In this episode of the Smart Business Revolution Podcast, I had the pleasure of speaking with Doug Lebda, the founder of one of the most successful online businesses to survive through the dot-com era to today, Lending Tree.
LendingTree.com was founded in 1996, and was inspired by Lebda’s own personal frustration applying for a mortgage.
He wrote the business plan for Lending Tree while still in business school, then left a comfortable job as an auditor with PriceWaterhouseCoopers to roll the dice and launch Lending Tree.
He later oversaw the sale of Lending Tree to IAC Corp, the innovative and entrepreneurial holding company run by Barry Diller which owns numerous well known online businesses, such as Match.com, The Daily Beast, and College Humor.? He later served as President of IAC Corp from 2005 through 2008.
After IAC Corp decided to sell off Lending Tree in 2008, Lebda returned to the company he founded, and oversaw a successful turnaround, helping Lending Tree to thrive and grow once again.
Welcome to the Smart Business Revolution podcast episode number two. In this episode, we talk with Doug Lebda, the founder of one of the most successful online businesses to survive through the .com era to today, lendingtree.com. Let's do it. Welcome to the Small Business Revolution. Revolution. Revolution. Do you want a revolution? Say you want a revolution. The revolution? It's going on right now. Welcome to the revolution, the smart business revolution podcast. Your source for how to grow your small business without working 24/7. Now, now your host for the revolution, John Corcoran. Alright, welcome everyone and thank you for joining us for episode number two of the Smart Business Revolution podcast. I'm going to give a longer introduction of Doug during my intro to the interview, but I just want to give you a few highlights about why this is such an interesting interview. Lendingtree was one of the first businesses in the mid 1990s to take on and reinvent an industry that really needed reinvention at the time and that was how to buy a home. The mortgage lending business was stuck in an old era, a pre-internet era and Doug took some of those concepts of allowing people to have access to more information and literally reinvented the industry and experienced a lot of challenges in the process. So he talks in the interview about how he's inspired originally to launch Lendingtree because of his painful experience and applying for a mortgage and he saw an inefficient market. He wrote a business plan and went for it. He was actually in a comfortable job as an auditor with PricewaterhouseCoopers at the time and decided to roll the dice and the rest is history. Lendingtree went public. It later was acquired by Interactive Court or IAC, which is a public company today led by one of the most visionary business leaders, Barry Diller. And so Doug talks about what it was like working with Diller and he actually worked as president for three years of IAC as well, working out of their beautiful Frank Gary designed headquarters in New York City and overseeing a number of well-known businesses. Such as Match.com, The Daily Beast, College Humor. These are all companies that are owned by IAC. And also in the interview, we talk about what he's up to today, including a few of his angel investments in Recycle Bank, which is a green tech company, Stella Service, which does reviews and ratings through mystery shopping and online retailers. And Tycoon. That's T-Y-K-O-O-N, which is a great financial platform for kids, allowing kids to track choices, allowances, and earn real money from their parents for performing chores. And he actually says in the interview that his daughter asked for more chores so she could earn more money. So it's a great product. I look forward to when my son is older to try that out with him. So enjoy the interview and now we'll be back at the end. Okay. Welcome everyone. This is John Corcoran and I'm really honored today to have on the line Doug, led Doug you there. I am. Great. Thanks Doug. I really appreciate you joining us. I'm really excited to ask you a bunch of questions and I have a lot of different areas I want to talk about. But first I want to give everyone a quick bit of background on your career and some of the accomplishments and things you've worked on. There's a lot to cover here. So Doug is Chairman, Chief Executive Officer and Director of Tree.com. He was the original founder of LendingTree.com in 1996, which he founded for the purpose of providing an educational resource for people who were financing the purchase of their home. And I find it really interesting that since the founding LendingTree has helped over 30-minute million borrowers through the mortgage process. It's just really quite impressive. And Doug is a true.com survivor having led LendingTree through a national rollout in 1998 and then a successful IPO in 2000 and taking the company through the.com meltdown in 2001. And eventually selling it to IAC Interactive Corp in 2003, at which point he became IAC's President and Chief Operating Officer and helped lead that company through a period of transition. And then in 2008 Doug actually rejoined Tree.com as it spun out from IAC as a separate public company. So I'll be interested to ask about that. So anyways, let's start at the beginning. You were actually an auditor and consultant at Price Waterhouse Cooper's, the big accounting firm, I guess around the mid-90s. And then you decided to go off