How does a founder who’s miserable at his job create a multimillion dollar company?
Martin Bjergegaard is the founder of Frokost.dk, Denmark’s leading food portal with millions in revenues. (I’ll ask him to get more specific about it.)
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All right, let’s get started.
Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart.
How does a founder who’s miserable at his job create a multimillion dollar company? Martin, and I’m going to try the name and he’ll get it right with me, Martin Bjegegaard. You say it Martin.
Martin: Thanks, Andrew. It was a good attempt. The way you say it is going to be Bjergegaard but I’ve never heard any American be able to say that so I definitely appreciate what you just said.
Andrew: I wanted to at least try and I definitely, as I told you before the interview, I wanted to get it on the record properly because I imagine somebody who’s on his way over to get a job with you or raise money from you is listening to this interview. I want them to hit the rewind button a couple of times and at least hear you say it so they can practice.
Martin: It’s a challenge but OK.
Andrew: So Martin is the founder of Frokost.dk. It’s Denmark’s leading food portal and it has millions in revenue, as I mentioned earlier. I’m going to ask him to get a little more specific about the revenues in this interview. And what don’t I tell you a little bit more specifically what the company does.
Basically, if you have an organization and you need lunch for all your people, you go to Frokost.dk in Denmark, you order lunch. They have it delivered. Everyone can sit down and eat together instead of having them all run around noon or 1 o’clock to get their own lunches separately. That’s what the company does and we’ll hear how he built it up in this interview.
We’ll also find out that he is the author of ‘Winning without Losing’, an upcoming book. Actually, it’s been published in Europe, it’s been big in Russia and soon will be here in the U.S. and he’s running several companies including RainMaking which turns ideas into businesses and Startup Bootcamp, an European accelerator.
Martin, thanks for doing this interview.
Martin: You’re welcome. Thanks for having me, Andrew.
Andrew: The time that made you say I need to stop. What was the job that you spent 15 miserable months in?
Martin: It was as a Management Consultant at Mackenzie and Company. And it’s not critique of them. It was just a bad fix with my personality. But I definitely learned something and that is necessary to be on top of that. But I learned to endure long hours and basically hated it.
Andrew: And the time that made you say Hey, I got to get out of here, was when you woke up in a strange place.
Where did you wake up?
Martin: I was stationed in Kuwait City and I’d been there for a couple of months. I had my girlfriend back in Copenhagen. And I was quite junior and I’d been made responsible for our work stream. I think that was a way of testing me, if I was ready to be promoted a small step on the long ladder there. And I guess I wasn’t ready up to the task. I felt it was a bit boring, it was [??] of industry analysis and long, long PowerPoint needed to come out of it. And it wasn’t really what I dreamed of doing and it came to a point where I was just sitting alone with this [??] analysis, this [??] files and all those numbers and spreadsheets and market research and [??] experts.
And then suddenly I just couldn’t sleep anymore. And I was at the Marriott Hotel in Kuwait City and I was just walking around there, enjoying the night because when you’re laying in bed, at least when I lay in bed, I lay in my bed for 3 hours. I just couldn’t stand being in the room anymore looking up to the ceiling. So I started walking around the hallways and found a couch and I sat down for awhile. I got up again. I found another couch. And then I half fell asleep on a very soft high quality couch at Marriott. And then I was suddenly looking up and there were some staff members standing there. And said, “Are you OK, sir?”
And I had to admit to myself that actually no. And then I made – after that had been going on for some days and when I can’t sleep anymore then it goes quickly downhill. So after three or four days I needed to make a decision. And I decided to simply call back home, in Copenhagen. Ask for the HR manager which was the person responsible for that kind of issue. And I told her, “I’m sorry, but I really need to quit.” And she said, “Can you just come back home and we’ll talk about it? And we’ll find something for you in Copenhagen. There’s no reason to overreact. Don’t you think of that.” And I said, “I totally appreciate and respect your attempt to get me to reconsider, but I really need to sleep and in order to do that I simply need you to accept the fact that I am quitting.” The message in person. I’m going to send an email now and it’s done. That was necessary, because after that I just went up to my room and slept as a baby. So it was definitely my decision.
Andrew: I can’t imagine actually just sleeping in the hallway on some couch at the Marriott and having a coworker find me, especially when you’re that far away from home and when you’re working at McKinsey which gives you all this prestige. So here’s this guy with all this prestige is now sleeping like a homeless man at Marriott’s couch. But I understand. It wasn’t the job for you. And what we’ll see is the next place was a huge step forward for you. And then you launched this company that we’re here to talk about in this interview today. And what people who hear that story are going to wonder is, “What was this guy doing at McKinsey?” And you went there for a specific reason, because you had a problem. What was that problem?
Martin: I started my first business when I turned 18, because in Denmark it’s possible to legally start a company when you’re 18. And on my 18 year birthday, I filed the papers and got my company. At least in a legal way. And I’ve been waiting for that, because I already started a little bit on the side. So it was really good to get it on paper as well. And I think the reason I started so early on was that my dad an entrepreneur and I had been helping him for as long as I can remember. So I was really excited about getting my own company. And then during the next five years I tried to launch five different companies. A couple of times got it up to around ten employees. But then each time it started falling apart. I was probably quite OK at working on my own, but I was a terrible manager. Terrible leader, I think. And also the strategy was not very sharp if it ever is, but I can definitely see today that there were a lot of mistakes being made there
Andrew: Give me an example, because I know that there are a lot of people in my audience who hit some, I guess we all do, we hit some ceiling beyond which we think we can’t break. Maybe it’s we get to $100,000 but for some reason we can’t get to half a million in revenue. Maybe we get to a million and ten people but we can’t break any further than that no matter how much we try. For you when you got yourself at an early age to a ceiling of roughly ten employees and you couldn’t break through that ceiling what was the problem? What was, in retrospect, holding you back?
