Had a tremendous time talking with Ian Sephton! We covered his background and the story and journey of Hangar202 and Funnel9.
#41: Patience and humility with Ian Sephton
I’m Aaron Spatz. And this is The Veterans Business Podcast. A podcast centered around the stories of US military veterans and their adventures in the business world following their time in service, its stories of challenges and obstacles and an inside look at how veterans find their life’s work, their purpose, and their post-military lives.
Welcome to another edition of The Veterans Business Podcast. I’m so excited that you’ve chosen to tune in. I just want to thank you so much for your listenership and for your viewership. It’s a true delight to curate these stories for you. And ultimately, I really hope that they help encourage you and inspire you on your professional journey. If you enjoy the show, please feel free to tell your friends, tell coworkers, tell others in your network about it. It’s a great way to get the word out.
I’m super excited to announce and introduce to you our guest this week. Our guest is Ian Sephton. Ian is a veteran US Marine. He served four years before getting out. And he has actually been a very busy guy and has been doing a lot of very interesting things in the business world. Most recently as co-founder of Funnel9 and he serves on the board of directors of Hangar 202 and The Branstetter Group and we will get into much, much, much more detail on both of these here shortly. So, Ian, I just want to thank you so much, sir, for joining the show.
Thanks for having us.
Awesome. Awesome. Well, no, as you and I were chatting during the pregame, I would just love to hear a little bit more about your journey. So share with us a little bit about your childhood, a little bit of your upbringing, and what inspired you to join the military?
All right. Well, it’s probably a theme that I think probably a lot of entrepreneurs have dealt with a little bit of adversity when I was younger. But I grew up in a modestly poor home. We lived outside of a Corona, California. There’s a little suburb there called Home Gardens and it was a nice little trailer park. So yeah, so money was always tight, and you know, definitely not coming from a house of education. Both my parents were not college educated, not really driven that way. But you know, just kind of had that little fire in me to do more and to be more and so worked through school, was a two-way athlete for Corona Centennial, which was a high school out here. That’s pretty, pretty good. Pretty well known.
And gotten a little bit of trouble in my senior year. And so instead of going that route, I decided to kind of straighten my life out and get a little bit more structure on my life. And so I joined the Marine Corps and it happened to be in 1996 and it happened to be the best decision that’s, you know, I credit a lot of my success to the fact that I was in the Marine Corps. The discipline, the attention to detail, the structure, the work ethic, the grit. I could go on and on about the things that it just forces you to find in yourself. I’m a little older to be a Crucible Marine, but these Crucible type moments where you realize that you can do a lot more than you thought when put under the right kind of pressure and iron sharpens iron. So yeah, and that was kind of where I got my start and I came out swinging.
Wow. Yeah, no, I like what you said about it. It forces you to find more within yourself. And I think that’s so true. I think that’s something that the military, specifically the Marine Corps. I am slightly biased but it does. It does. It forces you to grapple with certain aspects of yourself and it thrusts you into a whole different environment. And for a lot of people, it becomes like this, you know, I mean, I would say for all of us, it becomes a major life altering thing that happens. And then you look back on it, you know, three months later or 30 years later, and you can see the impact that it’s had on your life personally.
A hundred percent. I mean, some of my best friends are – in fact the best man in my wedding was somebody I me through the Marine Corps. It just puts you in a position where you rely on kind of your band of brothers to achieve whatever goal you’re going after. And so that stuff sticks with you. And I think what it’s really helped me understand is the dynamics of building teams now. I look at things way differently than I would have in high school. In high school, you know, as a young person with a little bit of talent, I was very selfish. I was a very much about my stats, my playing. I never really thought about it. I mean, I wanted the team to do well, but probably for myself.
And you really learn self-assessment in the Marines and you learn about just simple things in bootcamp where you’re punished really for someone within the platoon not doing what they’re supposed to do. And so you start to realize that, hey, we’re all in this together. Let’s figure it out. Let’s find the best outcome and let’s push forward. And so I’ve really tried to apply that type of leadership as I’ve moved through the corporate world and then into entrepreneurship.
Sure. And that’s terrific. Well then, share then a little bit about the decision to separate from the Marine Corps and then give us a little bit of insight into what were those immediate next steps for you right after you left?
Yeah. So I was in for four years. At three years, I was in E-5. I moved up twice meritorious. I got a NAM. I was very driven. I wanted to be a great Marine. And so I felt like I accomplished that. I was on the verge of reenlisting. There was a Marine commissioning program that I looked at and was pushed towards really heavily from some mentors of mine, but I just had this desire to go out and play football. I felt like I had left some things undone and I wanted to go give it a shot. And so, you know, candidly, I got out after four years and I went right into Chaffey College to play football. And, you know, the difference between myself when I was in high school and college was dramatic in terms of work ethic and everything else. The only differences at the time I had two small kids and I just couldn’t afford to play college football and take care of a family. So I had to basically kind of just blow that dream up and it’s like, okay, it’s time to grow up, Peter Pan. New dreams. And so I just decided I was going to dedicate myself for finishing my college degree, which I was able to do, and kind of climb the corporate ladder at the place that I was working at, which at the time was DHL Express.