and start a website that provided mortgages to consumers. So how did that come about? Well it came about really out of the frustration through the process of getting a mortgage. I was buying a $55,000 condominium in Pittsburgh, Pennsylvania where I was working. I joined Price Waterhouse in 1992 and in 1994 I was going through that process and found the process very confusing and disempowering. And even though I was financially savvy I saw that rates were changing and that the rates that were either in the newspaper or in those times hanging and advertised on the window weren't necessarily the rates that you got. And at the same time I was doing some consulting work for natural gas trading companies and saw very efficient markets and then kind of thought back in 1996 to my mortgage process and said why is the mortgage process. So inefficient but yet there are so many other efficient markets and wouldn't it be great if we could kind of turn the tables on the process and have the banks compete for the consumer and really make a marketplace. I envisioned it as something that would be great for consumers because they could comparison shop but also great for the lenders because they could zero in on exactly the types of consumers that they wanted and that we could create a real win-win situation. And that was relatively early in the dot-com run-up. Were there other companies out there that were, that you could, that it already moved online, that you could then use in partnership or were you kind of on the bleeding edge at that point? We were definitely very early. I spent from 1996 through really the fall of 1996 through the spring of 1997 in business school, University of Virginia writing the business plan. There were certainly early websites out there, Yahoo! had started as a directory website. There were other websites that were out there. We were definitely early in terms of mortgages and other financial products and there weren't really banks and lenders online yet. So we had a big behavior change at the lenders to get them to receive consumers this way and to change the way they were doing business. We never had a problem with, on the consumer side, the proposition resonated with consumers immediately. Interesting. And this was also a time when there were a lot of other dot-coms out there like peps.com and others that kind of expanded very rapidly and didn't really know what their source of revenue was. So did that take a while for you to figure out where your revenue would come from as you're starting up? No. In 1997 it was still very early. You didn't have some of those. The dot-com craziness really came in more like 1999 and really '98 and '99. But no, from the beginning we wanted to make money from lenders based on the success of our program. And that was always our goal. The challenge was it took a long time for lenders to actually be able to close loans and be more responsive to the consumer and really understand the internet and the medium and the particulars about these customers. But as they improved, the revenue started to flow. We had to raise significant sums of venture capital to grow the business. But as we did that, it was you got into kind of 2001 and 2002. The business was certainly very successful. And what was it like early on when you were adding on vast sums of employees, probably at a pace that was difficult to keep up with? Were there any hiccups or major setbacks that you'd care to share? The important thing, we weren't adding people, our business was very scalable. So we didn't have to add sort of thousands of people. Maybe I think we had a hundred employees by around 2000. And the point for me was always to try to make sure that we get cultural fit right. We are a company that is very firm on its mission and its core principles. And the important thing was to make sure that we had people who would fit in with our culture in the way that we do business. And generally speaking, we got that right, but we also operate with a lot of candor and honesty. So if we get it wrong, it's usually pretty evident. And then you just make changes. So at some point, things kind of came grinding to a halt, not for lending tree generally, but more the economy. Around 2001, things started to slow down. What was that like for lending tree? So for us, it really started to happen. And we went public in February of 2000. And the stock market crashed shortly thereafter. And then September 11, obviously in 2001, was certainly caused the economy to have significant issues. And for us, that was a tough time in that we still had to raise more capital. We weren't yet quite yet at profitability. But what we did is we stayed very focused on our numbers, very focused on our metrics, very focused on satisfying consumers. We operate with a very transparent culture. So during that time, we were able to tell everybody in the company exactly where we stood. And the company really rallied together and came up with, people came up with ideas to save money, ideas to advance the business. We certainly worked very hard. And by 2002, the company was very profitable and on a significant growth trajectory. And probably around this time, we're shortly thereafter, was when IAC came into the picture and ended up acquiring lending trees. So how did that come about? Were you looking for a buyer to acquire a lending tree, or did they court you? We were not looking, and we're very focused on the long term. The company was doing, now we're in kind