Andrew: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart.
And if you’ve listened to any of my 1,000+ interviews here on Mixergy, you might have noticed that I usually interview software entrepreneurs. Software has gotten easier, right? Easier to create, easier to distribute, easier to iterate on. That’s why I’m so surprised when I hear of entrepreneurs who actually get into hardware. Hardware is a lot harder. It requires patents often, manufacturing, distribution, and still people get into it like today’s guest.
What makes today’s guest so unique is not only has he gotten into hardware, but he’s using it to make the world a better place. He is bringing energy to people who need it. His name is Steve Katsaros. He is the founder of Nokero, which develops and distributes safe, affordable solar-based technologies. This interview is sponsored by two great companies. The first will get your email out to the right person at the right time. It’s called Drip. The second will you help you hire your next great developer. It’s called Toptal. Steve, welcome.
Stephen: Great. Thanks for having me.
Andrew: We had to do this twice like amateur hour. I did not hit record for the first intro. Thankfully we didn’t do a whole interview without me hitting record.
Stephen: We got through it.
Andrew: Yes. Hey, the boy over your shoulder, can you tell me about him? What’s he doing, first of all?
Stephen: Wow. Gosh, that was a wonderful experience. So this is a boy that lives in Zimbabwe. He is studying by a solar light, a solar light bulb that we created to provide access to energy for those who live without any electricity.
Andrew: So that’s a photo of someone who’s actually using your technology. He’s using your light to study, to read, to write.
Stephen: Absolutely. Yes. There’s a lot of information I can tell you about this particular story, but what the listeners might not understand is that one out of every five humans in the world live without electricity, and they burn a collective $30 billion of kerosene per year for lighting. So that’s our name. That’s our mission, Nokero–
Andrew: Nokero, meaning no kerosene.
Stephen: No Kerosene, yes.
Andrew: But you know what? I’ve seen solar lights for years. It was around since I was a kid at least. Why didn’t they use that?
Stephen: So you’re correct. There are solar walkway lights that have been popularized here in the U.S. over the last I would say maybe 10 or 15 years. The technology has grown exponentially along with LEDs and solar. So that core product has led to the birth of our entire sector of bringing that type of technology to the very base of the economic pyramid.
Andrew: I see. So existed in the U.S., in New York where I grew up. It didn’t necessarily exist in his life, the boy in the photo over your shoulder.
Stephen: Yeah. Pushing the technology to the highest level so that it really works for his needs–this boy lives in a village outside of Victoria Falls. Victoria Falls, people might recognize it for the very beautiful falls that the Zambezi River make when it drops across some type of natural occurring rift in the topography.
Anyway, so he has no opportunity to do anything at night. No access to electricity means you don’t walk up and turn the light switch on, very limited amount of money because half of the world’s population lives on–not half, but I think it’s about a third of the world’s population lives on less than $4 a day. So can’t afford kerosene, can’t afford a diesel generator. What are they going to do? They burn candles. They burn kerosene if they can afford it. Now they’ve got a solar light bulb that’s put outside, charges it up, gives light at night.
Andrew: I’ve got to show this on camera. It’s not just that it works on solar power that’s interesting about it. It’s also the way that I get to use it. I can screw it into a standard light bulb fixture right there using this bottom part. I can hold it with the my hand at the bottom to shine the light at where I’m going, or I can connect it to this base you’ve got to use it as like a desk stand or in his case I think he’s got it as a floor stand where he now gets to shine a light on whatever he’s working on.
It’s really innovative. From what I see with you, you are that kind of a person. You’re a tinkerer going all the way back to your childhood, right?
Stephen: I am. I love tinkering. It led to what I did in college and sold a patent to Dynastar, which is a ski company.
Andrew: How old were you when you created that patent for the ski product?
Stephen: That was in college. There were a couple of earlier inventions that were commercially sold as young as 14 years old.
Andrew: What was the one at 14?
Stephen: So I grew up ski racing. It was my passion. I didn’t even go right to college. I continued to race before I went to college. It was a tool for holding a file so as you sharpened the edges of your ski, you want to hold it very accurately. What I worked on is something that held that real accurately. It was a wonderful experience. I could go into some details, but at the end of the day, I had a bag of these that I’d bring along to the races, and I’d sell them to the other athletes. I’d sell them to the local high tech ski shops. It really kind of got me in the motion of entrepreneurship and inventing.
Andrew: And then you went to the library. You used one of the microfiche devices. I was going to call it a computer, but it’s not. It’s basically lighting up these little films and you saw what?
Stephen: Great. So you’re prepped here. There’s an event that happened slightly before that is I saw basically the same tool in the one ski shop. It was really packaged nicely. I opened it up and I saw United States Patent on there. I was like, “What’s this all about?” As kids, we all hear about patents, but I noted the number.
And the next time I was in Denver, which our public library here at that time and still is an official depository for the United States Patent and Trademark Office, had to go in, look on microfilm what the patent meant and realized, oh my god, somebody else has the exact same thing, close enough. That led down probably a long process of intellectual property interest. I took the patent bar four times. I passed. I’m a patent agent.
Andrew: What’s the patent bar? You don’t need to be a lawyer to do that?
Stephen: No. This is something all the engineers in the crowd there can learn. If you have a science degree and you take the Patent Practitioner Exam, which is generically referred to as the patent bar. If you passed, you’d become a patent agent. If you have gone to law school and passed the state bar, you’d become a patent attorney. So, Andrew, if you wanted to get a patent on something, I could represent you identically in the exam same way as a patent attorney.
Andrew: Why’d you do that? Did you do it to understand the patent process better or to reduce your costs for filing your own patents?
Stephen: Let me ask you this–have you ever played a board game and other people know the rules?
