Skully founder opens up about failure (and tells me what he learned)

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview real entrepreneurs for an audience of real entrepreneurs who are learning from the people who I have on here and they’re going out and using what they learned to build businesses.

Joining me is an entrepreneur who had an insight, which is that . . . In fact, maybe you did. I noticed this too. How many times do you see a motorcycle rider who has the phone attached to the motorcycle and you wonder, “Isn’t that a little distracting?” Well, today’s guest said, “Actually, it is. And I think there ought to be a better way.” And he created it.

The company that he founded is called Skully and they had this idea that, well, you could actually put using a heads-up display everything that a rider needs right in the helmet. So it’s not a distraction to look down and you can actually see through the navigation. So, like, if you’re doing GPS, for example, you can see right through it to see the road so it’s safer.

And he put it up on Indiegogo, raised a bunch of money from people who wanted to buy it, got a lot of publicity, was really good at marketing and then ran into trouble. And I invited him here to talk about the trouble and what happened when he tried to actually get the product out, what happened when he wasn’t able to and where the business is right now.

I also want to find out about his follow-up act, which is a company called Halcyon. Halcyon is a nootropics company that makes cognitive enhancement supplements. It helps with focus, motivation, and memory. And if you want to connect with him after this interview, check out his Instagram. His Instagram user handle, user handle, username, whatever, @drmarcus.co. And this whole interview is here thanks to two phenomenal companies. The first will help you hire great developers called Toptal, and the second will help you hire . . . not hire but get good web hosting, great web hosting, HostGator. I’ll tell you about them later. Marcus, welcome.

Marcus: Thank you so much, Andrew. It’s great to be here.

Andrew: Marcus, about a couple of months ago, I was leaving my building, I got a text from you, you wanted to get on the call. So we get on the call, and you remember what you wanted to know from me?

Marcus: Yeah, Andrew, it was . . . You know, I was basically wondering, like, is this the right forum and, you know, what’s sort of the intention here with respect to telling the story. Because it’s been a very difficult story to tell even, you know, with friends and family, it’s been a very trying time since Skully, as probably many of your listeners can imagine. When you go through the failure of a company, it’s very difficult, it’s traumatizing and especially if you make as many mistakes as I have, you know, it’s a tough road.

So what I was hoping is that this would be the first time that I would tell the full story of what actually happened and really, you know, come at it from the perspective of like, “Let’s make this constructive. Let’s let other people learn from it so they didn’t have to go through what I went through.”

Andrew: I love that. That’s the type of interview that I always wanted to create. Truthfully, even as a kid, I wanted to put something like this out into the world. Before you founded Skully, you were a Ph.D. . . . was it a Ph.D. student in psychology?

Marcus: Industrial psychologist. Yep. So . . .

Andrew: What does that mean?

Marcus: It’s basically, like, the psychology of business, so you look at, like, things like human factors, so how people interface with the world or with objects or with technology. And now also, really, the main part of the field is around performance and psychological variables and how they contribute to performance, either at work or in an engineering setting or whatever that profession might be.

Andrew: Do you have a concrete example of what this would be applied to in business, something that we could understand and relate to?

Marcus: Yeah. Or even you can even do sports. A really common application of industrial psychology is the application of the Wonderlic test to test cognitive ability for quarterbacks in the NFL combine. So it’s a really common method and it’s a strong predictor of performance in complex situations. As, you know, if you’ve got to remember a lot of different plays and a lot of different permutations of defenses, then you can, you know, use the Wonderlic. And I’m not even really a huge sports person, but I just love that example because it’s so concrete. It’s about a 12-minute test, and it very strongly predicts cognitive ability and performance on the field.

Andrew: Where did you study?

Marcus: I studied at Wayne State University, and then also at the University of Munich, I studied Cognitive Neurosciences there.

Andrew: And that’s how you ended up in Germany. And then from Germany, you came to Silicon Valley about eight years ago. What brought you here?

Marcus: So the Germany thing was that I was a Ph.D. student in Detroit, at Wayne State University. And this opportunity came up when my advisor basically said, “You should check this out. It’s basically doing some international relations work funded by the German government with the Humboldt Foundation and it’s funded directly by the Office of the German Chancellor.” And I thought, “Okay, there’s absolutely no way I’ll get that. So there’s really no risk in applying.”

But, you know, eventually, I went through the application process. I flew out to D.C. There was a big, you know, vetting process. And then, ultimately, I was selected along with nine other of my colleagues from United States and then some colleagues from Russia and China that we worked with peripherally. And it was just a totally interesting experience honestly to, you know, experience the world from that perspective. I had to learn German and really, like, sort of form a project of my own making and that was kind of the first time that I’d really done it at that scale.

And so then . . . But, you know, it was towards the end of that three years that I started realizing that I wanted to, you know, maybe be around more innovation and, like, Munich wasn’t really that much of an innovation center and there wasn’t a lot of upward mobility from a business perspective or from a career perspective. You know, you kind of just put your time in, you know, you earn your money and then you buy a house and, you know, a cottage in the hillside and you retire. And so that’s why I started exploring opportunities in Silicon Valley. So I found that . . .

Andrew: I’m sorry to interrupt, but you had this memory as you’re coming back of an accident and I want to jump to that. Tell me about the motorcycle accident that you were in.

Marcus: Yeah, actually that was a pretty fortuitous thing. It didn’t feel so at the time, but when I was living in Germany, I did an [inaudible 00:06:17] in Spain and so I lived there for a little bit in Barcelona, and I was using a motorcycle as my main source of transportation every day. And so one day, I was on my way to this appointment. I look to my right to read a street sign and because I was looking to my right I hadn’t noticed that this little smart car in front of me had slammed on the brakes. It was a stupid mistake, but I wasn’t doing anything I shouldn’t have been doing, you know, and so I smashed into the back of this car and it was . . . You know, I ripped my palm off my hand and went back to my apartment and nursed my wound and then . . .

Andrew: What do you mean it ripped the palm out of your hand?

Marcus: Yeah, the skin, the whole flapper skin, like, basically separated from my hand. So it was not nice. Actually, the funny part is that that didn’t hurt as bad as when I got home. I went to put hydrogen peroxide on it, but because I was kind of in a state of shock, it was actually a bottle of alcohol. I didn’t notice that it was isopropyl alcohol. So that hurt me so hard that I got nauseous and almost passed out. That was the worst . . .

Andrew: You know I’ve been thinking about getting a motorcycle lately, and I’m so glad that you’re telling me this story, especially since I don’t pay 10 . . . I rode my bike here, on the way in, I was texting you, you saw as I was riding a bike in here. I slipped off because I was singing out loud as I was riding the bike here through the Mission in San Francisco. I should not be on a motorcycle. I think I’d be hurt at least like that. And so . . .

Marcus: There’s a lot of stuff that can come up, like, at any time. You know, like a car can just pull out in front of you and so there’s a lot of things that you can’t control. So the name of the game is to really, like, be more aware. But flashing forward, you know, I moved to Silicon Valley, you know, I took a job as an industrial psychologist in the semiconductor industry. And it was about a year into that, that I had this dream one night while I was sleeping, that I was back on the motorcycle that day of my crash and I was riding along. But I had these, like, GPS maps and they were, like, floating out in front of me like a hologram. And it was so cool because I wasn’t looking to my right to read the street sign. I was just looking straightforward. I had the maps there. It was talking to me.

So I saw the car slam on the brakes, and I just swerved right around it. It was like my subconscious trying to solve that traumatic experience for me. And so I woke up out of a dead sleep and I sat up in my bed, and I was just consumed with the need to buy this thing. I was like, “I’m going to buy it. I don’t care how much it costs. I’m buying it right now.” And so, you know, looking all over on the web and I can’t find anything anywhere and I’m like, “Okay. This is either it doesn’t exist at all, or it’s so poorly marketed that I’m never going to find it.” So I was like, “Well, fine. When I wake up tomorrow, I’m just going to, like, buy a bunch of parts on Amazon and see if I can build one.”

