‘Being Isolated Is Just a Bad Idea’

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week H sh and Sean busy talk about why they put their businesses through accelerators and Paul DS explains why he might have done the same thing if accelerators had existed back when he started his business although he says I was probably too dumb to realize the value of it Hans who just completed a 13we accelerator program with his partner Luis also tells us how Wonder kcks scared while he and Lis were in the program what they got out of it and why they felt it was worth giving up the equity that was the price of admission plus we also talk about why Shawn went to an employees's college graduation and how Paul managed to take a vacation oh and Paul also tells us what he thought was weird about the recent 21 hats event in Chicago it's a good thing even a good times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations brought to you by our principal sponsor the great game of business will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report when Jake magazine named the best newsletter for business owners and which you can subscribe to for free at 21h hat.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews joining me this week on the podcast are regulars Sean busy CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy Paul DS who is CEO of Paul DS cabinet makers which makes custom conference tables outside of Philadelphia and Hans Shri who is co-founder of Wonder and e-commerce Bakery based in Austin Texas the episode is titled being isolated is just a bad idea welcome Sean Paul and Hans I appreciate you taking the time I want to start today with Hans uh Hans you've been busy lately uh putting your cookie company through a I gather a consumer package Goods accelerator in Austin uh I believe it's called skew can you tell us about it yeah sure yeah it's been a 13 weeks and it was a lot to handle but um basically the purpose was there was an insane amount of opportunities coming our way and a lot of the time we were not prepared and our first impulse was to say yes and we'll figure it out later but at some point we realized and I'm very grateful that we did this I don't know what miracle happened that we said you know what we don't really have the capabilities right now we need to build them before we actually go and tackle the costos and the targets of the world so that's what we've been doing and it was a very challenging experience this this s is called SK it works on a mentorship model so you get assign a ton of mentors and we have a team we got access to a large network of cpg professionals and they all come from different disciplines and from different spars part of the corporate experience so there was entrepreneurs and finance people and uh big big companies big cpg people they run the game investors uh people in PR and it was very interesting to really get to talk to people in every single corner of the world of cpg and to understand their perspective because I think that the what happens as a Founder is that you're a Founder your friends are founders the people you talk to they are founders and it's very easy to lose track of the stakeholders because down the line you're going to have to banish all of these people and it's very useful to understand how they think and what is it that they see that you don't so it was frankly very enlightening did you have to go through an application process yes from what I understand there were 800 applicants and it's actually the second time that we appli to this accelerator so in then being down to six six companies and then you had to pitch which was kind of intimidating because I was expecting to pitch to three people and it was 30 that were those in that call and people that have a lot of very intimidating people so yeah it was it was it was a whole process at the end of the day I think that what really worked in our favor was that we had the ability to convey what the larger purpose of what we're doing is and what we needed out of the accelerator did you and your uh part partner Lis both go through the experience yeah and did I hear you say that there were six companies that were whose applications were accepted and participated yes no yeah it was six and and 13 weeks can you give us a sense of what was a typical day like basically we had like everyone had their team of mentors and you had a lead mentor and then it had like a team of eight people and then you had access to all of the others so in total it was 70 um there was a weekly call that like okay so this is where we are this is where we need to establish priorities and then move into the next thing so like a weekly checking with everyone and then you got to work on the individual parts of a good different teams so if you were looking at the marketing part you went to the marketing people if you went wanted the finance you went to the finance and you got to talk to whoever you wanted and everyone was extremely willing to help and then there were classes which at first I found like oh I don't really need this I went through this already I know this but as they progress realized that it was very useful even things as silly as well not silly but things that you take for granted like oh doing a p&l there's some nuance and some things that you want to see yeah sure I can do a p&l but it's a very different thing to do a pnl that is going to convey the information that investors need for instance or that is going to convey the information that the buyer is going to need so that was very enriching to go back to all of these things from the lens of the startup Paul Sean if you guys have questions as we go please feel free to jump in I