How to Take the Leap & Become an EntrepreneurTBOP2017 ⋅ 23:29 ⋅ Filmed May 12, 2017
Grab a hot beverage and cozy up by the fire with Derek Ball, founder of atVenu, a merchandise business that is revolutionizing the music industry — and has already grossed 979 million sales. If you’ve got the spirit of an entrepreneur inside you, you’ll love hearing Derek talk about the joy of the ideation phase of new ventures — and the crucial steps on how to make those ideas into reality. Many people have ideas — but this conversation could be the kick in the butt you need to separate from the crowd and make it happen. Learn from his experience as he talks openly about the challenges and choices today’s generation of business leaders and entrepreneurs will face. He even reveals what is — in his opinion — the single greatest mistake entrepreneurs make. As for building your business, Derek advises that there are really just two different mindsets most people adopt and he discusses the surprising reason one of those mindsets will most likely lead to failure. Using the struggles — and successes — of the likes of Shopify, Nortel, AirBnB, and Amazon, Derek sheds light on the many ways entrepreneurs can find blinding success — and the very real reasons why they need to fail. Should you pitch to a venture capitalist? How will you get funding? Is it better to play it safe and work for someone else? Do you need to move to Silicon Valley? Is it even possible to have work-life balance when you own a startup? In this honest conversation, Derek answers the burning questions every would-be business owner wants to know.
Tom Clark: Just let me tell you a little bit about Derek before we get going. Derek launched back in 2013 a company called, atVenu dealing with over 7,000 — have I got that right? — artists.
[00:16] Derek Ball: It's about 8,000 now.
[00:17] TC: 8,000 artists. OK, well. I got my information yesterday so you're growing pretty quickly. And, 200,000 shows and events that you've been involved with. And course, that wasn't where you started but this is where you are right now. Tremendous success story.
[00:35] DB: Thank you very much Tom.
[00:38] TC: Let's talk a little bit about this because first of all, I just gave a top shelf view of what you do. Give me a deeper view about what occupies your day when you walk into the office and get this thing going everyday.
[00:54] DB: Thank you very much. I'm definitely — and I've lost a bit of my voice last night. I went to too many of these pubs. Unfortunately, I left my voice behind in one of them. I'll try not to croak too much while I talk here (coughs). So my day, really my role in a company and, I like, for the folks who heard this yesterday, I like the earliest stages. I like it when somebody has an idea and does not know how to get that idea to become reality. I've been very fortunate in my career that I've done that several times now with either ides of my own or ideas of my co-founders.
The Birth of atVenu
[01:29] DB: atVenu came about when one of my co-founders who is a long time music industry guy said, 'You know what? Artists are having trouble making ends meet these days. They don't make money off their albums anymore. It's really all about selling tickets and selling merchandise. There's 400 companies trying to help them sell tickets and their merchandise business is a disaster so we jumped on started talking about that.
[01:55] DB: So, getting back to your question, what do I do everyday? That's how I start my day is always thinking about why do we do this? What are we up to? You mentioned earlier today about having your mission up on the wall. That's a great place to start every day, is why are you getting out of bed? And what are you going to do when you walk in those doors? But I look at my role as being an enabler. I've got a tremendous team and the team starts off very small and gets bigger over time. My job is to remove obstacles and barriers so my team can be successful at what they want to do and why they get out of bed everyday. I think that when you are a founder a company, that changes depending on what the needs are of any given day. So some days I'll be out there trying to figure out, how do I raise capital. Other days, I'll be in there trying to figure out how do I get that important customer to commit to working with us? Other days it might be, we've just run into a great individual that we really want to hire, how do we get her on board? So looking at these types of, so each day is different and may be a multitude of the these things but it's all about solving problems.
Validation in the Early Stages
[03:00] TC: You mentioned the fact this was not your first rodeo. That you've been involved in other things before. When you just now, talked about how you came up with the concept for this venture, it goes to the heart of what everybody in this project is doing and what people watching it are thinking about and that is, when you have an idea (like you did), you had to figure out how you move that along, how you scale up, how you make an idea into a real thing. You've got a lot of experience doing that. Have you got anything to pass along to these folks?