Andrew: And so how long did it take you to build one? This does not seem like an easy project.

Marcus: So that first version was . . . I started on it right away and that was really, I think the important part. So within a week, I was . . . you know, received the parts from Amazon and I started, you know, hacking it together. I was using wireless HDMI and slinging the information from the phone into a little heads-up display module that I rigged up with some basic optics. But it took about six months to have something working, and there was a couple of months in the middle where I just figured, “This can’t be done, that’s why no one’s done it. Obviously, this was a stupid waste of time.”

But, eventually, it sort of slowly came together until the first test drive. I was on a bicycle, you know, biking through the neighborhood and just screaming out of excitement because of just this feeling of, you know, being able to see behind me in this heads-up display. I mean, it was really like . . . I was like, “Okay. My life just changed today.”

Andrew: I get that you had a camera behind you and then it would broadcast to this wireless HDMI. HDMI is just like a little screen. How would you get that to be projected on, I guess, the visor on the helmet? How would you do that?

Marcus: The way that you do it is you don’t rely on the visor. That’s where everybody kept failing because the technology is just not there to basically project on the visor and do that in lots of different lighting conditions. So what you do is use a control the optics that you can see through. You see through the optics and the image looks like it’s floating out in front of you about 10 feet away, but it’s not actually projecting it off of the visor itself. So it just makes it way easier to control sort of the lighting and all that stuff because that’s the challenge is if you’re going to make this like augmented reality type of experience, if there’s bright sunlight or whatever you have to control for that.

Andrew: So, wait, I guess I don’t understand. Are you saying that I would be looking at the screen that’s in front of my face but it’s . . . ?

Marcus: You look at basically, like, it’s like a piece of polycarbonate. And you’re looking through that clear piece of polycarbonate, but because of the way that the optics are structured, it looks like the image is floating out in front of you about 10 feet away.

Andrew: Okay. And the polycarbonate, I don’t even know what that means to be honest with you. But that’s the device that has the screen . . . that’s the screen. It’s plastic.

Marcus: Yeah, the screen is actually down below, and then it projects upward and then it uses a series of mirrors and lenses. And then you’re looking through this one lens and then that is projecting out in front of you. And it focuses the image at infinity so that when you’re looking up close, the image looks up close and you’re looking far away, the image looks far away. That was another key thing that we had to solve.

Andrew: I’ve got a photo of you sitting with a soldering iron here in front of me as you’re building this prototype. You look pretty comfortable with the soldering iron. How’d you get experience doing that?

Marcus: That was just . . . I was just looking it up on YouTube. I mean, you can basically learn how to do anything on YouTube. Like, you can build a nuclear reactor from YouTube. So I didn’t really have any experience as a, you know, intellect, you know, consumer electronics or anything but you can figure everything out. You can figure out how to read a circuit, how to solder and all that stuff. And then I would ask friends, you know, “Am I doing this, right?” And, you know, they would show me. But, I mean, the prototype at that stage was supremely ugly. But, you know, it was so much fun like that. That building phase, that’s my favorite part of starting a business. It’s just that, like, excitement of, like, “I’m doing something that someone hasn’t done before. This is crazy. I’m treading into a new place.”

Andrew: At what point did you quit your job?

Marcus: So what happened is I was talking to one of the executives of the company that I was at and I was like, “Man, I’m so excited about this. I’m so passionate about this. It feels like I’m in love. I feel like this is the feeling of being in love. Like, I just have infinite energy and I’m just, you know, full of passion.” And I said, “Man, I wish I could just quit my job and just do this full-time.” And then he was like, “Well, how much do you need?” And I was like . . . It didn’t even occur to me that somebody had asked me that question. So I just throw out a number. I was like, “I don’t know, 50 grand.”

I thought, you know, “Maybe I could build a prototype for 50 grand.” But I also was, like, aware that that was an enormous amount of money or at least it seemed at the time. And because I’m thinking that’s like a whole college fund, like that’s a lot of money, you know. And so he was like, “Okay. Let’s check this out,” you know. So he’s like, “What’s the deal? Like, what do you have?” And he’s like, “You have a slide deck or something?” I’m like, “No, like, I have a real prototype. It’s in my trunk.” He’s like, “What? You have this here right now?” I was like, “Yes. I mean, if you want to go check it out, put it on.” And it was like . . . he was already walking towards my car before I’d even finished the sentence. So we went out, he put it on and within about a week, he cut me a check and I quit my job.

Andrew: I’m looking at this prototype. It’s been a while since Skully looked like that and I’m still amazed by it. I feel like what you’re saying is an ugly first version, just looks amazing to me. I could kind of see the guts of it in one of the photos. I think even the finished product that has duct tape everywhere still just looks really impressive.

Marcus: Yeah, you got to be really facile with duct tape as a prototype. That’s the prototyper secret weapon.

Andrew: Duct tape. Yeah, I see a lot of duct tape on this. It’s nice also that the duct tape is black. The helmet that you’re using is black. You raised a quarter of a million dollars within a few weeks, it seems like, just because of that prototype.

Marcus: Yeah, it was the prototype and I think just the passion. I was just 100% certain that this is what I was going to do with my life. There was no question in my mind. I mean, it was like an idea that picked me. I didn’t pick this. I didn’t choose to do this. This idea, literally, came to me in my sleep. So I can’t take credit for, like, you know, having some smart way of generating the idea with some innovation process or whatever. That’s just what happened. And so I felt like I would regret it for the rest of my life if I didn’t follow it. And I still feel that way, that I’m so glad that I went out and pursued it.

Andrew: At what point did you join an accelerator?

Marcus: That was pretty early on. Once we had a prototype going, we got introduced by someone to, like, a group of mentors at this accelerator, and it was their first year, like, doing the accelerator and we were all just trying to figure it out. And so I think we kind of all bonded on that process.

But what was funny is, when I was leaving my company, they were like, “Okay. You had that idea while you were working at this company, so we own it.” And I had already quit my job and, like, given my two-week notice. Everybody gave me their blessing. Everybody’s like, “What help do you need?” Asking if they can invest and then suddenly, they were like, “Okay, but we own that whole thing and you can’t do it. So do you want to, like, take your decision back and take this promotion.” And I was like, “Hell no.” And so, basically, that costed about $200,000 and all my savings, and a huge, like, line of debt at a law firm to basically beat that because I didn’t use any company resources. I did it on my own time.

Andrew: And you won?

Marcus: And I won. Just to have the privilege of going through the pain of chewing glass and staring into the abyss.

Andrew: If only you could have just left the job a few weeks before, a few months before. The accelerator that you were part of was Techstars, right?

Marcus: Yeah. Well, we actually took capital from Techstars, from David Cohen, but we were part of a couple of different accelerators. And the accelerators were great because they were like a place where we could, like, meet people and see [inaudible 00:16:45] a business, you know, so it served a big, you know, purpose there. And I remember when we were raising capital at one point, and we contacted Intel, and we had a team of four people and Intel sent a team of six people for the first meeting to come over.

So it was just the weirdest thing sitting in this conference room and we were outnumbered by the people that were . . . You know, like, our whole company was sitting at the table and we were outnumbered. But those accelerators, like, they were really cool. And also we met just so many awesome entrepreneurs that were struggling through the journey with us. And we learned so much. I think that’s just such a valuable thing to do. Like, because, you know, being an entrepreneur is so freaking isolating. It’s really, really hard. And you think that you’re the only one, like, going through the challenges or facing the psychological difficulties that come along with it. So being in that community was just key for us at that early stage.

