What I Learned From Selling My First Company

New York. March 2017. The outside temperature was about 20F. ¬†Taking into account the wind chill factor, it felt around 15F. I couldn’t feel my face! There were mountains of snow on the edge of the sidewalks that hadn‚Äôt thawed from the blizzard the week before. Even though I‚Äôm originally from England, I hate the cold but on this winter day, my heart was warm. After almost a year of trying, and after running it for five years, I had sold my first company.

In 2012, I took one of the biggest risks of my life. I moved from London, England to Austin, Texas. I had no job, a small amount of savings and a dream: I wanted to change the face of a sport. The sport in question was table tennis (or ping pong as it is more commonly know in the US). I had seen the rise of wellness in corporations and how a lot of offices had introduced ping pong as a way for employees to bond at work. But the sport had remained the same for a large part of its history. There was no aesthetic appeal and no way for players to customize and personalize their experience. And so Uberpong was born. I would allow people to use photos on their phone or social media to create custom ping pong paddles.

I needed cash fast so I launched a Kickstarter campaign. I had stayed up late learning about effective strategies, target amounts to raise and time periods to run the campaign for. So I settled on a $10,000 goal and set the clock ticking down from thirty days. I started with my Facebook friends and family members and in addition to this early support, I got some additional funding from the Kickstarter community. I then hustled hard with the local Austin media and got picked up by a few blogs and one magazine. The numbers were looking good after the first week but then they plateaued. Two other big blogs covered us and it seemed that we were home but then another lull. I organized a ping pong night at a local bar and convinced them to show our Kickstarter video on a giant projector screen outside. This attracted a ping pong fanatic to pledge $500. My heart was racing as our deadline approached. We were still short. After speaking to an entrepreneurial friend of mine who ran a coworking space, he took us over the finish line with barely thirty minutes to spare. I was literally ecstatic. Here I was in a new country and a new city and I had the seed capital to make my dream a reality!
Lesson Learned: If you set a deadline and focus, anything is possible.

I had no experience in e-commerce but I was obsessed with the idea of making money while I slept. I told a British friend I had met at Austin Startup Week what I was working on and he offered to help. He helped to build a basic version of the site and cleverly used free tools to create a storefront. I was ready to launch Uberpong.com. I will never forget the moment the first sale came through. I was on my phone and I got an email saying a transaction had occurred. It showed the amount and the customer and this was followed with a second purchase on the first day. It wasn’t the money, it was the feeling that I had created something that the world wanted. It was validation. It gave me a natural high I had never experienced before.
Lesson Learned: Bootstrapping and using the lean startup methodology is an effective way to launch a new business. Hack, scrape, beg, borrow and steal (well maybe not steal!) to get your creation out to the world then stay close to your customers to learn what they need.

Out of the blue in January 2013, I got a call. It was ExtraTV. They wanted some paddles quickly for a segment of a show with Mario Lopez and Maria Menounos. I tried to act cool but probably sounded like a gibbering wreck! Here was my first major client and we had a tight deadline. We got them to Extra just in time and they appeared on national television. I was gobsmacked. I had been in the US for under a year and the brand I had launched was on national TV being broadcast into millions of homes. Soon after, more major clients heard about us and came shopping. We were still using my closet to store the rubber sheets, the kitchen table to print labels and pack the orders and a local printer to print onto our rubber sheets.
Lesson Learned: The garage startup is not a myth. To keep overheads down, it is a good idea to start at home.

It quickly became apparent that we needed more space so I bugged the owner of a t-shirt company to sub-lease us some office and production space. I also hired my first employee to handle operations and customer service and help on the events front. Within two years of launching, we were on the field at Dodger Stadium partnering with MLB team The Los Angeles Dodgers. We were running a celebrity ping pong tournament with Jimmy Kimmel as the host. A few years before in England, I had a dream that one of my brands would be on the jumbotron at a basketball game. As I walked up from the locker room at Dodger Stadium, I saw Clayton Kershaw getting interviewed in the stands but what really caught my eye was a bright orange color on the digital advertising board. A giant ‚ÄúUberpong‚ÄĚ was displayed there and around the entire stadium. I stopped in my tracks, pinched myself and then took a photo.
Lesson Learned: Be present, appreciate the highs and celebrate moments like this.

Back in Austin about a year later, the t-shirt company we were sub-letting from suddenly went bust and as the floor was filled with things they were trying to sell, we were the only lights still on in the building. Panic set in as we had no plan B for a production space. After talking to the landlord, we managed to move into a temporary space in the building but the heat was unbearable in the Austin summer. I eventually found an entrepreneur who ran an electric vehicle company and he let me use some of his warehouse space.
Lesson Learned: Always have a plan B. You never know when you will need it.