of 2003. And the company's doing very well. The stock had recovered nicely. We were on a great growth curve. And through an investment bank, IAC let be known their interest. And we took a meeting with them, and then things progressed from there. And really, from my view on that was, at some point, the price that IAC was willing to pay was sufficiently high. And it's our duty to our shareholders to really listen to those types of opportunities. And it's not about me or any one person. You really have to do right by your shareholders. And their offer was over $700 million for the company. It was something that we felt we had to do. And you mentioned a moment ago about how important company culture was to you. And IAC, for those who aren't familiar with it, is kind of an eponymous company with a lot of different brands and a lot of different companies. How did those two fit together, the culture of IAC and the culture of lending trees? They fit together very well. IAC is a very entrepreneurial company. It has a lot of respect for entrepreneurs. It had been built by acquisition and had a history of letting managers run their own businesses. And that's basically what we did. So we kind of got all the benefits of a bigger company. But there wasn't a lot of bureaucracy. And then in 2005, I actually moved to New York and became IAC's President for three years, where we really helped to bring the companies together. But also did that within the culture and the framework that we were going to add value, not detract from the entrepreneurial focus of the individual management teams. And that leads to another question which is what's amazing to me is really how diverse IAC is with everything from Match.com to the Daily Beast, Ask.com, CollegeHumor. Imagine they're all located all around the country with employees all over the place. How did you, when you were with IAC, oversee such diverse companies all over the country? It was certainly a challenge because I had to do a lot of travel, but we worked very hard at it. I had a small team that traveled with me and did it really through what I like to call an operating rhythm of regular, a very key and clear, I kind of call it key metrics, key initiatives. And then we talk about any issues. And we lay out the metrics in the plant at the beginning of the earth for a planning process. And then we just stay on task. And then I kind of managed by exception. So if things are on track, I didn't need to spend a lot of time there. If things were off track, that's where we really dug in. We created a number of initiatives to then be able to kind of dive in very deeply and very quickly and get something back on the right track. If it was off, so for example, we invented something we called the accelerator program where we were able to, if a particular business had a challenge or needed a new strategy in some area, we went around IAC, found the best people to help solve that problem, came in with very structured agenda and we'd leave after two days with a business plan, a staffing plan and a strategy for whatever the problem was that we were trying to solve. So really, once we got that down, then we were able to find the best stuff about IAC, which is its people. And we have great people all over the place. And people were really willing to help their colleagues in any way they could to make the company much better. And during that period of time, we performed very well. The company came together as really one company. And I was really proud of all we accomplished during that period. It almost sounds like a business incubator type of, you know, a nonprofit or something like that rather than just one unified business. Tell me about the headquarters, which the building itself is quite famous. And did some of the companies, did they move to the headquarters? What's the atmosphere like there? No. Well, first off, I wouldn't say it was a business incubator. The companies all work. They're all in similar businesses conceptually. They're all very much dependent on online advertising and marketing to get their word out. They're mostly all consumer businesses. So they're dealing with attracting consumers and serving consumers well. With a couple exceptions, most of their business was online. Or they were offline, but migrating online very rapidly such as a home shopping network or a couple of our catalog businesses. So there were certainly a lot of – there were more commonalities and there were differences. And our job was to make sure that we could help maximize the value of the whole. At the corporate center, we built an amazing building there. It was really the brainchild of Barry Diller and the architect, Frank Gehry. And it was a wonderful space. We didn't have many of the operating businesses in there. We clearly had the New York-based ones. But it was a wonderful space and it was beautiful. It was a great place to work in. Very energetic. And I enjoyed coming to work every day and I hated leaving. That's a good thing. And you mentioned Barry Diller, who's kind of an icon of business. What was it like working with him? It was wonderful. He's a brilliant, insightful guy. He is very knowledgeable about business. I learned a lot from him. He's very curious as he likes to say. And so he's always asking questions and continuously learning and was always as current, if not more current, than everybody else around him on emerging trends and emerging companies. And so it was challenging and fantastic all