TSP012 | Brian Smith – Transcription

Posted by John Livesay in Uncategorized | 0 comments

John Livesay:

Today’s guest on The Successful Pitch is Brian Smith. You may not know who he is, but I bet you know his company, UGG footwear. Yes, the comfortable sheepskin boots that are so popular around the world for both women and men. All started from him figuring out the right message to have in an ad to appeal to surfers who would wear their UGG boots to dry their feet, because the sheep skin inside would dry their feet after they were surfing and from there, it just grew and grew. He started the company with literally $500, took it to $15 million and sold it to Deckers and now the brand is worth over a billion dollars.

He has a book out called The Birth of a Brand and Brian says no brand is born an adult and you have to realize that it’s born and it’s an infant and you can’t give up on it just because it hasn’t learned or walk yet. He has so many incredible stories that he shares with us today about how he lost control of the company and then got it back. His whole premise on passion plus innovation makes you a catalyst for change. You’re going to enjoy and be inspired by Brian as much as I was. Thanks.

Hi and welcome to the successful pitch. Today’s guest is Brian Smith also known as Mr. UGG, thanks right everybody, the UGG footwear that is reowned around the world with the most comfortable sheepskin that you could ever slip your foot into whether you are a woman or a man. Brian has an amazing story of starting UGG from just $500 to growing it in 17 years to a $15 million dollar company that he then sold to Deckers and today UGG is a one billion dollar brand. So, when it comes to startup, Brian is the expert. Brian, welcome to the show.

Brian Smith:

John, thanks for having me!

John:

Brian, I just gave a snippet of your background, but there’s obviously a lot to dig into. I know you’re from Australia as our listeners would soon hear from your wonderful accent.

Brian:

Right.

John:

Can you share with us how you took your passion for surfing and how did the UGG idea even come to you?

Brian:

Well, I was an accountant in Australia and hated it. Should have never of been one, but I never give up and it took me ten years to graduate and the day I graduated is the day I quit and I was sitting around wondering what I should do and it hit me that all the cool trends are coming out of California. So, I’m going to go California to find the next big thing to bring back to Australia.

So, I got my airfare and landed in Santa Monica and I was there for one month, two months, three months. Still hadn’t found it and my buddy was down to surfing, we were going to go up to Malibu and he brought the latest issue of surfer magazine and I’m flicking through it while I was waiting for him and I just stopped dead on one page and I just got goosebumps and it was a photograph of these legs up in a fire place wearing sheepskin boots and I went, oh my God! There’s no sheepskin boots in America and at that time, one in two Australians had some sort of sheepskin footwear. So, I said to Doug, hey buddy, we’re going to go into business. We’re going to be instant millionaires!

John:

AHA! Instant.

Brian:

Yeah, what a joke. So, after we got from Malibu, we called up the little factory down in Australia, in Western Australia and we convinced them to let us the distributors, so we had to borrow that first $500, neither of us had it, and we sent it down to Australia and got six pairs of boots back and thought we were just going to rip, but what I didn’t realize is that Americans don’t get sheepskin like Australians do. They think it’s hot and sweaty and delicate, you can’t wash it, you have mud and slush, it’ll never work we are, sweaty, and in Australia you know that’s not right, that’s actually wrong. So, I think for every entrepreneur starting out, you have to have some level of ignorance, because if you didn’t have that ignorance and you knew all the obstacles ahead, you’d never start.

John:

That’s so true, Brian. Sometimes what we don’t know, we have to be unreasonably optimistic almost.

Brian:

Exactly.

John:

You run this marathon of becoming a successful entrepreneur and there’s many obstacles that you have to overcome, but I love what you said earlier about just even becoming an accountant even though you didn’t like it, you still have a mantra of I never give up and that’s what it takes to make your dream come true like you did of sheepskin boots for America. Literally you started with $500. Where did the $500 come from?

Brian:

We borrowed it from a couple of friends.

John:

What are some of the obstacles you faced to get UGG to $15 million dollars?

Brian:

When we started I thought everyone would naturally buy them in America, but it turned out that we went on the road to all the shoe stores and they just thought it was crazy trying to sell sheepskin in California. We tried a shoe show in New York and they didn’t get it either and it was on the plane coming back from New York that I thought, well, all my friends think this is the coolest idea and it struck me that they were all surfer and so, all the surfers had been down to Australia in the 60s and brought sheepskin boots back to their buddies, so within that community it was pretty well known. So, Doug and I decided to focus on surf shops and our first sales out of the gate was 28 pairs for the first season, you know, $1,000. In saying that, there’s no billion dollar company existed that didn’t start with a $1,000.

John:

I love that line. We’re going to use that as one of the Tweets from the show. There’s no billion dollar company that didn’t start with a small amount of money. Now, you think it’s almost counter intuitive, like, if you are a surfer, you’re wet, what do you need sheepskin boots for? I mean, I’m assuming because you’re cold after getting out of the water and that’s why?

Brian:

Yeah, in California the water is generally pretty cold and the sheepskin has this amazing property, it wicks moisture, so you can put them on with wet feet and in ten minutes your feet are warm and dry. So, that’s why it was such a practical product, but you know, we were doing the first year sales as about $30,000 and I couldn’t seem to grow it past that. We were doing swap meets and weekend shows. I had the back of the van open at Malibu beach. Had an amazing business going on there.

