Andrew: Three messages before we get started: If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you’ve read his articles on VentureBeat, you know that he can help you with issues like raising money or issuing stock options or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at walkercorporatelaw.com.
Do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said that she has her phone number on every page of her site because, and here’s a stat, 95% of the people who call end up buying. Most people, though, don’t call her, but seeing a real number increases their confidence in her and they buy. So try this. Go to grasshopper.com and get a phone number that will make your company sound professional. Add it to your site and see what happens. Grasshopper.com!
And remember Patrick Buckley who I interviewed. He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on shopify.com because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store and manage it. Shopify.com.
Hey, there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart.
One of our bookers here at Mixergy said to me, “You know, Andrew, as marijuana is becoming more and more legal throughout the country, maybe the right place to build a company is to make one that makes pipes for smoking weed. You’re more protected from the law if you make the pipes and you can benefit financially as more people start to smoke.
So today I have an entrepreneur who is in the glass business and he happens to make pipes. Dave Daily is the founder of GravLabs which manufactures glassware in the contemporary pipes market. Dave, welcome
Dave: Thanks, Andrew. How are you doing?
Andrew: Good. Are these pipes that I see on your website, are they made for marijuana.
Dave: Well, even today we still put a ‘For tobacco use only’ sticker on every pipe that leaves our facility, but as the social climate is changing we are starting to have the opportunity to market our products to a growing marijuana smoking demographic, specifically in Colorado and Washington where it is legal, as well as to some of the medicinal [sp] states that have recently changed their laws.
Andrew: [??] when and if this becomes legal throughout the country that your business will rise. You’re seeing revenues go up [??] market increase as it’s becoming more legal?
Dave: Absolutely. I think that this is… What we saw in November was a very defining moment in [??] social climate of marijuana laws. Where we haven’t necessarily seen a giant increase in our sales in those specific states, Colorado and Washington, but I think it just gave a lot of entrepreneurs across the country who always wanted to open up a glass pipe business a really great excuse. I guess it made them feel a little more confident in their ability to start that business and not be ridiculed for it.
Andrew: What are your revenues now?
Dave: This year we are projected to do about $6.5 million.
Andrew: What did you do last year, 2012?
Dave: $4.25 million.
Andrew: Wow! And this is all your business, 100% personally owned?
Dave: It is, but we are running up against some difficulties in that expansion, and it’s really hard to grow 40% to 50% year over year without external financing, which I could get really deep into, but I’ll let you continue asking some questions about that.
Andrew: And this isn’t like a lot of the businesses that I interview here on Mixergy where if their sales increase by 25%, they could fire up some servers, maybe hire one extra person and they’re covered. How many employees do you have?
Dave: We have 70 employees in Austin alone, and we do have some production that we do in China to help facilitate the production that we do here. Thirty of those employees in Austin are glass-blowers, and the other 40 do processing, shipping, sales, marketing.
Andrew: All right. I want to hear how you got here because I think the story of how you built up this business is inspiring. But first, the way that you and I met is through Noah Kagan of AppSumo. And it actually had to do with a post that he put up on AppSumo about this incredible entrepreneur who had an innovative way of meeting him. And I said, “This is the entrepreneur for me to interview on Mixergy.” What did you do to get a hold of Noah who famously turns most people away?
Dave: Well, that’s, I have an app idea just like everybody else in the world. But it doesn’t have anything to do with my company. But, I’ve followed Noah, I’ve been a fan off AppSumo for a while and I also subscribe to his blog. So, in January, he posted a blog about selling his Sperrys online. And I was actually already looking at some Sperrys, because they’re top-siders.
Andrew: Shoes.
Dave: And I was like “Hey, you know what? I have this app idea. Even if I don’t have anything, maybe this guy just thinks my app idea is amazing. I’m going to see if I win can his shoes in order to get myself in front of him.” Well, I ended up losing his shoes. I actually bid it up to $600 for a pair of shoes. And I ended up losing the shoes and kind of let it go.
Then, a couple of months later, I had pursued more about this app idea. And I was just running up against walls. And so, I decided “Hey, look. Let’s reach out to Noah. Just let him know I was going to buy his shoes. Maybe he’ll get back to me, maybe he won’t. Either way, the worst that can happen is that he doesn’t get back to me.”
So, I sat down for about an hour and typed out an e-mail and thought about how I would want to be addressed if the roles were reversed. And he wrote back in 30 seconds. It was amazing. I got an amazing response and I think that just putting myself in his shoes was enough to make it simple to write a letter that would get a response.
Andrew: Yeah. And that’s the thing. I’m looking at the letter here and anyone can see it on AppSumo. And what’s interesting is that you do just keep making it about him and shifting it over to you right from the start. “I lost your Sperrys and your apartment,” which you put up on eBay for people to use. “And this is why you should meet me.” And then, you kept going from there. Talked about him and talked about why he would be interested in meeting you.