do have a question so you said there were 800 applicants and six chosen did you get a sense for what the sort of the level of viability that you had to demonstrate in order to be considered I'm not sure that we talked about this explicitly but I think what what they were looking for for the most part was some traction and also the potential because there's a lot of ideas that are very in cpg particularly a lot of them are kind of Niche but if you're doing something that is very small doesn't really have the possibility to really grow it probably didn't make sense because the whole idea here is these are companies that are being built to scale and sometimes and I think this is some this something that was not explicit but my conclusion was that is where the difference between a small business and a startup lies like really is this really scalable I heard about a few examples there were companies that were solid business and were making money but were working in categories where it was not really realistic to expect them to grow into National Brands so I'm guessing that that potential was important and from what I got her like it was very relevant also that the founders were coachable because that's something that happens a lot and for us frankly a year ago I don't think we would have been the best candidates because it took us a lot of time to recognize what our shortcomings were so we're at a position where okay we are asking for help we're we're looking for help and we know exactly what help we need I think it's really interesting to use the word coachable which is a word I haven't used since I coached kids playing soccer but I think that is a pretty critical indicator of of potential success for any business person but I'm curious what you what you think the definition of that is the way I see it like having this appreciation of your strengths and weaknesses because what's going to happen for the most part is that you're going to realize and and this is where this is where we find ourselves what took you this far as a Founder is not necessarily what is going to take you the rest of the way but if you're talking okay I want to grow a company into a national into a national brand then that means we're going to have to find the very very very clearheaded expert on branding the expert on finance the expert on on Logistics instead of thinking that you know so it is a process at some point you realize that your role within the company needs to change who is funding this like why are they doing this are they do they want to take a position in your company or they take a little equity on the company and um the mentors they uh make a small investment into the accelerator like they pay a fee I'm not sure how much it is I know that is something significant so I guess they do have in the game and the equity gets distributed between the accelerator itself and the mentors so they get up I mean down the line is it ends up being a tiny tiny piece of equity but there's some upside for them okay what's a tiny tiny piece of equity look like uh I cannot say that because every deal is under a NDA oh so they they negotiate with each individual accelerator member on a one toone basis that is my understanding frankly I don't know but I do know that it is under 8 it's a small piece I'll tell you is under 10% of the equity and it gets distributed between 60 or 70 people so it's a tiny tiny sliver for each tiny for them but significant for you did you have any second thoughts about whether it would be worth that kind of equity yeah for sure once we were accepted we had to go and ask questions to people who had gone through it people who were a part of it that we knew people who had considered being a part of it but said no and to see is this is this worked it for us and uh it was a hard decision and frankly we kept them on pins and needles for a while because we couldn't really make up our minds but all being said I'm glad that we did you were in the program for 13 weeks both you and Louis your partner yeah how did the business do while you were in the accelerator there was a lot of uh a lot of stress it was like having two jobs frankly you were still trying to run the business at the same time you didn't deal delate that I mean there was no one to delegate it to so we did slow down on like uh new launches and that type of thing because the focus was here so we could automated as much as we could I guess but yeah it was like having two jobs and were there performance issues no no I mean not not really not really because at the end of the day you are working on things that are related to the business so you're looking at the most origin things first so that really help getting perspective really helps I think you said earlier that one of the things you most wanted to get out of this experience was to learn an approach to funding that would work for you I'm curious whether you feel you came away with a a Clear Vision of how you want to approach that going forward so one of the exercise that I've never even thought of doing was the equity Cascade for successful rounds so like oh of course you say as a found I would rather have 20% of a100 million company that I want to have 100% of a million doll company that makes sense that's a million dollar versus $20 million the problem is that you're not the only factor in this ecosystem so by the time you are holding just 20% of your company you are also looking at you not really being in control of your destiny anymore and that is a part of it that is normal but is the type of thing that you want to really ask yourself is this where I want to go is this something that I'll be comfortable doing down the line or not so did