How To Turn Your Last $100 Into $100M
Hayes Drumwright, CEO POPin, was a keynote at the Octane Technology Investor Forum in Irvine on May 5, 2015. His insights were amazing so we thought we’d share the transcript… enjoy!
Thank you everyone for the warm welcome. I am Hayes Drumwright and I have the pleasure of speaking to all of you for the next 30 minutes on the concept of getting rich quick. Pretty exciting, right! The title of my talk is $100 to $100 million. This is because I started a company called Trace3 here in Irvine with 100 dollars and have successfully grown it to over $400,000,000 in revenue. I think $100 to $100M sounds better than $100 to $400M, but regardless, those 5 twenty dollar bills I walked into the bank with in 2002 were the beginnings of a pretty special journey.
But let’s get back to the exciting stuff. How…Do YOU…Get rich quick? I am going to walk you through it as quickly as I can.
I was reading a book by C.S. Lewis, who is most famously known for the Narnia series that includes “The Lion, the Witch and the Wardrobe.” Those are not the books I am speaking of; he also wrote a bunch of adult books as well.
Lewis was a brilliant mind and this book he wrote was discussing some things that really gave me pause. It was spring break a month ago that I was reading it, so I can in no way say I am an expert in the concepts; but here is what he was philosophizing. If a man looks for comfort, in almost no instance will he find it. What he will find instead, in most cases, is deception and despair. In fact, the road to comfort is so difficult that many of us search for it in vain for decades only come up empty and alone. I know, pretty deep stuff.
He went on to write, but what if we were not to search for comfort. What if instead we were to search for the truth. And in that search for the truth we were to focus on making progress towards the truth every day. What would that entail? A search for the truth… It would for sure have hardship. It would have roadblocks. It would have setbacks and failure.
And this, my friends, is why most all of us would instead search for comfort instead of the truth. So if you were hoping for a very exciting “get rich quick” speech that you can take back to your garage and use to launch the next huge company, you are doing nothing but searching for the comfort I think C.S. Lewis was talking about.
There has to be a different reason you are starting your business. There has to be a different reason you are running a successful business. If you truly want it to have a chance to impact a market or have true longevity, then it must be an entity that at its core is in constant battle to find the “Truth.” I say battle because it is; it is a larger battle than I ever could have conceived. The truth has enemies and they are always trying to lull you into taking the easy path.
I argue that the Truth for a company is Value
. If you are an entrepreneur, or a VP, or a CXO or an admin… whatever your position in the company, get to spend every day thinking about your goal which must be to get to the core of what value means to your customer. Sometimes your client can help you find this truth and sometimes they can’t. It is your job to be relentless about finding it.
Point Number #1 – Your job as an entrepreneur is to build a venture that will search for real value. It is to search for the truth of what your client really needs.
So you are thinking… Duh; I am not an idiot. But I can promise you… I can promise you this with complete certainty. There will come a day where you will have your leadership team at an offsite and everyone will be patting themselves on the back and making decisions that might temporarily make your venture more money, but they have stopped searching and your company will be closer to ruin each day. I promise it. And it will be your job to help them step back on the road to value and the truth.
By a show of hands, how many of you have companies that you have just started or are just about to start? Okay, to try and make this point tangible, I want to ask all of you to do this; and for the rest of you, it might be a good idea for you to try it as well. But ESPECIALLY for those of you just about to launch… I want you to do this. I want you to find 5 potential customers and I want you to talk to them about the idea, concept, product, service, whatever that you are about to bring to market. By a show of hands, how many of you did that already? Good. I hope you did it like this; I hope that you sat across from this person ready to give you advice and said:
“I am contemplating starting this business doing “X” and need your help. I would very much like you to tell me why I shouldn’t do it. This is a big favor to ask of you but please do it. I need brutal honesty! I am hoping you listen to the concept and explain to me why it won’t work.”
I want you to do that. After you explain the concept shut up. NO SELLING. There can be explaining, but don’t start selling them.
Let’s say they love it. They actually think you have stumbled on a real winner. Don’t smile; don’t get excited. You see some version of this has happened to all entrepreneurs and what do we go do? We run home, we hug our spouse and start checking our bank accounts for what it would take to start this business that someone is TALKING YOU into starting. Could it be any better? I am going to ask you to please not do that.