Martin: It’s a really good question. And I think it was [??] my personality wasn’t right at the time.
Andrew: I’m sorry. It was what?
Martin: [??] 18-year-old. My personal maturity. I was quite young and very ambitious guy, but also an insecure guy in many ways. And I couldn’t see that there was anything else that maybe would work in people’s lives. And I simply couldn’t understand when my staff had to pick up children or when they didn’t prioritize our ventures as much as I did. And I guess I was – there were many good reasons to leave me if you were an employee [??]
Andrew: I see. You’re saying hey you were really passionate about your business. You didn’t understand why everyone else who worked for you wasn’t equally passionate. If they wanted to go and pick up their kids or go see a kid at a recital or even maybe go to take the kid to the hospital, not the hospital but the doctor’s, you said, “Hey. Do that on your own time. Why aren’t you focused like I am?” And no one wants to work for a boss who doesn’t care about them. And that’s essentially what was going on.
Martin: Exactly. And also if I wanted to get a message across I think it could – I hadn’t the communication skills to do it in a good way. So I would …
Andrew: Give an example of how you did it in a bad way.
Martin: What we did in one of the companies we sold toys to kindergartens, day care centers, and stuff like that. We had some sales people on the road. I was a pretty good salesman myself, so after a while, I hired someone to also do it. I took a ride with them, and observed them, and gave them feedback.
I know for sure today, I would have given that feedback differently, because I’m quite sure that what they experienced was to get a lot of their advice from an 18 or 19 or 20-year-old guy was pretty arrogant. He didn’t really know that much. Especially a lot about life. I can see if you’re 30 or 40 years old, how that could have been an experience that is not particularly motivating.
I think it’s very important, if you are a leader today, that you can lead in an inspiring way, in an insightful way, and a human way. As I evaluate myself, where there has been the biggest change, that today people can actually trust me to be reasonable, to be fair, to be respectful. That wasn’t necessarily the case when I was in the very early stage of my career.
Andrew: I see. All right. Now I understand, you go to McKenzie. You get that sensitivity for dealing with people, because McKenzie people, well, you tell me, are they diplomatic? Is that where you learned how to connect with people?
Martin: They are diplomatic with clients. Very diplomatic. Really, really good at client communication. Internally, they’re not that diplomatic. They’re not great people managers. What often goes wrong is when a McKenzie person gets to be a leader in some organization. Sometimes it works fine, because they are so clever, that they can even can adapt to that new situation. Also, in a lot of circumstances, it goes wrong. Even though they are so clever, but because they can’t handle with the people issues.
I would definitely say that, internally, McKenzie is not a great example of leadership. There’s a saying that it’s very easy to be a leader at McKenzie. Because they say, jump, and the staff asks, how high? That’s just very different from a non-company . . .
Martin: . . . where people should maybe say, why? I wouldn’t say they were good at people management at all. I think the most important thing was that I got to have a boss. I actually got to try three or five different bosses during my McKenzie time. That was extremely important, because I learned how it was to be on the receiving end of that relationship. I hadn’t looked through before, but actually I found myself to be pretty sad if my boss was just a little bit insensitive with me. I learned in a very real way, that maybe I should become a bit better when I’m the boss.
Andrew: OK. All right. Then you quit McKenzie, as you talked about earlier, and you end up going to work for a company that I said helped change your life. What was that company?
Martin: It’s called [??] and it a Danish chef called Klaus Meyer. He owns half of the Noma, which has been named the world’s best restaurant two or three years in a row now. It’s an amazing restaurant in Copenhagen. He also owns a kind of a food empire, where they have canteens, and delis, and bakeries, and [TD], food center, all kinds of things. At the time, it had grown rapidly, from 25 million [??] in 2000, up to a hundred million [??] in revenue in 2004 when I joined. It’s very successful, but also it was an organization with no business people.
Andrew: That’s why they wanted you. They said, McKenzie, great background. We want him.
Andrew: They brought you on board, and soon after, you discovered a problem. Somebody bought a catering kitchen. Why was that a problem?
Martin: Klaus Meyer has a principle of owning a lot of his businesses with other business parts. He was only a company who were running canteens together with a guy called Klaus Ingstrom. Klaus Ingstrom was quite independent. He just bought a catering kitchen to deliver lunches to companies, instead of running in-house canteens for those [??] as a company, and the boss got a bit upset with that, especially that he didn’t ask him. Klaus Meyer, his partner, also got a bit upset about it. Anyway, he was real important, because he was the CEO. He ran the company and the board didn’t do much, so they just had to accept it at the end of the day. I was working across the companies, and we agreed that I should try to help fill that kitchen up with customers, now that we had them anyway. Because . . .
Andrew: Let me see if I understand this. What do you mean by a canteen? Maybe it’s a language issue. What kind of kitchen was this?
Martin: It’s not a restaurant. It’s a big production kitchen where you make meals for maybe 500 or a thousand people, and then drive it out to the companies.
Andrew: I see. Then companies and their lunchrooms have the food that was driven out to them from the kitchen. Is that how it works?
Martin: Exactly. Yeah.
Andrew: I see.
Martin: I think it’s a cultural thing. That model is very normal in Denmark. If you work in a decent office, then the company takes care of the lunch. If it’s a company with more than a hundred employees, most often they will have their own in-house canteen. But if they have fewer than a hundred, then the financial probably won’t work out, so instead they get the food from an external supplier.
Andrew: OK. There’s a company here in San Francisco that does that. I met one of their employees at dinner once. It’s called Zerocater.
Andrew: What they do is they give a company menus from local restaurants. They pick what food everyone should eat. Then Zerocater comes and delivers it. OK. What happened was you said, hey, there’s this opportunity here. We have this kitchen that we shouldn’t have bought. We need to fill it up with cooks. Actually, what did you need to do with it? I shouldn’t explain it off my notes.