Nice. Yeah. No, I mean, that’s a compelling story in and of itself, where you have these other dreams and then you realize at some point, given your very specific situation that there was other people in your life that were counting on you and college ball probably wasn’t going to pay the bills. And so I can’t imagine the tension that that puts you under. Well, I mean, what was that like?
It was hard. Because my whole life, the love for football is strong. The love for the Marine Corps is strong as well, but it’s different. Football is a game and I love the strategy of it. I love the team aspect of it. I love the figuring out where the weak points in the offense and the defense was. I used to draw plays in a notebook. My friends could tell you lots of stories of my crazy ideas. And so my idea was I wanted credibility playing at the college level so I could coach. I didn’t have any idea ideas of going to the NFL. You know, there was no Patrick from home sitting across from you today. But I worked hard. I’m strong and I was physical and I felt like I could play at the college level. And so that was kind of the main goal was to get that credibility to be a coach.
And when I decided I had to make the decision between family, and that was mainly because I was working nights. So I was working at night. I was going to school during the day and I was practicing the afternoon. I’m sleeping four hours a day. I mean, it was extremely hard on my body, on my family, on everyone. And I just couldn’t do it. There was just not enough hours in the day. I wish they had a 30-hour day. I think I could have pulled it off. But they don’t. So at that point, it’s just like, you know, it’s time to move on. And there was a mourning process. I think whenever you have a dream early and you think that that’s what you want and then you have to kind of refocus yourself towards something else, there’s a little bit of a mourning period that you need to give yourself. I gave myself that mourning period.
But then I said, you know, I just want to be the best at whatever I’m doing. So I took the same approach that I went into the Marine Corps bootcamp, which was, if I’m going to be here, I want to be the best. That’s it. I’m just going to work my off. And I may not be the best mentally, physically, or anything, but I’m going to be the hardest worker for sure. And so I just took that and, you know, DHL, I was promoted almost every year and a half. I mean, at the point of when I left to USC to take that role, I was 24 and my leadership group that I managed was in their 40s. I mean, they used to call me the golden child and all these fun things to make fun of me, but I was just very driven, very dedicated, very committed to kind of achieving the goals. In that environment, these were KPIs (Key Performance Indicators) and I wanted to be the best. And so every region I would take over, we climb the rankings. And so it was a lot of fun. It felt like playing sports.
Wow. Yeah, no. And you know, you’re just continuing to crush your metrics, crush the goals, continue to do really well. And so what I hear you saying is it also fed a little bit into your competitive side, your competitive spirit, almost like an outlet for football in some ways, right?
Yeah, definitely. I mean, I’ve been competitive my whole life and things from board games, video games, all those things. So I definitely feel like those things bring the best out of me in terms of just focus. And I think in an age of distraction, if you’re focused, you can really outperform your peers. If you really just figure out a way to calm your mind and not be sucked into the social media vortex and everything else and just focus on the job at hand, you can do some pretty great things. And it’s not that other people aren’t capable of doing those; they’re just not focused enough to do those.
Yeah. No, I think that’s a great tidbit of advice right there. It’s focus. Tell me how much you agree with the statement, and just because that statement, just really what you were just saying really kind of provoked this thought was, you know, focus, I feel, is one of the biggest detractors of success. I feel like it doesn’t even have to be a massive loss of focus. It’s just like the little interruptions during the day or the little distractors or the little ten-minute whatevers, you know, checking sports score, checking how the Raiders did against the Kansas City Chiefs.
They did well.
What kind of impact do you think that has?
I think I would say that it’s the most critical thing. I think in a distracted society where everything is engineered to distract you, it becomes harder and harder and you become more of a zombie or kind of Pavlov’s dog to these little chirps and beeps and notifications. And if you’re doing truly deep focus work, you cannot switch contacts like that. You need to be focused on what you’re working on the task at hand. And multitasking is the biggest lie we’ve ever told our ourselves. And I would say, so if I was to argue for two things that you could have to be really successful in anything you put your mind at, no matter what your skill level is, it’s focus and lack of fear or at least understanding how to deal with your fear.
Because I think a lot of that are very talented don’t do anything with their lives professionally, personally, whatever, what have you, because of fear – fear of failure, fear of what other people might say, whether it’s on social media or in the real world. They cannot get over the fact that there may be someone out there judging what they’re doing and that really impacts them. And I just don’t care. I really don’t care what other people will think. And I really think that those two things have really helped me succeed to a level that I never thought possible.
I mean, when you grow up in a trailer park, and I say that half tongue in cheek, it was a trailer park, but I didn’t even have a room. I slept in the laundry room. And so during the summer, when my family had to do laundry, which was almost every day, the temperature in that room was like 90 degrees. It was miserable. And when I look at all the things that happened to me and then I look back now and I go, “I’m in such a better place now. And for my family, for my friends and everything else.” It kind of blows my mind. And it’s those two things. Really, it’s focus and lack of fear.
Wow. That’s mind blowing to think you’re living on the floor of a laundry room there for a while too. I mean, that’s absolutely insane.