All right. So, then, I reached out to Noah and said, “Can you introduce me to this guy”? And that’s how we got put together here, today. So, I want to see how you built up this business. You started out in sub-prime lending?
Dave: I did. I was working at a mortgage company in Houston, Fidelity One Mortgage. And a small firm, like four or five guys. And I was processing loans for a while and then I got into generating some leads and I realized that, it was 2004, early 2004. And I started to generate leads in the $40,000 to $100,000 loan range. In that specific range, you can just smell the steak a mile away. You were competing. You’re basically buying these leads on LendingTree and competing with all of these other brokers that were trying to (?) this business and lying to these borrowers.
Andrew: What do you mean? What would you say to a borrower?
Dave: Well, that’s why I didn’t really get very much business. I would be open and honest with them about the reality of the situation which was, “Look, you’re getting into an adjustable-rate mortgage which is going to balloon on you, and you are not going to be able to afford this loan in five years. Here is your full amortization schedule. Let me explain the amortization schedule to you.” And that wasn’t happening.
Andrew: What were most people doing? What were the bad guys that you saw, doing?
Dave: Well, first of all, they were getting borrowers into these loans for nothing down. You could get into an house in Beaumont, Texas for zero down and without coming out of (?) you could buy a $100,000 house without them checking your credit and you know, we would sell no-docs, which was you don’t have to prove how much you make, and we don’t care about your credit. Andrew: So what you were doing was basically pushing credit that these people couldn’t handle and you said I can’t allow myself to do that.
Dave: Yeah, it was an awful place to be and of course I was young and idealistic, no family, I’m sure that pushed up against the wall, playing by the rules, I might have been enticed to go out there and sell more sub- prime loans, but that’s not really the story, the story was I could smell the stink a mile away so I took the advice of a friend of mine who said, hey Dave, why don’t we make that gravity bong that we used to make in college, you said that you can make it, if you can make it I’ll put it up on the internet, we’ll sell a million of them and we’ll be millionaires.
Andrew: What’s the gravity bong that you made in college?
Dave: Oh, I should have grabbed one for you. Well in college we just took a Jim Bean bottle and cut the bottom off it with a scoring tool, and then put a bowl on the top of it and used a bucket.
Andrew: So the bucket has water.
Dave: The bucket has water.
Andrew: The Jim Bean bottle is empty, you put it in so that the bottom of the Jim Bean bottle is in the water but the rest of it is not full?
Dave: So let’s say that the bucket is ten inches tall and you put the Jim Bean bottle in it and when, you cut the bottom off of the bottle, it submerges completely in the water, and then when you light, when you seal the mouth of the bottle and light it as you lift, the bottle fills up with smoke, and then you remove the stem and push it back down and the water volume shoots the smoke back up into your lungs. So it’s like a shotgun apparatus.
Andrew: What does that do for, I’m not a smoker, what does that do? What’s the difference, why not just smoke it like a cigarette?
Dave: Why do people take beer bongs? It’s completely unnecessary and it’s simply a party effect, it has no real–I mean, it does have the utility, in the effect that if you were to roll your own cigarette, you’re smoking it, all of the, as the paper is burning down you’re losing all of that smoke. When you use a gravity bong you lose zero smoke. So it is a good way to smoke all of your herbs that you’re smoking. But for the most part, it’s a party device.
Andrew: And I saw it on your website, grav.com, it is beautiful. A beautiful bottle now. I know that what you have now is not what you started, but it’s beautiful and I can see why people do it. All right, so he says to you, if you can make this, I will sell it online, we can get rich together, you don’t start blowing glass at that point, how do you have the very first one made?
Dave: So I knew that I needed to figure out how to cut bottles efficiently, I had no idea how to cut a bottle, so I took it to a local glass fabricator called Ben’s (?), I think they just filed bankruptcy a couple years ago, so Ben’s (?), I took a bottle in that I had actually fished out of a dumpster at Sam’s (?) in Houston, and I scraped the label off of it, it was a McCormick’s Vodka bottle.
And I took it to Ben’s (?), I said I need to cut the bottom off this because I’m making a special base for my mom, it was close to Mother’s Day 2004, and they insisted that there’s no good way to do it but they sent me to the back, talk to one of our techs. So this guy gets out this tiny little (?) glass saw, and he asks one of the guys to come over here and hold it, and it’s water-fed, four inch glass saw and he starts to cut it and I flip out my flip phone at the time and took some pictures of them cutting this bottle, and they were just as surprised as I was that the bottom just popped right off. They polished the end of it with some grinders and sent me on my way. And that day I ordered that (?) saw and I went to work cutting bottles
Andrew: How much did that saw cost?