[03:39] DB: Well, one of things that I would say is that, everybody has ideas. And everybody has this ability to see things around that they think could be better. The entrepreneur, is the person that seizes that idea and chooses to do something about it. I think it’s really inspiring to see the teams here doing everything that they’re doing because they saw something they thought was broken that they wanted to address. They are pursuing that and seizes that.
[04:04] DB: It’s really a matter of not just having the idea but taking the steps towards making that idea real. The very earlier stages of that are validating it. You have this idea. It is really a good idea? How are you going to test that idea? I’m a big fan of what’s called the MVP (Minimal Viable Product). In fact, I test most of my idea without even building any products. We will fake it on some pieces paper, make a PowerPoint slide decks that look like they’re a product and go talk to customers. We got talk to people that need this problem solved and ask them, ‘would this solve your problem if we built it?’
[04:42] DB: Another thing that I'm a believer in for commercial projects, ones that are actually trying to become businesses is, people need to vote with their wallets. I’ve seen a lot of companies get started and say, 'well, we're going to give it away and hopefully get a whole bunch of people on our platform' but somebody, at the end of the day, has to pay for the salaries and the servers and everything else that [is] involved. So find something that not just solves a problem but if you want to be sustainable, find an economic model that's going to help you to actually accomplish your goals as well.
[05:12] DB: One of the things that's been great about hearing some of the teams here is, a lot of them are thinking about 'How do I not just rely on people giving me money?', 'How can I actually make my project self-sustaining so that it can generate it's own outcome'? So when you have an idea, validate it. Test it. And then figure out how it's going to stay alive no matter what.
Why Failure is Important
[05:32] TC: Let me ask you. We talk about the positives and what you must do but nobody who's successful in this world, especially the technology world, nobody who's successful hasn't failed at least once, twice or three times. So why is failure important, or as important, as success?
[05:56] DB: I've heard a few interesting quotes and I'm trying to remember if it was Einstein who said, "Wisdom comes from having done everything wrong the first time". (laughing) And there's no question that, I've built several businesses now, everybody goes, 'oh, it should be easy by now, isn't it?' No, it's like, 'it's never easy' and I just make new mistakes every time I do one. So, don't be afraid to make mistakes 'cause that is how you're going to get out there and be successful.
[06:27] DB: The way that you're going to learn what you want to do and if, you're doing it right, you're going to get knocked down and you're going to get back up. You're going to get knocked down and you're going to get back up. I think that's really important. In fact, I love seeing quite a few schools that have come out here today, and I think that a great message that I would like to make sure the students and the kids here are...you just have to try and when you fall down, you do it again.
Entrepreneurship at an Early Age
[06:50] DB: I actually had my first money making venture when I was probably about the same age as some of the kids that I see sitting out here. I used to catch snakes in my backyard in Kelowna and take them to school in an ice cream pail and sell them to kids at recess for a buck a snake. They would let them go and I would go catch the snakes again after and repeat the process until the lid came off in my locker and that was the day the school shut my little snake business.
[07:13] DB: One of things that I think we're doing a much better job of now that they didn't when I was in school, when I went to university I was taught to be a good employee at an oil company. I went to University of Calgary and that was just not how I was wired. I see now [that there's] a lot more focus in the schools on entrepreneurship. That it's OK to not just came out of school and go be an employee somewhere. I think it's great to be an employee and learn that but if you have that entrepreneurial attitude, go do it. Step out. Build your own business. There's no better time than when you're young and excited and energetic.
Stay Agile in Your Approach
[07:52] TC: You talked about the most important thing you need [for] a startup is validation. To make sure the brilliant idea that you've got is actually, at least a good idea in somebody else's eyes. What's the single greatest mistake you can make?