at the same time. And in 2008, I had decided to spin off the lending tree. And you decided, I guess, around the same time to go back to the lending tree. Tell us about that experience and why you decided to go back to the company that you founded. Sure. So for the same reason that we sold it, I viewed it the opposite as a way to, if you will, and by the whole company, but to certainly own a stake in it again. In 2007, the mortgage markets obviously seized up and went through a crisis period. And that existed into early 2008. And I saw an opportunity in lending trees business suffered very dramatically. At that time, I see it decided to spin off many of the larger businesses, Home Shopping Network, Ticket Masterable and Interval International, that didn't fit with the pure play, Internet, and media businesses that were remaining. And at the same time, lending trees business, given its mortgage, given its mortgage focus, was not going to need significant restructuring in just the new world order of banking and mortgages. And I viewed it as a great opportunity. I viewed it as something where I could have a significant stake in the company and lead it through a very turbulent time. And we spent the last four years doing that. I have a fantastic team of people here. We've had to both restructure the operation significantly, just given the downsizing of the whole industry. But at the same time, we've also invested in building out new businesses and just reinvigorating the culture here. And we've pulled off what I think is a really remarkable turnaround story. We've reversed declining revenue and very declining profitability. We've significantly improved our product and mortgage, but also have launched businesses in autos, education, and home services so that not only do we have lending tree, we also have degree tree and other businesses that are close cousins to lending tree and a similar business model and are helping to diversify the business and grow. So also, during this time, you had to unfortunately let go of a number of the employees as you're restructuring. And so it's essentially growth mode and retraction mode. Was it very difficult to add these new lines of business with fewer employees to do the actual work of creating these new businesses? Now, the difficult thing is always in restructuring a business is just having to say goodbye to your friends and colleagues and people who have worked very long and hard. And we try to do that with total clarity and hopefully in a very fair process to people, the good news is I think we accomplished that. It's never pleasant, but it's something that you have to do if you want to survive. And then in launching the new businesses, what we found is that we did a lot of that by attracting people who were experts in those businesses, made a couple small acquisitions, and we're both hiring people to go tackle those things even as we were restructuring in the core business. One question that I'd like to ask people during these interviews is supervising so many employees. What advice do you have for other entrepreneurs and business owners who have got so many employees under their supervision? How do you keep them motivated? How do you keep them accountable? Well, one thing I would say is I think it's important to hire people that are generally self-motivated as much as I can try to motivate people. I think it's a lot easier if you have people who are just sort of naturally motivated. That's much easier to do. So that's number one. But I try to do it by very clear goals and objectives, and then reinforcing the positive and giving people a lot of autonomy. I find that if people have, if they're working on exciting stuff and they feel that they have, the runway to go achieve things, that they'll work very hard. And we try to lead what we call an empowerment culture. We're not only trying to empower our consumers to get great products at critical times in their lives or trying to empower our lenders, but we try to empower our employees. We say to people, the type of employee, lending tree is somebody who can acknowledge where we're not doing well, who can come up with solutions, but then really ask for the ball and take charge to go get things done as long as we have those kind of people find that people stay motivated. We also try to have a lot of fun. We have pool tables and foosball tables in the office. We cater and lunch every day. We actually have a bar here that we have on Thursdays. We have Happy Hours as a company, and we have a gym in the office too. So we try to give people outlets during work and after work so that we all enjoy being together, which makes work a lot more fun. Absolutely. I just have a few more questions for you here, and then we'll wrap it up. I wanted to ask a little bit about your role as an angel investor. I know you've invested in a couple of interesting companies. I've got a few I'd love to ask you about, but I'll just throw it out to you for us. Are there any interesting companies that you've been working with or investing in that you'd like to share with us? I think three in particular. One is a company called Recycle Bank, where I'm actually chairman of the board. It's a green tech company that gives points and rewards for green action. I joined the board there about four years ago, and it's just a fantastic company. I was recently named one of the 50 most innovative companies in the world. I invest in a company called Stella Service. Stella Service