The smartphones that provide access to endless amounts of information also provide companies with an unparalleled opportunity to interact with their customers. Many of these companies, however, are not in positions to develop these types of applications.
Calvin Carter has capitalized on this situation. In 2008, he founded Bottle Rocket and has taken his company to the forefront of creating digital experiences to “surprise and delight” both companies and their customers. From its first customer, NPR, to the likes of Disney (NYSE:DIS), American Express (NYSE:AXP) and Chick-fil-A, Bottle Rocket has created mobile and web applications for some of the most well-known companies in the world.
The company's work has won it countless awards and even saw a nomination for an Emmy. Such success brought the attention of WPP (NYSE:WPP), the world’s largest advertising and media company, and Bottle Rocket was acquired in 2013. However, to this day, Bottle Rocket continues to be led by Carter and operates as an autonomous company under his leadership.
Carter was born in Tampa, Florida and made his way to the Dallas area for school. The positive energy of the city and the entrepreneurial environment captured his interest. As the son of two entrepreneurs, Carter felt that the city provided a welcoming environment for him to explore his passions.
Since his college days, Carter has been married to his supportive wife, one that has stuck with him through many risky ventures, and is the father of twin daughters. In his own words, the girls are “ready to take on the world” in every way. His daughters have come to share his interest in Star Wars and sci-fi, exploring the limitless potential of what could exist in space. He has even convinced his wife to cosplay with him, yet only twice and reluctantly at that.
Before the iPhone, or cell phones at all, Carter was a fan of Apple (AAPL) products. On his freshman dorm floor, he quickly made friends with another student who had a Macintosh computer. “We were very much into our computers and what we could do with them,” he said. At the time, local area network abilities were just starting to become available. AppleTalk gave them the ability to create a network with basic telephone cables. While nobody was looking, the two pulled up the carpet in the hallway, laid down wire and created their first network.
Post graduation, the two would join forces to create their first business. Initially, the company focused on custom database design and office productivity. The company would transition through multiple stages, focusing on everything from multimedia to website development. They would go on to build the first websites for many companies during the late '90s and eventually merged with seven other companies. Unfortunately, within a few months of the company going public in 1999, the tech bubble burst and the company would struggle to its end a few years later.
Carter found himself pursuing other interests and for a period of time trying to avoid technology all together. He found he needed a change from “employee-centric” businesses. This mentality had arisen out of struggles with hiring and running his previous company. The next several years saw him trying his hand at investing and floating around not finding satisfaction in any of his pursuits. Luckily, a good friend would lend some advice, letting Carter know that technology was “in his blood.”
However, the inspiration for Bottle Rocket had not quite been announced and Carter would find himself spending the next year recovering from a plane crash. During this time, he found himself continuously returning to his friend’s advice.
March 6, 2008 was the day that Carter found his inspiration. While watching an Apple keynote speech made by Steve Jobs, he was wowed alongside the world at the opportunity that the App Store provided. The iPhone would now be an accessible marketplace for any third-party developer. To take things one step further, developers had the option of releasing their apps for free with no charges from Apple. This would allow developers to put their apps in the hands of millions without having to pay fees. “That is when I decided that was what I wanted to do for the rest of my life,” Carter said.
The next day would mark the beginning of Bottle Rocket. “There were new challenges and new paradigms to figure out and new standards to set. New devices to figure out. All new code to figure out. New design standards and it was just a lot of fun,” Carter said.
At 9 a.m. the next morning, he went to the store and bought himself graph paper and pencils. He dove into his own iPhone and studied all of the existing apps to learn as much as he possibly could about design and usability.
From there, he began to draw out his own apps. He sketched out 33 apps to be specific. Each one of these apps had between 50 and 100 screens each. Thousands of screens were drawn by hand with no digital assistance. Carter described the process as building a muscle. This process required a kinesthetic connection and repetition to be effective. He needed to understand exactly what worked for an app and what did not.
BUILDING A TEAM
With newly acquired knowledge on building apps, Carter set out to build himself a team of like-minded individuals. “The founder is nothing without the first person following that founder’s vision. The first follower validates the entrepreneur and his or her vision,” Carter said. He found his first follower in a good friend and coworker from his previous business.