Dave: It was $210.
Andrew: So your whole investment in the business is 210 dollars plus whatever bottles you could get. All right, so continuing with the story.
Dave: So I had the problem of what, I had a bottle, but I didn’t have a vehicle, I didn’t have the bucket or the base that it was going to sit inside of, and I needed to have a presentable product. No one was going to buy a McCormick Vodka bottle in a trash can from me. So after a couple of days of trying to work this problem out…my mom, I was living with my parents at the time, and my mom came to me and was like, “Hey,” and bless my parents that they were so supportive of this idea. And she came to me and said, “Hey, how about you use my Kendall-Jackson bottle?” And it was that eureka moment that was like, oh, wine bottles are all the same, I don’t have any variance. So I can actually use the same wine bottle over and over again and then I can get a uniform base.
So I went to Michael’s, which is an art supply store, and found these vases that were three dollars and fifty cents. So I am still fishing the bottles out of a dumpster and cutting them, and now I have a vase that they fit. And of course, they are not made to go together, but I am re-purposing. And now I have to figure out how to get a down stem and a bowl in it, which makes it smokable [sp]. You don’t want to have a…wine bottles come with a cork, so you can’t really manipulate the cork. You need to have some sort of a bowl that goes in the top of it.
So I go to a local smoke shop and I tell this guy, confide in this guy, and say, “Hey, here is my idea. I need to put a down stem and a bowl in it.” And he said, “Yeah, no problem. Here is the down stem that will fit, and there is the grommet, here is the bowl.” It will be $10. And $10 is too much money. I want to sell this thing wholesale for $20. So I can’t spend $10 on this bowl. So I tell him, “Hey look, I need to be able to buy these in large bulk.
Where can I get bowls and down stems?” To which he tells me, “Good luck, you’re not going to find them. Here’s the names of some distributors but even they will sell them to you for $7.00.” So I am running up against the walls and I eventually kind of, through the grape vine after a couple of months of kind of intermittently making these things, I didn’t just jump right into it. I was still kind of picking up gigs at the mortgage company.
And I actually, during that time, I also moved back to Austin. So now I am in Austin, I’ve got a friend of mine’s apartment for the summer. I’ve got like $15,000 saved up from the mortgage company and I am fresh start, making my…starting Gravitron [sp] in Austin, Texas. So I continued to buy…I find a source for these little down stems and bowls for $3.50. Now I am buying the base for $2.00, the down stems and bowls for $3.50, and I am cutting all the bottles myself, which I get for free at a local recycling company. So that’s kind of the start.
Andrew: So the overall cost is how much?
Dave: My overall cost on the unit is about $6.00 all said and done.
Andrew: So now you have to go out into the stores and sell them, right? Is that where you go? Or do you go somewhere else?
Dave: No, that is exactly what I did. I started going door-to-door, knocking, going to the head shops in Austin, and there weren’t very many of them. In fact, I continued to take trips into Houston to try to convince the stores in Houston to buy some of them as well. So right out of the chute I started selling about 20 to 25 a month, and the stores were re- ordering them. I mean, it was very encouraging. Immediately it was…I had found this small community, this counter culture, of stores that were selling pipes. And I guess I thought that it was a huge market.
I should probably backtrack and say that my buddy who wanted to sell a million of these on the internet…about two days later we found out that just a year before there was a federal crackdown called Operation Pipe Dreams. And Operation Pipe Dreams…they came in, the DEA came in, and they raided 55 of the biggest online distributors of marijuana paraphernalia. So that rendered all online sales of our product impossible. So he was immediately out of the picture and we didn’t have any articles of incorporation. And he was a good friend of mine. And so he said, “Hey Dave, go do it. You’re going to do it great. I’ve got another job, if you need anything…”
Andrew: Wasn’t Tommy Chong, of Cheech and Chong, put in jail for nine months because of this? Because he was selling…?
Dave: Yeah, that’s it. It’s actually a really good documentary.
Andrew. I didn’t know that there was a documentary on that.
Dave: Yeah, it’s great. The details of this story are obviously very long, and I don’t want to bore the viewers…
Andrew: Give me a sense of the DIY way that you started your business.
Dave: Sure.
Andrew: You then went on to a trade show. Right?
Dave: Right.
Andrew: How helpful was it to go and instead of talking to store owners one on one, going to a place where you get to meet a lot of them all at once?
Dave: The trade show changed my world entirely. I encourage anybody that’s pursuing any industry to pursue the trade shows associated with those industries, obviously. It was profound. I took a friend of mine with me to the trade show that happened in Vegas, and I had no idea what I was doing. It was only two or three months into the–well, I take that back. I had been doing it for about a year in Austin before I went to this trade show. It was August of 05 when I first went to that trade show. I took two different sizes by then of the Gravitron. It was just an amazing reception.