Stephen: You get frustrated because you’re like, “What’s that rule? What’s the strategy?” I felt that way in college. I invented something and I almost got screwed. Other things happened in my life and I felt like I was playing this game and I needed to know all the ins and outs of intellectual property.
Andrew: I feel like you say, “Other things happened in my life there’s more there.” Unpack that. What else happened?
Stephen: So, as a creative guy, working in metallurgy, working in the ski industry, we invented track lighting for a large company that I don’t want to say, I felt like at times I wasn’t included as an inventor or understand the whole mechanics about a licensing agreement. So what I did was I set out to say, “Okay, it’s great to invent something, but if you don’t own it, how do you really profit from it?” That led down this process of just being very efficient about how do you prepare and file patents.
Andrew: I see. I think that makes sense. And as we’ll see, even when you know it all or as much as possible, there still could be some problems.
Andrew: Then you moved on into college and you noticed something with one of your roommates’ bike. What was the thing that you noticed?
Stephen: I was getting ready to go to college and I had a bike and I wanted to keep it inside and I moved into an 8×15-foot dorm at Purdue University. I realized, “I need to be able to store this thing somewhere.” So I invented the BOSS, the bicycle overhead storage system. Don’t spit out your drink because it was a bit corny. I received a patent on that and learned so much. In every class, I was intrigued by how would I design this, how would I manufacture it. I took classes on advertising to figure out how would I advertise it.
Andrew: Because you thought, “This is it. This is going to be the beginning of something big. I’ve got a great idea,” right?
Stephen: I think every entrepreneur and inventor, at the moment you have that idea, you’re like, “This is the one. You put your heart into it.
Andrew: I remember going and getting my first bank account for my first company and thinking that once they hear it, they’re not going to want me to leave the bank because they’re going to be so excited about this idea that I will be like a celebrity walking out of there.
Stephen: Whoever was signing that up goes, “Next.”
Andrew: It’s like, “Congratulations,” and open the account and really that first app didn’t really go anywhere.
Stephen: Yeah. What happened with that overhead storage rack was we had different people that were helping at different times. We made 50 of them, and I remember going around campus and I remember stapling advertisements onto every bicycle because I was like, “Here’s how I’ll target these people.” Luckily, Purdue University didn’t nip me for soliciting on campus. I sold several of them.
I remember I sold one to a guy in the Pike house, whatever Pike is, a fraternity. I got a call, like I don’t know, a couple weeks later, “Steve, this thing fell down.” I didn’t know at that time. This thing had like a spanner bar between the two walls that you have to drill into the ceiling and the walls moved a little bit. So it was by compression against the walls, and it moved and the whole thing just fell down.
Andrew: Why would the walls move? I wouldn’t think the walls can move.
Stephen: Yeah. But now that I’m a little older and have been around some construction sites, I’ve realized the walls do float a little bit. They change with heat and cold.
Andrew: I see.
Stephen: It was a great product, but just kind of lost interest or found all the hard things. Then I moved on to an invention for skis. I sold that and I got my check from the ski company before I–right about the time I graduated college.
Andrew: And then you ended up with like–what is it called RevoPower, motorized wheel for bicycles?
Stephen: Yeah. Back to your bank thing, I remember bringing this $25,000 check into the bank and depositing it. I was like, “I am a baller.”
Stephen: The lady is like, “Whatever.”
Andrew: I always thought what they should do is get a little bit excited about it, even if it’s just to cheer you on. Then I realized what’s in it for them? It’s not like they’re really establishing relationships with you. We’re not talking about the old days of banking.
Stephen: Yeah. I do think there are local banks that can be helpful that we should all seek out because they do help. At that point, it’s kind of a mix of what led to creating RevoPower, which was a motorized wheel for bicycles. That was probably the first company I had raised real money and learned some serious lessons there. I had 23 investors that put in $2.3 million total and spent five years on that.
It was a wonderful thing. I just held on to that so hard for so much longer than I should have thinking, “I’m never going to be able to create something as cool as a motorized wheel for bicycles that gets 175 miles to the gallon.” We were on Slashdot.org. That led to a whole bunch of interest and press, and lo and behold I did come up with something as wonderful.
Andrew: It’s an amazing invention, amazing creation. I’m looking at your Wikipedia entry on it. I would have thought this would take the world by storm. If I’m understanding this right, you take a bicycle that’s a regular bicycle and you turn it into a motorcycle, but not just a motorcycle, one that goes far on a gallon of gas, right?
Stephen: At that time, we created that in 2003, at that time batteries weren’t what they are today. Today you would create that same product around batteries. This was gasoline engine. Yeah. You took off the front wheel of your bike. You put this motorized wheel where the old wheel was and pedaled it up to a few miles per hour, the engine started and you controlled everything by the thumb throttle. It was meant to replace–well, to be a stepping stone in personal motorized transportation in the developing world and what kid hasn’t wanted to put a motor on their bicycle?
Andrew: What happened there? I can see that it took longer to launch than you expected. You expected 2006. 2008 is when it launched if I’m understanding this right. What happened? Why didn’t it take the world by storm the way I would expect?
Stephen: We were so naïve. I had business partners from Australia. The guy moved to Denver to cofound this with me. We thought it would just be an easy jaunt over to Asia, specifically China to manufacture this. I had networked into the right friend now, an individual who was making electric scooters. They hooked me up with a factory.
We got into this engineering process of, okay, we’ve got our first prototype and we made our second prototype and then we get into alpha and beta manufacturing. We were talking about big production tools to make engines, large plastic molded housings. It just kept getting more and more complicated to the point where we would solve one problem and introduce two new problems. Unlike code in software, it just turning into things that we couldn’t fix without completely rethinking the whole product.
Andrew: I see. Did you sell any?
Stephen: No. We collected deposits. This is way before Kickstarter or anything. Ultimately we returned all of those deposits, which I’m very thankful we kept that money not in escrow, but it was on deposit.