However, lacking resources to seek out app developers, people who really did not exist at the time, Carter turned to craigslist to find his team. He put out want ads for help, yet he worded them differently than most:
“So Shackleton is known for, I believe, discovering the South Pole. When he was putting together his crew he put an ad in the paper, this is obviously a long time ago, and it said something like perilous journey. Possible death. You know, freezing cold. Potential starvation, but ability to do something no one else has done before. And when he said that it was so high polarizing to the reader that they were either immediately inspired and were like ‘I got to do this,’ or they were, probably most people, totally turned off. Which is fine because Shackleton did not have all day long to talk to everyone who wanted to be famous. He only had the time to talk to people who were willing to put in the work, try something new, put something at risk, and hopefully enjoy some rewards from it. That is how I wrote my craigslist ads.”
Now these ads were obviously not as extreme as the one put out by Shackleton. However, Carter wanted people that were highly driven to explore this new field. He needed these types of people to take a risk and see if they could make something out of it. The small group of 10 daring individuals that Carter inspired would help him to build the shadow that would thrust Bottle Rocket into the spotlight.
This shadow, or reputation as it may be called, would be the backing for Bottle Rocket to take on real clients. It would take time for them to build it and it would not necessarily all come from success. The first year together, they developed eight new applications that were published under their name. According to Carter, seven of those first eight were considered financial failures. Only one actually made enough money to be considered successful, yet these apps would provide the backbone for them to stand face to face with their first client. This client was one that had their own national shadow to maintain.
For Carter and his team at Bottle Rocket, 2008 was “a hard time to make money with the app store.” With the aid of their creative director, they took their first eight apps and built a strong shadow and made themselves present at as many industry events as possible. Simply trying to “be in the room,” they attended Apple events around the country and began to build a network.
With their shadow growing by the day, Carter and his early group of rocketeers found themselves approached by one of the most recognizable names in radio, NPR. “In those early years, you could not really find an app developer because that was not really a thing yet. There were people building apps and putting them on the store, but there were not really people building apps for other people,” Carter said.
NPR called Bottle Rocket after reaching out to 11 different companies. Their shadow had attracted a nationally recognizable brand and gave them the opportunity of a lifetime. After speaking with them, Carter sketched out their app overnight. He presented them with a way to represent radio, but in a form that would relate to iPhone users.
After several months of collaboration, they would have the opportunity to move to contract terms with NPR. One of the first things written into the contract was the splash screen, or the first image that appears when launching the app. Carter negotiated to have the splash screen display Designed and Developed by Bottle Rocket. “That had our name on it. It had our name on it. It had our logo on it and you can imagine the millions of people that were launching the NPR iPhone app,” Carter said.
To compound the spread of their brand, the audience of NPR held the same values that Bottle Rocket did and many agreed with the way that Carter ran his business. It also helped that NPR was spreading the good word about Bottle Rocket before their app was even released to the public.
In the summer of 2009, the NPR app went live with Bottle Rocket’s name on the homepage as a signature of their “noble craft,” as Carter likes to call it. Within the same time period, Bottle Rocket gained new clients. Contacted by those using the NPR app, Bottle Rocket took on clients like CNN, American Express and Disney. The company would build each their own custom user experience with the Bottle Rocket on the homescreen, minus a small few as the Disney lawyers refused to budge.
The immediate success of the NPR app took Bottle Rocket to unexpected heights. Big-name clients began to trickle in through word of mouth recommendations. By the end of 2009, Bottle Rocket found itself in the green, yet the company was still operating with the small dedicated team it had set out with. 2010 would bring about more revolutionary technology from Apple seeing the iPad reach consumers hands, and one of the first apps available was from none other than NPR.
The iPad award would go on to win every award available in the words of Carter. The immediate success would help to spur repeated business with the brands that Bottle Rocket had already been in business with. The massive increase in demand over the next several years would see Carter expand his team tenfold.
From 2010 to 2013, the team grew to 150 people. With a singular focus on creating a sharp impact on the industry, the team solely focused on mobile development. The team built apps that brought many big-name brands into the mobile and digital realm.
While the digital experiences created for brands like Disney and NPR reached massive success, Bottle Rocket was also helping to pioneer new mobile technology. One of the original apps that it developed, a flight visualizer, utilized the accelerometer in mobile devices. This allowed the user to turn their phone or tablet and watch as the plane turned on their screen. While this technology has been normalized within the digital sphere today, it was revolutionary at the time.
Alongside the second wind from the iPad, Bottle Rocket saw another technological improvement begin to increase their profits. It was at this time that android software reached a level of stability that Carter felt comfortable developing within. When android software initially came to market, it came “like an experiment as many things from Google do,” Carter said. Prior to reaching this stability, he described the software as changing so drastically every six months that their developments would become useless.