I called the trade show a week before, and asked them for the cheapest table that they had, which was $500.00. They put me off in a corner, and I printed a banner that we did the graphic design ourselves. I brought maybe ten units, and that was it. I had a notepad, ten units, and a banner. That was everything I brought with me. I get there and there’s this massive trade show with all of these really professional booths, and all of these people selling all of these glass (?) pipes. It was like oh my God, I have arrived. This is where I’m going to sell these things. If I can sell them, this is the place. I did. It was a three-day event. We went home that day with selling 500 units to about 33 different shops. That was a big push.
The other big move for me was starting to advertise in a trade magazine. There’s a big trade magazine in the industry that was the only one at the time. Now there’s four of them. I got a spread in the trade magazine, and the orders started coming in. It was actually an amazing time to be getting into the industry.
Andrew: You told April in the pre-interview that at that point you said, “I’m going to be rich.”
Dave: That’s right. Oh man, it was like we’re going to sell so many thousands of these. It was a really exciting time, and it didn’t last long.
Andrew: What happened?
Dave: You gained it back, and it’s like that. There’s that Citi commercial where they’re saying, “OK, I can sell them. Can you make them?” It was hard. It was really hard to produce everything that we needed to produce. I started to bring on more employees. I had a new warehouse. We were, obviously, advertising in this trade magazine now that cost us a $1000.00 a month. We’re planning to go to these trade shows that are going to end up costing us $5,000.00 or $6,000.00 per trade show.
I kind of cruised along that way for several years. In order to buy more inventory, I would take out a new credit card. I would transfer balances whenever they’d have balance transfer offer cards, new credit cards to pay off the old credit cards.
Andrew: How deep in debt did you get?
Dave: By 2007, I had $80,000 in debt.
Andrew: Personal credit card debt, $80,000?
Dave: Personal credit card debt.
Andrew: Were you making any money?
Dave: No, I was losing a lot of money. That’s how I got into all the debt. I was simply buying and selling inventory. Something wasn’t working out. It seemed so simple that…
Andrew: What was the problem?
Dave: The problem was that I think that I got over ambitious, and tried to hire more people than I needed. It’s a really, really delicate situation. I can’t say that it was necessarily a mistake. I think that I had to do that. If I hadn’t have continued to fund this business in whatever way I could possibly fund it, it would have died. It would not have worked. So it was either do it through credit cards or go to a bank. And what ended up happening after I had this come to Jesus so to speak, where, hey I’m 80,000 dollars in debt, I don’t own property or have a ton of inventory, if I had to close this thing down today, I couldn’t liquidate my assets to cover this debt and this is a big problem.
And I either need to go get another job or do something dramatic with this business. And at that point I had started to make all those, if you remember those (?) that I was talking about, I had learned through these several years that in order to cut my costs further, I had learned how to make those myself. And I had spent the last several years essentially teaching myself how to blow glass. So I was all in on this. I’m also really young, I was 26 years old.
And so I’m teaching myself how to make these things as I go and at the ACL festival in 2007 I took these little giveaway pipes, they were little one hitter bats, that I was taking there to give away, the materials cost me nothing, I was making them myself on the machine, so I was just willing to give away hundreds and hundreds of them. And at that festival one of our shop owners was there and he saw what I was giving away and he was like hey, you should come see me on Monday and I think we’d be interested in buying some of these. To which I thought was ridiculous because it was a really simple bat with our name on it, but he said, “Hey, look, you’ve got a name. You can sell these things.”
And that was that eureka moment for me, it was hey, I don’t have to be pigeonholed into this Gravitron product, While I’ve been really unsuccessful in generating a profit, all of these little individual stores, I had 600 stores by that time, who were selling about one per month. Those 600 stores were happy with that one per month. They would look up at the end of the year after buying the dozen that they bought from me at the trade show and realize that they were out. So I wasn’t that washed up gravity bong guy, I was Dave, the Gravitron guy. It was the guy who makes the Gravitrons. So when I started calling these shops and said, hey I have this other thing, They said, that’s awesome we’d love to try it. It’s amazing what you start to realize once you start to put yourself out there and realize that you can be so much bigger if you just kind of ride that.
Andrew: I see that you don’t just have to be the Gravitron guy. You can create other products for the same customers and you started out with this, you call it the, what was it, one hit.
Dave: I call them tasters now.
Andrew: Tasters, is what you call it on the site. Like little cigarettes.
Dave: Yeah exactly. I guess I should say that the taster was born because I went to the Cannabis Cup in 2006. And everybody was smoking in Amsterdam. So I traveled to Amsterdam, went to the Cannabis Cup, and everybody was smoking after each other. They were just walking around and taking bong rips one after another and it was disgusting. There were a couple people that were wiping it off, but otherwise you’re basically making out with everybody in the room.