Andrew: Man, I’m looking at the inside of this wheel. There was a muffler inside it, transmission, spark plug, carburetor.
Stephen: It rotated.
Andrew: And it rotated.
Stephen: It was rotating. The fuel came in through one end of the axel. The silver–I’ve got one over here. The fuel was in a water bottle cage and it came in through one end of the axel. Through the other end of the axel were two things. It was a thumb throttle for the acceleration, but it was also the starter mechanism. It kept getting more and more complicated. The Achilles heel of that product was that it ran about 100 degrees C hotter than it should have. It would have just burned itself up.
Andrew: Wow. I see a photo of one of the bikes on Uncrate. It looks beautiful. When it closed, how did you do? How did you take it?
Stephen: Closing a company is not fun.
Stephen: Ultimately moved everything into a storage locker and told the board of directors and the largest shareholder that it was prepaid for six months and I hope they do something with it.
Andrew: I see. That’s it. It’s on them. Figure it out.
Stephen: Yeah. Honestly, if I believed in the technology still, I would have even to this day been fighting for it. But it just got to the point where it was technically not possible to send an engineer with every product to fix it as people are using this thing. It was too complicated.
Andrew: All right. I can see why on your LinkedIn profile it shows that from 2008 to 2010 you were a patent agent. Let me ask you this–when you were doing this, it was right after the internet bubble burst and just as Web 2.0 was starting to take off, right? Delicious was starting to happen, Flickr was starting to happen. Did you look at all these guys and say, “What am I doing creating a thing that could potentially be too hot or a bicycle device that could potentially fall on people’s heads? Why don’t I just create one of these Web 2.0 companies?”
Stephen: Well, the first thing is I’m not a coder guy. I don’t know software. I tinker with Arduino and little things like this. I don’t know. I like mechanical things. I have a machine shop at my house.
Andrew: You do?
Stephen: Hell yeah.
Andrew: I see. So this is just your passion. Like screw the fact that these guys are doing something, even if they’re getting rich overnight seemingly. You’re doing what you love. This is your thing.
Stephen: I like building things.
Andrew: What do you do with your–what is it called at home?
Stephen: Machine shop.
Andrew: Machine shop. What do you do with your machine shop at home?
Stephen: When I sold to Dynastar Skis, I went out and I felt like I had all this engineering experience in college, but I didn’t know how to build anything and I used the machine shop as much as I could at college, but I wanted to have a Bridgeport mill and a Monarch lathe and so I went out and I bought them. I set up the shop and I still have those tools. I build different things in there.
Andrew: What’s something you build recently that you’re especially proud of?
Stephen: We’re building new products for Nokero all the time.
Andrew: You’re doing it at home?
Stephen: Yeah. To be clear, these are the prototypes. All of production and all the real looks like and functions like products come from our factories.
Andrew: I see. It’s kind of like a musician who has a studio at home but that’s not where they’re recording their next big album.
Stephen: Yeah. I don’t have as much time as I would like, but that’s just the nature of these things. You get more obligations.
Andrew: All right. Then this spark of brilliance hits you that changed your life, and that’s what brought you here. Before we get into it, I’ve got to tell people about this sponsor called Drip. You’re not in software, but do you know about Drip, this email marketing software?
Stephen: Do not, actually.
Andrew: Good. I’m about to open your eyes to it.
Andrew: Here’s the thing–email marketing software has existed for a while. It used to be this dumb piece of software that would just collect all your email addresses for you and when you had an email to send out, you could send it out to a lot of people all at once. Then some companies made it a little prettier.
But it didn’t get smart until it turned into marketing automation, meaning somebody buys, you stop sending them email telling them that they should buy and you definitely don’t send them a discount. It didn’t get smarter until the email would understand. This was someone who’s clicked on every one of messages but still hasn’t bought. He actually should have a nudge, how about a 10% discount or 20% discount or here’s someone who just watched the whole first video of my sales presentation, how about as soon as he finishes it, that’s when we send him the next email telling him about the next video because he’s in the swing of things?
Also, marketing automation happened. That’s when you see in my interviews with people who are info marketers their businesses just started to take off. They could maximize every email address that they added to their list. They could actually treat people like individuals instead of like part of an email blast.
Andrew: The problem was that email software that did marketing automation was just clunky. If anyone’s listened to me for a year, you know I’ve complained about this forever. It’s so tough to use that I have two different groups of people I pay to manage mine, which is why Clay Collins, the guy who founded Leadpages bought a company called Drip. He said, “You know, this is going to be so much easier.” And Drip is. You don’t have to do much. Automatically, it will start collecting every piece of data about what someone’s doing.
So, if someone’s coming to my website, they’re clicking on five interviews with people who create SaaS companies, well guess what, they’re into SaaS, I should email them not everything that we do, but just the SaaS companies, someone who watches your interview and four other interviews about people who create real stuff, real products like yours. Well, maybe I send them another link to an interview about a real product.
That’s what Drip does. It automatically will keep track of what people do so that you know how to target them properly. It will automatically tell you when you send someone a workbook or an eBook or something whether they actually read it, whether they opened it immediately or five minutes later. It allows you to do things like A/B testing which is very clunky on email but easy on the web. You can say try this headline, try this headline. An email would be try this subject line versus the subject line and figure out which is best.
Clay discovered and a lot of other people did that if you send out an email to your audience and you figure out who did not open the email and you send it out again with a different subject line just to the people who did open it, you get a 30% lift. Well, most software, it takes forever to create that second follow up email. You have to segment and so on. Not with Drip–with Drip, it’s just one checkbox and boom. You automatically can send the email out to everyone who didn’t open it using a new subject line.