Yeah. Well, you know, so my stepfather, who was really a big instrumental part of my life, was really trying his best. I mean, he worked his tail off his whole life. He just didn’t make a lot of money and that’s just the way it is. And you know, he was a vending machine guy so he would be the guy that would come and refill the vending machines and take the quarters out. So a lot of times, and it kind of gives me goosebumps thinking about it, you know, I paid for my lunch with quarters that he would find under the machine. So those machines are very heavy. And so I know anybody that’s ever used coins. I know a lot of them are credit card now. Remember it’s like trying to put it in and missing and then it rolls under? Well, you know, at the end of the round, he’d have $1.50, $2. Well, $2 would buy me two burritos. And that was my lunch for that day. So, you know, he sacrificed a ton for me. I can’t thank him enough. But it just made me, that fire in me burn even hotter. I did not want to live like that ever. I was determined to figure out a way out of it.
That’s a great motivator. And then going back to your point about focus and lack of fear, yeah, I mean, speaking for myself, I think it’s a journey for me of mitigating the fear and pushing the fear down. And so not letting all these other hundred voices, either your own or other people, impacting – and I mean, in my case, specifically, it’s criticizing yourself. And I imagine for a lot of us, you are your own worst critic and so you’re constantly doing battle with yourself.
Yeah, yeah. I mean, but I think that anybody that’s a high achiever, you almost have to have that self-reflection of what could I have done better? What did I do wrong? I’ve made a ton of mistakes. Don’t get me wrong. I’m happy and I’m very blessed, but I’m also very aware that I’ve should have gone right instead of left in a few turns. And there’s some relationships that I wish I would have handled a little bit differently. But I think overall, I’ve just tried to stay my true north, which is, I want to build great teams. I want to build great companies. I don’t want to do great things. And that’s it. I’m a builder. I like to build things. And whether that’s a team or a product, it’s a lot of fun.
And you know, that’s why, you know, I know we talked a little bit about the Hangar202 and Branstetter Group in the intro. I got involved in those with a guy that’s 73 years old. That was my business partner. He was the co-founder of Houston’s Hillstone Restaurant Group. They started in 1977 in Nashville and grew. They’re iconic. I mean, anybody in hospitality knows who they are and knows what they stand for, mainly quality of servicing and quality product. And working with him for the last ten years has been like just having Yoda, and you see Star Wars behind me. I’m a huge Star Wars fan. It’s like having a Yoda with you to sit there and tell you, you know, maybe you should look at it this way. And the way he nudges me and pushes me is just very, very Yoda-like. That’s all I’m going to say. And I couldn’t have been anywhere that I’m at without him.
So, you know, you climb these ladders, you grow through these different roles and these opportunities, but it’s all these people that you kind of connect with that help you kind of mold yourself into something that you are today. And I’d have to say my stepfather and my business partner, Vic Branstetter, are the two that basically I owe a lot of the success that I’ve had to them.
That was cool. And now I’ve just got a picture of Yoda stuck in my head now, which I think is awesome. I mean, we all need those people, right? I mean, my closest advisors, I mean, I wouldn’t – you couldn’t get me to give away enough to trade for just the quality of advice. When you’ve got great people in your corner and you’ve got people that you can count on, I mean, that is so invaluable. And partnering with incredibly wise and talented people, I mean, that’s a win for everybody.
Yeah, yeah. And I think it’s essential. So when you’re trying to do, you know, I know we’re talking to different people with different parts of their journey, sure. My advice to anyone starting a business or thinking about starting a business is look for those wise people in your life that may not have that direct experience in what you’re trying to do, but may have that wisdom of life. You know, at 73 years old, even if we just take him in terms of years, he’s already blown me away. He’s been on this earth a lot longer so he’s seen more things. He can help me avoid maybe those landmines that I don’t see, but he’s already stepped on. And so that’s the kind of thing that I think that people – I think sometimes young people think I’m smart, I’m capable, I’m a hard worker and they just want to kind of go through and forward and they need some of that, I would say, like bumper pool or those big inflatable things they put in a bowling alleys, just to keep you on track.
Yeah, yeah. So shifting gears a little bit. Take us then through the next part of your journey. So share this story about USC and then kind of start carrying us through that.
Well, anybody that’s born and raised in Southern California, there’s one university. One. It’s not UCLA, it’s USC. And the reason it’s USC is because it stands for greatness and the USC network is everything that you dream about and more. My experience at USC was twofold. I was hired there. And the main reason I left – I was climbing the ladder at DHL. I was on the list for vice president very quickly and there was a future there for me. But I wanted something more and I really wanted my MBA from USC. And so I thought, well, let’s go work there and let’s just go to school. How hard would it be to go to school if I’m working there?
And so that’s what I did. And I had a great mentor there, Dan Stimmler, who again saw something in me and gave me opportunities to grow within the organization. So I was able to get promoted multiple times. And at the end of the day, I was the number two of the largest business unit of the university, which is housing, transportation, hospitality, hotel. So I got to see things that my background in the military and logistics, I just didn’t have exposure to initially, but I was able to learn very quickly, get exposed to things that you wouldn’t probably not see unless you were a consultant at McKinsey or Bain or potentially in private equity where you’re looking at different deals in a variety of different industries. So that experience was huge. I was also able to get my MBA in two years. So very helpful. Very, very… I’m a Trojan. I mean, I’m a diehard Trojan. I love that university like I love the Marine Corps. It was great.