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All right, I see where you are in the story. You now have raised some money, and at some point, your investor said to you, “Look, spend the money already.” Why? Why didn’t you spend the money?

Marcus: Yeah, at the beginning, you know, we didn’t want to run out of money. We were so worried about running out of money, and it was just me and another guy at that time. And so, you know, eventually, we brought this advisor in. He was one of the accelerator guys and he said, “Listen, the investor put the money in so you can make the money grow. That means you have to invest it in things that are going to make the business grow. You got to deploy the capital in.”

And that’s, really, I think, the stage where we started accelerating on the prototype development. And that’s . . . I think, honestly, what was really important, especially in the early stages of the investor conversations is that we had something to show for it. It wasn’t just a concept and it wasn’t really like a . . . it wasn’t something that, you know, only half worked. It had all the features. You know, it needed a lot of refinement but it had the features. And so people could . . . even if they weren’t motorcyclists, they can kind of see the vision and they could see why it needed to exist.

Andrew: Tell me about the essay contest, because you used $2,000 of the money that you raised to create a video. And along with that, there was an essay that you were asking for. What was that?

Marcus: Yeah, we had a great . . . I met a great guy at CCA in San Francisco that did video stuff. His name is Robert Gomez Fernandez. And so he agreed to do this video for 2,000 bucks. And it was this fantastic video. We went through, like, basically frame by frame designing so that we could articulate what the experience was. And that was just . . . You know, basically, all we did with the video is make it almost exactly like my dream, except to set in San Francisco and the San Francisco Bay Area. And so people were seeing it from my eye view because I knew, like, that woke me up out of a dead sleep and it made me change course in my entire life. So maybe, you know, it’ll stimulate other people to feel something.

And that’s exactly what happened. So we shared that video. It started going viral. We put it on the website, and then when people were going to this video, they were seeing this video and they were saying, “Okay, wait a minute, how do I get involved with this?” So we had a little form underneath and you could apply to be a beta tester. And then the media started picking it up and sending even more links, you know, more traffic to it. And it just kind of went crazy, and we had 150,000 people apply to be beta testers for the product.

And to apply, you had to write an essay. You had to write an essay about why you should be a beta tester. And I was really hoping that we would have, you know, maybe like 2,000 people apply. And, you know, that there would be such a huge amount and I would read all the essays, and then I would pick, you know, like a handful of people and we’d do some, you know, deeper beta testing with them.

When that flood of people came in, I mean, it literally crashed . . . We were using Google Spreadsheets as the backend, and I didn’t even know there was a limit to how many rows in Google Spreadsheet. It’s 20,000 rows, or at least it was then. And so we had to keep, like, resetting it and setting new spreadsheets because they were flowing in so fast. And it was just really mind boggling.

I mean, I thought, you know, “This is a motorcycle helmet, like, how many people out there could actually even care about this?” But it turned out it was a lot of people. And when I started looking at the essays, which, you know, just mathematically, I couldn’t even read in a single lifetime, the quantity of writing was just astounding. But some of these essays, people were saying, you know, like, “I would actually ride a motorcycle because of this.” You know, like . . . So it was pretty interesting to see that sort of transformation happen and how it how it really captured people’s imagination.

Andrew: And so now, what you had was a product, clear interest from the public and 150,000, that was the number, right? Potential customers?

Marcus: Yep.

Andrew: Every one of those people could potentially buy it. Why did you then start raising money? Why didn’t you start producing so that you can sell to these customers?

Marcus: Well, I mean, it’s just really, really capital intensive to build hardware. In fact, I’m of the opinion now that intrapreneurship is probably better for hardware, doing it under the umbrella of a larger corporation that has a vested interest in you continuing on with the project and can support it long term, just because it’s going to cost millions of dollars to bring a consumer electronics product into existence, that has things in it that haven’t existed before.

I mean, the helmet itself, we knew from very early on, from all of the hacking and building, that it was at least as complicated as an iPhone. It had really complex optics on the front. It had complex optics on the back with the rear camera. So it had heads-up display optics we had to create, you know, camera optics at the back that had to have all the special characteristics for using it outdoors, and having this 180-degree viewing angle that was somehow rendered into a display that was intuitive, and then all of the electronics inside and how it wirelessly communicated to the web into your phone. It was just an enormous amount of stuff that had to go into this thing. And so . . .

Andrew: Yeah, I’m always shocked when I interview entrepreneurs and they minimize how hard it is to create hardware. It’s not easy. And just saying that you needed to go through a few factories and the one factory you picked had a lot of defects before you got it right, just doesn’t seem to communicate enough of the difficulty of it. Okay, so that’s why you raised money. David Cohen from Techstars put in a check for half a million dollars, personally?

Marcus: Yep.

Andrew: This was before South by Southwest. You were talking about Intel. They sent over half a dozen people. Did they end up investing?

Marcus: They did. Yeah.

Andrew: They did. And what was it like to raise money from Intel? What were they like?

Marcus: They were honestly amazing. You know, in a lot of ways, they had, you know . . . They’ve worked with a lot of different companies. In fact, they had invested in a friend of mines company before, and he had a pretty good experience with them. And so, honestly, it was really cool. And, you know, it’s like, “Wow, I never imagined that, like, I was going to make this stupid motorcycle helmet prototype that only I cared about and then Intel would want to, you know, invest in it.” So . . .

Andrew: I thought Intel was also taking advantage or they were trying to drag their feet, trying to get you to a desperate spot so that you would have to give them more equity, you would have to . . .

Marcus: The caveat is . . . and this sort of happens with any investor or can happen with any investor in a conversation is, you know, you’re going to . . . The due diligence process will drag on and if you’re not highly capitalized, and you’re building hardware, you’re depleting your capital as you’re progressing, and you’re losing leverage the whole way through until you’re coming up on a cash cliff, where you basically need to make a decision very quickly.

And so we weren’t getting to the deal structure that looked right, that had the right board structure, that the other investors could support and that, you know, the founders could support and we just couldn’t get there with them, and we kind of stalemated and we were running out of cash. So that was the bottom line. So that’s where we said, “Okay. We got to step back. We have to come up with a totally different funding strategy right now, and it has to happen flawlessly and immediately.”

Andrew: And you picked Indiegogo?

Marcus: Yes. So we picked Indiegogo because we thought, “Okay, this is a way where we not only can raise some capital, but also validate the interest of those 150,000 people that applied. Like, do they really want it? You know, do they really want to buy it.” And that’s a really important piece is to validate. So we had this like working . . . you know, these working prototypes, we had them out on the road and we were like, “Okay, we’re ready to do this. We’re running out of money. The best way to do this is to let the customers validate whether this product should exist. And if they don’t validate that, then we walk away. That’s the signal to walk away.”

But what we did know is that the huge risk of going to Indiegogo was, we looked at it and there was only a handful of hardware companies that had ever raised even close to a million dollars. So we were like, “Okay, we have to, basically, have a record-breaking campaign or we totally fail.” Because if we don’t break the records, you know, the investors would just . . . they can just use that against you and say, “Well, people don’t really want it that bad.”

Andrew: Right. They’re willing to write an essay for it, but they’re not willing to pay money for it.

Marcus: Right. Or they’re not willing to pay at your price point or whatever.

Andrew: I saw the Indiegogo campaign. You guys were asking . . . you were hoping, according to the campaign, to hit a target of a quarter million dollars. Secretly, you knew you needed more and that’s what you were aiming for, right? You put the campaign up, and you ended with how much money?

Marcus: I think, 2.4 million.

Andrew: That’s phenomenal. That’s huge. From 1940 different backers?

Marcus: Yeah. And those people were amazing. They were so passionate, they still are passionate about, you know, the product and what it could do, and they could just visualize themselves using it. And that was a really interesting thing too because there was so much demand, even at the end of the campaign, that there was that . . . they started going to our website. So we’re getting all these hits to the website, so we put up the pre-sales on the website as well. So we did another two and a half-million in pre-sales on the website, even after the campaign closed.