So, we started advertising with these models, putting them on the rocks at Windansea beach and the perfect hair and shoes and sunset and next year sales $30,000 and so the following year we got better looking models and more expensive photographers, poise these models on the beach, $30,000. It just wasn’t doing anything and I remember – I was in Montgomery Ward, which is a big shoe retailer in California, but their office was in Chicago and I made my best sales pitch to this guy and he just looked at me and said, “Brian, why are you here?” And I said, because I want to get an order for the California stories and he just crossed his arms and he looked at me, he said, “Brian, don’t you get it? We’re the elephants, we don’t move until the mice are running around under our feet.”

John:

What a great quote!

Brian:

I instantly knew what he got. They were not going to touch it until all the specialty stores were ripping, you know, so when I went back to California, I was having a beer with one of my surf shop buddies and telling my problems and he just called out to the back of the room, “Hey you guys, come out here.” And all these little, you know, 12-13 year old surfers came out and he said, “What do you guys think of UGGs?” And every one of them just went, oh man, those things are so fake. Have you seen those ads? Those models, they can’t surf!

John:

Ohh.

Brian:

I instantly realized for two or three years I’ve been sending the wrong image to my target market and so the next day I called up a buddy of mine who ran the Scholastic Surfing Association in Orange County and I told him, Pete, any of these kids going to go pro soon? Because I didn’t have any money. He gave me a couple of names and Mike Carson and Ted Robinson, I just followed them to the beach to Trestles and Blacks beach.

All these famous beach walks with my own camera and did photographs of them and ran them in the surf magazine and the sales went to $400,000 in two months and all the moms are walking the malls, you know, to Kinney’s, do you have UGG boots? No? What are UGGs? Nordstrom, what are UGG boots? So, that one stroke of understanding the message you send to the target market was so critical and that was the big breakthrough that got UGG started.

John:

That’s a huge takeaway from our listeners, because your messaging and your marketing. So, they both have to be correct and if one of those two elements is wrong, you won’t grow and the way you figured it out was talking to the target market directly and getting feedback and when they said it wasn’t authentic, then you figured out how to shift your messaging so you were authentic and then you got the smaller retailers. I love that quote that the Montgomery Ward gave you.

Brian:

Yeah, he was great.

John:

We’re the elephant and we don’t move until the mice are running around our feet. So, the mice can be consumers, can be specialty stores, but they have to see a lot of demand and activity and the same thing can be true when you’re trying to craft your successful pitch for investors is before you’re going to get a big investment from someone, they want to see a lot of mice running around, they want to see some traction with consumers and they want to know that you’ve pretty much got an idea that’s a good fit for the market and you thought things through and figured out what you just figured out before they step in with a big investment. I love it. That’s a fantastic information.

Brian:

It is. It’s like one of the rules of the universe, right?

John:

Yes, now Brian you have a great book out and I love your formula, which is passionate plus innovation = catalyst for change. Can you tell us about what inspired you to write your book and tell us how you came up with that formula.

Brian:

Yeah. The book is the result of an evolution of thought, you know, about five or six years in the business, I just couldn’t help realizing how much like a little kid, like I just had little babies, how much like children a business is and so I wrote up this piece of paper that said, you can’t give birth to adults and I stuck it in the front of three ring binder, you know, a big fat one, and for years I’d go, ugh, that’ll be good in a book one day and I would just throw this stuff into this binder and, you know, 15-20 years later, I sold the company and then I got involved in other businesses and at one point I said, okay, I’m going to go write that book and I pulled it out and the thing had not changed in the next 15 years that every business starts with someone conceived the idea and they take the first action. For me and UGG, the first action was buying samples.

Now, I’ve given birth. And then the problem is every business goes into this infancy. It just lies there and there’s no amount of feeding or jiggling the cradle. It can not get up and go to college, because it has to be an infant.

John:

Wow.

Brian:

Then it’ll start toddling and that’s a pretty cool stage for your business, because small orders are coming in and people are writing blogs and articles about you and that’s a pretty cool stage and you’ll get through that to the youth where it’s the best phase of every business where you’ve got consistent orders, consistent production, sales team working, accounting administration, that’s the best phase for every business, but if it’s a really good product or a really good service that you have that’ll hit the teenage phase and it wants to be everywhere at once, everyone from all across the country or the world wants to have a piece of it and that’s a really dangerous stage.

I almost lost control about three different times during that phase and then the administrators come in and put on all the rules, the restraints, and then it becomes a mature company. So, that theme is what I wrote about in my book and when I speak from the stage, it’s amazing how many people come up to me, oh, thank you, I was about to give up my business, but now I realize I’m in X stage and they know where they’re at and they have confidence.

John:

Right, so, you wouldn’t give up on an baby, right? If you’re upset that the baby is not running because it hasn’t learned to walk yet. I mean, your book, The Birth of a Brand is such a great title. I love anything with the iterations like that and when you say that no brand is born an adult in your book, it’s such a great analogy and that – no amount of, as you said, coddling can get you to move from infancy to youth before it’s time and just like a chicken coming out of an egg, it’s got to take that time to mature and don’t give up is helpful.

Brian:

You just have to keep doing what you believe is the right thing everyday and, you know, may not see the results for ages and ages, but as long as you’re doing the right thing, what you believe is the right thing, eventually the movement will start and that’ll give you a new direction.

John:

It’s almost like the tipping point or the 212 degrees. It’s consistency and progress as a opposed to seeing action as really what gets it to go. Now, this formula, passion + plus innovation = what I’m fascinated by is the world catalyst for change as oppose to just change. Can you explain a little bit about what you mean by being the catalyst for change when you have passion and innovation?