There are so many things you can do. I’ve got this big list. Clay is so proud of this software. He told me, “Look, everyone has their own favorite shopping cart. We’re not going to build a new shopping cart for them. Let thing bring whatever shopping cart they want–WooCommerce, Stripe, E-junkie, Eventbrite and so on.”
Anyway, so I heard it and Steve, I thought this is fantastic. But as much as I hate my software, I’m too locked in to shift. So I brought up the issue and he said, “Hey, guess what? We have 100 contacts for free. A lot of people are using Drip not instead of their current software, but at first in addition to.” So, he said, “Find a piece of your business you’re excited about that you want to start out fresh with and just try putting people into Drip. You can always migrate everyone else in and you’ll see that it makes sense.”
So that’s what I’m doing. Right now I’m using Drip on a new piece of my business. If you’re out there listening to me and you have dumb email, go to the smart email marketing automation. Drip.co/Mixergy will get your started, 100 contacts for free. If you love your system, go and create an account anyway just to see how good it could be, how much better it could be. The URL is Drip.co/Mixergy. You’ll get 100 contacts for free and you’ll get to really see how powerful email can be when it’s done right, simple and powerful. That’s what Drip is, Drip.co/Mixergy.
Stephen: That’s interesting. I will be checking that out along with a lot of other things I’ve learned through Mixergy. Thank you.
Andrew: Why do you listen? What do you listen for?
Stephen: I haven’t been listening over the last several months, but in the last three years now or so I’ve listened to so much. I’m a what’s new in technology junkie, and I listen for the little tips that you just don’t get when you’re an entrepreneur and you’re out there by yourself, you don’t get the water cooler talk about what’s the newest technology, something like Drip, for example, that intrigues me. I know it takes a lot of discipline to set it up.
Andrew: I like that too. I really like the idea of looking over someone’s shoulder when they’re working or when they do a screen share to explain something to me. I like seeing the other stuff on their screen to see how they’re running their business and that often gives me a lot of insight. It gives me ideas that I didn’t even know I needed.
By the way, I forgot to say if you go to Drip.co/Mixergy they’re giving an email mastery course for free. They usually make it available for $79. It’s available for free limited time. It’s a new sponsor. That’s why I’m making sure to get everything right.
Stephen: You’ve got one. I’ll go on find the right little bit of business to try.
Andrew: You’ll be happy with it. You guys don’t do email marketing. I was looking at your site. I don’t think you collect email addresses at all, do you?
Stephen: We do. We have our PopUp Domination and it pops up.
Andrew: Then what software does it go into? It’s okay if you’re talking about a competitor.
Stephen: I don’t mind at all. We go into MailChimp. There’s a world of opportunity inside Nokero to monetize a lot of that. We were so successful when we first launched this thing that we just had huge amounts of people coming at us, and we haven’t done the finesse of milking every part.
Andrew: Yeah. You could, for example, know if someone has–in your shop, you sell lots of different products and one of the items is the donate a light item. If someone’s lingering around for that, you can just send them future messages about donation instead of products to buy because you know what they’re interested in.
Andrew: The idea came to you from your realization. You looked at the world as a patent agent and you said, “I want to create another product but one that’s going to do something for the world, something meaningful.” Where did that idea come from, this meaningful idea?
Stephen: Yeah. I needed to make up some lost ground after RevoPower. You get stuck in these things and you’re not making money and you’re really struggling. I went back into patent law. I used to do a lot of patents for HP and Coors and Mattel. I went into a law firm up in Fort Collins and did a lot of patent work for OtterBox and LSI. Anyway, I was always–I just didn’t feel fulfilled pushing paper. I enjoyed more doing the patent drawings. I could sit down and I have the discipline to sit down and write patent applications and respond to office actions.
But I’ve always been looking for something that would make a difference in the world. I had some friends who started a company called Envirofit. They’re the leading manufacturer of clean cook stoves for the developing world. I just had enjoyed what they were doing. I thought it was interesting. It might have led to me creating Nokero, I don’t know, but ultimately just had that idea in January of 2010, where I woke up one morning and sketched out the product and five months later launched the company.
Andrew: I see. You’re saying all these ideas were bubbling in your head. At the same time, you said you wanted to do something meaningful. Even though you were good at your work, you wanted to find something that had bigger impact. That’s what it was, just went to sleep, woke up and had this idea. When you have an idea like this, is it enough to sketch it out or do you need to do more? Do you need to do something physical with it?
Stephen: The workflow is I’m a firm believer in prototyping fast. You can prototype by sketching, sketching the idea. I can show you notebooks for of sketches of different ideas. They come to me but you have to document them. At some point, you put them into Solidworks is the CAD software that I prefer, have a lot of, thousands of hours on Solidworks designing stuff. Then from there, it goes into rapid prototyping, which is often referred to as stereolithography or 3D printing.
Andrew: How fast before you get it back when you send it out to have it 3D printed?
Stephen: Well, I have two or three printers here. So I can do it in-house, but I prefer to use a service because the quality is better.
Andrew: I see.
Stephen: You can get stuff overnight in some cases.
Andrew: What did you sketch? Did you sketch–sorry, the connection seems to be going bad, can you still hear me?
Andrew: Did you sketch this physical product or the inside the guts of the solar powered light?
Stephen: Yeah. The first model that we launched–here’s another thing about products, obviously the first idea you have is never the right one that’s the finished idea. This was a different product. It looked more like a traditional light bulb and had four solar panels. That was the first model we launched off of, filed the patent four days after conceiving it, hired a factory, had preproduction samples in a month, had cut tooling within a few weeks after that and then physically launched in June with 500 samples to give to the audience.
Andrew: Which audience?
Stephen: We launched at a business plan competition. Here in Denver, it’s now called the Jake Jabs Center for Entrepreneurship, University of Colorado. I just launched there. I won that in 2003 for RevoPower and ultimately launched at that event. Somebody was in that audience that knew somebody at CNN. We wind up on a six-minute piece on CNN with Ali Velshi six days after we launch. We didn’t have our systems down. It was total chaos.