That’s terrific. And you did it right because you were working in and going to school at the same time. So, I mean, you’re just maxing it out.
Well, so I had to get my undergraduate while working at DHL. So it took me six years, nights and weekends. That was tough. But again, as tough as when I first got out of the military, gave up a lot of free time to get my degree. As far as the USC degree, I got sponsored, so I didn’t have to pay a penny. That was kind of quasi fun scholarship, which is huge for private university. There’s a lot of talk right now about student debt. I totally agree that it’s out of control. The cost of going to a university is way too high and it is definitely a problem that needs to be solved. My experience at USC was amazing. And so I just want it to be more approachable for people that don’t have the money. And I don’t want to see young people buried in student debt, paying those things for 20 years when they’re just getting started. So, you know, I believe in these great universities institutions, but I believe that there needs to be change in how economical they are for other people to attend. And they shouldn’t have to be straddled with $300,000 in student debt to go to school. That’s just ridiculous.
Yeah., yeah. It’s pretty absurd. The price tag for a lot of these schools, it’s pretty insane, but yes. So share with us what happened after USC. So, you know, what’s the story of Syncromatics?
Yeah. So Syncromatics. So I had met someone at USC. He had actually worked for me. He had spun out a technology while working at USC. And so we had stayed in contact. Great guy. Josh Bigelow, who’s my current business partner in a few things. And we just always stayed in touch. And so he hit a pretty rough spot in about 2012 where the business was on shaky grounds. And I, at that time, was working with Vic Branstetter. We had The Branstetter Group and Hangar202. So we were doing investments and a little bit of advisory services, but I had some time. And so after meeting with him and meeting with some of the key executives of his team, I thought, you know, this is a great company. This can be much better. And the challenge that they were faced with is kind of integrating technology within mass transit, bringing mass transit to a level that you see today on Uber and everything else. But this is 2012. So this is a little further back.
And so I joined. We’ve worked out a deal to get me on. And I took over in 2012 and we grew the company and then we had a successful exit to a company in 2018. And then I ended my time, kind of quasi earned an out 2020. That company is international base and they’re very large, you know, billion dollar company. They bought us because they thought the team was amazing. They liked our technology stack. In fact, they’ve integrated a lot of the different things that we were using in their own base of operations, which is Madrid, Spain.
And so, you know, it was a great experience. It was fun to do the turnaround. It was fun to build the team and get the product to be a little bit more solid and build the pipeline of sales, which was really the biggest problem we had to solve. We had zero in sales when I came on. And turning that around was just tremendous amount of effort and time. It got less fun after the sale. You know, the thing I would say to entrepreneurs when you’re contemplating a sale is just be careful because a lot of things that you feel like – even though you’re quasi the CEO, once you sell, you lose control, and we lost control pretty quickly. And you know, some of the things, some of the promises I made to the employees based on some of the conversations that I had with folks at the company that acquired us, I wasn’t able to deliver on because they changed their mind or they changed the rules of the game.
And so I felt at a point in 2019 that I had done everything I could to deliver the returns. I mean, our sales were through the roof. Our pipeline is through the roof – everything. But they had not fulfilled their end of the bargain, mainly around a stock plan for the employees. And so I thought, well, at this point, I should just take myself off the table because I think that there’s some sort of thought that I’m negotiating for myself. And so I said, “I’ve got other things going on and so I don’t need that.” So I basically said, “Listen, I’m going to remove myself from the table. I still think you should do this.” And I pushed really hard to try and get it in place before I left. It was basically my last year there, which was the hardest year ever, knowing that you’d already given notice, knowing that there’s a recruitment for your replacement and trying to get this stock onto the employees that you know want to stay and not being able to succeed on that was just really, really demoralizing.
So I’m not there anymore. That’s okay. I feel the company will be fine. I’m sure. And the employees that know that they can earn more and do more may leave and that’s their choice. But I really tried to do right by the acquirer by setting up a modern American stock plan. And I think the fact that they’re European base, they don’t have those types of plans. They don’t have stock plans like we do.
Yeah. Wow. Wow. I mean, there’s so much here, right? So you covered like a lot of stuff in a very quick period. And I like to park here for just a few minutes. So share with us a little bit of then how did you go about the process of first entering the company, realizing that there were issues, and setting out to fix those issues? I mean, you mentioned sales. So what specifically were you looking at? What specifically were you doing to improve that situation?
Well, startup, especially a technology startup that like this has a lot of moving parts. So this is a technology company that really valued. It was a hard hardware-software mix. So an integrator. And so you had some homegrown hardware that we had designed in-house, some off-the-shelf hardware, which we relied on third parties, and then our own software that kind of brought it all together, provided this platform for folks to log in and log out whether you’re a rider or a manager of a transit system. So those things were in shambles mainly because when a startup, you know, you’re all about growth, you’re all about landing more customers. So a lot of times your idea of what the product should be day one and what the product in the market demands day 365 could be totally different, right?