Brian:

Yeah, well, that came from a study, a woman called Sally Hogshead has developed this matrix and if you do one of her little tests, she puts the indicators of what your personality is and mine just happened to be passion and innovation, right, they collided on this grid. Passion and innovation and those people are the catalysts for change. If you do have passion for anything and this urge for innovation, then you can’t help but change things and so right now my book is designed to be a catalyst for change for anyone who reads it who is on the entrepreneurial path, because I list – it’s very philosophical.

I’ve got a lot of truths in there that I’ve learned both myself and from my reading and from my experience, so I’m trying to be a catalyst for every potential entrepreneur to read my book and show them the path of how to get to where you’re going to get. It’s never easier, but here’s all the tips to overcome the challenges you’re going to find.

John:
That’s fantastic. You know, so many of our listeners, you know, have the dream of a company and having it grow as big as UGG became and then having some potential exist, either going public or getting bought by another big company like Deckers buying UGG. Can you take us back to that day of what made you decide to sell in general and how did you decide to Deckers and was it hard to let it go?

Brian:

Great story, yeah. I got the business up to about $15 million in sales and my problem was always that I grew so fast and I never started with any serious capital. I was at the whim of investors to bank roll the production and we were staring down the face of a $20 million seasons and I’m thinking, oh my God, I have no idea where I’m going to get the money to finance this year’s production.

So, that’s one part of it. Let’s flashback, remember I told you I opened up the bank of my van at Malibu in the 70s or the early 80s? Well, three or four cars up, there was another van with the doors open and the guy was selling triple decker shoes. They were pink, yellow, and pink neoprene with the little, what do you call them over here, flip flops, and they were triple deckers and that was the guy that started Deckers. His name is Doug Otto and we used to see each other on the road all the time. We’d be out trying to pitch all the same retailers.

Well, he eventually grew his company to a – he did a lot of licensing and he eventually bought the license for Teva sandals, Teva. When the outdoor market took off, he took his company public. So, last fast forward back to 95 and I’m going to a trade show in Atlanta and I’m at the Atlanta airport and I look way down the other end of the baggage claim and there’s Doug Otto and I just immediately got goosebumps again and for me goosebumps is my inner spirit telling me you’re on the right path, you know.

John:

Trusting your gut, almost, yes?

Brian:

Exactly that, yeah. So, I walked down, you know, we saw each other and we high-fived and I said, you know, Doug, if we’re ever going to do it, now is the time, and the reason was that his company was dying every winter, my company died ever summer.

John:

Oh, what a great fit.

Brian:

And so, by putting the two together, we had year around stuff, year around cash flow and that was what was crippling both of us and so we had the accountants talking to each other that afternoon. So, selling out for cash. So, it was like going public without having to go public.

John:

Yes, there are so many great little messages inside of that story, Brian. The first one is you knew him for years and respected each other and you were both in the same market and then the complimentary non-competitive element of what he was doing, which was all summer oriented, and what you were doing was typically winter oriented, was such a great fit that it was a logical think for Deckers to buy UGG, but everyone doesn’t know that behind the scenes story.

They just think, oh, it just sort of happened and now we know the story of – it didn’t just sort of happen, there was a relationship and mutual respect for years and why those two brands were so complimentary seasonally that it was such a great purchase for him and clearly it’s been a fantastic success. What a great, great story. I love that on so many different levels. The goosebumps element and the year round synergy that you now have makes it for a great, great stuff. Is there any story in your book, you and I were chatting before the show about two women that you’re interested that – I think you said was in chapter four. Do you want to tell us a little bit about the takeaway of what’s going on in their story?

Brian:

Yes, they have a fantastic product. It’s a very high quality lambskin product. Instead of having a big bulky purse that women carry on their shoulders, it’s a sash and it looks like a piece of clothing and it has two pouches, so it doesn’t sit on the hip. One is in front, one is in the back of the hip. So, it’s beautiful looking piece and it has all these pockets inside for organizing phones, keys, credit cards, and cash and all the stuff that women carry.

So, when they’re at a bar, they don’t have to look around and worry about their purse. When they’re out shopping with a baby, they can just have everything out, so I told you they’re like in chapter four or five of my book. When I was really starting to get traction and as much as the sales were getting so easy, you know, this is after that little hard moment, you know, the sales was so easy that I couldn’t finance the production right from the very early stage and these girls are in exactly the same situation. They took their product offline, because the sales from the online store were just so overwhelming, they couldn’t – they knew they couldn’t get the product.

So, it’s one of those things that, had I looked back, well, if I do look back now on the whole UGG thing and think what did I do wrong? Well, I did a ton of things wrong, but what should I have fixed as the most important thing and I would have gotten a really good finacial partner in. I’m not saying equity partner, but somebody who was on my team that really understood finance, because I can see down the road the problem these girls are going to have, the more they grow, but they can’t see that yet.

They’re just worried about how do I get product this season, but because I’ve been down that road for year after year after year, I foresee what’s going and I know that if I can help them get a really good financial partner right now, they will just rip and take ten years off the growth that I had to go through.

John:

Wow. Ten years off the growth. Well, obviously everybody wants to buy that book, The Birth of a Brand to learn these wonderful insights and you mentioned earlier that there’s like three times, I think you said, that you almost lost control of the company. Was it all related to production and traction?

Brian:

Yeah, there was one instance, this is a great story. I hope we got time left.

John:

Yeah, we do. We have five more minutes.