[08:11] DB: Believing your own BS (laughing), because I've seen an awful lot of startups as well convince themselves that their problem is real. Because they feel it's real but the rest of the world doesn't necessarily believe that. I think that the biggest mistake you can make is just not tuning into the messages that your community and your customers are giving you.
[08:37] Most businesses that are alive today are not successful with the product they started off making. Whatever they started doing really got them out into the world. And when they got out into the world and started really trying to make a go of it, is when they really realized what they should be doing. And so almost always companies will pivot or adjust what they're doing towards what they learn is a better opportunity or a bigger need. And so don't believe…(laughing)...don't drink the Kool-Aid...you have to drink enough Kool-Aid to get up in the morning to go and do it but pay attention to when you've drunk too much Kool-Aid and need to make adjustment.
Funding Your Venture
[09:15] TC: So, what's interesting about the team that are operating here is, that for the duration of this project, they're trying to raise capital online. A little like a Gofundme operation. For anybody else doing a startup, in your experience, the funding of course is a key element to all of this. Where to do you go for funding?
[9:40] DB: There's a lot of focus, I think especially on the technology and innovation world, [on] venture capital funding. Ben, who will be up on the panel with us shortly said yesterday, that's not always the right fit. Yet, we seem to think, as first time entrepreneurs that that's going to be the secret.
[09:57] DB: I remember when I was building one of my first companies and I was living in Calgary. I was invited to present my company to Banff Venture Forum and I thought, 'This is great! I'm going to whirl in there. I'm going to give my pitch and someone's going to write me a cheque for a couple million bucks. I'm off to the races.' It was a harsh wake up call when I walked in there and nobody wrote me a cheque. I had to step back and realize, 'Why not? Is my idea terrible?' It was because I was going after the wrong money for the stage and time in my business.
[10:29] DB: So, you don't usually (right out of the gate) run and pitch a venture capitalist. Your idea might not even be the right fit for a venture capitalist. You really need to understand your business, it's economic model and what kinds of monies you should be seeking. Most of the time, your first money is what we call the 'love money'. That's going to come from your friends and family. They're going to give you money because they love you, not because they believe in your business or their going to get a big return on it.
[10:55] TC: Well, they love you now.
[10:58] DB: Professional investors like to see you've taken some love money because they know Christmas dinner is going to be very uncomfortable if you screw it up. You need to get a little bit of that just to help you pay the bills, get things started, incorporate your business.
[11:13] DB: And then you can go out after seed or angel money because they have a different threshold of what they're looking for. And Angels are generally high net-worth individuals. They don't have investment committees. They're not going to do as deep a due diligence but they're going to buy into your passion and your vision of what you're trying to accomplish and if they buy in, they will usually write you a cheque — $5K, $10K, $25, $50K — and you'll get a handful of those who are buying into your vision. That's also good validation. Somebody who has been successful thinks that whatever you're doing has potential. Once you get that, then you can move into seed and if appropriate, venture capital, growth capital and private equity later on in the stage of business.
The Event Horizon & Business Sustainability
[11:59] TC: One of the other things, and you’re a good example of it is, in startups, it's becoming the traditional biography of the truly successful folks in that field, is that he started this business in 2001 and he sold it in 2003 and then started this in 2004. In other words, the question becomes, how long do you stick at something? It's not the like the old economy where you'd start something and the next 5 generations of the your family would be involved in the business. Now, it seems that the event horizon on all these things is fairly short.
[12:30] DB: I think that's very true. Because the public markets have not been very friendly to tech companies recently, although it's getting better now, we've got a few more improvements. Generally, the path to actually getting return on your investment, if you're a founder that might just be your time. Your investors are going to want their money back and hopefully more at some point. The most common way that happens now is through an M&A transaction. So if you've built something of value, someone will pay you for it.
[13:08] DB: I used to joke that really I have one product and I have to sell it one time, and it's the company. If you want to create a sustainable technology cluster. I know Kingston, we were having some discussions about that earlier is, how do you make that happen? You do need some anchors that are in it for the long haul. You need the Shopifys that are helping to fuel what's going on in Ottawa right now. There have been others before that between Nortel in the past. So you do need some that are going to be around for the long haul as well but most of them will not turn into a Shopify. Most of the them will get acquired by a Shopify.