So there was some refactoring that had to be done. Some schema changes that had to be done. Some things around how we looked at routes versus loops and things that probably anybody listening to this won’t care about. But the bottom line is that it was a mess. So we kind of went after it with a couple different tactics versus we had to solidify the team. So we went out and recruited some real strong engineers, namely one of the strongest engineers that I’ve worked with, Frank Wise, who was our CTO from the point that we hired him back. He had been an engineer there before, but we brought him back and he stayed all the way through the exit.
And so on the business development side, it had really been kind of pushed to the side. Anytime there was a technical problem to fix, sales stopped. Everyone focused on technology. Technology is getting better. We focus a little bit on sales. There’s another problem, sales stopped. So we did this start and stop, start and stop. And so we went in, we built out a CRM system where we had a flow. We started professionalizing the proposals because a lot of the work we did was to government. And we just tried to really professionalize the company.
So department by department, we went in and tried to just like, okay, we’re a startup, but now we’re going to be kind of an adolescent grown-up. What do we need to get there? Whether it’s people process, resources of any kind, structure. And so we just did it. It was trench warfare. Any turnaround, I think, is trench warfare. So every day was like a new challenge and a new surprise. You know, you always picture these doors you’re opening and then there’s another skeleton. You go, Hey, you didn’t tell me about this guy. Whether it’s disgruntled employee, lawsuits, things like that. So it was a challenge but it was fun.
And the thing is that I had so much trust with Josh Bigelow because we had worked together before that when you have that level of trust with somebody, you can take that off the table as a thing to consider, right? So when you’re working with someone and you hundred percent trust them, your mind doesn’t go to weird places. So when you’re frustrated or you’re not having a good day, you don’t think that that person’s out to get you or that I’m out to get him. And so we never had any of that. We’ve had some disagreements, some great ones, some very colorful ones. You know, I definitely brought my Marine out a couple of times with him because he’s an engineer and anybody that’s worked with engineers know they’re tough to manage. But the one thing about him is he’s absolutely dedicated to doing the right thing. And so when your core values align, when your trust is high, you can really do anything you need to do.
And so we were able to get a successful exit out of a company that honestly at the time, he was hoping for potentially a fire sale or maybe having just somebody take over his customers because he didn’t want to let down his customers because he was in over his head. He’s come a long way. In fact, we started Funnel9 together and mainly because there’s just so much learning that we did over the last eight, ten years that we’re ready to go. We know exactly where the landmines are. We know the type of team we want to build. We know the architecture we want and the tech stack and the things we want to play with and the things we have no desire to get involved in. And it’s been great. I mean, the last year has been really motivational. It really has despite COVID. I mean, COVID has been obviously a kick in the nuts, but you know, it’s been really fun to get in there and start something from scratch.
Oh, yeah, yeah. Well then, I mean, it’s kind of a perfect segue into the next topic, which is then just the whole entrepreneurship idea. And so where was that burst in you and where do you feel like you started to really allow yourself to think in the framework of an entrepreneur?
So even as a kid, I always had a little of – maybe entrepreneur would be too bold, but maybe a hustler in me. So, you know, the toys I had whenever we had garage sales and we had them a lot, mainly because there would be bills that were needed. And so we would have a garage sale as a way to kind of make ends meet. And I would love to sell my toys, you know, whatever toys I had. And it was not about getting rid of toys because I didn’t like them. It was about trying to figure out if I could get $3 for a Han Solo figure that was slightly used. And so I had a lot of fun doing that. So I’ve always been really good at a couple of things – building teams, relationships, and sales. So that’s really my strength, I would say. And so I would say that’s probably where I saw a little bit of it.
I don’t like always being called an entrepreneur. I feel like that phrase sometimes is overused. And so I don’t like to be clumped with people – my whole life, I’ve been trying to fight titles. You know, in high school, I played sports, but I was also on the yearbook staff. So, you know, I have a lot of curiosity and I don’t want to be painted in one broad stroke for anything. So, you know, I’ve had other businesses that, you know, we’ve been early stage in a lot of our investments for Hangar202 and then we haven’t talked much about that, but that’s the investment arm that I did with Vic. And so I’ve seen some really cool stories out of there in terms of growth and getting in early and things like that. We actually had a company, Cure Pharmaceutical, that went public. So we’re pretty excited about that.
But yeah, I feel like I’m a builder more than an entrepreneur. I like building teams. I like building companies. I like building products and I like building my life. And you know, I think the freedom you gain when you start to have some successes is you can build the life that you want. And so, you know, this morning I went and played tennis, and you can’t sometimes have that freedom when you’re in a crunching nine-to-five type of environment. So I’m very blessed and I’m learning tennis at 43. That’s challenging and humbling at the same time.
Right, right. Yeah. I can only imagine. Yeah. So, I mean, let’s go ahead and go in any number of directions. I mean, we’ve kind of touched on it, but let’s just go ahead and go there. So, I mean, you’ve been involved with Special Forces Sports Foundation. You’ve done a lot of work with Branstetter Group, Hangar 202, Funnel9 is your most recent thing. So I mean, any number of directions we can go there. So share with us – one curiosity I think that I have and I think a lot of folks have is the decision to take capital as it relates to startup versus the bootstrap process. So, I mean, what’s your perspective on that?