Brian:

Okay, so this is perfect. The business was doing $2.5-3 million dollars and I had to buy out the smaller investors each time, because they couldn’t handle the next big rush, so I brought on three new guys as investors and our deal was we were all going to share 25% each of the company and I didn’t get my 25% until I finished this little trademark lawsuit and I knew I would win that, so we moved the warehouse up to Anaheim where they belonged and the very first day I went out on the road, I had to finish the trademark and I got to be the sales reps for Southern California, alright.

So, first day out I went down to Huntington Surf and Sport and I walked in the door and he says, “Hey Brian, I heard you sold the business.” What? He said, “Yeah, I just got an order in and they said you don’t own it anymore.” And I went what?? And I couldn’t wait to get out of there and I went next door to the Shell gas station, before cellphones, you know, and I called up and go, Neil, what the hell are you telling people? And he goes, “Well, it’s true, you don’t own the business.” I just drove straight back to San Diego and I pulled out the contract and I looked at it and I read it again and I read it again and I went, oh my God, I don’t own the business and I went into this two or three days of depression, you know. I just stayed at home and all my dreams of building this huge international corporation crashed.

I think about the third day I was doing some meditation and I’m thinking, you know, what can I do? And I thought I’m not going to be an accountant, maybe I can get into real estate or business brokering and then I thought, you know, I really come to love sales. I think I’ll go back into sales, so I started thinking, okay, what can I sell that I really love and the answer was UGG boots. So, I decided to suck it up and eat humble pie and I went back out there and I said, okay, I’m just going to be the best salesman, because I really want to get UGG boots on everybody I can.

So, I went back on the road and by now all these guys are my friends, you know, my retailers, as terrified as I was starting out, now they’re all good buddies and I used to over service the heck out of them for inventory and all that and I got back after the first march to the warehouse and Neil handed me an envelope and it was a check for $5,000 and he said, that’s your commission and I went, oh my God, I have not pulled one cent out of the company in five or six years and here’s a check for $5,000 and I got back after the next month and there’s a check for $10,000 and the next month another check for $10,000. I’m going, oh my God, this is amazing. I’m doing what I love, I’m making all this money, and it lead me to this thing I wrote in my book, which is that most often your most disappointing disappointments become your greatest blessings.

John:

Wow, that’s so huge. We’re going to Tweet that out too. Your biggest disappointment becomes your biggest blessing.

Brian:

Yeah, so that was a classic example of all my dreams crashing and the irony is that over the next few years we went fantastic and Neil bought the other two partners out and we were just getting ready for me buy my stock back and we taken out life insurance policies on each other and by a chance, he was in motocross race and had this massive heart attack and died.

John:

Oh my God, how dramatic.

Brian:

Yeah, it was, and then within a few months the insurance policy paid out and I bought the business 100% back from his widow.

John:

Wow.

Brian:

So, you can’t predict what’s coming down the line.

John:

Brian, you just gave me goosebumps! That is such an amazing story. I don’t think I have ever heard anything that dramatic and the takeaways for me are, love what you do, don’t be attracted to having to own something, and you already acted as if you owned it, you couldn’t have worked any harder selling UGG. People bought from you because you had such passion and belief in it and you had a product that literally solved a problem for people, which was drying their feet after surfing and kept them warm. So, it’s just such an incredible to take all that disappointment and turn it around and we would never wish ill on anybody, but you never know how something is going to work out. So, that’s just so moving.

Brian:

Yeah, the first thing I talk about in my book is that the minute you start out on a path, the universe will conspire to work with you and that’s an ancient, ancient saying, but it is still as true today as ever, but if you don’t take that first step and start moving in the direction of your dream, nothing will happen.

John:

Nothing will happen.

Brian:

You gotta take that step.

John:

Well, you’re certainty the expert in talking about taking the first step when it comes to footwear with UGG. I love that analogy. You have a special creditability talking about taking the first step, because you created something for our feet and our hearts. Thank you so much Brian and let me, before I let you go, in addition to your book The Birth of a Brand, is there any other book or piece of advice you’d give to our listeners that are start ups besides some of this great takeaways you’ve already given us?

Brian:

I’m a veracious reader of books, but I think the things that have helped me the most and still do is to buy books on spirituality and there’s lots of things like called Law of Attraction, which is cool, and there’s lots of things about overcoming adversity, but you know, any sort of reading that is inspiring has an element of truth to it and those things work more to make you happy in life. Business is great, but it’s just what you do during your life. Your real life is living and being happy and so that’s why I found more comfortable in spiritual books than I do in any other business book.

John:

I love that line you just gave us. Real life is living and being happy and business takes care – if you have got that handled, you got a good foundation to make your business express that happiness and at the end of the day, people buy your passion and that’s what investors live in. Thank you so much. Now, Brian, how can people buy your book? How can they follow you? How can they book you as a speaker?

Brian:

Sure, the book is available on Amazon and it’s called The Birth of a Brand and it’s also available on my website, which is BrianSmithSpeaker.com and if you sign up there, you can get a free chapter of the download if you like and I have weekly videos that people can sign on for, but generally the book is designed to help people get over the hurdles that they’re facing and it’s a very, very strong in spirituality, which is a bit of a risk I took writing a business book. People end up saying, my God, thank you so much. So, yeah, just buy the book and I think it’ll really help you accelerate your business.

John:

Fantastic, Brian, I can’t thank you enough for those incredible stories, the inspiration, we’re all going to take the first step, we’re going to remember that our brand is a child and it needs to go through all the stages that children get to before it becomes an adult. Thank you again, Brian, we look forward to reading your book, following you, and staying inspired.

Brian:

Good, thanks a lot, John.