that experience change your view of where you'd like to fall on that Continuum in terms of how much of the business you control I think it didn't change it but it did give me a more nuanced perspective I would say like down the line at some point you're going to lose control most likely if you really want to grow you're going to lose control and that is fine but you want to lose control at a point where you have proven yourself and when you have yourself options did you have any kind of demo day at the end of it did this lead up to your pitching to potential funding sources yes yes that was last Tuesday how'd that go it was a lot of fun you know even that is a learning experience because there's a lot to be said about knowing your audience it was fine I wouldn't say that he was a that he was not successful like our own pitch but I think it would have been way stronger had we asked ourselves the question who is going to be listening to this and we really didn't so we had this amazing presentation it was beautiful it talked a lot about our mission about our brand it didn't really talk much about like the financials which makes sense in certain context I'm not sure it made sense there but frankly I would have liked to make to to do this knowing what who I was pitching and I didn't so that wasn't me for not asking frankly if you're selling anything knowing who you're selling to is pretty basic and we we deploy all kinds of different playbooks depending on who we're speaking to yeah absolutely absolutely the nice thing about this is that this is a controlled environment like all the people all the people that were're in that we're in front of where within the ecosystem so uh you kind of have like a little taste of the real world if you will so yeah that was a mistake that was a mistake but you Lear like that I can promise you that mistake won't happen to me again it it seems like the kind of thing that they might have coached you on I'm I'm surprised they didn't give you a better feel for that this is the thing like you wish you will go to an accelerator and they're going to tell you oh so he this is what you have to do that is not how it works what's going to happen is that you're going to get exposed to a ton of different perspectives and it's of course you get coach and you get some Direction but for the most part it's also about you being able to walk through that the same way that you would do in real life Sean I think when you told us about going through a program that uh EO offers fairly early in your journey was it anything like this uh I think considerably different I mean for context I did this in 2000 the end of 2009 I think it might be called EO accelerator but it's a it's a really structure at least the way it was run then it was a really structured curricula it was designed as a three-year program to get your company up to a million dollar in annual revenue and you had to be uh at least $250,000 a year in sales so a very different thing there was no investing um component to it and it was because it was a three-year program it was it was pretty in-depth around the different each of the different areas of the business I had been running the business for 9 years by the time I joined it but I really didn't know anything about business so you know I really wasn't living up to our potential and and the accelerator program really unlocked that potential for us but that's when we saw you know really considerable growth year after year is there something specific you would point to that unlocked that potential for you that you got out of it I mean a lot of it was um being exposed to you know how to think about a business you know how to look at Finance how to look at your operations how to look at culture higher just just a lot of fundamentals that I was never exposed to and and then I would say the the most important part was strategy and business valuation so I focused a lot on what made a business worth something and really built the organization around that you know so things like recurring Revenue as opposed to project Revenue things like low turnover of employees things like higher value customers that valued you for what you did as opposed to transactional relationships so a lot about strategy in that case Paul I I don't think there were accelerator programs when you started your business but you've spoken here about how you feel it was a real turning point for you when you started getting some outside perspective on your business um you know and part from participating in a peer group uh setting like vistage yeah well if it was a turning point but it was 26 years after I started so so you survived 26 years do do you think an accelerator of some sort would have been of interest to you had it existed back then absolutely although I I was probably too dumb to realize the value of it but I would say that for anybody who's trying to start a business just getting out of your office and talking to more people is almost always worth doing and we just saw that when we all went to Chicago a couple weeks ago but you will meet people who know more than you and if you're smart enough to listen to them it's going to open up worlds of new information plus building a network of people you can call to help you and I don't I think it's very very difficult particularly these days to even imagine someone succeeding without building a network reaching out making use of the the ease of connection that we've been blessed with and so I think that these things are great and I definitely would have done it yeah I mean I think about you know for example the period of time at you know in the early early pandemic days when when the government put out