So if you value control, avoid raising money if you can avoid it. Depending on what you’re doing. I mean, everything has obviously a purpose and a reason. If you’re looking for fast growth, you need capital. In fact, part of the reason why at Syncromatics we needed to bring on a third party and eventually sell to them is the amount of capital that we needed for hardware, for floating AR, and all those things, and to grow and hire the engineers when you need them. Because the way that business cycle works is I would win a business contract say with the city called Santa Cruz and there would be a requirement of stuff we have, which is great. That’s always nice. But then there would be at a requirement stuff we hadn’t built yet. And so we would then have to build it.
And so the engineer cost in California, you know, 150 to 250. I mean, you’re talking about a very expensive resource and to throttle those on at the right time and know that it’s really hard to throttle them back without impacting morale and stuff like that. It’s very difficult. So managing cash for a fast growing hardware intensive technology company, extremely difficult. We did it for many, many years, but at some point, it was like, this is the reason we can’t grow at the rate we can grow. So let’s go out and do it. So that’s one case.
Funnel9 is an example, though. You know, we’ve had some success with some exits and so we’ve bankrolled the whole thing and we plan on bankrolling it too as long as possible. And the main reason for that is control. You know, the one thing that I learned a lot from working with the folks that acquires Syncromatics – really great people overall. You know, the stock thing aside, they were great people. And so there was great learning opportunities. But the one thing you lose when you have that controlling kind of figure over you is control and speed. When you see something, you go, “We definitely should do that. We got to go after it.” But then you got to go and get board approval. It really slows you down. And so I would argue that a smaller, more nimble company should be able to eat the lunch with almost any larger company just because of the bureaucracy and the BS that they have to deal with in getting things over the line.
So control is something that I value highly. I wouldn’t raise a lot of money for anything that I was in if I could fund it myself within reason. But there’s always outliers where I probably would and say, “This thing’s going to be huge and we need to bring around in before somebody else comes and eats our lunch.” So, yeah, I mean, I know that’s kind of a waffle answer but that’s how I feel.
No, that’s good. Yeah, no, it’s good. I think you touched on a few things. So going in reverse order was, you know, if you know that it’s a new idea, it’s something new to the market, and so realizing that basically whoever’s got the most amount of money to get it out there and scale up as quick as possible is going to become one of the Titans in that specific space, that it adds a little bit of pressure and a little bit of urgency. So that’s when capital would be incredibly useful. And then really the other part of your answer was whether or not you want to maintain control or not. And so if control is not absolutely a deal breaker then that may be another reason why you would consider taking on money. If I heard you right, those are essentially your two points.
Yeah. I think that that’s accurate. I mean, candidly, I’ve done over a hundred angel investments myself. So, you know, obviously, I believe in investing in companies. So I see that I’m serving two masters here. I don’t want your money for mine, but I’m willing to put my money in yours. And that’s because of the control aspect. I want to have control. I don’t want to have anybody outside influencing yet. Now at some point, every company, I think, comes to a point where you have to start thinking about what’s the exit or what’s the next phase of this company’s growth. And so there’s probably an appropriate time for every company to take on some capital. But my goal right now, especially with Funnel9, is to wait until the absolute latest moment possible.
Nice. Yeah. Well, it’ll be cool. It’ll be cool to where you go with that. And I mean, it looks like a great platform. I mean, more than happy to give you the floor so you can share with us a little bit more about what that’s about.
Yeah. I mean, I’m very excited mainly because I’ve got – so because of the investments in Hangar202 and some of the personal investments I have, I have a lot of either significant or majority owned stakes in a lot of companies. And so the benefit of that is I’ve done diligence and I’ve dug into how companies operate, how they do marketing, and how they do operations. And so one of the areas that I saw as an opportunity as to Josh – Josh is also an investor in a lot of companies with me – is that there’s really a lot of unknowns out there from digital marketing.
So as an example, when you’re selling your services or your product, you go to Google, you go to Facebook, you go to all of these platforms and you do these advertisements and you get conversions, clicks, impressions. They have all these different fancy titles. And so for like a large company with a marketing department that can sit there and do analytics and data analysis and do a bunch of fancy reports, it is very simple to run those platforms. In fact, digital marketing agencies make a lot of money doing that, and that’s okay. But for small business and medium business, when you can’t afford a marketing department, it is extremely overwhelming.
The data is everywhere. It is abstracted at so many different places that it’s hard to know what’s real and what’s not. So you could look at your website and go, “Oh, we got 400 hits today on our website.” And you think from just a number’s fact, that, wow, that’s really high. But when you dig in and look at it, you go, “200 of those are job board web crawlers. So I only had 200 hits on my website.” But if you stopped at that first number, you wouldn’t have any clue about that.
And so what we’ve done at Funnel9 is kind of just combed away and just think of it as like there’s a ledger coming to – your online presence is your physical store. And everyone that comes there, signs ledger and says why they’re there and who sent them there. So whether it’s Google, Facebook, and all those things, we can tell you where they’re coming from, where we’ve gotten the sophistication that you can get way more than Google Analytics and some of the other platforms is we go to the lead level. So if somebody converts into a true qualified lead, we can give you that attribution data all the way back, all the way through the funnel – where they came in, how they came in, how long they played in different areas. At the lead level, not at the click level, not at the impression level. And then further, we’re planning to integrate with accounting systems and some other things to give you the real lifetime value of some of the customers.