With this stability came the potential to once again work with clients that had found success with Bottle Rocket. Carter described the initial android contracts as companies having a little extra budget to throw around and play with in a potential new market. Luckily, android began to improve in leaps and bounds and Bottle Rocket began a full force android development team that took their past clients onto new devices.
Bottle Rocket itself operates as a work-for-hire company. It charges customers for the effort and the product they are provided with at the end of the contract. Carter would describe the company as a professional services company rather than a product company. In general, the technology that is made for a client belongs to the client. Bottle Rocket maintains the rights over some of the base structure and code for many of the apps, but the majority of the technology is owned by its clients. However, the company made a run at being a product company for several years before coming to conclusions on it as a business model.
In 2010, the mobile market saw the emergence of television everywhere with the release of HBO Go. For the first time, people were able to access their favorite TV shows and movies from mobile devices anywhere. Needless to say, many companies saw the need to develop their own versions of TV everywhere to maintain their own relevance.
Initially, Bottle Rocket was contacted to create similar apps for both TBS and TNT. Both networks needed an app like HBO Go to provide their customers with a mobile experience. Bottle Rocket set out and created a unique digital experience that could be utilized on mobile devices. They utilized a common foundation for each of the apps so that they could expedite the process. Here, Carter came to two separate conclusions that would change Bottle Rocket’s business model for the next five years.
It was 2012 when Bottle Rocket developed the apps for TBS and TNT. Carter noticed that many of his competitors were creating apps for companies while maintaining rights to the technology. In essence, his competitors were renting the apps to the companies that they were working for. Carter saw the potential to keep his clients working with his company by doing this.
At the same time, he saw TV everywhere taking the industry by storm. If he could make apps for two companies, he could do the same for hundreds of others. While he liked the idea of returning business with his clients, he realized that many of his competitors were “holding their clients hostage” by renting the technology used in their apps. He decided to approach the ownership of technology in a different way.
Approached by Scripps Media to build apps across their many different brands, Carter struck a deal. Bottle Rocket would develop all of their mobile applications, charge them half of the usual price and maintain the rights to the code so that they could use it for other apps in the future. In comparison to his competition, he offered the deal up to his client and allowed them to work as a partner with mutual agreement on their terms. Nobody was held hostage.
Bottle Rocket would land NBCUniversal and several sports teams over the next several years as clients. They would provide applications at highly discounted rates while maintaining the base code under their ownership. With many different brands under contract the business seemed like a success on paper, yet Carter saw a change that needed to happen.
The work that Bottle Rocket was doing was indeed bringing recurring business with their clients, but it was beginning to hurt the professional services side of the business. Carter described the company as working on a diet during this period of time. The product side required a significant amount of money upfront, while the services side required significant reinvestment in the company. In the end, the product development was draining the company of resources that simply was not worth the impact it was having on the development of their services.
2017 saw Bottle Rocket wind down the product based relationships that they had developed. They created a “no app left behind” program to support the companies that they had worked with. Each was provided with the ability to maintain their own apps and Bottle Rocket even offloaded some of the work to other companies to support their clients.
Bottle Rocket earns the rights to the contracts that they sign with companies on a recurring basis. They see anywhere from 50% to 70% of their revenues recurring on an annual basis. They maintain their growth in the most organic way possible. However, their organic growth story became the biggest threat to the company in Carter’s own words.
Over the first five years of its existence, Bottle Rocket saw its team grow and take on businesses from some of the biggest names in the country. All of the growth was done organically. The company did not once take on outside funding to support itself. Carter worked hard to build the company and reinvested the majority of the revenue to support the fast growth.
In 2013, Bottle Rocket was acquired by WPP, the world’s largest advertising and media company. Why would Carter sell the company that had funded itself over the preceding years? The freedom Bottle Rocket had seen from being self-funded had actually placed it in a precarious position. They had grown to 150 employees and those employees required a lot of money for their salaries. If Bottle Rocket saw a three-month pullback in business, there was no money to support these people.
Carter found himself in a tough position with what he saw as two potential outcomes. First, he could bring on an investor who inevitably would have a difference of opinion over something. Carter would be forced to either upset the investor or do something he saw as wrong for the company. The second was to sell the company and potentially lose control over his baby.