the PPP funding the people who were networked in and who had connections and knew how to navigate that terrain they got money so much faster than those that didn't have those resources and the same with other issues like the employee retention tax credit and as I look back on my career I could tie all of its success to its the network and the people around me being isolated is just a bad idea yeah that was what I found the most valuable about the whole thing that this was people that of course I could reach out to them but I'm getting to know them like in this uh Mentor V relationship instead of just like professionally really allowed for a lot of things I guess it help to put yourself in this position of vulnerability because you tend to do when you have your bus hat on you want to come across it that you have it together so talking to this guy for instance what one our Le Mentor used to run m&a for Coca-Cola years and there was the equivalent for Pepsi and these were guys who are crazy experienced who have seen like the Vegas brand how they move and how they operate and had I met them on the street would I have been a lot more self-conscious about asking questions so here it was like the safe space if you will to say yeah you know what I don't have a together uh could you help me and what I really enjoy and be enjoy a week after we're still talking to a bunch of them it really allows for this closeness because you're talking to the people week in and week out and for us particularly as immigrants that we don't have a network per se it really was helpful well also you're talking to these people you're not just asking if you can pick their brains they have a a stake in the outcome they they benefit if you do better exactly so you can actually ask them for stuff like hey can you do this for me or can you make this introduction or can you look at my model and check this out because I'm not sure it's way different it's way different so at the end of the day just having the network it just makes a lot of things easier because frankly I spent a lot of time asking people this is what I want to do I'm pretty sure that I'm missing something what is it that I'm missing so last question Hans what has to happen for you to know that this experience was successful I already know that you know what there's a lot to be said for knowing yourself better and understanding both both the good and the bad as a Founder you to be a generalist you know a little bit about everything and there are some things that are more your inclination in my case marketing is definitely my thing one of my Witnesses personally is in the leadership side of things because I tend to be focused on like oh the spread says that this should be this and this and that is the reality is that yeah but there's humans actually doing the things so you need to take that into account and that's something that I have learned a lot about so I would say successful even then like even if I had if if if our company folded tomorrow I would say I am in such a better place to found a new one if I had to well let's hope it doesn't come to that I really don't think it will but I do think that like the experience is worth it and and this is think of this I mean I really hope that we're going to sell a company for hundreds of millions of dollars sure I am also aware that the possibility of that happen is limited so is this is not this is not a sure thing by any means no matter how good I am even if I was the perfect operator and the perfect founder and everything was perfect there are a lot of things that are going to be out of our control for many many different reasons my husband and I always talk about it like if you wait to start living your life until you are rich or until you have accomplished this and this and this and that you're going to be waiting a long time with no guarantees that it's going to actually come all right I want to hit a couple other topics uh in the time we have left one is Sean uh because of your uh activity on LinkedIn I learned recently that you kind of attended an unusual well not an unusual college graduation but it was kind of unusual that you went to this college graduation can you tell us about that yeah sure I haven't been to a graduation a long time but my uh one of my longtime employees Susie in the pandemic she decided to use the opportunity to go back to school and uh you know she's been with us for I don't know 9 years or so it's always been sort of a hope for me that she would want to go back to school cuz I think it would you know just do some really great things for her and so she decided to do that and we supported it and so she was going to school fall time while working for us full-time and so when she graduated I decided to go down to San Diego where she graduated from and congratulate her yeah it was great was it a big deal when you hired her that she didn't have a college degree at that point no it was kind of funny um you know Susie has everything you want on an employee right she's got the right attitude she's a go-getter hustles like crazy and she's got incredible skills you know she can run a spreadsheet like nobody's business she's a fantastic writer you know she's had a really great career but what was really interesting is that when I met her she was trying really hard to make a career change she was trying to get out of hospitality and into creative services and nobody would hire her you know they she didn't have the degree and she didn't have the work experience she's she's just really talented and and you know what really got her the job was she had had a Blog that she was running at the time and so she was just writing her own kind of personal