Andrew: Wow. All right, I can see you smiling even to this day.

Marcus: It was . . .

Andrew: It’s a point of pride. You did it. Now, though, it was time to actually start producing it, right?

Marcus: Exactly.

Andrew: And so you went to manufacture and what happened?

Marcus: Well, we got some capital closed to fund it. So that we weren’t just relying on . . . we didn’t feel comfortable just relying on the capital from the customers because we know that it’s hardware. Like, it wasn’t a mystery then that it was going to be really, really expensive to build, possibly even more expensive than $5 billion. But, you know, most probably a lot more expensive than $5 million to realize this product and produce them.

And so we raised some more capital. We raised about $11 million in the Series A, and that’s when we embarked on really getting into the nitty-gritty of how are we going to realize this product in terms of the manufacturing processes and making sure the quality is dialed in, all of the regulatory and compliance stuff is done? And, I mean, we were flying out to like labs in Spain that did like DOT and ECE certification and they were like, “What the hell is this? What’s all this stuff in here? What is all this technology in here?”

And so we had to basically, you know, create or conform to these standards that weren’t set up to accommodate this type of innovation, you know. So it was really crazy, like, that process. But one thing really shitty that happened, I don’t know if I can say that. But . . .

Andrew: Yeah, go on.

Marcus: One thing that happened was that one investor, in particular, that I won’t name, they basically . . . they put in about, you know, $3 million and through the course of this product realization process, they had placed consultants inside our company on the manufacturing side because they were all . . . you know, their pedigree was all, you know, manufacturing stuff, that’s where they made their money. So they put these consultants in and we ended up spending . . . And this was, honestly, my mistake. You know, I should have recognized this was a red flag way earlier. But we ended up spending $1.5 million on consulting, from consultants that were placed at our firm by an investor.

Andrew: Wait, the investor gave you $3 million dollars, but they sent so many consultants to you who racked up so many hours, that you had to give half of that money to consultants.

Marcus: Correct, that were . . .

Andrew: Were the consultants helpful?

Marcus: We did not arrive at a product that we could ship. So this was over the course of about nine months, we ended up with a design that didn’t meet compliance and for some of the EMI, and some of the other constraints that we had to comply with wearing it on your head and it wasn’t successful. And so we had to go back to the drawing board after spending that much money and that much time. And we were . . . I mean, needless to say, the team was devastated.

Of course, you know, the engineers, they were looking . . . You know, because these were placed by our investors, the engineers would defer to them in a lot of cases, for a lot of things and that was just not the right way to do it. I mean, we should have focused on, you know, hiring the best people and letting those people, you know, guide the product realization. Ultimately, and I’ll tell you about this later. But, ultimately, that’s what happened is the best engineer that we hired is the reason why the product is still alive today,

Andrew: That actually is a good spot for me to talk about my second sponsor, Toptal. You guys have seen this here at Mixergy interviews. The best engineers, the best developers can make a huge impact on your business. And that’s shocking to me when so many people will say, “I’ll just go online and find a cheap developer.” You want the best that you can possibly get. The problem with the best is that it takes a long time to hunt them down.

That’s where Toptal comes in. When you go to toptal.com/mixergy, you just hit that big button on the page and you’ll be quickly set up with a conversation with a Toptal matcher. The matcher will understand your business, what you’re trying to do and then go into their database, find the right developers for you and make an introduction. If you’re happy after talking to them, working with them, making sure they’re the right fit, you can often start within days. All you have to do is go to toptal.com/mixergy. That’s top, as in, top of your head, tal, as in talent, toptal.com/mixergy.

Boy, I’ve got a sense of who the investor is. I’ve got your whole investor list here in front of me. I guess, I kind of want to play the game of, is it them? Is it them? Let me ask you this, why not talk about it at this point? It’s not like you’re raising money from them ever again. Are you just concerned that . . . ? Well, why? You were going to say something.

Marcus: Okay. Listen, your listeners know but the business world is ruthless and litigious. And there are certain things that I have been desperate to say over the last two years, watching all of these stories fly around about stuff that didn’t happen and being just devastated by it, and my family been devastated by it. But, you know, when you’re coming from the position, you really have no power or, you know, ability to fight it off.

Andrew: Because they could just sue you.

Marcus: And so you just can’t do . . . The unfortunate way that it works is you’re taking undue risk for not enough gain. Now I think that people, smart entrepreneurs will wisely triangulate which investors they’re going to work with in their careers and they should always do their due diligence.

Andrew: Yeah, I can imagine anyone who wants to work with Western Digital . . . Western Technology Investment, Intel Capital, Techstars even. Who are the other ones? Walden River Ventures, any of these guys on your list would probably check in with you and say, “Hey, what do you think? What were they like to work with?”

You know, the other thing that I found that works . . . You’re right, there isn’t enough upside for you telling me and there’s not enough upside for me dragging it out of you in this interview for either of us to pursue it. What I found is gossip, gossip seems to be the most effective way to just behind the scenes say, “Hey, listen, here’s what happened. Here’s the story.” And then the word spreads and people know who to stay away from.

You know, as long as we’re talking about issues, on my screen here on the right, I’ve got a Los Angeles Times article about you. One of your employees sued you and said, “This guy Marcus was spending money like crazy. He had me by a couple of Dodge Vipers, an Audi R8, limo rides to Florida, $2,000 charge at a strip club.” I don’t want to just point fingers at other people. Any of that true?

Marcus: That’s not true. What she was saying is that we were spending company money on all of these crazy things and it was really, really devastating to let all those accusations fly and not be able to defend ourselves. And, you know, lawyers were telling us, “Don’t go in the media.” And it’s going to get into this back and forth. But we knew that, when they would just pull the records of the finances, they would see very clearly that that did not happen.

Andrew: You’re saying, literally, if I had your books right now . . . What do you guys do your books in? QuickBooks?

Marcus: I don’t know. I didn’t [dispose 00:35:22] but . . .

Andrew: Oh, really? Okay, interesting.

Marcus: We had a CFO that we hired from Ducati but yeah . . .

Andrew: Okay. From Ducati, the motorcycle company?

Marcus: Yeah.

Andrew: Okay, so wait, so if the CFO showed me the books, I would not see an expense for a Dodge Viper, for an Audi R8, whatever that is, none of that?

Marcus: No. And I’ll just leave it . . . What I’ll say is this. She had to release a statement that said that her claims were totally without merit. And that, basically, never happens in these cases where somebody makes an accusation fly, they don’t then release a statement that says that, you know, they said something that was inaccurate. And so . . .

Andrew: And this is going out and you can’t say anything about it, and people are angry because the helmets didn’t come out and . . .

Marcus: They’re pissed . . . They’re rightfully pissed, you know, that they haven’t gotten their product yet, you know, and then this thing flies. Now, what I will say is that, in discovery, what we found out from talking to witnesses was that there was some communication between this investor that I was referring to earlier and the person who filed this lawsuit. This person that filed this lawsuit was terminated several months prior. And, you know, so they were upset. She said in her statements she was upset and that’s, you know, why she pursued this.

But I have a feeling that there was more going on there, because there were these allegations of misappropriation of capital. This was not something that someone in her role would care that much about. But the context in which this occurred was that, you know, we were raising a Series B and it was a difficult road, and we were having problems with product realization and manufacturing. So because it was tough to close this capital, we were trying to raise $20 million, I said, “I’ve got to pull the trigger.” It was like another Indiegogo moment. I said, “I got to pull the trigger. I got to make sure that this survives.” So I went to China to try to find a way to sell the company. So I was there for two . . .

Andrew: Sell the company?

Marcus: Yes.