Martin: Yeah, we had cooks. We needed to fill up with customers.
Andrew: Was it individual cooks who were working for you, or working for themselves and renting space from you?
Martin: No. No, we owned the kitchen, and we had hired some chefs.
Martin: We had a capacity of somewhere between 500 and 1000 meals a day. We just had the problem we were only serving one-third of that, or something like that. Klaus Ingstrom had bought the kitchen, but he wasn’t that aggressive a salesman, so I’m thinking that he was a bit more patient than maybe the board was in terms of filling up that kitchen with customers, so we could make money on it. We agreed that I should have a look at that. I just started a sales effort. It quite quickly filled up with customers, because it was a good product and there were a lot of customers out there.
It wasn’t that difficult. Then the challenge was a few months later when the customers started quitting, and finding new kitchens, and new restaurants. I did some exit interviews, and said, so, why are you leaving us? Have we done anything wrong? Is the food bad? Was it too late or anything? They actually said, no, you did everything fine. We just need to try something new.
Andrew: Just new kind of food?
Martin: Yeah. A new kind of food. I said, okay, we can change the menu. We have a chef who can do Mexican on Monday. The problem is that all chefs have, even though they try to vary the food a lot, it’s the same guy doing it. They just needed to try something else. I thought that made a lot of sense, because when I go to a restaurant, I don’t want to go to the same place all the time. I want to try different things. Why should that be different with your lunch? I thought that it made perfect sense.
When I looked into the market dynamics, I found out that almost all customers switch within six months. So we have this industry where there are tons of restaurants, tons of kitchens, delivering to tons of customers, and they all need to establish a new relationship every three to six months.
Andrew: They’re willing to do that, because their employees are so bored with the food that they need to switch and find a new kitchen.
Martin: Exactly. Yeah.
Andrew: You discovered this because you were doing exit interviews. Because when someone said, hey, we’re going to cancel our relationship with you, you called them up and said, why. You understood their issue.
Andrew: OK. Then an idea struck you. The idea that was the golden idea. What was it?
Martin: The idea was to make a network of kitchens instead.
Martin: I didn’t know exactly what that would look like, or the legal structure of that would be. I just thought that let’s have a shared office with some employees who make sales and customer service on behalf of many kitchens. They are good at making the food, and they’re not really good at talking to customers, to do invoicing, to do sales, marketing, branding, all those things.
We, on the other hand, are quite good at that, and it’s something that I feel comfortable about, and I think I could make a difference in this industry. To just allow the chefs to focus on what they’re good at, and split up the value chain, then, basically. We introduced a new role in the value chain. I know that, normally, it’s popular to take away roles in the value chain, we say. We actually introduced a new layer there.
We came in between the kitchen, or the restaurant, and the customer, the company who bought the lunch. Normally, that would be a direct relationship, but I thought that let’s go in, and be the middle man there and a facilitator of that, and take a [??] that’s going to be our revenue model. Then we’re going to buy from a lot of kitchens.
If you’re a customer at our company, you can choose from a lot of different restaurants. You can really get your Mexican on Monday, and it’s going to be from a really Mexican chef. Then you can get sushi on Tuesday if you want to, and sandwiches Wednesday, Thursday and Friday.
Andrew: It’s all done by specialists. You’re not getting the guy who makes Mexican food to make you sushi on Thursday.
Andrew: Now when you took this to Klaus Meyer, what was the response?
Martin: He said that I’m not put into this world to be Mr. 5%.
Andrew: Why? What does he mean by 5%.
Martin: He meant that because he said, how are we doing to make money on this, and I said that we’re going to take a cut. I don’t know exactly what that should be, but we’re going to take some percentage for hands in this. It’s kind of a trading company, or it’s a middleman model, or what you should call it. He didn’t feel that that was his role in life. He’s very passionate about producing the best olive oil in the world, finding a way to make the best apples in Denmark possible. He’s very much into the world of gourmet and make the best products. Give people peak experiences with food, like Noma does. That’s what he’s passionate about. He’s not all about making money, not at all.
Andrew: But you take this idea to him. He shoots you down. Very noble reasons why he says, no way. What’s interesting to me, and we haven’t even gotten to the company that you launched. What’s interesting to me is what you did when you heard no. You didn’t just say, ah, damn, good idea. Maybe I should hold off, and do it some other time, or come up with another idea, or focus on my work. You, instead, went to someone else.
Martin: Yeah. I think that’s been that way, for good and for worse, in my whole career, that when I have something that I’m passionate about, no one can say no. Only myself. Oh, of course, reality kicks in sooner or later. A lot of times I have been fighting with something, and a lot of people have said that’s a bad idea, or no, or something, and I’ve just been keeping going at it.
After a while, of course, if I don’t get any positive response from the real world, the I have to [inaudible] problem with Klaus, and what I did was that I spoke to Klaus Ingstrom, and the chairman of the board. The chairman of the board was was kind of, yeah, it might be a good idea, but if Klaus says no, we probably shouldn’t do it. He wasn’t completely against it, and then I talked to Klaus Ingstrom.
That was an example of that it’s good to try many entries, because he liked the idea. He said, yeah, that’s a great idea, and if Klaus Meyer doesn’t want it in this company, we can do it here in my company, which they own together 50/50. That was the history of how Klaus Ingstrom could make his own decisions.
Andrew: I see. You can now take your idea, partner with his partner who had a kitchen, and get started.
Martin: Yeah. Exactly.
Andrew: And you own what percent of the business, and what percent does he own of the business?
Martin: We made a model where Klaus Ingstrom owned 25%, I owned 25, and Klaus Meyer owned 25.
Andrew: Okay. So even though Klaus Meyer didn’t like this idea, he still ended up with 25?