So I said I could make these little one-hitters that I could give away at this event, and that way everybody could use their own piece. It would be a nice little giveaway piece. It costs nothing. Well, I never did anything about it, and then the ACL festival came around and I was like, hey I’m going to do that thing and give some of these away, and then, hence, the shop picking them up and me having that eureka moment.
Andrew: So does this taster, do I need to have a bong to use it, or can I just put some weed in it light it up and go?
Dave: You just put your herb in it, light it up ad you’re good. It’s just exactly like that.
Andrew: Should I be calling it herb instead of weed?
Dave: What’s that?
Andrew: Should I be calling it herb instead of weed? Am I?
Dave: Yeah, that’ll be fine.
Andrew: Not weed, I should have changed it in the intro
Dave: That’s okay. It’s fine.
Andrew: I have a cousin who does smoke who says that up until recently I was saying pot and he’s like, you’re insane. You’re sounding so out of it.
Dave: No, in fact, you should leave all this in.
Andrew: I will leave all this in, of course. Unless Skype craps out, we don’t edit. So then you needed more equipment to blow glass. And you got it from an interesting place, where did you get it?
Dave: This is where the stars really align and people get really upset at my story. It was shortly after, I had this epiphany that I need to sell more things to more people. It was in November of ’07, and I had been sitting on this Teischer[sp] machine. I actually made this machine myself. The guy that taught me how to make the bowl and (???) myself, he had a this machine which was, basically, a single-sided lathe. I took some pictures with my flip phone and went to Granger and built it myself, with the help of Granger. I proceeded to teach myself how to make these things. So, I’m sitting on this Teischer machine, making all of these things, trying to claw myself out of this debt. I should say, I let go of a lot of my employees during that time, to try and minimize my overhead, and really get back to bare bones. It worked really well, and I was able to. I had to work a lot harder.
The point is, I was making all these Teischers myself. One day, I realized that if I had a bigger machine, I could sell more things to more people. I got up off my chair, and went into the other room, got on Craigslist and I searched. I first searched Austin for glass lathe, and then my second search was Dallas. I type in glass lathe and up pops this posting that says “Glass Lathe or Spinning 5-inch Borosilicate Inner Tubes”. It had a phone number on it, and nothing else. I think it said “Do Not Email”. So, I call this guy, and the posting had just been posted five minutes before I had gotten online, miraculous. And it was 120 dollars. These are machines that typically sell for 20,000 dollars. So, I was thinking, there’s got to be some kind of mistake.
Andrew: Wait, 120 dollars instead of 20,000?
A: That’s right. So, I’m thinking, there’s got to be some kind of mistake. Yeah, 20,000 dollars used, at the time was a very typical price point to pay. So, I call him up. He’s says, ‘Well, you’re the first person to call. If you want it, you gotta be here in the morning.’ I said, ‘You can’t send me any pictures?’ ‘Nope. I don’t have a camera.’ So, I borrow a buddy’s truck, get in the truck the next morning, and I’m in Dallas by 9:30. He takes us out to this barn, in the middle of nowhere, opens up the barn door and sure enough, this is a Litten lathe, a glass blowing lathe. The guy ended up being ex-military, that used to make vacuum tubes for the military. It was a treasure trove of stuff. I got a lathe, I got a cut- off saw, I got some other vacuum tube equipment. It was amazing.
Andrew: Why was he selling for so little?
Dave: It was one of those situations where his wife said, ‘Get all that s**t out of the barn, or we got a problem.’ It wasn’t that simple. The lathe had been idle for 15 years, it needed a lot of work. I actually ended up having to borrow some money from my dad. I ended up borrowing about 5000 dollars in order to restore this machine. I got it restored, hired a glass-blower, and we, in tandem, started to make some bigger things, and expand the catalog. That brought us into 2008, and then she, the glass-blower that I hired, had a friend that wanted to come work with us as well. I had enough space to have a second machine, and this guy was working out of his house and he wanted to be in a more conducive environment. He brought his machine up there, and all of a sudden we were three glass-blowers with two big machines and a small one. All the while, we’re still going to these trade shows, still advertising in the magazines and the company is growing. At that point, it was definitely time to start becoming more of a distributor, continuing to exploit that asset which was our existing customer base.
Andrew: Distributing your own products, or other people’s products too?
Dave: Our own products. I mean, to this day I still don’t sell anybody else’s products. We design and manufacture every single product that we sell.
Andrew: So things are going great at this point, but wasn’t there a period when you had to let go of people, including some of your closest friends?