Andrew: Wait, before we get . . . I want to walk a little bit slower so I can understand it. I actually, for a second there, spent a little bit of time, like, seeing if I could find the article where she took back what she said, I wasn’t able to find it, to be honest with you.

Marcus: It’s a VentureBeat article.

Andrew: Then I got distracted by how many articles are like this, “Skully’s founders spent Kickstarter cash on strip clubs and sports cars claim employee.” And they go, “What are you talking about?” That’s actually . . . I may not be able to confirm your books because I don’t have access to the CFO here. But I know that you guys weren’t on Kickstarter and if that’s in the headline, and they didn’t catch it, then it really says that they didn’t do much research.

Marcus: No. And, you know, they weren’t contacting us. The ones that we contacted, we said, “We didn’t do this stuff and we’re going to maintain that. And we’re going to go through the discovery process.” You know, and it was brutal, dude. I mean, listen, I made every mistake in the book that a founder can make.

Andrew: Like what? Before we go on to what happened next with the factory, give me an example of a mistake that you made. I don’t want to look like we’re just pointing fingers. I want to say we’re getting . . .

Marcus: Absolutely. No, I mean, the bottom line is, if it spirals out of control that far, you as the founder have made the mistake regardless of whether you get these . . .

Andrew: So what is the mistake?

Marcus: . . . false accusations and all this stuff.

Andrew: At this point in the story, what was the . . . ?

Marcus: The biggest thing was this.

Andrew: Yes.

Marcus: The genesis mistake was that when we started paying out all those consulting fees to this investor, we didn’t appropriately address that with them. We just started doubting them and we started basically worrying. And so that started to erode our trust. And the dynamic just got worse and worse, until finally, we said, “We have to terminate this contract with these contractors. We have to terminate it.” And we were just at our wit’s end and we’d paid so much money to them that . . . And then, they were very upset and it was not a good situation.

And so that was the thing that soured the relationship with our investors. And I had an angel investor because I called my angel investors, you know, when all of this was going on, when it started to collapse. And one of them, he said, you know, he’s like, “I still believe in you. I’ll still invest in your stuff. But I really wish you would have called me in because I would have helped you manage that relationship.” But he’s like, “You had to manage that relationship better.”

And that was true, you know. Like, I think that your success as an entrepreneur comes down to how many difficult conversations you’re willing to have. And I think, in some sense, because, you know, I’m in my 20s and, you know, my first startup, I was intimidated by these guys that were, you know, practically billionaires and I thought they knew everything about what I needed to do. They had all this, you know, manufacturing background and stuff. So I think that was a . . .

Andrew: I feel like David Cohen, at this point, by the way, he’s got to be like a billionaire or something. David Cohen is so unassuming, but he’s had phenomenal hits.

Marcus: Yeah, he’s amazing.

Andrew: Like didn’t one of his hits Twilio end up buying another one, SendGrid, right?

Marcus: Yep. Yep.

Andrew: And so were you able to go to him? He’s incredibly empathic. He is really good at early-stage entrepreneur, not management, but working with early-stage entrepreneurs. Was he helpful?

Marcus: He was amazing and so was this whole Techstars ecosystem. I will have to say that, that was . . . You know, in that category of mistake, like, isolating, instead of reaching out, you know, when things go hard. And it’s, like, you know, not knowing what to do and not really reaching out to the people that could have probably helped and you become so narrow. I became so narrow in my thinking at that time about trying to solve the problem internally and to sort of contain it, and to just press forward and, you know, hit our milestones, and do all that stuff. So it was just . . . I’d say that was, like, one of the biggest things.

And another thing that we did that was . . . that I did that was difficult was, we grew a little too fast. So we got up to over 50 employees, and we hadn’t shipped our product yet. So, you know, we’re burning through a lot of capital. And, eventually, we got that we were burning about a million dollars a month and it was just really . . . it became extremely capital intensive to operate.

And I think that if we could have leaned down faster or not grown that quickly, that would have been advantageous. And, you know, I think, the more experience I have now, I’m very reticent to . . . It’s like, yes, deploy the capital efficiently but do not grow too quickly. There’s no glory in raising a bunch of venture capital and hiring 100, you know . . .

Because, you know, let’s be honest, like, the more employees you have, the more headaches are going to boil up to you. There’s all kinds of, like, HR stuff you have to deal with and like culture issues and disputes among employees, and all kinds of stuff that, you know, it just magnifies the more people you get. So if you’re good at running a 10 person company, it doesn’t mean you’re going to be good at running a 50 person company or have any passion for it.

Andrew: You got tied to a manufacturer. How did that happen?

Marcus: That was just, you know . . . That was a situation where there were relationships with a particular investor, and so we were kind of told to use this, you know, manufacturer or to stay with this manufacturer, I should say. And, you know, we did want to start changing things up at a certain point. It wasn’t working. And so we wanted to go with this different Taiwanese manufacturer. And that’s actually where the product is being manufactured now but . . .

Andrew: Were you able to do it before when it was your company?

Marcus: No. We were not able . . .

Andrew: Because you were so tied, you could not leave the manufacturers.

Marcus: Because that investor was still involved. So we . . .

Andrew: That investor was pushing you to do it.

Marcus: Yeah, and well, it’s not just that. I mean, we were in so deep with them, we were so deeply invested, all the knowledge that’s in there and all the know-how about what the nuances of the optics and the tolerances, and all the stuff that you’ve got to figure out with a given partner to then teleport it all over again for a third time. Because remember, the first go around with the consultants was, you know, a nine-month, you know, basically wasted span of time. And so you only have so much time and you’re burning through capital. You know, you got employees and engineers working on things and . . .

Andrew: Were you freaking out at this point? How do you deal with it?

Marcus: Well, it was kind of trial by fire in starting the company, when I cratered my career as an industrial psychologist to go and be a helmet dude. And so then and getting like . . . then having them sue me for the idea, like, right after I cratered my career. So that was, like, the . . . I was waking up in cold sweats every night. Like, you know, I’d have a notepad right next to my bed and I would write down the worst thing that I was thinking about while sweating and shivering, and like that would . . . so it would get it out of my mind and onto a piece of paper so I could, you know, eventually go back to sleep

Andrew: Did that help?

Marcus: That just was a jaded me to a lot of like . . . I just said, “You know what, it’s going to be really hard all the way through.” I, you know, and I’ve been through really hard stuff before, this is not going to be any new different.

Andrew: Look what, I’m looking at your past and I’m trying to understand what the tough thing was that got you ready for this. What was it?

Marcus: Well, I mean, you know, growing up, I was in a bunch of different difficult situations. I mean . . .

Andrew: Like what?

Marcus: The main thing was, like, when I was really young, my brother died and, you know, my dad basically kind of spiraled out, you know, and he was just not around. So he wasn’t really great . . .

Andrew: What do you mean by spiraled out?

Marcus: : . . . at that point. You know, he started gambling and started drinking and . . .

Andrew: As a way of coping with that?

Marcus: Yeah. And he was, you know, like, in his early 20s. Like, I can’t imagine that, you know, like, as a man to deal with a loss like that. But my mom was kind of left high and dry. And so I was kind of, like . . . I remember just being like, “I’m the only like, male presence in this house.” It’s, like, really weird as a little kid. And so I would always try to tell her jokes and cheer her up and it was a trying time. And, you know, so my next brother Mitch was born and he’s ended up being my co-founder at Skully. But we’ve been through everything together. And so, you know, we were really, really poor for a while and, you know, had a really abusive stepfather and stuff. So, like, we just, like, were constantly [inaudible 00:45:51] . . .

Andrew: That’s what happened to your dad. Your parents broke up.

Marcus: What’s that?

Andrew: Your parents broke up and that’s why the abusive stepfather came in.

Marcus: Correct, yeah.

Andrew: When you say abusive, what kind of abuse are we talking about?