is doing online ratings and reviews through mystery shopping of online retailers. It has great data on all types of websites and all types of different industries and is giving a seal out based on the level of customer service. The third one is a company I recently launched actually this week, co-founded with a great guy named Mark Brunidge. It's called Tycoon, T-Y-K-O-O-N. That is a financial platform for children and families where kids can earn, save, give, and spend real money, whether through allowances, chores, jobs. It also has some social network and components to it, so they can communicate with friends and family members in a parent approved closed social network. I'm glad you mentioned that Tycoon because I was checking it out. I think it's a really cool company. I know you have three young children. I have one young son, and so it seems like a really fun project to be involved with. It's Tycoon with a K. I want to point out to everyone so that they can find it on the web. We're really thrilled about that. I'm actually working with my children on it. They all have roles in the company. What we're seeing is that it's actually changing behavior. My 11-year-old daughter Rachel came to me a couple of weeks ago and said, "Dad, I'm number four on the leaderboard, and I want to climb up to number third. Can you give me some more chores to do?" I've got something on my wish list that I want to buy, and can you give me some jobs to do this weekend so I can earn more money so I can actually buy it? We've got an app that will be out on the iPhone hopefully later on this week here in the middle of April, and that should take us to hopefully a level of growth there. But we're absolutely thrilled about it. I think one of the things that I believe as an entrepreneur is that it's my responsibility and something I clearly enjoy to help other entrepreneurs out and help pay forward as a mentor and as an investor what people did for me. That actually leads to my last question, which was, looking back on your career, what do you think it was about you that led you to take the more risky entrepreneurial route rather than staying with, let's say, price-waterhouse Cooper, but to actually go out and start a new company, not just a new company, but in a new industry inventing itself and reinventing itself as it went along the way. Do you think it was just something that was born in you with your personality? Looking back, I think I probably have somewhat of an entrepreneurial personality. At the same time, I was very reluctant to do this, believe it or not, and almost didn't do it, which kind of still scares me a little bit. Basically, what I did is I changed the way I evaluated success and failure, and I actually didn't see this as a risky bet. I saw this as a very non-risky bet. The reason for that is I basically said I disconnected the success and failure of the business from the success and failure of me personally and changed my definition of success. I said if I'm successful for me as not if the business succeeds, successful as I'm advancing as an entrepreneur and as a business person in learning a lot, that's success. Because of that, I freed me up to hire great people, to learn from them, to stay focused on our business, to always be curious and learning about new industries, and that's how I define success. I basically said to myself, I evaluated if there really wasn't much downside. If the business failed, I'd have to go back to business school and get a real job. I didn't see that as a failure in life. I viewed that as something that would certainly be a learning experience and didn't see much downside. The flip side is I saw the downside is that I might never start. Imagine if I said to myself, well, if I don't give this thing a shot and 10, 15 years from now, I'm living a nice, normal, safe life, I'm always going to regret it. I'm going to miss out on the opportunity to actually have learned all those things and doing what I did. So changing my definition of success and failure was really the key for me taking the leap. Great. Well, thank you so much for taking the time to talk to me. I really appreciate it, and thanks very much. Happy to do it. Good to talk to you. Okay, and that's Doug. Love to hope you all enjoyed listening to that interview as much as I did participating in it. He's such a fascinating guy. He had such an interesting range of experiences, and he just seems to really enjoy what it is he's doing. He's got some fun projects he's working on, so I hope you all will check out some of the companies that he's working on, and thanks for listening in. So if you want to check out any of the links that were mentioned in this episode, you can go to smartbusinessrevolution.com/podcast1. That's the number one. So smartbusinessrevolution.com/podcast1, and I'll have links in the show notes for the episode at that website. And we've got a bunch of other interesting interviews coming up in the weeks ahead, so be sure to subscribe when you visit the blog, and I will send you updates. And next time we have another episode with another interesting entrepreneur. Until next time, thank you for joining us. See you soon. Thank you for listening to the Smart Business Revolution podcast with John Corcoran. Find out more at smartbusinessrevolution.com. And while you're there, sign up for our email list and join the revolution. And be listening for the next episode of the Smart Business Revolution podcast. [MUSIC] [BLANK_AUDIO]