Martin: Yeah. Because I didn’t want to do this against his will together with his business partner. Based on Klaus Ingstrom’s interest in the idea, I went back to him, and said, Klaud Ingstrom likes it. The board likes it. At least they’re not against it. I really want to so this. I want to have you in the business, so you can make money on it as well. I’m not going to require a big investment from you, or anything, just your blessing. To sit in the office and be able to be, even though not by name, part of this group.
Andrew: You got 25% of the business just for a little bit of investment and a lot of credibility?
Martin: Yeah. It did help me a lot. The first person I hired, Tanya, was extremely important for the business. I couldn’t have done it without her. She came in because she was attracted to my ability, and . . .
Andrew: I see.
Martin: . . . to this brand. We had an inflow of talent, and I grabbed the best of that talent for my company.
Andrew: I’m sorry, Martin. I want to make sure that I understand the percent. Klaus got 25. The other Klaus got 25. You got 25. Did I miss a 25 somewhere?
Martin: The last 25 was distributed. Tanya got some, and some people we needed to make happy to make this happen got some. The chairman of the board got some. [laughs] 5%. It was a bit funny. It was just to make it possible.
Andrew: It seems like everyone who knew you got a percent of the business. Did the guy who woke you up at the McKenzie couch, did he get a percent?
Andrew: No, not that person.
Martin: To make Klaus Meyer happy, we had to give 5% to his chairman, because the chairman was asking for equity in the mother company. Klaus was reluctant to give him that, and that was kind of a problem. This solved the problem for Klaus and that was part of him allowing me to do it.
Andrew: I see. He said, I can’t give you a percent in my big business here, but I can give you in Martin’s new company, and we’ll see where that goes.
Martin: The chairman of the board got 5% and Klaus Ingstrom also had a guy, his right hand at the canteen company. He was also asking for equity. He’d been there forever, and he wanted equity. Klaus Ingstrom didn’t want to give it to him. Klaus Ingstrom saw what Klaus Meyer was doing, and he said, okay, then put aside 5% for my guy as well. I was just, yeah, okay, whatever. I need to get started. I did that. Those people helped us, of course, more than they would have done if they didn’t have any equity. It wasn’t completely useless.
Then I owed 5% for Tanya, and then we reserved 10% for a future CEO, because I said, from the beginning, I’m not going to be the CEO forever. I don’t know how long. I think that it’s important that we reserve 10% for a kick-ass CEO, when I’m not going to be that guy anymore. That’s was how we came to [??].
Andrew: [??] OK. Then you started to get customers by working the phones. Right?
Andrew: You needed credibility, because you wanted to be able to say, hey, we can do this. What I thought was interesting was what you did to get credibility when you were just starting. Can you tell the audience what that was?
Martin: What I did to get credibility?
Andrew: Yeah. I could tell the story. I love it. I see it in here in my notes. Why don’t I tell it? This is such a good story.
Martin: Yeah, please do.
Andrew: OK. You call up a customer and a customer, of course, wants to know that they’re not going to be a guinea pig, especially when it comes to food. You have to say, I have customers already, but you can’t usually say I have customers, because you just got started. What you did was, you partnered with three kitchens. One of them had 500 people they were doing lunch for on a regular basis. So when you called up new customers, you were able to say, yes, we have experience. We do 500 people every single day, and we’d love to add your employees to that list, and maybe make it 700, or whatever. How did that sound?
Martin: Yeah. It’s about right. I think it’s often difficult to be a startup, and you need to find ways to get credibility. Right? This was a way to do it without lying, and I did get a really good relationship with three kitchens going on. Suddenly, we had three good brands on board, and we had those 500. That quickly turned into a thousand.
The idea resonated with people immediately. It, of course, required a lot of cold calling and a lot of sales meetings. Of course it did. At the same time, I will say it never seemed impossible. We did ten sales meetings, we got two or three new clients. We did ten more. I used to be a salesman so I was quite comfortable at that role, and Tanya was just great with the whole back end of the business. She loved food. She went out to those kitchens, and she made sure that the supplies were great. Also some lucky things there, because her boyfriend was great at building an IT system that he did for us for almost nothing in the beginning. In different ways, we actually started this company with 125 thousand Danish Kroner and a small bank loan. Combined less than a hundred thousand dollars.
The first year we had revenues of 20 million Danies [SP], so some two and a half million dollars the first year. 50 million Danies the second, and 80 the third. It was really a great start and it felt amazing. After five years of, kind of, failures to some extent, some really intense feedback experiences, and then going to school and sitting while the whole dotcom thing happened. I was just sitting with books while MySpace was made, and stuff like that. That was almost the end. Then going to McKenzie, then I was so hungry for having for my own startup at that time, and I got it, and it was successful. That was amazing.
Andrew: How long did it take you to make your first million in sales?
Martin: In the US?
Andrew: In the US.
Martin: It didn’t take long. It was half a year, or something like that.
Martin: Half a year.
Martin: Yeah, but it’s very different than from running an online community or something like that. My latest venture was that I started up an online platform for charity, but as a business. That takes a lot longer to get revenue.
Andrew: Because the price of each lunch is higher than what people would pay for something on a daily basis online, and because you were serving so many customers.
Martin: Yeah. We were selling really good, like people are used to pay for. It’s subscription based, so when we got a customer with 50 employees, we were serving them every single day. The problem was not to get revenue in this business. The problem was to become profitable, because it’s low margin. Our cost, we started taking 10% in the beginning. We’ve grown that to 20 over the years.
But it is generally a low margin business, so you can see that, even though we had revenue two and half million US the first year, we passed along 90% of that immediately. we only had $350 thousand to run our company. The trick here was to get profitable. That almost only happened two years ago, and today it has a solid profit, but it did take a while.
Andrew: Today it has a solid profit? What’s that profit today?