Dave: Yeah, that was that part that I skipped over briefly, which was the end of ’07, which was that really dark time when I was $80,000 in debt. I had no assets. I mean I didn’t even own my own car. It was that moment where my best friend, who I had come to the trade show with that first time…letting him go was really probably the hardest thing I ever did, but it also taught me a lot about myself and my business. You know, it was me owning up to the fact that this…when it comes to being an adult, you have to make some very difficult decisions. But between having to let him go and having to tackle this gigantic debt that I didn’t think that I could…that was rock bottom.
Andrew: Are you guys still friends?
Dave: Yeah, it definitely took some time, but he has since gone off and started his own company and…
Andrew: Because he was hurt that you were letting him go?
Dave: Yeah, I think it was really hard on him. I mean, I know it was really hard on him, and it was hard on me. I mean, it was definitely harder for Evan [sp] to get back on his feet. We weren’t necessarily taking on a lot of money in the first place. So…
Andrew: How do you let go of a friend properly?
Dave: How do you do it properly?
Andrew: Yeah, what did you do? Did you go in there and say, “Look, I want to work with you, but I have got to tell you I have got $80,000 in debt, and I think I am going to get crushed by all this debt and I know I can’t keep this going.”? Or do you say, “He doesn’t care about me. He just needs to know about himself.” So I will say, “I have to make this decision, but let’s talk about how we exit you.”
Dave: No, I don’t think it went down like that. I think it was neither. I think I did it much less eloquently than you put either scenario. I think it was more of an, “I don’t know what I’m doing, I’m flailing away, all I know is that I can’t keep paying you to do this and I don’t feel like we can continue on with this partnership.” And there was some more to it. I definitely remember feeling like he didn’t really understand the extent that I had gone to to build the business. I think there were some misunderstandings between the two of us, but…
Andrew: Did you also feel like this was his company and that was hard?
Dave: Absolutely.
Andrew: Like he had shared in the ownership of the business?
Dave: Absolutely. And to me it was like, hey look, you know what? That debt, that’s the business, you know? That’s what’s left of it. And unless you want to share that debt with me this isn’t going to happen.
Andrew: Was there any conversation with you guys beforehand about who owns the business or any implied understanding that he owned a piece of it?
Dave: I don’t think so, I don’t remember it that way. You know, of course, I started the business on my own. There was never any paperwork. There was never anything to document that there was any co-ownership of this. So no, there wasn’t. But yeah, I think that you put a lot of blood, sweat, and tears into a company that is in its infancy and you feel like you are a part of it, and I can understand that.
Andrew: Yeah. Was there a period where…well, how do you handle worry? Do you wake up in the middle of the night, unable to go to sleep? Do you smoke more? What do you do?
Dave: Neither. I feel like I’m really lucky to be a pretty stress-free person. I actually play a lot of sports. I think that is more of my outlet than anything else. I mean, every day of the week I either play basketball, ultimate Frisbee, or softball, so that’s a huge outlet for me. And Austin is a great place to do all of those things. And I also…I have since been able to hire a lot of really great people. And I have grown, that is one thing that I have never sacrificed, is trying to, you know…we don’t waste our time on people that don’t work out with this company.
Andrew: What about those periods when you are stressed? Was there a period where you woke up in the middle of the night? Was there a period where you were crying in the shower? There must have been something. That crying in the shower, by the way, came from a past interviewee who said, “I would go into the shower, grab a beer when I got home, drink it in the shower because I just didn’t even want to waste time, and start drinking.” And he said he cried sometimes. Those moments when you have $60,000, $80,000 in personal debt, that’s a big weight, especially when you’re the kind of person who dreams so big that several times, I am looking in my notes here, you said to yourself, “I’m going to be rich.” So you clearly wanted something big for yourself, but instead you were on your face watching the rest of the world succeed while you were in debt. Somehow you had to react to that. You’re not a machine.
Dave: Yeah, I guess…I have been fortunate enough to have a lot of vices. I don’t smoke a lot, I don’t drink a lot, but there were those times where I definitely didn’t think it was going to work out. And I can tell you that the hardest parts are not thinking that the business isn’t going to work out. The hardest parts are firing people. I definitely shed tears when Evan [sp] and I broke up. And I have shed tears almost every single time that I have had to fire somebody. There is not a single firing that I can remember where I didn’t get choked up, and because these are people’s lives.
And that, more than anything, I have realized throughout the years that if I can make the people who work for me successful, then I can get rich and be successful too. And when you have destroy other people’s dreams and excitement, that’s when it gets emotional. The money doesn’t make you emotional, I will be fine. I always knew that. Even if I had to close the doors with $80,000 of debt, I knew that I was going to be okay. At the time, I didn’t have a wife, I don’t have any kids, I didn’t have a lot to lose. And that I think had an instrumental effect on being able to bounce back.