[13:48] DB: The event horizon is definitely shorter but I don't think it's as short as people realize. Most tech companies that you suddenly see as being an overnight success, spend a lot of years trying to get there. AirBnB spent an awful lot of time making no money and struggling. [It] was several years before all of a sudden it took off for them. Before they hit the radar of most people in the public eye, they had been grinding it out for 3, 4, 5, 6, 7 years under the hood. I think some entrepreneurs think, 'I'll jump into this. I'll build something for 2 or 3 years. It will be successful. I'll get bought'. From my experience, it's usually a 5-7 year commitment on every one of these you launch. So you should expect that going in that this is going to be your sole focus for half to 3/4 of a decade.
Building A Business To Sell vs. Keep
[14:36 TC: Do you manage differently, if you've 'built to sell' as opposed to 'built to keep'?
[14:44] DB: I think that's one of the lessons I've learned having gone through this a few times. If you've built it to sell it, you're probably not going to be successful. You ultimately have to build a good business. It has to have good customers and good economics. If all you're thinking about is 'how I'm going to sell this in 5 years?', you're focused on the wrong things. You really need to be focused on what's going to make the people who are coming and giving me their business, 'how am I going to make them successful?' Because if you make them successful and you build a good business and the economics sustain it, then they'll be a lot of people suddenly interested in your business. If you think you just need to get bigger enough that someone is going to buy me, you're probably going to miss the ball.
When Do You Move On?
[15:24] TC: When you do know when it's time to leave an idea or to leave a project or to leave a company because it's not working? Because every entrepreneur believes to their boot straps that, 'if I just push on one more day, really going to work'. It's the problem with entrepreneurs, the good ones know when it's time to drop something and move on to Plan B. And the ones who fail tend to be the ones who stick with something a bit too long. How do you recognize that point?
[15:54] DB: Excellent question and a tough one to answer. It's not that there's a set of rules that you can follow. I'm definitely guilty of persisting with things too long especially earlier in my career. One of the mantra that I heard very quickly and one of my favourite leaders in innovation is Jeff Bezos of Amazon. He believes a few things. Start faster. Fail faster. He says when you feel you have 70% of the information you need in order to know whether you should something, you've already waited too long. You should have been going already. He said, go hard and if it's not working, quickly scrap it and move to something else.
[16:34] DB: I think that your gut is going to tell you pretty quickly [that] it's not working. When you get into trouble is when you don't listen to that when you really believe because your brain overrides your gut. So I've learned that my gut has been a pretty reliable indicator and if something's not working, I need to shift gears quickly for a few reasons. You have limited resources. You are burning through with the capital and the good will and the energy of your team. If you're ultimately not getting traction with it, you need to move on.
Traction Is An Indicator of Success
[17:06] DB: If I was going look for an indicator, it's traction. I had a chance to chat with the founder, who was up here yesterday, from Scent Trunk, and he was walking me through his business. Much later in his deck, he told me, “Hey, in February we kind of got out there with our product. We now have 2,000 customers. We had 1,000 the first month. 2,000 the second month”. “Whoa, what? You're telling me in two months, you've gone from 1,000 customers the first month to 2,000 the next month. Do you think that's sustainable?” He said, "Yeah, I think we're going to keep growing that." That is unbelievable because you have no idea how hard it is to do. That is your leading indicator that you're onto something real because he doesn't just have customers, they are paying him. They are voting with their wallets. If he had launched that and said, 'we've got it out for two months now and we only have four people that bought' that's the evidence saying something is not right.