TSP011 | Randy Rayess – Transcription

Posted by John Livesay in Uncategorized | 0 comments

John Livesay:
Hi and welcome back to The Successful Pitch. Today’s guest is Randy Rayess, the co-founder of Venture Pact, which finds software developers for companies that need them. He is also an angel investor and ironically both what he does at Venture Pact and being an angel investor requires screening good talent to be on your team.

He said you need a cultural fit, good communication, and figuring out the combination of passion and the ability to motivate others. Are you a self starter or not? When you come up with your problem to solve for the market place, if you’re working on a tough problem, you need to realize it requires both patience and persistence.

Randy has some great insights as to exactly how to look at life and how to make your business successful. In fact, he was a finalist in the Innovative Awards for 2014 and he’s got all kinds of innovative ideas that he shares with us in this interview. Enjoy.

Hi and welcome to The Successful Pitch podcast. Today’s guest is Randy Rayesss who is the co-founder of Venture Pact as well as being an angel investor. So, Randy has incredible insights into investing and figuring out what the market needs as far as what the problem is to solve so much so that he was a finalist and innovative of the year for 2014, so he’s got lots to share with us. Welcome to the show, Randy.

Randy Rayess:
Thanks for having me.

John:
Randy, I gave, as you heard, a brief, brief introduction as to who you are, but I would love for you to take our listeners back to how did you get the entrepreneur bug? Was it while you were in college or even earlier?

Randy:
I think it was more a fortunate kind of stream of events where a few of my friends had recommended I check out a few companies and one of them was in LA and one of them was in San Francisco, so I kind of worked for summer in LA and then I worked in San Francisco for a bit. It was kind of working in that environment that got me into, so kind of, I stumbled upon some entrepreneurial companies and they kind of got me into that mindset. So, it was a random stream of events.

John:
Is Venture Pact your first co-founding startup or was there another company you were involved with before Venture Pact?

Randy:
Formally co-founding Venture Pact was the one where, like, the one I spend the most time on and the one we’re still working on and has been most excited. I have worked on a lot of other startups informally or formally in different types of roles. Some are more general, some are analysis roles, some are developer roles, but I think I’ve got, you know, I’m able to work different types of startups to get a sense of, you know, what are the challenges of working at small companies and what are the kind of opportunities that exist and how that varies obviously from larger companies where you have, it’s a very different working environment.

John:
Well, that’s a great segue into your experience lend you to see a problem that a lot of startups have, which is a shortage of quality software developers, correct?

Randy:
Yes.

John:
Obviously investors are very interested in who’s on your team and the synergy that you have and do you have developers that have a good track recorded of working for other startups that have been successful so you and your partner decided let’s figure out away to match developers with the right companies and that’s the dawning of Venture Pact, is that accurate?

Randy:
Yeah.

John:
How long ago did you start and how did you decide that you could come up with something that caused you to be a finalist and to be so innovative?

Randy:
Yeah, sure. I think the key for us was we had worked – so after I worked at a few startups and I got into the investing space and my business partner, Pratham, who I had known from college also had worked at a few startups, had some experience in investing. So, we both kind of recognized that when we worked with companies that there was a bottleneck when it came to executing on software building, web apps, mobile apps, and the question we thought about was this is a pretty big problem. It’s kind of consistent across the board for technology companies, it’s like, how do we get better talent, how do we get more talent, and so that’s kind of got us excited about the problem was that it was pretty, kind of, ubiquitous.

The way we thought about solving it was we knew this was tough to solve, right, a lot of companies have a problem and their solution, there’s no really good solution. It means it’s not an easy problem to solve, so we said, okay, that’s exciting, you know, we’re working on that problem. We knew it was not something you can work on overnight, that you can solve in one night, so we looked at kind of the key problems and one of the main things was just the supply/demand imbalance, which is the key issue. When you constrain yourself to a local, smaller base around your office.

So, what we got more excited about was the thought of remote work and if we could help companies figure out how to hire remote talent and help companies engage with remote talent, then you could be sitting down in New York and you can hire someone in Wisconsin. You could be sitting in San Francisco and you could hire someone from Denver. You could be sitting in Florida and hire someone in Tennessee. So, you can start doing these things that are initially were not available and suddenly the pool of talent available increases quickly.

John:
I love what you said there earlier about when you guys realized that you were working on a tough problem. If it was an easy problem, it would have already been solved by some other startup, but it’s so important for the listeners to realize that if you’re solving a problem in the market place with your product or offering or SAAS, whatever it is, if it’s a tough problem, it’s not going to get solved overnight. That’s such an important point and to realize not only are you guys helping people think outside of the box, but literally think their geographic area.

Randy:
Yeah, exactly, exactly. I think it’s one of the things with startups, it does require a lot of patience and extreme persistence, because if you’re solving a problem that’s not easy to solve, which most startups are unless you’re trying to do something and focus more on the fashion, the marketing side. If you’re more of a tech startup, usually you’re working on something that’s difficult, the product is difficult. In fashion it’s more of the marketing that’s difficult, but in any case, I think the key is that you just need to have a lot of patience. It doesn’t happen quickly.

There are very few companies that – you know, some companies will grow very quickly and able address a problem and grow bright from the first few months. Most companies to really find what, you know, what you call product market fit and then a scalable, repeatable process, post-product market fit that does take time, so you have to have the patience and the persistence to get through that.

John:
I love the iteration. So, that’s going to be one of the Tweets from this podcast. Patience and persistence from Randy Rayess. The double R meets the double P, right?