Andrew: Meanwhile you got sales?
Andrew: Why do you think people wanted to buy it?
Stephen: It captured imaginations.
Andrew: Like you could put it in your ceiling and know you’re going to have light no matter what.
Stephen: The threads are more for the aesthetics. This threaded top, just wanted anybody to look at this thing and know that it was–
Andrew: They’re not actually plugging it in for an outlet.
Stephen: They do provide access like you showed there where the stand just screws on real easily. The point here is that in seeing this and seeing the original dream in my eye of like impacting one billion people’s lives by bringing them light who don’t have light at night, that was something that just resonated with the audience that watched this on CNN and we had $50,000 of orders the first month and it was very exciting. Six months after that was when we launched with a model that we’re known by now, which is this rotating design. It’s just more efficient than the first model.
Andrew: Let’s talk about the first model. It’s the N100, right?
Andrew: How’d you come up with the name, N100, by the way?
Stephen: In typical entrepreneur fashion, I’m like, “We need a model number. Call it the N100.”
Andrew: I see.
Stephen: The next that came in, 200.
Andrew: Right. Now the one in my hand is the N233.
Andrew: The first one looks a lot more like a light bulb with the light on the bottom half of the bulb and the top part of the bulb has got four solar panels, rectangular solar panels. My thinking when I see it is you’re expecting that no matter how you’re laying it down on the ground, sun is going to hit one of the panels and it will actually power it up. That seems logical. Why didn’t you stick with that? What did you discover when you actually launched it?
Stephen: So you’re paying for four solar panels. At best, two are seeing the sun at any given time. So, while you don’t have to take care of how to aim it in a charging condition, it really just led to the realization that we’re paying for this solar panel, we need to put it in one plane and have it see the sun at the same time. That’s what led to this model.
Andrew: I see. Okay. This model, I could tilt it towards the sun wherever I want. Listen, guys, if you’re not watching this. If you’re listening, which I think most people do, you can just go check out the website at Nokero.com. I know that most people now are listening to the audio version of it. The first version still sold for a while before you created the second version. How’d you come up with the idea for this model, this design that I’m looking at and holding?
Stephen: Before we had even launched, I had come up with this solving the problem, but I had to launch the company. I had a date and I needed to launch with what I knew at that time would be a slightly inferior model. There’s this old guy that I know, who’s since past, so I guess I don’t know him now, but Burton Morgan and he has the Morgan Center for Entrepreneurship at Purdue. He says it’s better to get shot out of the water than to rot at the docks.
That’s always just been in the back of my mind about doing things and launching when you’re a little uncomfortable. The problem with physical products like this is you have to build new sets of tooling and experience $50,000 of engineering costs and you can’t just change lines of code and swap them out.
Stephen: It’s much more serious.
Andrew: Where’d you get that money?
Stephen: So I’d sold a house. It just was the timing of it. The $60,000 in launch costs that we incurred carried us for the first two years before we brought in an equity investor.
Andrew: Wow. Did you imagine there’d be a big market for it in the U.S.?
Stephen: No. I think that we’ve always known there would be interest in the U.S.
Andrew: But this isn’t who you hoped to sell it to. This isn’t where you thought the revenue was going to come from?
Stephen: Correct. About 95% of our lifetime revenue has been from overseas in the intended markets. Only about 5% is for preppers and emergency response kind of interest, camping, boating communities, stuff like that. It’s becoming more important to us to have that revenue because it’s a stable revenue.
Andrew: Which one, the campers?
Stephen: Here in the U.S., yeah.
Andrew: How are you reaching your market?
Stephen: We need to get better at this in general. Our market, our intended market is the international development community, where we’re impacting these 1.2 billion lives without electricity. So that has brought me to the UN General Assembly several times working with the Sustainable Energy for All programs there. The World Bank and IFC under Russell Sturm created a program called Lighting Global.
So there is a very vibrant international energy access community that are interested at the high levels bringing energy access to the base of the economic pyramid. Here in the U.S., we’re in some channels like Sportsman’s Warehouse and Bulbs.com and Amazon and your traditional retail.
Andrew: Do you do any marketing?
Stephen: We do not. We need to get better at lead generation. We had a lot of bad behaviors as a result of being successful with press releases. We’ve been in every magazine you could ever–not ever think of. But we’re talking about Wall Street Journal, the Washington Post, CNN, Mixergy now.
Stephen: But really we had to figure out our rinse and repeat now where we know how to get people into a funnel and move them through.
Andrew: I see. You’re saying, “We’ve done so well without putting much effort in that we didn’t get good at putting the effort in and knowing what our process is for selling.” Got it. Right from the start, like you said, you lucked in to CNN happening to cover you, and as a result of CNN, a bunch of bloggers and other reporters picked you up, right? Gizmodo had you in there, Popular Science.
Stephen: Yeah. Six months later we launched this model. Then every three months I was launching new products. Those ten products aren’t on our website. We actually cut them because they weren’t generating, but now I’m in the process of figuring out what is our recurring revenue model.
Andrew: I see.
Stephen: We’ve sold–I don’t think we’ve said it, we’ve sold 1.5 million of these lights.
Andrew: 1.5 million lights? What’s your annual revenue, 2016?
Stephen: So 2016 was an off-year for us. In general, we’ve been $2 million a year. Last year was off of that.
Stephen: I think that a couple things were going on. We have a lot of infringers in China.
Andrew: We should get into that soon too.
Stephen: And then more competition, both domestically–and then I think that it’s just the realities of business. I think that enough people in the audience will understand how the highs are highs and the lows are lows, and you kind of go through these cycles figuring out exactly how you’re going to affect sales or revenue. We’re just ready to launch some new things around new sales efforts.