Andrew: So when your head would go into, “Oh my God, I can’t believe I have got $80,000 in debt,” you would snap it back by saying, “Yeah, but I’m young. I can figure this out,” or “Yes, I’m young, but at least I don’t have a family that could end up on the street with me. I can always survive.”
Dave: Absolutely.
Andrew: Okay. Are you a millionaire now?
Dave: I think, I mean it depends on your definition of a millionaire. I mean, do I have a million dollars in the bank? No, I don’t have a million dollars in the bank.
Andrew: But the value of the company is?
Dave: I probably have a million dollars in inventory and the valuation of the company is probably significantly more than that, I don’t know. I mean, we are actually in the process of evaluating the company in order to be able to potentially raise some equity capital. Of course, we haven’t decided on doing that, but that is the process by which you go. You try to figure out what…you try to find [inaudible 00:03:37] and in order to do that you try to do an evaluation of the company, so.
Andrew: And Dave, ordinarily a business like yours with inventory, with customers, with a track record…you didn’t just start yesterday, you’re not a start-up anymore, you’re an ongoing business. Ordinarily you should be able to go into the bank and say, “I need to borrow money. Here is the inventory that you guys have as collateral.” You just can’t do it because of the industry that you’re in and the fact that there is some kind of stigma still?
Dave: Yeah, that’s right. I mean, I have no problem throwing Bank of America under the bus and telling you that they flat-out rejected me. And my new bank, who I love, who is Prosperity, they are very supportive but after we applied for a loan they only agreed to give us a $100,000 line of credit and that is a joke to a company that is doing $6.5 million in business, on track to. So we took it, and the truth is that we’re actually doing fine. It’s a matter of choosing to grow, and the unfortunate part about the banks not wanting to get on board is that we have this spectacular growth rate and if we were to get that financing, I think that we could grow significantly. I think that the conversation might be different if we were somewhere else. There are a lot of very open minded, liberal people in Austin, even liberal bank presidents and decision makers that really want to fund us and do all the things that you would do in a normal situation.
I think that they worry about the backlash. They tell you under their breath, “Hey, you know, I totally support what you’re doing, but, you know, I think that we can only afford to do about 100,000–let’s see how you do with 100,000, and then we’ll explore it.” I do believe that if I show them that I’m using it responsibly that they will extend that. Most banks won’t. That’s the truth of it.
You’re not going to walk into a bank and say, “Hey, I’m selling pipes that are for tobacco use only. But yeah, we also sell them to Colorado and Washington where they’re used for marijuana.” They’re going to go, “Whoa, hold on, you know, I don’t know if we’re really comfortable with that.” It’s a risk assessment on their part. I understand it, but it’s really unfortunate.
Andrew: Let me do a quick plug here, and then I want to ask you about top resources here that you gave April in the pre-interview. The plug, of course guys, is for Mixergy Premium. You guys see how this thing works. Right?
I bring on entrepreneurs to tell the stories behind their businesses. The reason I do that is because we as entrepreneurs don’t often react well to just being told what to do. Do this, do this, do this, do this. If we watch someone else do something that works, like hustle, talk store to store. Hustle and go to conferences, to trade shows and get a bunch of customers. Those ideas get implanted in our heads, and then when it’s time for us to think, “How do I get new customers? What haven’t I tried? I haven’t tried door to door. Let’s try that. That worked for Dave.” That will pop in your head, or “You know, we’re not actually going out and talking at conferences.” This guy, Dave Daley, did that. He went to trades shows, and that’s where he got the bulk of his customers early on and the idea for products that got him to grow even more.
That’s the idea behind interviews, that when listen to other extrepeuers you get ideas, and you don’t even have to work so hard. It’s not like they’re holding you by the lapels, or grabbing you by the neck and saying, “You’ve got to do this.” You’re just hearing their stories. It’s interesting. It’s motivating. You use what you learn without actively sitting down and saying. “Now I’ve got to use every single thing that I learned.” It just naturally will come out of you, and watch, trust me, if not immediately, maybe a few years from now, you’ll be thinking, “How do I get new customers? What didn’t I try? This thing worked for Dave.”
That’s where this comes in. We have hundreds, literally hundreds–I can actually use the word literally properly, hundreds of interviews at mixergy.com for premium members where you can download them, listen to them, and just allow this motivation and inspiration to hit you right away with the knowledge to really fill up your life for the rest of your life. When you are ready to actually take on a topic that you need like, “How do I get customers? How do I organize my pipeline?” I’ve got entrepreneurs who teach that in the courses. We have over a hundred courses. Again, I could use the word, literally properly. Literally, over a hundred courses taught by real entrepreneurs who break down how they did it and show you how you can too.
For the pipeline course, for example, if you are looking to do a pipeline, I’ve got you the guy from Mind Valley to teach you how to create a pipeline, how they did it and allowed themselves to keep growing consistently. It’s Juan Martitegui from Mind Valley. That’s the idea here behind Mixergy Premium.