Carter was well aware that the company was in the position to go under if things ever took a turn for the worst. While they were not specifically for sale, he began fielding calls with offers a year before the sale actually happened. “I said to myself early on in the company’s history that I would be an idiot if I did not sell the business. Now I might be getting to the point where I might be the idiot who should have sold the business,” Carter said.
Over a year-long process, Carter took calls from WPP. They would call and ask him if he was interested and he would politely ask them to call back in 90 days. In his own words, they were smart enough to actually ask what his goals were for those 90 days. The time would pass and then WPP would be back on the phone again. “We essentially built up a reputation with them that we really were delivering on the goals that we were laying out,” Carter said.
Finally, WPP let Carter know it was time to get serious. He understood that there was no real time to market time the sale that it really was time to sit down and make a deal. To make sure that he was finding the best home for the company and the people he was supporting, he hired an investment banker. They went on to talk to 20 different companies about selling and found themselves with many other offers on the table:
“We came all the way back around to WPP as the best fit in terms of culture, but also mainly as the best fit in terms of autonomy. So there were some other large consultancies that wanted to buy us, but I just knew that we would become a division, in a division, in a division, so far down the line. Our brand name would be stripped from us. Paychecks would now start coming from the parent company. It would really be nothing of us left in that type of a situation and so that is why we crossed all of those off.”
From there, Carter gave his list of demands to WPP. Bottle Rocket would maintain everything key to its identity. Its logos, office, technology and clients would all remain the same. Carter would remain in charge and the company would have the ability to freely work with its chosen clients without being forced into a new relationship. WPP agreed to every demand and continues to uphold them to this day.
With Bottle Rocket backed by a global company and safe within its financial moat, one would think that Carter would operate care-free with the day-to-day business. However, he still maintains a constant hum of paranoia.
He believes that everyone is judged based upon their last experience. A person could go to a restaurant many times and be treated poorly by the chef once and never return. The hum of paranoia comes from the digital experiences his company shares with people. Carter knows that if they release an app with bad code that crashes or unstable data on their servers, that people will remember it. His paranoia is multiplied by the tens of millions of people that see Bottle Rocket’s work everyday.
Luckily, Carter has channeled the hum into productivity at Bottle Rocket. He has dedicated himself and many others towards quality assurance on their products. “Quality assurance at Bottle Rocket is not an afterthought,” Carter said. They continuously check their products throughout the entire process of development. Additionally, Carter believes that their success can be dedicated toward remaining in constant contact with their clients. This allows them to solve problems as quickly as possible and generates more business in the process.
When looking to name the company he had created, Carter found himself narrowing down his ideas to three main candidates. The first option was Apptastic. “Fantastic with app at the front of it. Thank gosh we did not pick that one. That was a one-trick pony,” he said.
The second option was be HEROIC. Carter found himself drawn to this option as it was an embedded command. Every time someone heard the name of the company, they were challenged to do something heroic. It would inspire people to do good things for those around them. Unfortunately for Carter, he was the only one who liked that name.
The final option was Bottle Rocket. “A lot of people ask if I am a huge Wes Anderson fan. Which I am, but it has nothing to do with the movie Bottle Rocket,” Carter said. The main idea behind the name Bottle Rocket was that bottle rockets are “small but powerful.” This notion had two meanings that struck a chord within Carter. First, he said, the company that they had created was small but powerful. Second, the devices that they were using were small but powerful. At the same time, the company they had created was going to “take off like a rocket.”
The rocket aspect of the name imposed a certain seriousness. Rockets can only be built and maintained by scientists that are trained to handle them. If something goes wrong, it can cause harm and death. Bottle, on the other hand, implied an informality to the name. It acted as a reminder to not be too serious about the business.
“I liked the idea of not getting too serious about ourselves and the idea of space and space exploration. We do not go to the moon because there is a return on our investment. We go to the moon to see if we can go to the moon and then see what is next after that. And that like true authentic explorer mentality can only be driven by passion because there is very little logic, but it has to be passion. When JFK did the we are going to the moon speech it was all about passion. There was no logical reason that it was in the best interest of the country. It was all about a passion attempt to do something that had never been done before. And so it convinced me that Bottle Rocket was the best company name ever invented in the history of man.”
QUESTION AND ANSWER
GuruFocus: What would you do differently?