Andrew: By the way. I’m glad that you sent this over to me. I think if I didn’t see this in person, if I would have seen it online, I would have liked it. But there’s something about actually getting to hold it. It’s such a well-designed product.
I feel like it should be in the Museum of Modern Art or something or not Museum of Modern Art. You know when you go to a museum gift shop and they’ve got these interesting, beautifully designed products that you don’t even know how you’re going to fit in your life, but they look so good, that’s what this is. I can’t put this freaking thing down. I had to take this clip off because it was making so much noise.
Andrew: Hang on a second. I’m going to shut the lights and let’s see how much light comes in from this.
Andrew: I’m walking over to my wall. This is not too dark, right? I don’t even need the lights on, the ceiling lights. Let’s turn this off. This is the computer, actually. I should shut that other light off on the computer. There we go. I don’t think it shows that well on camera, but this is a really good light.
Stephen: Yeah. Now you’re on the high setting, which is 25 lumens. One day of putting this solar panel in the sun–we call that five hours, but it’s one day. You put that in the sun and it will run on high for six hours.
Stephen: And low it will run for 15 hours.
Andrew: It already came to me fully ready.
Stephen: They ship in a charged condition.
Andrew: All right. Let me turn the lights back on here so we can continue. I kept sitting here, Steve, saying, “Be disciplined. No one is going to be able to see this. Don’t do it now. Do it later.” Okay. Let me talk about my sponsor and then I’m going to come back and tell you about this search I did on Alibaba.com that you might have done and maybe it infuriates you when you see it. But first–that might be a tough place to leave you, huh?
Stephen: No. I’m fine with that. It’s reality.
Andrew: I’m creating a little tension with the audience, but I don’t want to create too much tension for you. Here’s my sponsor. My sponsor is a company called Toptal. I was just interviewing my friend Noah Kagan and I told him about Toptal, how they have these great developers. I said, “Hey, Noah, do you have anything you need?” He said, “I do have a need. I bought this Chrome extension and I’ve been wanting to improve it but I don’t have anyone on staff who can do it.”
He sat there and he heard about Toptal, how they screen out 97 out of 100 people who want to work with them, how they focus on the top three developers and he said, “Huh, maybe I can use it.” I think he wrote it down using a pencil, which is kind of different for him. He said, “That actually can be a really good fit for me.”
That’s the way that I kind of discovered Toptal. I heard about them and then I said, “You know, I could use better search on Mixergy. Maybe they’re the right company for me.” So, I hired them and within a week or so, my search was vastly, vastly improved. We had by then over 800 interviews, which is hard to search through.
So that’s the idea behind Toptal. They pay me and they have been working with me for over two years now because people keep hiring them because every time I talk about them, someone in the audience will say, “I have this need. My staff isn’t big enough. I actually would like one person who focuses just on this new product.” Maybe it’s an internal piece of software. Maybe it’s a new product that you want to launch.
Whatever it is, bring it to Toptal. One of the first things they’ll do with you is what they did with me–they get on a call with you, a real human being, someone they call a matcher The goal of the matcher is to understand your need. What is it that you are trying to accomplish at your company? Can they find someone at Toptal to help you with it? If they can, they make a match, if you like them you can get started within a day or two often. If not, they let you know.
Here it is–if you’re a Mixergy listener, they’re going to give you–just like Steve, this was created by a Mixergy fan, so if you’re a Mixergy listener, they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours and that’s in addition to a no risk trial period of up to two weeks. So, go get them. Top as in top of the mountain, tal as in talent. That’s Toptal.com/Mixergy to get those 80 hours of Toptal developer credit. I’m glad that they’re sponsoring and have for so long.
Andrew: Here’s what I see when I go to–this infuriates me–I go to Alibaba. I type in Nokero and I see a bunch of other people, some of them are just using your name for SEO. Are you actually selling your stuff? You are. You’re also selling it on here.
Stephen: So we want to get better on Alibaba and we want to get better on Amazon and Made in China and Talbot and all of these platforms. But Alibaba is an interesting thing. I’ve been to China 47 times now. I’ve been in a lot of factories. I’ve been in a lot of trading hubs, where you see these knockoff-type products for sale. We, two years ago, spent a lot of time enforcing our patents in China. We won. We won $60,000 of damages from infringers.
Andrew: Somebody copied your light.
Stephen: 20 different–
Andrew: 20 different people, they produced it, they started to sell it. You caught them. You challenged them in court, you won and then they stopped, right?
Stephen: What happens is about 17 of those kind of point to two different guys, three different guys. You really need to figure out who’s who in the zoo and go after the source. We confiscated tooling and put one guy out of business, as a matter of fact. Now what you’re seeing on Alibaba is we do have about $15 million per year of patent infringement out of China.
Andrew: 15 million per year meaning 15 million knockoffs.
Andrew: $15 million, so that means seven times your sales are knocked off.
Andrew: Yes? Oh wow.
Stephen: So we need to restart this. I’ve spent a lot of time with various law firms. We had to switch law firms for something I don’t want to get into at this point. We’re going to restart that effort after we close our next round of funding and get that all reined back in and have it either be revenue generating through royalty income or stop the infringers that we feel are really confusing the market. Our performance is two times greater than any of that knockoff product that’s out there.
Andrew: Look at this. Good price of Nokero N100 solar LED light bulb with long-term service. It doesn’t look anything like yours. It’s not even a good knockoff.
Stephen: Yeah. We’ve stopped the N100. We actually–
Andrew: This is a fake N100. It doesn’t look like it. They’re just using your name to sell their product.