Martin: It’s a little bit less than a million Euro in 2012.
Andrew: What size revenue?
Martin: We have 13 million Euros in revenue.
Andrew: Let me ask you this. You went specifically for a subscription- based model, partially because that’s the way business was run in Denmark. You could have changed it, because you were changing everything. You didn’t want to change subscription. I’m looking at Zerocater’s ‘frequently asked questions’ page. From what I can see, they’re not doing a subscription. Why did you decide to stick with the subscription? Why was it so important that you mentioned it earlier?
Martin: The thing is that in Denmark the employer of the company pays for the lunch. That’s very different from almost all other countries, which is also why we have had a hard time exporting this model. We are only still in Denmark, and I would have loved to have taken it to other countries. The model only works, at least the way we have seen it, it only works when the company is paying for the lunch.
Because if each person is making individual decisions, then it’s something completely else. Then it’s what Zerocater is doing, making a platform available for all employees. One can buy a sandwich, another can buy soup. It’s very different logistics. Then, because even though we serve meals for seven and half thousand people every day, we only have three hundred people that we need to relate to.
Andrew: This is three hundred customers who are buying for all those end users.
Martin: Exactly. It’s very different to have a course for 300 people than for 7.5 thousand people who could call and say, my soup, you know tomorrow could I get a little bit more spicy? We don’t have that problem. That’s why I think that we can become profitable. It can be maybe difficult for companies like to get to ZeroCater to get profitable, I don’t know, maybe they’re profitable already, but at least in a small market like Denmark, it needs to be run very efficiently.
Andrew: Okay. We’re hearing all the great things. Eventually, it did take off. But there was a bump along the way. I’m so glad, by the way, that we do pre-interviews, because, first, I was able to, thanks to Jeremy’s pre- interview with you, get that story about how you had social proof as soon as you called your first customer. How you were able to say, no, 500 people are happy.
The other thing I learned from the pre-interview is, there was a period there where you were depressed. It happened around, what was it, 2009. What happened around 2009 that made you feel the way that I just described?
Martin: Yeah. Yeah, I know. That was a big financial crisis. [laughs]
Andrew: Yup. Something happened to your business or as a result of it?
Martin: Might have been in the US, but it quickly came to Denmark. What happened was that, during 2009, people canceled their subscriptions. Companies canceled their subscriptions, because they started laying off people.
A lot of our customers are advertising agencies, architects, consultant companies, and they all had to downsize. When they laid off the first [?] the staff and they saw that there was also the lunch, and actually they could either fire two more people, or cancel the lunch. A lot of the companies decided to cancel the lunch. We had grown to a volume, before the financial crisis of 6,000 daily meals, and we got down to, at the lowest point, we were at 3,600.
Martin: I remember thinking that maybe the last person here will just close the door, and turn off the light, and we will go home. [laughs] Because if this continues for another year, then we will, basically, be out of business.
Andrew: Nothing left.
Andrew: You thought about killing yourself. How serious were you about it?
Martin: I think that’s an expression. At least I didn’t mean it seriously.
Andrew: The thing that separates these interviews from something that you might hear in your college business class, is that entrepreneurs are willing to get personal about what they went through. Depression is not an easy thing to talk about, but I’ve gone through it as an entrepreneur. There are people who are listening to us right now who are in that place themselves. Can you talk about what it was like for you?
Martin: Yeah. I think I was very lucky. At that time, I was not the [??] CEO of the business anymore. That was very, very lucky because I think what I said in the pre-interview to Jeremy was that, if I had been the CEO, then I’d probably have killed myself. Even from a distance, it was very depressing to watch that company fade away. I was doing another company at that time which failed, and I lost a lot of investor money.
If you combine those two situations that [TD], and losing investor money, having to layoff six people. At the same time, my existing company, our old company is just bleeding seriously. It was, in a lot of ways, a quite depressing situation. Luckily . . .
Andrew: Well, before we get to the luckily.
Andrew: How did you react to that? Did you find yourself sleeping in more often? Did you find yourself watching more t.v.? Did you find yourself getting distracted by something else? What did you do?
Martin: It’s a good question. I’ve read a lot of books about happiness and personal development and things like that. I kind of think that’s been great for me. Some people are able to figure out on their own, but I probably needed to read the books that happiness is not depending on success so much.
Even successful people can be unhappy, and life is what you make of it. It’s probably the simple stuff like taking a walk in the park, and the relationships you have, and eating an ice-cream. I can still do that. I think I just used what I learned from. I’ve always had great friends and family, and a lot of good things going on and all the time I’ve been doing a lot of sports, which helps a lot. I think if you’re depressed, then take a 10k run and run until your lung’s about to burst. After that, I promise you, you won’t be depressed. Only craziness if you can do it. But no one after having 180 pulse can be depressed. it is physically impossible because you set off a lot of endorphines. Happiness alone and you get so proud of yourself that you actually did it.
So there’s not really any reason to be depressed. Of course the problem is if you can’t get yourself to do it. I’ve never been that depressed. I’ve always had some tools. One is getting drunk together with my friends. Another one is going to the movies with my wife. Nowadays playing with my daughter or taking a run. Taking a really high pulse and traveling. I have a lot of good tools in my tool box and I use those tools to, you know, mentally survive during the hard times. And another thing I did, I stopped reading the newspaper. I stopped.
Andrew: The way we’re reporting about the failure of Lehmann Brothers and about the collapse of this bank and that country’s financial crisis. Because why?
Martin: It was depressing. That was a time where seriously and I think it must have been the same in the U.S. but it seemed like all these people in Denmark, at least 95% were sure that it was going to be like in the ’30s again. That it would be completely terrible and of course, I know and I respect it but for some people it had been extremely hard and maybe it still is and people have lost their jobs and it’s definitely a serious thing.