Randy:
I like it. I like it.

John:
So, tell us about being an angel investor and how being an entrepreneur helped you when you’re doing your own analysis to decide who you’re going to invest in.

Randy:
I think, everyone always says it’s the people that matter most with companies and the reason is that at the end of the day, the company, what a technology company is doing today is going to be different from what a technology – that same technology is going to be doing in three years and that’s pretty much across the board. So, the technology companies are in the business of innovation. So, when you’re in the business of innovation, what differentiates companies is talent and so talent is like the number one most important thing. That’s the key. So, the question is how do you screen talent? It’s interesting because that’s what we do. At Venture Pact, we screen development talent.

John:
I love that. Let’s just take a minute and really focus on how much insight you have into screening talent that’s going to be the right fit for a company to hire and then as an Angel investor, you had to screen the talent of the team to see if that’s the right team to invest in for you.

Randy:
Yeah, exactly, exactly. So, it’s interesting, there’s some similarities and some differences. So, with tech talent, you look at the – there’s the coding skill set, which is pretty clear, like you have to access them for coding. You’re the code, but there’s a lot of other things that need to be assessed for which is called (#8:16) and communication and then there’s remote specific things that we have to screen for, because when you hire someone who’s remote, it’s different than hiring someone who is sitting across the table from you.

So, there is remote specific things we have to do for screening, but you know, obviously communication and cultural fit and just the concept in the assessment of someone actually being a self-starter and self-motivated to be able to manage this remote environment. So, that’s the key. Vetting people for founding companies, the key difference is you’re also looking for people who you think can motivate other people to join them, can motivate other people to handle, you know, if you think of a startup. So, think about it like you have this kind of crazy marathon run with a bunch of obstacles on the run.

John:
I love that.

Randy:
And so, you want to think about which person is going to be able to get over all those obstacles and convince his team to jump with him over these obstacles. Sometimes it might take you awhile to figure it out. So, you’re going to be frustrated when you’re stuck behind one bottleneck, but you need someone who is passionate about a problem, someone who understands it, and someone who has that ability to lead and motivate teams and convince people to join even when they come across all these challenges.

John;
That is so insightful. So, when someone’s pitching an angel investor, you or anyone else, they need to come across as someone who not only is passionate and understands their market, but the key element that you really honed in on there is can you motivate other people A) to join your team and B) stay motivated to run that marathon with you. You know, that’s a lot of skills for one person to have and the need to have all that come across in a pitch is really key. Can you talk to us about some of the best pitches you’ve heard and what made you say wow, that’s someone I want to be in?

Randy:
Sure. I think one of the key things I want to qualify is that it’s a team of people that you’re vetting. It’s not one person. So, when you’re founding the startup, you’re running a team, which is different from one person or when we vet a team of developers, it’s also different from vetting a founding team that’s going to run a company, so that’s one thing I wanted – when you’re looking at vetting a team to start a company, you also want to understand the market that they’re in and what their problem is.

So, if you’re going after a food company, food tech, right, then you want to see like, what’s their experience in food and like the basic things around their understanding of that industry, but then what are the key characteristics of someone who is going to implement this, so you’re going to need someone who really understands ops and supply chain, right, operations and supply chain, and then they are going to need someone who is going to think about distribution and how to get their products wherever they need to go, which is like sales, and then you’re going to go by the technology, which is the technology product that they’re using to manage whatever they’re trying to do, so any food tech.

So, ideally you’re going to have three people, one who is a master of supply chain, one who is a master of distribution and sales, and one is who’s really good at tech, then you have a good team mix. If they’re all really talented at what they do and they have and so that’s kind of the first layer. Do they have the right combination of skills. Secondly is how excited and passionate are they about this concept, okay. So, someone who’s like been in the space and understands it and has been in it for awhile, they recognize a problem, usually the problem is well informed, right.

So, you’ve been in – you understand the space, so you have a reasonably good understanding of the problem. So, can you define the problem you’re going after very well and do you understand it and then the next thing is can you talk through or know something about problems and do you feel like they live and breathe, like this question of how to solve it – are they living and breathing and thinking about it all the time and as you discuss it with them, you can see. If you ask them a question and they don’t know the answer to it, then you’re asking them a question or – they can’t answer it intelligently and they’re like, oh, I’ve never heard of that question. Usually that’s pretty bad, because you only spent 10 minutes hearing this and you already come up with questions that they’ve never even –

John:
They haven’t even thought of.

Randy:
Yeah. Now, sometimes if it’s a younger company, you know, it might happen, but ideally, we’re like we’ve thought about that, that’s a great question and they have a bunch of things these are possibly solutions. We can’t guarantee these are right. We’re going to test them or this is why this is a bad question, that means they’re thinking about this all the time. It’s in the back of their head. So, there’s a couple of things there, but really, it’s an imperfect science to judge people. It’s an imperfect science.

John:
It’s like hiring, yes. So, when you heard a pitch besides the combination of the right people and being able to find and understand what the problem is and they live and breathe it, is there any one pitch story that stands out to you that’s like not only did they have all that come across, but they told me a story that made it interesting and memorable that made me want to invest. Is anything pop into your head for that or something you would describe Venture Pact if you were to come up with a story? Do you have a specific story of somebody not being able to find somebody and how you solve that problem and then all the great things that happened once they had the right match?