So if you’re in a, let’s say, wealth management as an example, where every time you sign a new customer, the LTV is obviously really high because they don’t probably switch every year because that would be a real pain in the ass. Finding out where you found them within the digital arena would be very valuable. And so that’s what we’re really doing. Longer term, we’re trying to build a platform that could be small business kind of ERP. So just think of something to help you manage the very limited resources, namely your own time, to maximize your spend and increase your ROI.
That’s terrific. I’m genuinely excited to check it out. Yeah, no, that’d be cool. So shifting gears back to business. Share with us some of the traits, and I’d like for you to go positive and negative on this too. What are some of the things that you’ve seen that are telltale signs that someone’s on the right track? And they’re maybe a self-funded startup business and they’re just barely scraping by or they may have a great startup idea and they’re well on their way to raising a ton of money, versus those that struggle and they don’t make it, right? Or they take over a company and instead of it being a turnaround, it’s a nose dive. It may be very obvious answers too, but you have a lot of insight into a lot of different companies. So I’d love to get your perspective on that.
Yeah. I mean, like I said, I’m very blessed that I’ve gotten exposed to a lot of different industries and a lot of different companies at a level that most people probably haven’t. In my work at Hangar202, we’ve done some diligence for some private equity on some major deal points, acquisitions and things like that. And so, you know, you kind of get to remove the marketing, remove the smoke and mirrors a little bit and see the inner secrets of the company. And I can say without a doubt, and this is not uncommon knowledge. I mean, people know this. It’s the people. It really is the people. I’ve not found a company where I’ve said that this is so great that even though these people are terrible at running things or terrible at treating people, their employees, or any of those things, it’ll still be successful. Generally, never happens.
You know, hopefully this word doesn’t scare too people. We have to a no-hassle rule. You know, if you’re feeling that vibe from somebody, it’s probably a bad fit and there’s probably stories out there of unicorns from people that are very abrasive and kudos to them, but life’s too short. Who wants to deal with that? So yeah, in my view, it’s the people, and it’s generally not just the C-level, it’s that one layer down. How are they developing the people that are going to be replacing them? I’ve seen large companies that have a really brilliant C-level team and then you meet the people below them and it’s B and C players, that’s dangerous.
And then, you know, obviously, cash is king and financials are very important. And so are they managing things in a very diligent way? Are they noticing the trends? Are they staying on top of things and reducing workforce? Like COVID is great example. So I own a company up in the Bay Area that does office furniture, manufacturing refurbishing. It’s the investment that I did with Josh Bigelow a long time ago. And it’s been a great company run by an amazing team and they do great. And seeing some of kind of the headwinds of COVID, we were making some major changes on our board calls early because we were seeing things just absolutely shutting down. And I feel like we were so fast at some of the reductions in labor, which was tough, going to our landlord, which was tough, and doing all those things that when things started to normalize – and by the way, they’re nowhere normal in San Francisco, but they’re normalizing, the rebound and everything seems like it’s moving in the right direction. And we would not be in that position had we not made those changes and made those moves early in the process.
So, you know, strong team, being diligent on the financials and staying on top of things. I think those are the two key elements. On the product side, you know, if you get lucky and you find a product guy that gets it, especially on the tech side, that’s really something special. Steve Wise is a guy that worked with me at Syncromatics and just somebody that was a believer in mass transit, a believer in data as an enabler of moving people from A to B and minimizing traffic and inclusion things. Just a true believer in what we can accomplish there. And then giving him the reins to the product was probably one of the best decisions we ever made and seeing him refactor the UI/UX and doing all those cool things, it was so awesome. And he was a younger guy that just had that fire. And so you love to see people, younger people kind of climb and do great things. It’s really, I think, probably the coach in me wants that more than anything now as I just want to see young people succeed and be challenged.
That’s terrific insight. And yeah, I mean, you’ve got a really unique perspective. Because I mean, again, you’re in a lot of different things and so it’s really fascinating. And then one more question and we’ll start to wrap it up. I don’t want to keep running here. But you know, what advice would you have then for those that are listening or watching that either a) they have a business idea that they want to get off the ground, they just haven’t taken those first steps and then maybe b) the other group would be, hey, we have started a business this year and we’re in the early stages and we’re continuing to grind and hustle and trying to get off the ground. What words of advice, what perspective would you give them?
Yeah. Okay. So let me start with somebody with an idea. I think validating the idea is really critical. Like when we built Funnel9, you know, like I had mentioned to you, we had exposure to a lot of different small businesses that were all having these similar challenges. So we were able to go, “Okay. Let’s build a feature.” Not a product, not a platform, no other buzzwords. Let’s just build a feature and see if this helps. Show it to the team that manages that or show it to the owner and say, “Does this help? Do you like this?” And hearing them say, “Wow, this is great. What else can you build?” “Well, what’s your other largest problem that you’re dealing with?” “Oh, okay. Give us some time going away.” So it’s a slower process for sure. It takes away the kind of the allure of being the brilliant entrepreneur in your silo, you know, solving problems without any output or input from other factors. But I can tell you, it’s been very helpful for us.