However, during the whole process, I have been able to live my life and travel and eat and all those things and it’s mainly been a question of [??], for most people, for a lot of people it has been a question of mindset more than reality. All my friends, they’ve had the same luxury life basically.
Andrew: And you know what too, Martin? A lot of people would say ‘Hey, it’s a mindset so I would try to work on my mind on my own’. But what I’m noticing about the way that you did it was you said ‘It’s a mindset but I’m going to use running, an outside tool to get my mind to change. I’m going to use drink with my friends to change my mindset. I’m going to go out with my wife to change my mindset. I’m not going to try to do it on my own but use what’s outside of me’.
The other thing that I notice is all the things that you might have consider sissy when you were starting out in business, in your first companies, even in your book ‘Running without Losing’ you say, I forget where it was. In one of the early chapters you guys were going to call some of these ideas sissy. Don’t. Listen. Pay attention. And then you continue talking to people about some of the what we might call the balance of life.
Martin: Yes. Exactly.
Andrew: Two other things happened. One I hate to keep going with this bad part but we have to go to the bad part too to understand how you [??] the business.
You say 5% of your business to get a kick ass CEO. You hired a CEO. What happened?
Martin: The first CEO we hired, he was a good guy but we felt that we had a company where we just needed someone to be good at people management. So we hired that. It turned out however that as we grew, it became a huge problem. So people were sitting and waiting for their lunch. It was awfully late by half an hour or even 45 minutes. And if that is something that really pisses people off is to wait for their lunch. So our phones were jumping off and our call center employees were getting hell and we needed to solve the problem.
And he tried to but he couldn’t. And it was an emergency situation. And he didn’t any skills in logistics. I simply hadn’t seen that that was an important skill, that the CEO needed to be an expert with logistics. So after 7 months I had to ask him to come in to the meeting room and I had to tell him the most respectfully that I could that he was fired and it wasn’t his fault but it was a bad situation for all of us and that he actually had to go out grab his stuff and go home. Not because I didn’t trust him but because I needed to quickly restore trust and motivation in the team and that was just impossible as long as he was sitting there. Even though he would try to look happy, put on a happy face, even if he could try to do that, then they would of course see that it was fake. So he had to go home at once.
That was a very difficult thing for me to do. I thought long and hard about how to do it in the best possible way. Because I know this is something that can actually give people scars for life. Yeah, we just had to do it.
I had found a replacement for him already. Which was also a bit weird because for two weeks I was just out there looking for a replacement. Normally, I’m all about openness. But this thing of course, needed to be a bit below the radar which I felt shitty about.
I found a guy so I could present him to the team a few hours after having the other guy go. I think that was critical in that time because it was a difficult time to be an employee in the company there with all those angry customers.
I found another guy. He was really good with finances and logistics. He fixed the problem, that problem. But he gave us a new problem. That was because he structured everything and put everything into boxes. He wasn’t very flexible with customers. He wasn’t that interested in sales and marketing. He was great at fixing the [cure] problem. When he had done that, then he got a bit bored.
We also thought that maybe it’s now time to get a more growth oriented person onboard. Not that the other guy wasn’t growth oriented. He just wasn’t a salesman. He wasn’t a marketer. He was something else. He was a finance guy and great at that.
We agreed with that. That was just a very nice because we just sat down and agreed on this. He got a great job offer from someone else. He’s a very skilled guy. He moved on successfully in his career.
Then we made a big bet that turned out to be very successful on the [??] CEO. That was great.
Andrew: You never wanted to be the CEO of the company. Unlike Michael Dell who stepped in, you said, ‘I can’t be the CEO because.’
Martin: Because it didn’t feel right. I liked to start up the company. I really don’t know. What I could feel it in my stomach, I felt it in my stomach. It doesn’t feel right. It wouldn’t excite me. I need to do something else.
I really don’t know why. I still love the business. We own it. In my company or the company I’m proud of [??] making. We love it. It’s now turning in a good profit and it’s great and it’s still [??] growth. But I never felt right to go back and become the CEO.
Andrew: In fact, you still own the company and you actually bought out your partners. Can you talk about that?
Martin: Yes. [??] They didn’t contribute. At that time, they were not supposed to either so it’s completely OK. What I didn’t know at that time and I’ve learned since is that it’s really annoying to have passive partners.
It’s OK to have passive owners if they brought in a big check. Because you need money to launch a business and everyone understands that you put on a valuation on the start up and then someone gives you some money so you can start. You don’t expect them necessarily to be active. That’s fine. [??]
Andrew: So you’re saying, while the connection’s catching up with us, you’re saying it’s OK to have passive investors but not OK to have passive partners. You understood that they were going to be passive from the start but you realized as you continued, hey, that’s not the right way to work.
Martin: Yes. Especially when I wanted to do [rain] making, it became a problem. Because in rain making, myself and three of my friends, we started this company factory. We had [??] decay. We had a lot of, cover a lot of companies that we owned in a little bit of a different mix of things.
We decided, let’s do this company factory and let’s put all our things together and be partners in it. Then I put in my [25%] equity stake. Then suddenly I only owned a fourth of 25%. The other guys did too. We just felt like only 25% is not a lot when it’s us who are supposed to run the company for years and when we are four guys to share.
Andrew: What did you say? How did you get your shares back?
Martin: We paid for them and quite dearly, a fair price, I think. But we did pay a substantial amount for it. We went to the bank. Now were four guys. If there was just me, I don’t think I could have borrowed that kind of money on my own. We went to the bank, and said, we would like to make an offer to [??], because we’re the ones running the business and we have great plans for the future. They agreed to borrow us some money, and then we made an offer and they said no.