stuff and it was it was fantastic so I just kind of hired her on the spot you don't often hear of business owners attending the college graduations of their employees was that just a spur of the- moment thing or is this something that um you thought about from the time she went back to school yeah I mean you know actually it it was maybe somewhere in between those two you know I've gone to employees weddings I've kind of helped them you know with the process of buying houses and you know just sort of coaching them through that kind of stuff and I mean these are Big Life events and I think that it's you know it's just a good thing to celebrate your employees accomplishments and you know San Diego's a 2hour flight from Portland so it's not not really that difficult nice I don't know I tend to have relationships with employees that are hopefully a little bit deeper than just the you know working together relationship yeah I think that's part of the reason we have low turnover are you at all concerned that now that she has that degree and you just gave her that great plug here on the on the podcast that you're going to lose her no I mean I don't think you can live your life worrying about losing employees um I think you just have to you know be gracious and uh celebrate people for their awesomeness and and hope that you provide the kind of place where they want to stay which you know I mean I think we've done that and over the years I you know I'll occasionally meet an owner who's like well I don't want to put any of my employees names on our website because people will poach our employees and I think that's thinking about things in the wrong way I've heard that many times I think you need to think about how you're keeping people excited to be there as opposed to fearful of others quote unquote taking your employees and you know with LinkedIn now I mean all that that that kind of thinking is kind of moot recruiters know who works for you and they're calling them and emailing them all the time so I think it's your job as an owner to create a great place to work that's your job you know if you're not doing that you have bigger problems than whether you're employees on your website Paul I wanted to ask you you recently managed to take a vacation tell us where you went I went to Ireland uh my wife is an artist and she went with a group of other painters for a week of painting the Irish Countryside and I had no particular role and all that so I just got to hang around in the Irish Countryside for a week doing very little and it was lovely has this been something that you've been able to do through the years no um from from 1986 to 2017 I don't think I ever took more than 2 days off work ouch jeez oh my God fall I think Hans was just talking about not waiting until you're successful to to enjoy your life well a big piece of that was that my personal situation with my autistic son just made it difficult to travel so even if I had just left work and stayed home it's not like we could throw the family in an airplane and go places right uh until his situation was sorted out I mean don't get me started on some interesting travel moments with a with an autistic kid but um it's not easy to travel when you've got a challenge like that in your personal life and it was just something that um you know this just how it happened but then once he was out of the house and settled into an adult living situation then my wife and I have been able to travel more I'm not a huge traveler it's not like I get up every morning pining to go somewhere so usually what happens is she will initiate something like hey I want to go here I want to see this and I resist and then at a certain point she's like I'm serious and then then I have to take over and do all the booking because she just doesn't do any of that and uh and so I'm swearing until the moment we get on the plane and then when we get there it's almost always it's lovely and I'm happy I did it but I hate the w up for it you have told us on the podcast uh in the past that if you got hit by that proverbial truck your business would not be in great shape how did it do for a week without you for a week it was no problem I could probably take up to I would say 3 weeks without much difficulty and the biggest thing that requires me to be around is I'm still signing checks and reviewing checks that go out aside from that I mean first of all when you travel doesn't mean you you're not seeing what's going on in the business I have my business set up so that there's information that I'm would like to see available via internet from anywhere in the world so I can see my emails and I can see orders that came in I can see our cash flow I can just so even when I'm out in the middle of nowhere as long as there's an internet connection I can I can uh reassure myself that things have not gone completely over the edge but in terms of just the people they barely know whether I'm here or not it's came back after I mean the 3 days I was in Chicago and then immediately went to Ireland so basically gone for two weeks and there are a number of them where like oh there you are you know he back whatever and which is good that's exactly what I want a a team that gets along and gets work done and everybody understand what has to happen they don't need me around every minute of the day and I take advantage of that I don't try to micromanage them in any way all right so so so the real question though you know Lauren is a terrible self-promoter what about Chicago tell us about that do you want Lauren to tell or me to tell I want you to tell us uh Paul like why' you go and what'd you get out of it well why did I go uh I've as I said at the