. But ideally, the more they can, you know, test it and stuff before they kind of go in and make it better.

Shawn Flynn 45:14

So are movie production companies, are they currently analyzing Rotten Tomatoes, collecting that data and figuring out what maybe makes a good movie from that?

Patrick Lee 45:25

I don’t know, I’m not sure if they do that. I imagine they probably are using it as one reference point. I think, with my limited experience on the actual film production side, it all comes down to script. And I think if you have a really good script, then of course, you want to get good actors and a good director and stuff as well. But outside the script, I don’t know, if Rotten Tomatoes can help you with a script, you know, at that stage. So, it might be useful from a reference point of like, “Oh, this genre or this kind of thing, or these actors or whatever.” And maybe you look at their ratings, you probably look at their box office and stuff as well. And also, the other thing is, ratings don’t always correlate with box office. Actually, in my experience, when we were running it, the thing that affected the opening weekend the most was how much advertising a studio put behind it. And it could be super rotten, but if they put a ton of advertising, it’ll still make a decent amount of money. But where it correlated a lot better was the ratings and how long the legs were for the movies. So, if the ratings were high, the movie would tend to have less drop off each week. And if the ratings were really, really low, it sometimes would have massive drop offs.

 Shawn Flynn 46:45

Are you still in contact with all the original founders that you worked with?

 Patrick Lee 46:49

Yeah. So especially Stephen, and Senh, you know, we message regularly, we probably… Stephen is in China now. I don’t see him as much but probably about twice a year. We’ll meet up, get together, grab dinner, and as well as some of the other founding team.

 Shawn Flynn 47:04

And how come Stephen and yourself, why China for so long in your next adventure after Rotten Tomatoes? Why not stay in Silicon Valley?

Patrick Lee 47:14

For me personally, I was born in the States, American Born Chinese, ABC. And you know, growing up, I grew up in Maryland, and there were Asians around but like my elementary school, there’s only a couple. And so, you really felt, you know, growing up as a minority and everything. It was just, I wanted to see what it was like to be around more Asians. So, my junior high school was magnet programs. And there’s a lot more Asians there. One reason, a big reason why I went to Berkeley was Berkeley, it’s famous for having a very high percentage of Asians at the campus. I went there and that was… And going to China was like another extension of that like… But when I went there, like very quickly, I realized like, “Oh, I’m super different from them.”

Like I don’t, I don’t have to say anything, but they know I’m not from there. And then that’s when I kind of came to the realization that, “Oh, I’m a minority everywhere.” And I think actually everyone, doesn’t matter what your race or gender or anything is. I think everyone still feels isolated a lot in their own way. They’re still unique, and they’re a minority, even within their own group. But yeah, that was a big thing for me. Well, for me to go to Asia was related to be like, try to find a place that maybe I belonged in more, and I think Stephen actually acclimated a lot better than I did. And he actually ended up meeting a girl in China and got married, works for WeChat in Guangzhou. But for me, I came back here. I think I feel most comfortable, you know, in the States as an Asian American, but ideally, in places like San Francisco or LA where it’s still quite multicultural.

Shawn Flynn 48:50

What other advice would you give to founders out there?

Patrick Lee 48:54

Still, the number one advice is focus. Try as quickly and cheaply as possible to find something that people want. So, with Rotten Tomatoes, I mean, we were kind of lucky with Senh. But he did it with zero budget. We launched the site in two weeks. It started getting noticed, for about a year, we kept running it and hosting it for him. And we waited until Roger Ebert and Pixar were using it. And at that point, we went out, raise money, put all our resources behind it, try to find as quickly and cheaply as possible product market fit or something that shows that people want it. And so, a great example is if you got a hardware idea, right? Kickstarter, the benefit of Kickstarter isn’t just the money that you could raise from people but is that people are telling you with money that they want your product. And then you can do a Kickstarter first, and then build it after you find out people want it versus the old way where you’d spend probably millions of dollars and years of time building a product to then launch it and realize, “Hey, no one wants this thing.” And so, don’t do that now for hardware. Don’t do that for any other projects that you’re doing. Try and figure out first if people want it and then raise money and put more resources behind it.

Shawn Flynn 50:11

Thank you for taking the time today. So, with that, are there any companies you are mentoring and or any projects you’re working on that you would like to give a shout out or give some publicity to?

Patrick Lee 50:23

I list out a number of different companies I’m advising on my LinkedIn page. And they’re all great. You know, there’s WePlay out in Melbourne, Australia. We have Kiwibot. That’s in Berkeley, they’re doing food delivery with robots, which is super cool.

Shawn Flynn 50:43

I’ve seen their pitch. And I’ve seen the Halloween costume pictures of them.

Patrick Lee 50:46

Yeah, yeah. I mean, people are actually dressing up as the Kiwibots. There’s Oishii Berry. It also came out of Berkeley. And they’re based out in New York, and they’re doing vertical farming of like super high-end strawberries.

And yeah, they’re doing great. I mean, I think they just raised like 20 million on a 100 million valuation, and a very impressive group of folks. And yeah, there’s a lot of amazing startups, there’s a couple that are more stealth, but definitely, you know, check out my LinkedIn, check out those companies. And there are some really cool ones in there.

Shawn Flynn 51:20

And is it okay if we put your LinkedIn in the show notes?

Patrick Lee 51:22

Yeah, of course.

Shawn Flynn 51:23

And once again, I’d like to thank Patrick for taking the time today to be on Silicon Valley.

Patrick Lee 51:28

Thank you, Shawn.

Outro 51:29

Thank you for listening to The Silicon Valley Podcast. To access our resources, visit us at TheSiliconValleyPodcast.com and follow our host on Twitter, Facebook, and LinkedIn @ShawnFlynnSV. This show is for entertainment purposes only and is licensed by The Investors Podcast Network. Before making any decisions, consult a professional.