Martin: And then some hassling and negotiation. I reminded them that, if I lost motivation it, it could be a problem. They reminded me that they could find another CEO, if necessary. We had good communication, but it is what it is. It’s never easy. In the end, we found a number that they were happy with, and we did the transaction. That was really a happy moment for me. Up until then, I only owned a minority stake, so that meant that everything had to be negotiated. All big decisions needed to be brought to the board. Those people were busy and distracted.
I’m all in favor of having good advice. However, sometimes it can be a problem if a too young company has too heavy structure and too heavy governance. After the transaction, we, at rainmaking, me and my friends we were able to do, basically, whatever we wanted. We consulted, of course, with Tanya, who was our first employee and still a part of the team. Apart from that, we could do whatever we wanted. Meaning that the guys who know the business are making the decisions. We made a new board, but we asked them to be kind advisers to us, and they were, and that was fine.
Andrew: All right. There’s one great story from how you raise money that I’ve go to get to. But first, this company that you mentioned. You said it was a company factory, is how you described Rainmaking. What does it mean to be a company factory?
Martin: It means that we get business ideas. We start them. We [inaudible]. We hire employees. We build the companies. Eventually, we are very open to exiting them to keep afloat in our portfolio. We’ve been around for six and a half years now. We’ve done 15 companies. We have closed down five, because they didn’t turn out the way we hoped it for. We paid them what we owed them, but we closed them down.
We are running seven right now, and we have sold three. Today we are nine partners, so the four of us have expanded to five more guys. All of them have been working with us for years. Now the idea is that, being nine partners, we can run eight companies. Each of us can run one company, and the ninth guy, he’s a lawyer. He keeps you us of jail, makes sure that everything is correct, all payments are in good order, so that we are, at all times, ready to go into an exit process, if an opportunity [inaudible].
Andrew: The idea is instead of investing in other people’s ideas, instead of incubating the way TechStars might, or YCombinator, say we have good ideas. We understand the market. We’ll create the business. We’ll invest in the business. We’ll run the business. We’ll sell the business.
Martin: [inaudible] We did something similar to textiles in YCombinator, which is the leading European accelerator. That’s called startup boot camp, because what we experienced was that a lot of people started coming to us three or four years ago. We would like to do something with a lot of those people, but we wouldn’t distract ourselves too much from our core businesses. We felt that we needed a way to capitalize on that inflow of ideas and opportunities, and great talent, without distracting ourselves.
We read in Fast Company, I think it was, I read an article about YCombinator. I thought it was a great model. We looked into it a bit more. We found out that TechStars was something similar, but we like the TechStars model better. They actually have the teams sitting there in Boulder, Colorado, and now also in other places. They basically sit there together all day long for three months. That was the kind of environment we wanted to create.
We invited David Cohen, the founder of TechStars, to Copenhagen. Luckily, he was very nice. He came, told us everything he knew. He has this open source philosophy as well. He told us everything and then I bumped into this guy, Alex, an amazing guy who was out looking for a challenge in the Danish and [??] community, and who had also read that article and loved the idea. When we met, we agree that should do a text task in Europe. That would be the start of boot camp. Alex had found that name . . .
Andrew: Let me just make sure that it’s clear on mike. That’s what startup boot camp is. And the reason I said that is because you and knew going into this interview that we might have some sky fishes, and every time you say food camp, it feels like there’s a pause on that. The thing you said that I loved about how to raise money has to do with dinner. Can you tell the audience about this dinner, and how it helps entrepreneurs raise money?
Martin: I think we raised a lot of money, basically, and I’m particularly proud of that. Our investors have gotten a decent return in almost all of the cases. That’s fine, but it is always a challenge to raise money. We’ve been so fortunate that we had some early successes, early exits, so we can normally take the companies at the first stage ourselves for our own money.
Then at a stage we take in co-investors. That’s normally business angels, and that’s probably just because we’re trying to step up our game a bit, so it’s going to be VCs in the future. For some reason, it started out being business angels. I work with business angels because they are able to make their own decisions, so they can make fast decisions.
The flip side of this is that is you want to raise a million Euro or dollars or whatever, then you need to gather a group, because they don’t write as big check as VCs. We waste a lot of money on business angels, and one thing that surprised me is that it’s not about rationality so much. It’s much more about that they want to get some good experiences out of it. I think it makes good sense because if you’re like 16 years old, and you have tons of money on your bank account, what motivates you in life? It’s not to get 10, 20% more money.
Everything that I can contribute, the most realistic scenario is, it will not make a big difference to that person’s financial life anyway. They are home safe. They have a lot of money. It’s more to create some good experiences.
I think what you’re referring to is that, at one time, I had gathered a group of nine people that were going to invest in us, in one of our investment rounds. The ninth guy was very difficult to just also get him to commit. Then I suggested that we could have the closing dinner at his restaurant, and then he responded to my email, because I think it was a nice experience for him.
I think all the time he intended to make the investment, but he just needed a good occasion to respond to my email, or my phone calls. That was that I said, can we made the closing dinner at your restaurant? Do you have a good table for nine people? The other guys are also pretty cool, and [??].
Andrew: Tell me if this is wrong. From what I’m seeing from the notes, you learned that some people just invest because they want to get a chance to host a dinner, or to get to know the other investors.
Martin: At least, I think that first we need to check mark the boxes of have they done the preparation, are they professional. Do they have a track record is some [TD]. They want to check mark all the rational boxes. Then you need to put in something emotional, as well, if you want to get it there. That can be they can be proud of the startup. Maybe if you’re featured in a big magazine or newspaper. That can be something. Okay, now I’m going to invest in them.
Andrew: I see. So you get them with the brains first, and then the heart is what gets them to sign.
Martin: Exactly. You need to get the brains. In the beginning, I thought that it’s enough if I’m just rational about it. Make a Mckenzie like presentation and all the numbers add up, and I can defend my case, and be confident. Then they’re going to invest. Suddenly, I saw that, no, I need to throw in something emotional, like a dinner, or [??].