beginning of the show I I believe there's always value in just meeting a new group of people and I really like a format where you actually have some time to sit down with every single person and get to know them a little bit I also have have faith in Lauren that he's going to put together an event that that's just basically valuable I mean he's been to 10 million small business conferences I believe so you have probably know what's what's good about him what's bad about him and it was a chance to meet some of the people I'd interacted with on the podcast but have never met face to face and uh I would say that it was a well-managed event uh there was never any useless downtime or everything that Lauren planned seemed to be well thought out Jay goz deserves a huge shout out for being an extremely gracious host and Chicago is a nice place to visit and the weather was good so yeah it was good and Lauren has such an interesting mix of people I got to say we were in Jay's boardroom and I'm looking around the room I'm like there's something really weird happening here and what it was is that first time in my entire life where I was in some kind of business situation there were more women than men and and I you know huge shout out to Lauren for being able to find a diverse group of of people to get together that really reflects what the future of business is going to look like of all the people who are there I know Liz pigazzi best because she and I have known each other for a number of years and she would probably be the one to comment on this but I have a feeling that for or your average founder who walks into a room of 50 plus year old white guys there's an intimidation factor and so I was just really happy to see successful business owners in a mix of demographics that really looks like the country and that's so unusual so six stars for Lauren for putting that together I I did not pay Paul to say that but I would have what did uh what did you learn from it Lauren what would you get out of it you know for me it was I I viewed it as an opportunity to kind of prove that there's real potential to to create a a 21 hats community and that if you brought people together they would connect you know I made some mistakes I definitely learned some important lessons doing it but it it exceeded my expectations in many ways you know it almost felt like a family reunion you know the the group came together really quickly and just seemed to feel really comfortable and we we discussed some difficult issues uh and you know people people let their guard down and and you know to to Paul's point one of the things that I did decide based on all the business conferences I've been to previously is you know the one thing I've just heard over and over again is I just wish there had been more time to get to know the other people who attended the conference there seemed to be some really great people there so I I did go all in on that there were no speakers we just talked and I felt like it worked I think that that's a huge plus honestly we we all got together for drinks the first evening everybody was arriving and there's sort of like a you know like H strangers how are we going to get along but everybody there was absolutely worth knowing there there is a depth of knowledge and then a generosity to share what people knew about their own particular business their own particular sector that they worked in and there was a broad range of people doing different things and it was just super valuable to have that time without being lectured to and uh yeah so kudos to to Lauren well thank you Paul I really appreciate all of that and uh the biggest thing that came out of it for me is I definitely am going to do another and uh hopefully uh maybe Shan and Hans will join us on the next one yeah definitely yeah congratulations that's I mean as somebody who's organized a conference before it is no small feat even a small group is is a real Challenge and it says a lot about you know the kind of relationships you've built over the years that people were willing to you know really take a risk side unseen and I I think you you know you really hit on something there about speakers you know as we're we're organizing Catalyst for our fourth year the feedback we've gotten in years past has been similar is that people want time to connect to each other and make it less about the speakers and and the the Paradox to that is that people often choose to go to events because of the speakers yep so it's a real tough needle to thread because you want to get people to come which is typically look at the speakers that we have but actually when they get there they don't care that much about the speakers they really care about who's in the room with them and that's a that's a neat trick that you've pulled off there and I think it it means you have deep relationships with people and I think it says a lot you know about who you are and and also the value providing connecting people who share values with each other yeah great job man I appreciate that well before you guys embarrass me any further um my thanks to Paul DS uh to Shan busy and to Hans shy uh and to our sponsor the great game of business which helps businesses use an open book management system to build healthier companies you can learn more at Great game.com thanks everybody wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's L ren21 hats.com do it now before you forget and don't be afraid to tell Jay what you really think you can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess thubron founder of blank word Productions okay now you can leave thanks for listening everyone 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