Stephen: Yeah. We have trademarks in China for Nokero. So that’s something that you need to do locally. It’s very hard from afar to get involved in these things. So we’re ready to start enforcing those patents. This is something that’s very interesting. I know people won’t be able to see it, but this is a patent from Africa. It’s a regional patent for Botswana, Kenya, Rwanda, Ghana. This is just one regional patent there. We have the same patents obviously for China, in the U.S., Mexico, Indonesia, India, global patent portfolio. We just need to have the right level of cash reserves to lodge those battles.
Andrew: And one of the other protections that you said to our producer that you have is the brand. The stronger the brand, the harder it is to take away business.
Stephen: Yes and no. When you’re dealing with people that are at the very base of the economic pyramid, whether you’re here in the U.S. or in parts of Africa or India, there’s less brand loyalty and more shopping on availability. I hate to give you a mixed answer there, but we are known by the very top people in the UN. We won the Patents for Humanity Award. So most of the senators know us. Our brand is quite strong.
Andrew: I was going to log in to Alibaba and start complaining about this person, and then I realized I don’t know my Alibaba password and it’s not on LastPass.
Stephen: It becomes such a whack a mole project.
Andrew: I get so fired up on your behalf for no reason at all. You’re not fired up. You’ve got it together. I’m trying to go and complain.
Stephen: Yeah. Alibaba has improved. Two months, three months ago I was with the intellectual property attaché from the Shanghai embassy. So this is somebody that works at our U.S. embassy in Shanghai assisting intellectual property rights holders with their claims in China. They have a very strong relationship with Alibaba. We need to restart that. The Amazon knockoffs is another thing we need to work on. It’s either spend time engineering and launch something that’s two times the energy efficiency of our prior model.
Andrew: I see.
Stephen: Or spending time and resources on those patent battles. We park the patent battles for two years. We’re going to restart that.
Andrew: I see. It seems like things were going well right from the start where CNN covers you, Gizmodo, popular science I think it was, etc. Wall Street Journal as you mentioned. But you told our producer, “Look, there was a period there where we were bumping around in insolvency, if not completely underwater.” What was that period? When was it?
Stephen: Well, so those periods come and go. I think that we’re in a market that’s very challenged with the strength of the U.S. dollar. As you probably know, the strength of the U.S. dollar today is at an extraordinary–
Andrew: How does that impact you? Aren’t you having your stuff made in China anyway?
Stephen: The pricing winds up being in U.S. dollars. So we’re trading into countries which are deriving their income from extracted industries, mainly being oil or minerals, a little bit of agriculture income. There’s very little income in those communities. We’ve seen currency fluctuations of upwards of 20% per month in some of these countries. We set up an entity in Kenya, for example. I’m going to get back to answering your question.
Andrew: No, what were you going to say about the thing in Kenya? I feel like you’re going somewhere with it.
Stephen: We lost $250,000.
Stephen: Because we moved a container of product there while it was on the water and it was going to come in duty free and VAT free. The MPs reversed the VAT holiday on solar products, and we were stung with a $40,000 bill on the way in.
Stephen: Then there wound up just being other troubles that you experience in the developing world and having been in nine African countries now–Pakistan and Haiti and all over at this point–I’ve seen how hard it truly is for these entrepreneurs. So that’s why we lost that inventory.
Andrew: They take it because you don’t pay the new taxes?
Stephen: We paid the money and then the VAT rebate–excuse me, the VAT holiday on solar products got reinstated and when we filed for the $40,000 that we had to put on deposit to get it out of customs, they said, “There’s no rule on the books. We can’t give you money for something that isn’t on the books.” You find these scams all over the world when you’re moving physical products. I am so jealous of an app company that can just send across an international border and there is no border.
Stephen: Now, we can move 150,000 of these in one 40-foot container, but it still involves a lot of logistics and lead time and all of that.
Andrew: You know what’s surprising to me about this? It seems like such a functional product and still the packaging design–I almost don’t want to open up the other one. It just looks so nice. Who are you trying to sell to with this package? Why does it look like it’s giving so much information?
Stephen: We’ve changed more. This is like a newer model.
Andrew: I see. Yeah.
Stephen: This is even more interactive and promoting somebody to hold it and click on it.
Andrew: I see. This is not what’s going into the developing the world, the package I’m looking at.
Stephen: Actually, we do. The box is like $0.10. So it’s easier to kind of treat them all the same. Our instruction booklets that are in some models are in a whole bunch of languages. But the way it was designed, I wanted it to be so intuitive. That’s why it looks a light bulb. I pictured a kid when I invented this walking down a dirt path and picking the thing up going, “This is a light bulb,” because everybody has seen a light bulb.
Believe it or not, at this point everybody in the world has seen a solar panel. It’s a solar light bulb. Then after a little bit of time, you see there’s a button and they can use it. The packaging doesn’t have to lift that task. It just has to be enough for both our retail operations and for protection during shipping.
Andrew: Yeah. It is so intuitive. I think maybe what you need to do is get into product design and just do that. It’s so beautiful and so fun to click. The click gives you a satisfying click.
Andrew: What about this other thing you told the producer, “By far, my lowest point was admitting that a large deal had fallen through?”
Andrew: What was that?
Stephen: For seven years now that we’ve had this company, we have heard of huge deals. We’ve shipped over 450,000 units into one country. These things do come true from time to time, but a politician was leaving office. His political party had to drain the coffers. They were going to do the right thing by bringing their country of 70 million people without electricity light. They were going to buy 20 million lights from us.
You hear these stories and you’re cautious, but then you find out that they pushed the button and they show you a wire transfer receipt. It’s like the money did move and it moved from this entity to this entity and the next thing is they’re going to wire it to you. Nobody can ever say no in these markets. There’s a lot of optimism in the developing world. That $90 million order never happened. Money moved. People are in deep trouble right now. There are federal indictments against some of these guys that took the money and ran. But that was a low spot.
Andrew: Because you’re manufacturing for this deal and then suddenly it gets taken away?