Marcus: Oh, it’s, you know, just like, you know, physical abuse, like, smacking us around and, you know, kicking us downstairs and stuff.

Andrew: You made enough money as a babysitter that, by 16, you were able to loan your parents money?

Marcus: Yeah. That was . . . I started a babysitting business when I was really young. I was about 10 years old. And, basically, what I wanted to do is make some money, save some money away. And so it started just building up in there because what I did is I ran an ad, I took an infant CPR class and then I ran an ad in the paper that said that I have, you know, a CPR certification. And then so, I just started getting all of these jobs.

And, you know, some of them were really good. Like, one, you know, I was babysitting three kids at a time, you know, and for, like, a whole summer and socked a bunch of money away. And so every once in a while, like, you know, money would come up short and they would say, “Hey, we’re going to take a little bit out and we’ll put a little bit in, you know, for interest.” And I realized, wow, like, you can, like, you know, deploy your whatever thought into the world and then garner the resources and then they’re valuable to other people.

Andrew: So then, look at this, guy who had trouble in his childhood, nevertheless got to a point where he could help his parents. So you must have felt, maybe not invincible, but I remember the way I felt when I had my first company, invincible is not too far off. And so to, suddenly, then have these big setbacks, that doesn’t just mean a setback for the business and a trying time for yourself, but a reevaluation of who you are. You were the person who was sane while your family was collapsing. You were the person who survived when your brother didn’t. You were the person who was able to help your parents when they couldn’t help themselves. And now, am I right?

Marcus: Yeah, I mean, you know, what I will say is that my brother and I, we relied heavily on each other through a lot of that. So, you know, and that’s the same way to this day. You know, we just really use each other as support system. You know I’m really blessed to have him as a brother and a business partner, and a lot of the stuff that I do.

Andrew: All right, and so you’re now tied to this manufacturer. You can’t get out of it. You can’t make this manufacturer produce what they can’t produce. And you were starting to say you had to fly to China. You had to take drastic action. What did you do?

Marcus: So we got some of the units shipped. We shipped about 500 units of the product, which was like fantastic. We’ve gotten a product into the world and it existed. And we did what everyone was saying we couldn’t do or that it was a scam. And we realized the product, we got it in the world and we’re pushing software updates over the air, just like Tesla, to these helmets to enable new features and all kinds of stuff.

And so I was like, “This is a good inflection point, where maybe I can actually sell this company and get out of this bad investor relationship.” So I flew to China. I brought a translator with me and lined up a bunch of meetings. I probably did, you know, 20 meetings in that two weeks and found a buyer, and they were interested in buying the company. And so we got a deal put together and I came back and delivered a deal to the investors.

And, by the way, when I say investors, I’m only talking about VC. I’m not talking about angel or any thing that came before the VC stuff because all of those investors are angels in the truest sense. I mean, they were amazing and so supportive, and are always open to help. And I still interface with a lot of them on projects. But, basically, we brought that deal back and it was a deal to sell the company for $50 million. Everybody was going to get paid. You know, people are going to be really happy.

And the product . . . the criteria for the deal was that we want them to continue shipping all of the units to the customers and, you know, continue to fund the business and then launch the second product. There was going to be another version of the helmet and a bicycle helmet version that was like a toned down version, a lower price. And they made like, electric bicycles and, like, that are really fancy and had all these different things on them as well. And so it’s a really big conglomerate in China. So we were stoked about this.

So we brought it back and they were strangely less than enthusiastic about the deal. And we were just baffled, like, this is it. This is going to happen. You know, we got wet signatures. We’re ready to rock and roll. And then, so they came back to us, one of the, you know, investors, in particular, and said that they wanted a 3x liquidation preference. So those are very dirty words for an entrepreneur that’s about to exit.

What that means is they are instituting this liquidation preference right at the last minute, which is going to take all the cash out of the deal. And when that happens, you know, all the people that put the work in to build the product, all the employees, nobody’s going to get paid. None of the angels are going to get paid. So they were proposing to, like, recapitalize the company or take a 3x liquidation preference. And so they were saying, like, basically, “You’re going to do this or we’re going to push you out of the company and then we’re going to just take it over, and we’re going to have the whole thing.”

Andrew: Wait, if they have liquidation preferences, they got it when they gave you the money, right?

Marcus: No. They use blocking rights, which were a term that they included in the charter so that they could have blocking rights, unilateral blocking rights on an exit deal. But it was . . . You know, the terms are really, really important, guys, like . . .

Andrew: That means, when you sign the agreement to accept money from them, they said, “Fine. But we get to block any acquisition that you could come up with.”

Marcus: Yeah. But that’s not a scenario and the way it’s structured in the document, you know, it doesn’t really, like, look or feel that way. We were using a very big, you know, four figure an hour law firm that were, you know, combing through this stuff. I’m a 20 something year old so, you know, I have to . . .

Andrew: What’s the name of your law firm?

Marcus: At some point [inaudible 00:52:16] we’re getting the right advice. What’s that?

Andrew: What’s the name of law firm? It’s one of the big Silicon Valley ones?

Marcus: Yeah, it’s called Pillsbury Winthrop.

Andrew: Okay. So I don’t know how it works with them, but I sometimes feel like the interests are misaligned with some of these law firms here, that they have longer-term relationships with the investors than they do with the entrepreneurs.

Marcus: That’s possible. I think that we had a good structure, honestly. I mean, they were the also the ones that supported me through the first lawsuit when I was . . . the first lawsuit, when I was leaving the company to start this new company. And so, I mean, I think that they actually just did as good a job as they could, but when you, like . . . some business partners that really want to achieve a certain objective, you know, it’s going to be dicey. You know, they had different mechanisms to push us out to achieve that objective, by the way. So they were either going to recapitalize . . .

Andrew: And their objective was either you get out and we take over the company, that’s true?

Marcus: Yep.

Andrew: You still would own a share of the business, but they then put someone else in or you sell it and they take, basically, all the money?

Marcus: They actually wanted us to relinquish all ownership stake, all of our vested equity in the company, you know, when they pushed us out. So, anyways, it was very difficult to basically have this deal. Everybody’s going to get paid. We couldn’t fathom, like, what the incentive was or why they wouldn’t want to pursue or go through this deal. So they push us out. They basically run the clock out on the deal so the deal goes away. They say that the people on the buy side were saying, “You have an investor problem, we want to do this deal and they’re just not doing it. You know, if you can solve that, we still want to buy this company.” So they run the clock . . .

Andrew: Also fair, we were talking about gossip. It’s fair to say that they were gossiping about you or spreading gossip about you?

Marcus: We did find out in discovery that they had been contacting the investors . . . I mean, this investor, in particular, was contacting the buyer directly saying, “Why don’t we just buy? Why don’t you just do the deal with us? And we’ll get them out of the deal.” Because between Mitch and I, we owned about 40% of the company, at the time.

Andrew: Okay. And you found that in discovery? What was the lawsuit about that would bring that . . .

Marcus: This was the lawsuit . . .

Andrew: With the employee.

Marcus: . . . of the employee, yeah. The disgruntled employee lawsuit, yeah.

Andrew: All right, so that . . .

Marcus: So we found out a lot of interesting facts at that . . .

Andrew: Like what? What else did you discover?

Marcus: Well, I think the main thing is that, you know, when we tried to basically facilitate a graceful exit for the company and this all like basically happened, what they did is they had, you know, put their own team in, they told all the employees, these investors, in particular, that everything was going to be good and they were going to fund the company, and they were going to do all this stuff. And they didn’t actually do that.

Meanwhile, in the background, they were working on selling the company to a different buyer. And so they had already been, like, lining up these conversations to sell it to somebody else, where they would receive the proceeds in a recapitalize state. So then we found out that there was, I guess, some shadiness going on. I don’t know the details exactly.