What is the one thing I wanted you to remember from this speech? We are on a search for the truth. We are on a search for real value. If you have an amazing meeting and they convince you to do your idea, then say thank you and that you are trying to separate goodwill and the truth. You see, you are potentially about to embark on a very difficult journey building a company from scratch and that will affect and put at risk all the people you care about. So while they seem to like the idea you need to go one step further. Ask them right there to pay for the product.
Not an investment, just to pay for the product. Consider it a prepayment for serious value that will be delivered soon. If it is not a product you planned on charging for… think of another way to figure out how much REAL value they see in it. I have started many companies and this is a CRITICAL question. Ask them for the money right on the spot. All the sudden a completely different conversation happens. It is a real conversation. One that drives progress towards the truth.
All the sudden they tell you purchasing is not really adding any more vendors so a PO might be hard to generate. Or they would need to see a couple iterations first and you would have to have 100 other companies/people using the product before they could commit to anything. Maybe they are just simply out of cash right now.
What am I doing here? Why am I trying to make it so hard on us to step into the new venture? You need to establish a couple things before you start. Do they believe in the concept and would they give you some of their valuable time and effort to help get you an order for it. If they will, that is saying something.
The other really important thing you will discover with the second question is what they think of you as an entrepreneur. This is more valuable than almost anything. So many of us are asking our family and people that love us about whether we should start. You are going to get soft answers and a lot of goodwill. When you test the concept, make sure you test on at least half people/clients that do not know you. If you don’t know how to find those people then stop right there, you shouldn’t start a company.
Point #2 – Separate the Truth from goodwill. Truth about the perceived value of not just the concept but also their belief you can execute it. Ask why you shouldn’t do it, and if it goes well, ask for money. Usually half of the people you ask will have some excuse why they can’t pay now.
Another point I loved about the book I was reading was the concept of progress with finding the truth as the goal. How many of you set goals or initiatives for your company? Most all of us at every level do that. Well, as a leader I believe first and foremost your job is to explain why it is that we are doing what we are doing. At Trace3 we want to strive for greatness and innovate the markets we choose to impact; that is our reason for existence. We also came up with a rally cry a couple years ago that we wanted to “be relevant in the post VAR era.”
For years the company had gone down a path and grown very successfully. But every year I would get with clients and ask them in a group dinner or one-on-one setting what they thought I should be worried about. Were there adjacent markets I should be considering? At one of the dinners a bold client told me if Trace3 were to continue down its current path with our offering we would be out of business within 3 years. This was a good client. I stopped the dinner and asked by a show of hands how many other clients agreed. Half the hands went up. I was floored. Next dinner with a different group, after a couple glasses of wine, I asked and got the same results. They all really like the company and our culture, but an offering that had once offered us terrific growth as an org had hit a ceiling and was potentially going to be commoditized very rapidly.
I went to an offsite and was very clear that we need to come up with plans and initiatives that would have two main goals. We wanted to secure the family, family being people at the company that truly worked hard and deserved to be there, and at the same time create massive opportunity. We eventually narrowed it to “Secure and Create.” The WHY of all initiatives could be explained in those terms. With the why I would write playbooks each year and try to not only explain why it would secure and create for the company, but also for the individuals. I’ve always wanted to make a company that could have held me as an employee. For me to stay I had to feel relevant. I wanted to have some say in the plan or its execution. The playbooks were my attempt to do that.
In our search we realized that even though we had grown from $100M-300M in two years that we might be sprinting right off a cliff. After much thought and debate I made the call to build two new practices and invest all the profits from the year into the bet. We would continue the old business as it still had good play in the market but we funded a cloud and big data team and started to look in how to add very aggressive advanced technology on the best things coming out of Silicon Valley. Not everyone agreed with my plan. I mean what if the clients were wrong? What we were doing was just starting to make good money and we should bank it rather than invest it. There were even big parts of me that want to stick with the status quo. But I made the executive decision to lose money and invest in securing our future and creating massive opportunity.
Within a few months there was a mutiny and I was asked to step down as CEO of the company I owned 100% of. I was always trying to change the company and people were tired of it. They were smart people. They were good people. They were by all standards incredibly successful people. They wanted to focus on the money on the table in front of them.