Location, Location, Location
[17:58] TC: I would be interested in your perspective on where you set up and where you operate. There's no question that for some lucky startups who all of a sudden The Valley calls and says, 'Yeah, we're willing to invest but part of that is here's the leash, put it around your neck and move down to California because we want you around the corner to keep an eye on you’. There's money that you can get from New York and Boston and all sorts of other places. Yet there's been some terrifically successful companies operating in Canada which is, at the beginning seemed to be a little bit, like ‘why are you still here’? I know of a quantum computing company in Vancouver. All of their clients are American, so why are they still in Vancouver? So the question becomes, can you — I mean, the answer is obviously yes you can be successful if you stay in Canada, if you take a look at the success companies that exist in Canada — but if you're a young startup and you get that call from The Valley, at what point do you say, 'Adios Canada, I'm moving down south' or at what point do you say, 'No, I'm going to try and make it here'.
[19:13] DB: Another great question. That's something I get asked a lot because I moved, I answered that call, I moved down to Silicon Valley. My wife and I said we'd go for a year and try it out. Six years later, we haven't left. I think the question comes back to, can you build a successful company anywhere in the world? I know there's people tuned in from all over the world right now listening. It's become easier and much more viable to do that. Anywhere in the world now. Or almost anywhere in the world.
[19:43] DB: I think some of the tools that we now have at our disposal make that very possible but what I would encourage you [to do] is understand where your customers are and where your key partners are going to be. You can be anywhere but make sure you're ready to get on an airplane to go make things happen. With D-Wave [Systems Inc.] in Vancouver, they're spending a lot of time on airplanes with JPL [Jet Propulsion Laboratory] and their key customers in the US.
[20:06] DB: So you can build it almost anywhere but that doesn't mean you shouldn't go to Silicon Valley if that something that interests you and you want to try it out for a while. There are incredible experiences that you're going to have. You're going to see a different kind of culture than what I've seen in any other place in the world that's special to that area. You don't have to make it permanent. In fact, these days, I distribute my teams. My product team and everybody that's building our technology is in Calgary. My business team, we're in the Entertainment industry these days, so my business team is in LA. I have a small team in San Francisco and that works very well for us. Other people have the philosophy that you must have everybody together in one place. I think that's less critical these days. You want to get the best people and best people want to be in Kingston or Hawaii then find a way make that work.
[20:59] DB: Now as far as moving to The Valley and what's the siren call. For me it was because I had to spend so much time down there, I was never home. I have three kids and I wanted to make sure that — and I wasn't seeing enough of them and they weren't seeing enough of me. I thought, 'well, let's have an adventure'. The spark for me was some very good friends of ours moved to Santiago for three years and I thought that's really interesting. If I was going to relocate and our family was going to have an adventure somewhere, where would that be? Given what I do for a living, it was a good fit. Doesn't mean I won't come back here or I might not move somewhere else in the future. So I would say, be where you want to be. If you're not there, get there. But you can be here.
[21:41] TC: You brought up an interesting question when you said you didn't see enough of your family. Entrepreneurs face this all the time. It's the old question, you know, the work-life balance. Is there such a thing as a balance between work and life? Or is it something else?
[22:00] DB: I think there absolutely is and in fact, when you see an unbalanced entrepreneur — the one that's pouring 20 hours a day into their project and sleeping under their desk — it's not healthy and it's not sustainable. So when I see an entrepreneur exhibiting those characteristics, I tell them, 'your investors don't want that, your family doesn't want that. You really don't want that'. Make the time.
The Grass is Always Greener
[22:22] DB: I've seen something else which is probably a universal human characteristic, but once you see it, you can address it. The grass is always greener. So I was finding at various stages when I was with my family, I was feeling very guilty that I wasn't working on my project. When I was working on my project, I was feeling very guilty I wasn't spending time with my family.
[22:44] DB: Somewhere in the agenda, I saw there was a speaker who is going to talk about Mindfulness and being present and that's one of the biggest lessons I've learned. When I'm with my family, I am totally with my family. I'm not thinking about my project or wishing I was working on it. When I'm at work, I don't feel guilty about the fact that I'm working on what I'm doing. Once I came to peace with that, everything seemed to fall into place much better. You definitely need to rest, recharge and balance your life if you're going to be effective as an entrepreneur.