And so that would be my advice on somebody that has an idea. Validate it through somebody that needs that idea. Who are you building this for? And validate that you’re building the right thing. Because you don’t want to build something that you think is great. You spend ten weeks, 12 weeks, six months a year, you get it out there and it’s just crickets. That would be the worst.
As far as somebody that is dealing with business today, I got to say any business owner right now has probably been challenged the most in my lifetime. I’m 43. So not to say – I’m not Warren Buffett, but could it be a worst year, 2020, where you’ve got political unrest, you’ve got a worldwide pandemic, you’ve got an economy that is a little bipolar, right? We got stocks going up. But every single person that I talked to is telling me sales are down or they’re dealing with some troubles.
It is tough. And so for me, the problem is really our government hasn’t handled this the right way. And the analogy that I would give you is if you tell a business owner two weeks and then we’ll go back to normal, or six months, we go back to normal, or a year, you’re giving them at least something to plan towards, right? So if you have cash forecast and you have your numbers and you know what you need to do in terms of your burn rate, you’re able to kind of go, “Okay. Here’s the game plan to match the two weeks or the four weeks or the six months.” But when you get an unlimited number thrown at you, for whatever reason, whether it is to control the spread or flatten the curve or whatever, it’s extremely difficult to plan around that because where’s the end date? Without a second PPP loan, I think there’s going to be a mass amount of companies that are not going to make it.
So for me, if I was mentoring any business right now, I would say preserve cash at all costs, cut more than you think you need to, slow your delivery times down and whatever you’re giving to your customer. Because at the end of the day, they’ll probably be pretty accepting right now. And don’t bury your head in the sand and think that things are just going to figure themselves out. And don’t hope. Seriously, don’t hope for this election to change anything. Because the virus is not partisan. It’s being promoted and marketed that way, but it’s not partisan. And I just don’t think that whether it’s Biden or Trump, I don’t think we’re going to see a major change right away. So just as business owners and as entrepreneurs, we just need to be as resourceful as possible and preserve cash at all costs.
Wow. I appreciate that. And, Ian, really, just our last segment here, but I mean, if there’s anything else that we haven’t gotten to yet, if there’s anything else that’s on your chest, I mean, I’d love to give this last segment back to you. Any final parting shots?
No, I mean, you know, part of the reason why I was excited to do this was the fact that you’re a Marine and I’m a Marine. So, you know, we have that, we’ll always have that semper fi. I think in my opinion, that veterans today, more so than probably any other time, are just insanely suited for entrepreneurship. Command and control, grit, hard work, dealing with adversity, getting knocked down and getting back up, you’re talking about a society that in general in a lot of areas is pretty entitled, pretty soft. And so you’ve gone through and been tested in fire. And so applying it is kind of like playing varsity football versus junior varsity. A move you could never do it at the varsity level a lot, in the military, you can do against a JV player because they’re not as fast. They’re not as talented. They’re not as brave.
So I just think if you’re a veteran and you have the capability to start your own business, you should definitely do it. And just try and find those core values that are important to you to make sure you hire around you or things that you’re not best at and go at it because we need more entrepreneurs, we need more builders in this country. And I think the veterans are – not just Marines, I mean, I’m biased to Marine Corps, but I think the army, every one of them has a leg up on most of the civilians that have not been tested like that. And that’s not to disparage civilians. We love you. But I’m just saying, we’ve just been tested a little bit harder mentally physically, and those things really have been helpful to me. Like I said, I credit the Marine Corps with a lot of my success, especially around self-discipline and attention to detail. I think those things are really critical.
No, that’s terrific. And I just want to sincerely thank you. One, for spending so much time with me, but two, just for sharing all your words of wisdom, some of the hard-fought thoughts, struggles and triumphs of what you’re working on now. And again, thank you so much
Happy to do it and hope it helps someone out there. Even if it helps one person, that’s great.
Man, what a fun conversation. I really, really enjoyed speaking to Ian. I love the pace of our conversation. We’ve covered a lot of material very quickly and there’s a lot of really great points that I would encourage you to go back on and really ponder. I loved a lot of his points as it related to one, I mean, it’s funny, you know, he doesn’t like to be labeled. He doesn’t like the concept of certain labels just because it kind of sets up a certain level of expectation. I loved the points about entrepreneurship and about getting the right people around you, continuing to grow. What would drive you to want to take on investment versus bootstrapping at yourself? Just a lot of very interesting perspective. So he is doing a lot of really exciting things in business. He’s done a ton of exciting things in business. So a tremendous amount of information to learn.
And so it’s great to see stories of guys that and gals that have done well in the business space and they’ve had maybe multiple successes. They’ve had failures and successes, but they’ve got a little bit of a body of work that you can go back on. And so, I mean, as evidenced by his current business partner, which he met several years ago through one of the very first things that he did. So it’s a really fascinating study and really worthy of some serious reflection. So anyway, I just want to thank you. Thanks for tuning in. Thanks for watching. And look forward to doing this again soon. See you.