Randy:
Yeah, so I’ll take the second point, the story for Venture Pact. Yeah, I think we have a lot of stories like that and what’s interesting is – I can give you one example. So, we’re going to the company, they have a really cool, really cool product and they’re trying to say like, alright, what we’re trying to do is we’re trying to change the way companies cobrowse, so a lot of customers service people, when they’re trying to speak to their customers, you know, they’re speaking over the phone and it’s hard to really communicate the problem you have.

So, if you can actually browse the same, you know, cobrowse, and be on the same page at the same time, then it’ll be very profitable for all these customer service people and there’s obviously thousands of customer service people and all these big companies have this problem. So, they were like, okay, this is actually not an easy technology problem to solve because you have so many different browsers and different types of browsers, etc, etc,

So, they needed to scale their tech team and so they came to us and like, alright, we need to scale our tech team, you know, they’re very talented developers, but again, you can only do so much as a few developers, so they wanted to scale out their team and they were looking for people with specific language experience and specific experience with browsers, so we connected them with a team that fit criteria that they wanted which is their budget, their location preference, and the technology skills that they wanted and they were able to build that out and they built a very powerful cobrowsing platform and then they were able to sell the company for a very nice return and it was basically they had a great idea, they built a solid solution, they just needed to scale it out and they just needed tech talent.

John:
I love that story because there’s a problem, you provided the solution, scaling it, and the result was they were able to sell the company that would never have happened had they not used Venture Pact. That’s the kind of quick, easy to understand problem solution result formula that I love to work with my clients on getting that everybody can easily grasp and understand.

Can you speak a little bit, Randy, about the cultural fit. Not so much with what you’re placing people into the company, but it’s the same kind of thing when you’re wearing your angel investor hat, what do you look for in a company culturally. A) Do they have a culture defined, I guess, to see whether it’s a culture fit for you personally to invest in.

Randy:
Can you repeat the question?

John:
Sure, what do you look for in a company as an angel investor, what kind of culture do you look for to decide whether that fits you and the kind of culture you like to work in. Obviously, you’re an innovative person, so I’m guessing you like to work with companies that have that as their culture, but are there other things that you look for in a culture?

Randy:
Sure. One thing I like obviously, we like to look for companies that we work with is if we’re going to mentor that company, it’s obviously better if we have the experience relevant to what they’re looking for, so if it’s a company that’s innovating a woman’s purse company, like it’s a new woman’s purse, I don’t know that market that well, I don’t have that much experience in buying women’s purses. I just don’t know the industry.

So, I’m not able to give a lot of guidance. I can give some guidance into the tech marketing and some guidance in the tech product, but I’m not going to be the best investor for them. Like, they need someone who understands fashion and understands their customer whereas someone who is doing a market place product, right, they’re building a marketplace or they’re building something relevant to remote work or they’re building something relevant to procurement or B to B services or B to B buying or payments or things like we’ve spent a lot of time on or international transactions, international that’s where we specialize in.

So, that’s where I can add a lot more value, because we had o deal with a lot of those challenges as we built our Venture Pact, so Pratham and I can add a lot more value and my business partner and I just have a better understanding of these things. So, I think, you know, the key is like how much value can you add and how good of an understanding of a space, of the space do we have.

John:
So, you’re not just interested in giving money, you’re interested in becoming a partner with them and using your expertise to make the company grow, so you’re investing your money and your skill set it sounds like, is that accurate?

Randy:
Ya, and I think one of the ways that’s – that is accurate. I would add another point to it where that would be, you’re going to invest much better in companies that you understand. So, if I’m investing in a fashion company and it’s going to be much harder for me to really know if they’re doing something really powerful and different or not. So, that would be a main point. If I’m investing in something that I don’ understand..

John:
It’s like buying a stock that you don’t know what it does.

Randy:
Exactly, exactly.

John:
What range do you like to invest in? When someone needs a certain amount of money and you’re like, oh that’s too low for me or that’s too high for me, what is your sweet spot as an angel investor?

Randy:
I think, well, we don’t, there’s no like specific thing, even at Venture Pact, like we’re already with the companies. We’ve worked with startups that are actually building their first product and we help them build their product or we work with companies, like the one I mentioned, where they, you know, they already have a team, they already have a product. They’re just scaling it out and so, there’s I would say, we don’t usually specify that, like this is a company that we like and that we think we can help.

John:
Got it, so if somebody said, I need $250,000 and wanted to approach you as an angel investor or I need $500,000, if the fit was there, that kind of price range is something that you typically look at as an angel investor?

Randy:
Well, so, I mean, if they are looking to raise, – it depends on the round. The structure of the round and who else is investing and so our network of our investors, so obviously I have a network of people that we, that I pass deals to and we kind of think about together on deals, so it depend on the network and how much each person in the network is willing to contribute. So, we are always open to looking at deals and passing them around and it might be that I am not a good fit, but someone else I know is a good fit, so you know, there’s a lot of passing around of deals, that would depend. It’s something that would depend on the situation.

John:
Right and for someone to even become aware of you as a potential investor and your network of investors, there’s a warm connection ideally the way you like to meet people.

Randy:
Yeah, so warm connection is good, definitely. It helps validate the person. Sometimes there’s just great people who reach out directly you don’t know. It’s hard because you just don’t, like from an email, there’s a few sentences you’re reading and you’re kind of scanning, you get so many emails, it’s just hard to make a good assessment, so sometimes you’ll miss out on people that you just don’t have time to respond to. So, warm connections are good, because then you have someone else that you know that can vouch for specific things about the person.

John:
Right.

Randy:
But yeah, it’s one of those things where it’s like, ideally you just reach out to the person and you know, we can respond, but in today’s world, email has become a challenge, so warm introductions are preferred, yeah.