If you are not yet a member, I urge you to go and sign up, because the sooner you sign up, the sooner you have access to all this. You’re going to start to see results sooner. You know me, Dave knows me, Noah Kagan, knows me, the hundreds of entrepreneur at Mixergy know me. I would kill this whole reputation that I built up over the years if you came back to me and said, “I’m not happy,” and I didn’t give you a refund.
There’s no risk here. You try it out. If you’re not happy, of course I’ll give you a refund, but thousands, again I could use the word properly, literally thousands of entrepreneurs who have signed up have been happy. I urge you to be one of those. Go to mixergy.com right now.
I intentionally did it a little bit slower, because a few people on Twitter have said, “You rush through your own sales.” It is tough to sell your own product, isn’t it?
Dave: I think you did a great job. That was great.
Andrew: Thank you. I’m actually happier with this. I can feel that I did a better job here. Sometimes it’s easier to sell your own stuff, because you believe in it more. Other times it’s harder, because it’s like I’m looking at the camera, not even at the audience. I’m trying not to look at the audience. I’m trying not to look at you. I’m looking at the camera, and I’m saying, essentially, “Love me, love my work, please. Love me enough to take out your credit card. That’s not the way to think about it. The way to think about it is to say, “Wait, what do all these people who signed up, say?” They say that they get a lot of value, a lot of benefit, out of it, and one guy actually called me a God.
I immediately showed the email to my wife last night. So I say, alright, these people are clearly happy with this. What are they happy about? Let’s explain that and look in the camera and say that, so that’s what I did. I’ve got a few resources, here, that you gave April. I don’t want you to have to remember what you said, but she asked you, ‘What are a few books, courses, online products that you recommend?’ Here’s the first one. I’ll give you the name, and you just tell me why you recommend it, the book, ‘Good to Great’, why that?
Dave: I think it really teaches you the fundamentals of leadership. I think I’ve read a lot of books and you try and conjure up all of them, and I guess the best endorsement for it is that it’s the one I think about the most. He really talks about the levels of leadership, and allows you to pick a category and it gives you a defined path to increasing your level of leadership. That can play really well in small businesses, all the way up to large businesses, and it’s allowed me to stair step during the growth of my business. So, that’s my favorite book.
Andrew: Here’s another one. I love this. I don’t think I miss an episode and I savor them, they’re so good. The ‘Marketplace Podcast’ from NPR, what do you like about that?
Dave: Well, I love Kai.
Andrew: Kai Risdol.
Dave: Kai Risdol. It’s just such a comprehensive website. It is hard to keep up with, on a daily basis. It’s 30 minutes, but it’s still digestible. I try to listen to, about 10 minutes of it on my ride to work in the morning, and then I’ll try to catch the second part, either during lunch or right after work. It automatically downloads again, at about 6:30 when it’s sent to my podcast. It’s free, and it just keeps you up to date with the news. I know that most of the entrepreneurs out there are probably so busy that it’s hard to keep up with everyday news stuff.
Andrew: That is the way that you keep up with business news,”Marketplace Podcast”. I should say, by the way, I got it wrong. I meant “Planet Money”. That’s the one that I love. “Planet Money” breaks down complicated topics and explains it very slowly and in an interesting way. I feel like I understand what’s going on in Greece. I feel like I understand why Greece could end up being a domino that leads to destruction in all of Europe. They’re just interesting. Alright, final one is “Freakonomics Podcast”. Why that?
Dave: The “Freakonomics Podcas” is probably one of the most useful, as far as direct business information, because of how focused they are on incentives. I hits close to home, because I graduated from UT with an economics degree, and I find that I’m constantly, every single day, thinking of new ways to properly provide incentive to the people who work here. Not only just the people who work here, my vendors, my customers, everybody throughout the business process all need the proper incentives in order to be motivated to work with you, continue to spend more money, work harder if they’re an employee, and that’s not always done by paying people more money. You need to find ways to give people the opportunity to grow, and do the things that they want to do in life. That’s really hard to do. If were a matter of just throwing more money at them, It would be easy.
Andrew: Could somebody help me out, and just hook this up in the comments, ‘Good to Great’, “Marketplace Podcast”, “Freakonomics Podcast”, and “Planet Money”, too. We share that passion. I love that podcast. The website is, I love how you have a four letter domain name, it’s grav.com. You can see the, what was it called, the Gravitron?
Dave: The Gravitron, among hundreds of other products, yeah.
Andrew: Even if you’re not a smoker, like me, I think you’ll agree that his stuff is just beautiful. It’s really well done. Thank you so much for doing this interview, and thank you all for being a part of it. Bye, guys.