What is the Entrepreneur’s #1 job? You must build an organization that will search relentlessly for real value. You must always have a gauge on your current value and what your future value might be.
One of the simplest exercises you can do to get to the bottom of this quickly is to get with 20 clients after your business is running and serving them well and give them this as a conversation topic. Hypothetically Hayes (put your name in) has left Trace3 and is now going to start a company to destroy Trace3. What should his offering be? How would you tell him to crush the current business? Then sit back and start taking notes.
The end of mutiny story is interesting but not the point and I don’t have time to cover it. The point is that progress is not always racing forward as fast as you can. Sometimes it is, but sometimes it might be taking REALLY hard feedback and completely retrenching something that is no longer working. Sometimes progress is doing a 180 and completely walking back to the start. Your guiding star on this is value and the truth. If you are walking farther away from value towards money or something else that equals short term gain, it will be a short walk. And I do not mean to trivialize this. In the moment you have to make this call, you can never know for sure you are making the right move and many times, you will be wrong. It is hard.
Point #3: Sometimes progress towards the truth and value means going against what is easy. You might even need to do a 180 degree turn. It is hard. It is lonely. And sometimes the ones you love the most might even turn on you. Don’t take it personally if you can. Explain why you are doing it. Make it personal.
I am sure there are many of you sitting out there that know a great deal more about all this business philosophy than I do. So why am I up here and you poor saps have to sit out there listening to me drone on? I think it’s because I am masterful when it comes to failure. I am always willing to fail.
In fact that phrase “fail fast” should be your best friend if you are starting a company. That is why I asked 6 clients when I started my new company POP to tell me why I shouldn’t do it. I wanted to fail fast. Unfortunately 3 different companies gave me $35,000 just for the concept and here I am with a new company that I love.
Here is why I think failure is so, so, so important to have ingrained as part of a company’s culture. If you have done your job and built a venture focused on finding the value and truth for your clients, then failure has to be part of that. If it wasn’t we would need to evolve perfectly every time. Progress towards the truth will require trial and error. I lost a company before I started Trace3. I had bootstrapped it, had success, then raised money and in late 1999 early 2000 it began to fail apart. I was in my 20s and I was searching for peace. I was not searching for the truth. In the late 90s I think this was probably true of many companies. I wanted to be a millionaire by 30. I worked hard and wanted to get rich quick. And I did it. It is a stupid goal. A goal to have a certain amount of money; a goal like that will cause you to make compromises to hit it; compromises that will usually take you farther and farther away from real value.
So I failed with that company. I had to tell over 200 people that I had lost their jobs because I thought too much about creating and not enough about securing. Even after all that I did it again with Trace3, and then again last year with POP. I also have a winery that is taking off in Napa.
Failing is acceptable to me if you can overcome one requirement. I can’t be an idiot. If you are an idiot or you plan on hiring a lot of idiots that refuse to look the truth in the eye and walk around with blinders on, well then failure should terrify you.
If you are reasonably intelligent and you hire a smart team, most of the work will be testing value and making small corrections. The lean start up calls them pivots. POP started as an enterprise kickstarter and now is a crowdsourcing app that drives massive engagement and buy-in from a corporation’s human assets by making them all an accomplices in the master plan. It makes everyone feel like founders no matter the size of the organization. We pivoted at least 20 times in the first 6 months to figure out where the truth in value was. I expect we will pivot 20 more times now that we have clients like DirecTV, Comcast, Corelogic, Kaiser, and others helping us in our roadmaps.
Point #4: Failures are part of progress towards the truth. Embrace the learning that can happen by failing and pivot towards real value.
So I am sorry if I disappointed any of you looking for a get rich quick talk. When I read the beginning of the C.S. Lewis book last month, I was stuck with how for so many of us that search for “comfort” is probably a search for money. He talked about how this could lead to pain and despair.
But if you were brave enough to search for the truth in a relentless fashion and you stuck with it long enough then maybe, just maybe, as you got close to it, comfort could be an outcome. I loved this concept deep in my core as I read it.
If it is really money you are after, then maybe, just maybe, by focusing on value for your clients, real value, then maybe profits could be the outcome.