John:
Right, and then when someone pitches you, you prefer the pitch being live versus you looking at the pitch first before you met them.

Randy:
The key is to make sure this is (#20:00) company so, you know, a lot of times companies want to jump on a call straight away and that’s going to be tough. Usually it’s best just to kind of make sure it’s a good fit first so what you’re talking about, what’s your industry, what’s the experience, what are you trying to solve. That validation part, it’s just to make sure you’re not, because if it’s a company that I don’t have experience in, then there’s no reason for us to take your call, because I’m not going to be able to help you on it and if I can help you, it’s me introducing you to another investor, so first let me see that other investor. And see if he’s interested. So, you don’t really need to jump on a call with me. I can just see that, assess that on my own.

John:
Do you look at an actual deck or do you just a couple of lines, like a 90 second pitch.

Randy:
Yeah, sometimes (#20:44). Well, I guess the, you know, the long deck, you can’t spend that long, so you really skimming them. I would recommend shorting the decks, because if you shorten the deck, you’re choosing what I’m spending my time on, other wise, if you have a long deck, I’m choosing what I’m spending my time on and so you might have something important that I missed on.

John:
The shorter decks actually get more focused than a longer deck. That’s a great takeaway. What if someone is trying to invent some new kind of game for people to play and it’s not technically solving a problem, do you have any advice for those kinds of developers?

Randy:
Yeah, I think, there’s the standard advice, which is like, if you’re trying to build a game, you know, the way games go if you look at history and how games goes, it’s pretty kind of organize and kind of crazy somehow the way some companies go. We’ve seen some gaming companies just sky rocket in countries where there was zero marketing and overtime it takes over the small countries and then it starts to grow into other countries, so it might, I would say, the first version of your game, gaming development is not cheap.

Obviously it’s expensive, it’s time consuming, so I would try to create whatever that sticky component, what’s the stickiness of the game. I would try to build a very small game that includes that stickiness component and try it out and just try it out, you know, going through gaming forums and things like to see if it works.

Once you’ve done that, then I would start to think more about the next, it’s like, is this, because gaming is all about, it’s entertainment, so when you’re looking at entertainment companies, it’s like how sticky is it, is it entertaining or do people enjoy it, how many times are using coming back to it.

So, you want to understand your metrics and see likes which type of gamers like your product, so are they gamers who use, call it x, if you like product x, you probably like product y. So, let’s see what affiliations. There’s many things you can do to get cross market and things like that. The main thing I would say for gaming is don’t spend too long building your first product. You want to assess the stickiness.

John:
I love what you said about it if you like this game, you probably like that game. People love those kind of references, especially since it is entertainment and that’s how movies are pitched.

Randy:
Exactly.

John:
As we’re wrapping up our podcast, it went very fast, you gave so much great information. Is there any one particular book or books that you like to recommend to startups either about investing or just life in general?

Randy:
That’s a very tough question, because there’s a lot of books that I like.

John:
It’s not Sophie’s Choice, you can pick more than one.

Randy:
Okay, good. There’s, I really like the book Drive by Daniel Pink. He talks about how to motivate people, which is very important and there’s a lot of things in that book that help you, when you think about how to manage employees and work with employees, so that’s a good book.

I like the book by Grove on Only the Paranoid Survive. It’s an interesting title. About the book is he talks about the challenges of managing and leading companies and so one of the things he talks about in the book is that if you’re not paranoid and then you’re less likely to successful, because the world changes so quickly and you can quickly become comfortable in something that you once worked and no longer does or will no longer work and so what I liked about his take, as a leader, you’re a great leader is if you can act in the times of struggle.

When there’s terrible things happening in the company. If you can act without having the emotional baggage of what once was in the company, if you can act as a newcomer. So, he asks this question, like if I’m a new owner, if I came in – if they fired me and I came in as a new CEO, what would I do to revive this company and basically what that means is if I was to take out the emotional attachment that I have with our existing business, what decision would I make? And that’s how – he talks about a personal story how he moved Intel from the memory business to the microprocessor business and the reason he made that big shift was because he realize that another CEO came in, they would do that specific thing and he just had this emotional attachment to the product.

So, that was a great book and then, you know, there’s a few other solid books if you want to look at personal challenges of entrepreneurs, there is a book by Eckart Tolle (#24:41) called The Power of Now. If you want to look at the – if you’re interested in just the process, like Lean Startup, obviously, there’s Eric Ries, Lean Startup and there’s Reid Hoffman’s book on networks and how the new age of employees and he has good books there.

John:
That’s great. I really like this concept of Only the Paranoid Survive and really taking a look non-emotionally, very left-brain, like renewing your wedding vows almost.

Randy:
Yeah, yeah.

John:
And taking a whole new look of recommitting yourself to where you are. Randy, thank you so much, if our listeners want to follow you on Twitter and LinkedIn and follow what’s going on with Venture Pact, what’s the best way for them to stay in touch with someone with your insights and see what other awards you’re going to win and follow your career.

Randy:
I would say Twitter is great. My Twitter handle is @RandyRayess. LinkedIn is pretty similar just LinkedIn.com/in/RandyRayess. So, those are two ways to reach me. Of course, if you’re interested in Venture Pact, then it’s just [email protected]. So, those would be the three main ways.

John:
Fantastic. Well, Randy, I’m so excited to watch Venture Pact continue to soar and I know you’re going to do a lot of more innovative things in the marketplace and we’re thrilled to have had you on the show. Thank you again.

Randy:
Sure, thank you for having me.