But, eventually, it got to Western Technology Investments, WTI. They received it in insolvency. They had the rights to receive it because they had, like, loaned money to Skully. So they tried to basically, like, work with the different people that were involved in the company. And this investment group, in particular, was totally unhelpful and, you know, all of this talk that they were saying to the employees about what they wanted to do just wasn’t a reality.

So, eventually, what happened is WTI contacted us and said, “Hey, you know, we want to basically keep this thing alive somehow. So how can we do that?” And so we worked with them to help them communicate with this buyer, in particular, that was based out of Barcelona, where the idea actually came from, and they agreed to buy it. They got a great deal on it. And so they didn’t have to put a lot of capital upfront. But the deal was, they would have to invest on the backend and shipping to all these customers, so that these customers that paid wouldn’t have to pay any more money.

So WTI offered us some cash to, like, help out because they knew, like, our life had just cratered at this point. And we said no. We declined the cash. I just said, “We should not accept any compensation for this. I just want this thing to survive and I want these customers to get their fucking products.” So, basically, that’s the deal and that’s exactly what happened. So right now, they’re shipping . . .

Andrew: And the investors accepted it, why?

Marcus: The investors had already been washed out in the insolvency and so the only investor remaining . . .

Andrew: Oh, wow. So they took it to insolvency, instead of getting what they wanted, which is the whole company.

Marcus: And under the argument that we just messed up the company so bad that it wasn’t even viable, the product wasn’t viable or anything. Meanwhile, the acquiring company that buys this thing from Western Technology Investments, they do some tweaks to it, the product is still to this day, about 95% the same and they’re shipping it out. You know, and people still want it and they’re still passionate about . . . the community is still passionate around the product.

So these things, you got to step back as an entrepreneur and be realistic and you got to say, like, you know, what was good about it and what was bad about it. And I think what was good about it is that there was a passionate community around this idea and this product. And those people were so passionate, and the product, and the collaboration of all the engineers, and all the passionate people, and creating that product. That product was so strong, it survived this nuclear blast.

Andrew: Wow, you know what? And here’s the thing, everything you’re telling me, I’m researching. I couldn’t even let go of the fact that you said the lawsuit was dropped. I said, “How did I not find that the lawsuit was dropped?” I eventually found it. March 7, 2018, VentureBeat had a story about it. But your history is completely polluted in Google. Anything I search for is just full of this other stuff. It’s not until I do some deep research, that I can come up with . . . All right, what you were saying about what she said after, it’s true, at least according to this article.

Wow. How do you feel about that, by the way? That I can’t even just like follow along, without seeing a bunch of negative stories about your past when you spend years of your life on this.

Marcus: That sucks a lot, man. I’m not going to lie. That’s really . . . it sucks a lot. But, you know what? Listen, like, life goes on. I’m just glad that customers are getting their product now, you know. And I think that, like, you know . . . I haven’t been out there. This is the first time I’ve ever told this story. So, you know, it’s not that I feel that passionate about correcting the record. Like, the media article is out there if people want to find it.

But, yeah, I mean, it gets totally consumed by all this salacious stuff and these articles start flying. And the problem is there’s no due diligence, there’s no investigation to, like, really figure out, “Is this story legit?” And it’s a sexy story, like, “Oh, like, they’re buying Lambos and going to strip clubs, and they’re doing this and that, and, you know, spending all . . . and, like, running off to Fiji or whatever.” I mean, I get why people . . .

Andrew: To be honest with you, that would get more. We should do that in the headline, “Stripper buying founder of Kickstarter.” [inaudible 01:00:12].

Marcus: Somebody hacked us for all you hackers out there.

Andrew: So I also looked at some of . . . There’s some other companies that were trying to do this too that ran into similar problems. Do you know any? What do you know about . . . ? Is it pronounced Nuviz?

Marcus: Yep.

Andrew: Who creates ride HUD. They also had similar issues with production, am I right?

Marcus: Yeah, yeah, any of these, like optics driven ones, Navdy is another one that was a heads-up display for a car, any of these hardware optics, you know, devices, you know, they’re trying to basically do augmented reality or heads-up display. They’re having a tough go of it. You know, this is extremely capital intensive and very difficult to solve some of the problems. That’s why they’re not solved yet. And I think, what you’re going to see as we approach the end of Q4, is you’re going to see probably even more casualties in augmented reality, while people come to the ironic realization that the reality of doing an augmented reality company is a lot different than anticipated.

Andrew: But, largely, it’s . . . Well, yeah, it’s hard to create something that lives up to expectations, right? Magic Leap has been getting that in the press.

Marcus: Right.

Andrew: But the thing that gets me is I saw the picture of you with a soldering iron, actually creating something that was good. I didn’t use it. It seems like it was good. Was it not good?

Marcus: It was amazing and it is amazing.

Andrew: So then, what’s the problem? What goes wrong between taking it, amazing, where you do it at that bench that was crowded with a bunch of stuff to taking it to the factory and having it produced for people? What’s the difficulty there?

Marcus: Staffing the right people on the project is absolutely key. Don’t rely on external consultants because your interests are not aligned. They’re billing hours and you’re trying to make history and it’s not compatible. And, in many cases, it’s not compatible. So that’s one thing.

The other thing is you’re going to run into some difficulties and you’re going to need very deep pockets to do new types of hardware. Like, when we were doing . . . One of the main things that was a huge challenge for us . . . Well, there was really two things. One was compliance. So putting all of this stuff into a helmet, you have UL, CE, EMI requirements, DOT, ECE, they’re all these regulatory bodies. And you’re having to, basically, fit this whole puzzle together that is compliant on all of these fronts, all at one time, as a startup. You’re interfacing with these governmental bodies. They don’t work at your pace. It’s very, very, very difficult to do that.

So that’s one thing that . . . It’s going to take more time. Even if your development pace is fast enough, that regulatory piece, they may say, “Oh, it’s not compliant in this way, or that way. Or when you put these two things together that have never done before, then it’s not compliant in this way.” And so you have to go back and re-engineer stuff. So that’s one thing that people run up against, especially, as heavily regulated a product as a motorcycle helmet with heads-up display technology. And you would hope that it’s heavily regulated because it’s got to be right. If it’s not exactly right, it can hurt people.

Andrew: Yeah, Magic Leap doesn’t get it right, and I’m still sitting in my couch.

Marcus: Right, you’re sitting on your couch, right? So it’s such a high consequence product, but we knew we can save lives if we got it right. So it was . . . You know, that was, obviously, a big sort of motivating factor.

The other thing that was really, really challenging was with the optics. We were working with a manufacturer that just wasn’t good at manufacturing optics. They were good at some other things like assembly and stuff like that, but for optics, in particular, the tolerances were so tight to get it to focus at infinity and perform the way that it needs to, according to the spec. And so there were so many like workarounds that we had to do to just engineer solutions so that, when at manufacturing, if the tolerance was slightly off, we could perhaps shim it and, like, do all these different techniques to make the optics work.

So we had to basically do a ton of engineering on behalf of the manufacturer, just to allow them to work around their inadequacies around a particular type of, you know, manufacturing, which was the optics. Now there was a firm in Taiwan, that I would have much rather used. But like I said, at that time, we really didn’t have that optionality.

Andrew: What’s the firm?

Marcus: I’m not going to share that because that’s confidential information of the acquiring company because [inaudible 01:04:40] they’re just doing an amazing job. They’re shipping units . . .

Andrew: You said finding the right manufacturer is so hard that that actually is . . .

Marcus: That’s proprietary information.

Andrew: Proprietary information. Okay. And you didn’t want to bring up . . . They’re not getting any of the money from Indiegogo that you raised?

Marcus: No, they’re doing their . . .