Andrew: Let me just acknowledge what I’ve been holding in my hand here throughout this interview, and ask you one final question. I’ve asked people in the audience, a small group of people as a test, to send me mugs of their companies. This one, because until now, I’m holding up a blank mug like this. I said, you know what, I’m drinking these mugs with all these entrepreneurs. Why don’t you get your own mug, and maybe we’ll help promote. This one comes from Stephan Seewan [SP] Park. He is a PhD candidate in Vienna, Austria. He runs something called Unconventional School, and he says that watching me do the interviews in Mixergy inspired him to do interviews to. And so he started doing interviews. And I love to get to know the people in the audience. This is a reminder of who’s out there and I also love to see the people in the audience don’t just watch my interviews but do their own interviews.
If you want to, all the software that I use here is available online. I can give you the list here. You can check the help files if you guys are interested. But we also, for premium members I have a course where I walk you through the process, where I show you how I find guests, how I get them to say yes, including the exact email that I send out that you’re welcome to copy and I wish the people would ask me to do an interview would use that email because it’s so good.
And the full process, the editing process I think you can actually watch me edit the interviews so that they’re side by side. It’s all in there. If you’re a Mixergy premium member, you go to MixergyPremium.com and if you’re not, I urge you to sign up and start doing your own interviews.
I’ve learned so much from Martin as you guys have. You watch me do this interview and from the 800+ entrepreneurs that I’ve been lucky to get to know. In fact, one of them is going to be over here later today just for some yerba matte, just for a drink. It’s been more than just getting to know and learning from it. It’s been great friendships. So I urge you, guys, to do it and Stephan, I’m glad that you’re doing it and that you sent me a mug.
Martin, here’s my question to you, related to what Stephan wrote to me. In your book, you didn’t just say I started this business. I’ve started other businesses. Here’s my process you guys should learn. In ‘Winning without Losing’, your book, you did that. You thought what you learned but you also said Hey, I’m going to bring this other entrepreneurs like Jason Freed, like Tony Shea, like people who’s names aren’t as big but who’s ideas and their experience are equally important.
Why did you do that instead of saying, “Here are the things that work for me, go do it”?
Martin: I think that I’ve learned some things and I know some things but what was really interesting was to go out and find a lot of people all over the world and interview them, like you said that you learned some thing from those 800 people you’ve interviewed. That’s an impressive number. We found 25 and we thought that we learned so much.
I think that it would be both a bit lazy and arrogant for me, like a 6 years old to sit down to write a book to the world about what I learned. Not to say anything about people who do that. I think that in some cases they’re clever enough to pull it off. But we had big ambitions for the book. We wanted it to be a National Bestseller. Wanted it to be something that could really inspire and help millions of people. We wanted it to be the ultimate business book for how to create a startup from scratch, something that’s as challenging as that. We [??] an impressive career and at the same time live a whole, happy and balanced life.
And we felt that we needed to learn from other people that had those things. Learn what they felt was difficult, how they found strategies that worked in their own lives. How they thought about the topic. And I think that we just learned a lot and it made the book.
Andrew: But what did you learn from interviewing these 25 people and using them as mentors that you didn’t know before?
Martin: The most specific thing is that I started doing a today list instead of a to do list. And that might be a small difference in letters but actually the impact was just enormous. And we learned that from Mr. Muzy, a self made Indian millionaire, the creator of [??] small foundation in Stanford and [??] some of the world’s biggest organizations and companies. And he told us in the interview that he seems extremely down to earth and calm by the way, even though he has this ton of obligations and responsibilities on his shoulders. We thought He must be very busy and a big distracted in the interview. But he was just completely present.
And he told us that from the beginning of his career, he always thought what’s the most important thing for me to do today, not focus so much on these long plans, what do I need to do over the next year or 10 years or just 3 months because you can get overwhelmed by it. If you make a to do list of everything we need to do, then it’s going to overwhelm us and our brains can’t really separate what needs to do.
Andrew: So you just make a today list, what do you want to get done today and limited to that?
Martin: Exactly. And focus on that. Tomorrow make a new today list and all the time just focus on what do I need to do now. And also think about, in the morning, what would I perceive as being a decent day’s work? The problem can be that we get into this never-ending workflow. Where you’re never satisfied, because there is always tons to do as an entrepreneur in a busy career. There’s always tons of stuff to do. So I think it’s a really big favor to yourself to say, ‘What’s actually a good achievement today?’ And when you’ve done that, allow yourself to be happy, to be proud that you did achieve what you set out to do today. And go in tomorrow with full energy and do another today list. It’s a small thing, but the impact is enormous for me. So I think overall the group turned out to be ten times better if Doran [SP] and I had just sat down and emptied our heads. Because we’re really not that smart. [laughs]. But combining all those great minds, and moderating it, and adding our own contribution, I think it actually turned out to be a pretty okay contribution.
Andrew: It’s a great contribution. And that’s a good example of what’s in the book, Winning Without Losing. I’m looking through the table of contents. You’ve got lists of empowering thoughts when times are tough. You’ve got new ways of doing old things, five adjustments with profound impact. Fifteen strategies to increase your efficiency exponentially. These ideas come from you, the two co-authors, and also from the mentors. It’s a great book. I want to make sure to mention it again. Winning Without Losing. There is one other thing that I want to make sure to mention. You told me before the interview started, and I should have introduced it earlier. The meaning of grocost [SP] is lunch. So it’s basically like saying lunch. That’s where the company grocost.dk got it’s name. Thank you so much for sharing that story and telling us about the book and what else you’re doing. You were going to say something?
Martin: No, I’m just going to say thank you. I think it’s been great. You’re asking very exciting questions. It’s been a pleasure.
Andrew: Thank you. Thanks for doing this, and thank you all for being a part of it.