Carter: You know, there are some places where you mess up and get fired. Here you mess up and you say you know what, this did not work out so I am going to try it again. Everyone says that is terrific. I would say there were a couple of things that were mess ups in our businesses. Number one, I think that it would have been better for the business to bring in more and more senior level, executive talent earlier on in the company’s growth. I felt that as an entrepreneur, I had to do all that stuff and I felt like it was my responsibility to figure out all these different disparate things. Whether it was people issues, or technology issues, or client issues, or funding issues and cash flow and things like that. So if I did it again, I would bring together a more senior team earlier on within the organization's lifespan to really leverage their built-in abilities and their crafts versus me having to figure it out myself. I am a quick learner, but I am not going to be as good at something that you have been doing for 20 years in your professional career.
The other thing I would say, and this is a fairly touchy topic to discuss but I do not mind discussing it, is I believe that A players want to work with A players. There are A players that are interns here. There are A players that are executives here. There are A players that are engineers and quality assurance professionals. I as an individual want to see the potential a person has versus what they are capable of. I might give someone five chances and I should have just given them two because I am hopeful, and I am optimistic, and I want them to succeed. In reality, you need to balance that with the needs of the rest of the staff, which is “Hey, we are dragging this C player around and the rehabilitation program is not working and it is hurting our work but now it is starting to hurt my morale.” It starts to hurt an A player’s belief and trust in a company that they really mean it when they say that they want the best quality and the best of the best. We did not prune our garden is the best way to say it.
GuruFocus: Where do you look for inspiration?
Carter: I would say that there are two things that I find it in right now. One is the curiosity of what is possible and I am experiencing that through my love of sci-fi. Through my love of cosplay. Through my love of astronomy and astro-photography because those are like big unknowns that you explore. The other side of it, more on the business side, is I am absolutely inspired by the idea of someone having the opportunity to do the best work of their life. Let's be honest, we have all had a job somewhere that is not an environment where we would ever be able to do the best work of our life. Whether it was because people did not support us, or believe in us, or did not give us an opportunity to try things and make mistakes. You do not go from knowing nothing to knowing everything. It is a long journey. A sawtooth journey to get there. Here at Bottle Rocket over the last 12 years, I have worked with a lot of people of various age groups. I am not a big believer that age means anything. Whether you are the 18-year-old rocketeer or the 68-year-old rocketeer, it does not matter to me. What matters is making sure that you have the opportunity to be your best… When you get a large group of people together that are leaning the same direction, the stuff that you can do, oh my gosh.
GuruFocus: What are you most grateful for in your life?
Carter: So I learned a while ago, or someone taught me, you either look at life through the lens of scarcity or abundance and it is natural for humans to look at life through the lens of scarcity. There is not enough food for everyone to eat. There is not enough money for everyone to pay their bills. There are not enough jobs for everyone to pay their bills. The reality of it is there is more than all of that than we could ever shake a stick at. The problem with food is not that we do not have enough food. We have a bad way of distributing food to those that need it and we are very bad about waste around food, but there is enough food material. There is just not the right way of handling it. Through the mindset of scarcity and abundance, I choose abundance. I have to push myself to think abundance sometimes because I am a human just like everyone else and I fall back to my primal nature of there is not enough to go around. Really life is so abundant. The thing that I am grateful for is that life is so abundant and I am so grateful for the fact that life gives you as many opportunities as you are willing to take. I am so fortunate that I am in a time in our history and in place on our little blue planet that abundance can be a way of living and can be a way of thinking. I am so fortunate and so inspired by all of the people who have joined Bottle Rocket who have that same mentality of abundance over scarcity.
Carter’s advice for entrepreneurs
If you do something you are passionate about, you will be the best in the world at it:
People do not give up on their passions. You will give up anything to protect your passion and you will never give up on it. Due to this, you will always outlast any of your competitors. They might be doing it for other reasons such as money. When things get difficult, they will give up and drop out because they do not have the same dedication that you have. It is not about coming up with a new cool idea for the market. It is about finding what you are passionate about and working to be able to turn that into a business or a career. Sometimes you need to keep something a hobby and take it one step at a time until you can make it happen.
Just because you have not done something before does not mean you cannot do it:
Prior to Bottle Rocket, Carter had never managed more than 65 people. He questioned his ability to manage 85 people. Then 100. Then 150. He had no proof that he was able to manage that many people or even more, yet he was able to figure it out. As an entrepreneur, you are always going to be faced with new challenges that you have not come across before. You can figure them out and you will. According to Carter, the biggest mental block to any human being is the fear of failure. Sometimes you just need to accept that there will be bumps along the road, but you will be able to get past them. You have to keep putting in the time and believing in yourself to keep moving forward.
Make sure to check out the podcast.