Andrew: It’s all gone. They’re taking money out of their own bank accounts to create these helmets and then ship it out to people who paid you, who then ended up having to pay these consultants and everything else?

Marcus: Yep. The CEO, Ivan Contreras is spending millions of dollars shipping units, developing . . . you know, because they had to change some manufacturers, you know, because of those old relationships. And so they had to do some development and get it shipped out. And now, those customers are receiving product. And you can go . . . you can see on their website, Skully Technologies are just . . .

Andrew: I’m on the site right now.

Marcus: And you can see, and in their blog, they’re, like, and out on our Facebook page, they’re actually, you know, they’re hand delivering, just like we did in the first 500, you know, going and actually delivering them by hand so the people can see, like, “Yep, it’s real. Here it is.” And it’s funny to see them interact with their community on social media as well, because they’re up against the same thing like, “Yeah, you’re never going to ship it. It’s not real.” And they’re like, “Yeah, it is. Here it is. It’s in my hand.” It’s like almost hard for people to, like, accept that it was real.

But even back then . . . before the whole, you know, collapse, even back then, it was difficult to accept that, like, this thing is really going to exist in the world. You know, and I’m just really happy for them and I’m extremely happy for the customers that put their leap of faith in us to realize the product. And, really, it’s just that this company, Torrot, they’re just amazing people. And the company and the product would not exist if they didn’t intervene and also take on that deal. I think it’s, ultimately, a long-term, a really good deal for them but, most importantly, in the short term, it’s a good deal for the customers.

Andrew: Wow. Yeah, I’m on the site right now. I don’t have motorcycle but I picked out matte black, size medium, DOT certification, I hit Checkout, I can buy it with Apple Pay right now. All right, what you’re working on right now is nootropics. I’m wondering how you got into that. And I don’t want to, like, create a whole other interview around it but why that as a follow-up?

Marcus: Well, that was something, you know, like along the way, just the amount of time and energy that you’re putting into the startup . . . I mean, I was going through it, where I was just trying everything under the sun to, like, basically keep up that level of effort that’s expected of you. And, you know, I was trying like Modafinil and Adderall and caffeine, like, extreme amounts of caffeine and . . .

Andrew: You were using at Adderall, while you’re going through this. What did it do to take all those things, Adderall and all the others that I don’t even know what they are?

Marcus: Basically, it allows you to stay focused for, you know . . . It’s not uncommon for you to have to do maybe eight straight calls in a day, and so it’ll allow you to just stay in that chair, do the calls, don’t stop, don’t lose focus, no spacing out, you’re just in the zone and you’re there. But there’s this huge drawback, so none of them I could really stick with. I’d try it for a week and then I just like, “This isn’t working,” because they’ll interfere with your sleep or your mood, your appetite. They’re just not effective solutions. And then, you know, so I would try to rely on caffeine but you develop a tolerance so fast.

Another thing was, two, is that they did nothing for your mood balance. I mean, you know, if anything, they gave you this flat affect, right? And so I was thinking about it and just how difficult that was in doing this, and all the experimentation I’ve tried and all the different supplements I’ve tried. And I thought, you know, it’s just . . . Mental health is so important for an entrepreneur. And it doesn’t have to be when mental health is going bad, you can have a positive psychology approach to mental health, where you’re really trying to optimize getting in the right state every day, getting in the flow state.

And so I had been, you know, testing all different kinds of stuff. And then after Skully, you know, I was like, “Okay, this is something that, you know, as a psychologist I’ve been very interested in for a very long time. And I’m finally going to take a step back and make something for me at my countertop, like a prototype formula that works for me.” And it was like, going right back into that feeling again. And I was like, you know, it’s coming from a place or, like, I was just crushed emotionally, you know. And so, like, being in that phase where the whole world fades away, and it’s just you and your prototype, and you’re just building it, and you’re getting closer and closer, that gave me new life, you know.

And so after about two years of development, we just started shipping. And it’s just a wonderful feeling to, like, be back in the mode of, like, producing something that’s helping people and, you know, so it balances the mood out, gives that focus. We made this new technology that does a sustained release version of this compound called Theacrine that you don’t build a tolerance to but it kind of has a caffeine-like effect and it’s wonderful. And, you know, it’s kind of crazy to, like, make a product that helps you be better at making the product and now, or the business that makes the product. So it’s been a really, really fun project.

Andrew: And it’s on halcyon.bio. All right, thanks so much for doing this. I asked you if there’s any way . . . if I should be promoting anything and you said, “You know what, you can give out my Instagram account.” Why your Instagram account? I’m on your Instagram account. Of all places for me to refer people, Twitter account, what is it about Instagram?

Marcus: You know, it’s a place where I’ve neglected for a really long time. And, you know, basically, the main thing is I want to, like, interact with the world again and not in the context of, like, all this crap that went on. I want to have, like, real human interactions and, you know, interface with people. And I want to . . .

Andrew: You picked, like, a personal thing where . . .

Marcus: I want a personal interaction. And if people have questions for me or whatever or hate mail for me, or whatever, that’s fine. You know, like, I want to have real interactions. And like I said earlier, you know, I think your success as an entrepreneur comes down to the number of difficult conversations you’re willing to have. And, you know, after two years, I’m ready to have them.’

Andrew: All right, you guys can have it with him at . . . here it is, instagram.com/drmarcus.co, Dr. Marcus Co. I want to thank my two sponsors who made this interview happen. The first is a company that will host your website right. It’s called HostGator, check them out hostgator.com/mixergy. And the second is a company that will help you hire phenomenal developers that is toptal.com/mixergy. I’m really grateful to them for making this whole thing happen and, really, just supporting me going in whatever direction I want with these interviews and they never come back and say, “How dare you?” I know some sponsors are a little bit upset by certain things. They’re not. Cool.

So now that it’s pretty much done, how do you feel about it?

Marcus: I feel great, man. I really appreciate you taking the time, and it’s been really nice to share the story finally. It’s like a massive weight lifted off my shoulders.

Andrew: Yeah, I get it. You know what, I feel buried as I was searching for articles about you and all the stuff that is . . . And someone must have written that first article about the lawsuit and used Kickstarter in the title and then everyone else picks up on it. And then when I go search for you, all I find is references to that one article, where you can see they’re kind of copying from each other. I’m glad that you’re out there telling your story.

Marcus: It’s just [inaudible 01:12:26] the way that, like, news spreads nowadays. And I would have probably not taken that perspective. I would have said, “Oh, you’re just a skeptic, you know, or you’re, like, overly conservative,” or whatever. But I think that there is a certain degree of truth that, you know, news can circulate and have not a lot of truth. And you’re kind of left wondering, like, “What’s going on here? And, you know, but it is what it is.

Andrew: Yeah. And the truth is, I got to be honest with you, I think you’re going to get fewer people listening to this interview than saw the headline on all those different sites about Kickstarter. All right, to their credit, what was it? It was The Next Web, they at least corrected it. And I could tell that they made a mistake because the URL still had Kickstarter in. It had false information in the Google search results. But when I clicked over, on the bottom had a correction. All right, anyway. Yeah. What were you going to say?

Marcus: Oh, I was just going say, yeah, and it’s just interesting how, like, even VentureBeat, I mean, that’s a huge, you know, outlet for this kind of information. When VentureBeat released the correction later, you know, with her statement, that didn’t circulate because people don’t . . . journalists don’t want to admit that they didn’t do any due diligence.

Andrew: Also, I’ll be honest with you, that’s not getting anyone any hits. I’m telling you, there’s no way that lawsuit against . . . Here’s the reason that it didn’t come through. Here’s the correction, “Lawsuit against AR helmet maker Skully over strippers . . . ” Let me see, I have to click the Google search results to get it, over strippers and sports cars has been dropped . . . I’m not trying that. All right, thanks so much for doing this interview. Thank you all for being a part of this, guys, and bye.