Stephen: We never manufacture in advance for these things. We have small stocking inventory, but something that large involves a whole bunch of logistics we had to do. Today we can build 10,000 units per day. We can double that or triple that in about 30 days’ notice with the right amount of tooling. That particular one, it was just after a whole string of times that we had heard the big deal is coming. It wasn’t just from this country or this region. We hear this stuff all around. Over time I’ve come to realize we’re a tool for some of these guys to get what they need, I guess. I don’t know.
Andrew: I see. They’re using you to look like good guys, and you’re starting to think about it as if it’s there but it gets snatched away.
Stephen: Yeah. I can go on a little rant here too. These things happen here in the U.S. too. In the Bay Area, you’ve probably seen investor forums where they hold people out as investors are here and they get the entrepreneurs to come and sometimes you feel like the conversion rates are really low on those things. There are a lot of people there that have no business being there.
Andrew: That used to happen more, where people who weren’t real investors were actually calling themselves investors because they got more attention from people. Everyone wanted to talk to them. It’s happening a little bit less now. It’s easier to spot who’s real and who’s not.
Stephen: Now it happens with the phrase “impact investors,” which we hear a lot.
Andrew: I see. I do see a direct knockoff of you, LumiQuest.
Stephen: That’s actually ours. We did some private label.
Andrew: Wow. That looks so much like yours except white.
Stephen: It is ours. This is before we realized the value of co-branding. As a matter of fact, our very first sale into the U.S. was with Westinghouse.
Andrew: It was a Westinghouse bulb.
Stephen: We were branded as a Westinghouse bulb. It was available at Ace Hardware. We were focusing on the developing world. We weren’t doing the developed world distribution. One of the things–earlier in our conversation I talked about this idea of taking the world’s best technology and applying it to the base of the pyramid. In doing that, we’ve just ingratiated ourselves with so many amazing individuals. One of them is a guy that happened to be the VP of International Sales for Westinghouse Lighting Corporation and that’s how that deal happened.
Andrew: Oh wow. I see.
Stephen: We could repeat this story through most countries in the world.
Andrew: Who’s the most exciting person for you to have gotten to meet?
Andrew: I’ll take it. Are you guys profitable now?
Andrew: Wow. And you just raised another round, you said?
Stephen: We’re in the middle of raising around right now.
Andrew: How much was the first round?
Stephen: The first round, we’ve raised a total of $1.8 million in equity, then we have $200,000 of bridges out there and then we’ve got–we won a grant from the state of Colorado for the Advanced Industries accelerator grant. Very small.
Andrew: How much?
Stephen: That was $250,000.
Andrew: Oh wow. Grants are good because you don’t have to give up a piece of your business for them.
Stephen: Yeah. Colorado has a really high growth right now in entrepreneurship in the tech sector.
Andrew: All right. I really appreciate that you sent this over to me and I can understand why. I don’t know where you said it, but you said seeing is better than telling or something. I forget where you said it, but you’re totally right. I saw this online. It made sense. It was interesting. There’s nothing like just getting to see this in person. I really do feel like this is something I would find at the Exploratorium Museum here a few blocks away from my office. It’s really well done.
Stephen: Well, thank you.
Stephen: It’s designed and durable enough for the world’s poorest people to use them for five years. It’s very appropriate in that it costs about the equivalent of one month of kerosene.
Andrew: When we have an earthquake here in San Francisco and the lights go out, I’ll be able to use this.
Stephen: Yeah. Those are the types of channels we need to get better at going after, but we don’t have the resources. So anybody in the audience that is really drawn to something with this altruistic view of the world and what we can do for renewables and sustainability, I’d love to hear from you.
Andrew: What’s a good email address for them to use?
Andrew: All right. Check it out at Nokero.com if you want to see what I’ve been holding in my hands or just watch the video if you want. I want to thank my two sponsors. If you’re looking to hire a developer, you’ve got to check out Toptal. The special URL for us is Toptal.com/Mixergy.
If you want better email, better email marketing automation, you’ve got to check out what I’m doing. I’m signed up already for Drip. Go to Drip.co/Mixergy and get really good email marketing. And of course they’re giving us, just for trying it they’re giving us that $79 course on email marketing from the people who know it best.
Finally, I want to say thank you or congratulations to Gabriel, who just wrote the book “Zero Excuses,” long-time Mixergy fan. I’m proud of him for having done this. I don’t remember if I bought it. I like to be the first someone’s book. I either bought it or he gave it to me. But either way, I’m appreciative that it came. Thanks, Steve.
Stephen: Great. Well, it’s a pleasure meeting you.
Andrew: Same here. Bye, everyone. Guys, I just ended the interview and right after we were done, Steve said he didn’t answer the question about what his proudest moment was and I forgot to ask it in the interview. So go for it. What is it?
Stephen: Well, my very first experience of going in the country and seeing people benefit from our product was a very influential family in Pakistan invited me to go to Pakistan. We flew into Lahore and got in a car or a truck and wound up way out in the sticks out in a village and they’re drying cow dung on the brick walls for heat and for light. To spend the afternoon with them and the evening capturing that moment and understand what we had done for their family by bringing them light was just absolutely riveting. That’s what has fueled me for the last five years.
Andrew: What have you done for the family? What did light do for them?
Stephen: So the access to light improves access to education, security, all kinds of things. I need to get my elevator pitch down on this. It’s so fundamental to how we live, right? You only have 12 hours to the day.
Andrew: I feel like the day is work, the night is when you prepare for better life. The night is when you get to spend some time thinking, when you get to spend some time learning and reading.
Stephen: And socializing with your family and your community. When you don’t have access to light, bad things happen, but also boring things. We help expand that.
Andrew: Cool. All right. I’m glad we came back in. Joe will edit that in. Thank you all for being a part of Mixergy. Bye again, everyone.