As I got to the point where I had been running the company for about 4 years, I had another venture which I wanted to launch but I had to make sure that Uberpong would be in safe hands if I sold it. I researched brokers and settled on one and learned about common deal structures associated with acquisitions. What was clear from early conversations was that a partnership had to be secured with someone who could produce the paddles so we could focus on marketing and distributing the paddles. I had been talking to a company in New York on and off for almost two years and thought they would be buyers. I suddenly thought that they could be partners. The hunch was correct and I managed to do a deal which would be massively beneficial for the people who bought us. At this time a few things made this a tricky time in my life: myself and my wife had just had our first child, we were moving from Austin to San Diego for health reasons and I had to move business operation to New York. Everything somehow came together and it all worked out. Now in San Diego and after talking to potential buyers and going pretty far, no obvious buyer had identified themselves. Just when I thought no-one was going to buy the company, a couple of guys from Austin came in and we got to the due diligence stage. We went back and forth and settled on agreed on a price. The closing date was right in the middle of a trip to see my sister-in-law in New York. I will never forget some of those phone calls and the tension. In the end however, everything went through and I knew I had chosen the right buyers who would take the brand to the next level. Now I was clear to work on my second startup: Qwerky.
Lesson Learned: Most people hit a stage where they give up. They let the deal die. They assume it will never happen. That is when you have to stay strong and see it through. Persistence is everything.

[I am working on turning this adventure into my 1st book so please subscribe to The D Lowe Playbook to be the first to hear when it launches].

David Lowe is the Founder of Qwerky, a coliving community for like minded people. Find him on Twitter @davidjlowe and email him here: hi@qwerkycoliving.com

Coaching Through Chaos Podcast

I was extremely fortunate to be interviewed recently on the Coaching Through Chaos podcast. Colleen Mullen is doing incredible things with her organization and I felt truly thankful to be included. Since meeting Colleen she has not only featured me and my startup Qwerky Coliving on Facebook Live, Soundcloud and iTunes but she also sponsored the Qwerky pilot house in San Diego. Here is the full interview and below that the podcast:

Startup Lingo: A Glossary of Business Terms

Over the last few years, I have learned a lot about business. I always tell people my first startup (Uberpong) is my MBA. You frequently find yourself in situations where business people (who have probably got an actual MBA) use acronyms or lingo to either try and confuse you or make you think that they know what they are talking about. Due to these endless abbreviations and expressions, I decided I had to make a list of the ones that I see the most. I have also started a visual guide for startup lingo for my next startup Qwerky Coliving. You can see them on our Instagram channel. If there are any acronyms I missed, please add them in the comments so I can update the post. Enjoy.

A hub where startups are given mentorship, space to work on their ideas and sometimes seed capital.

Accredited Investor
The SEC (Securities and Exchange Commission )¬†defines an accredited investor as, ‚ÄúA natural person with income exceeding $200,000 in each of the two most recent years or joint income with spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or A natural person who has individual net worth, or joint net worth with the person‚Äôs spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.‚ÄĚ In layman’s terms, it is a rich individual potentially interested in investing in your company.

Advertorials / Advertainment
Advertorials are paid content that is meant to look and feel like a true story or blog post. Companies are turning to these because display ad pricing has become less effective and viewers have become immune to them.

When one company or investment group buys another company.

Boot Strapping
One of the most common expressions in the startup world. A lot of people will quote “the Three Fs”: Friends, Family and Fools. These channels are often where you get your first cash to get things going. If you are using very little capital and proving your hypothesis, you are successfully boot strapping.

This means you offering a “Business To Business” product or service to other companies.

You offer your products or services to other consumers (Business To Consumer).

Describing an industry that does not realize that it might be overvalued and over-inflated. When a “tech bubble” bursts, it means that a lot of startups go bust and investors lose their money.¬†

Burn Rate

How fast you go through your cash. The majority of startups lose before they break even and then make a profit.

Cash Flow Positive 
Accountant speak meaning that more money is coming in than going out. When you deduct your expenses from your earnings, you have a positive amount in your bank account. Staying in the black, especially when you are self-funded is the name of the game!

Churn Rate
The annual percentage rate at which customers stop subscribing to a service or employees leave a job.

A cliff usually applies to vesting schedules (shares given to employees over time). Cliffs can be a device for the CEO to fire employees or let them leave without giving them stock within a limited period of time (usually 1 year). There are horror stories from Silicon Valley about early employees being cut just before they get to receive their equity stake. Cliffs are also used on CEOs by investors to make sure the CEO sticks around after getting the cash.

Usually used in the creative industry, copyrights protect your music, art and film. It allows the creator to have exclusive rights for its use and distribution.

Cottage Business/ Cottage Industry

A business that is never going to make millions or scale but can be a nice lifestyle business.

Using a site like Kickstarter to get a tribe of early fans together to give you money to help you get your product/site launched. You keep 100% of your company and only give away a % the total you raise to the crowdfunding portal.

Getting information for free from people on the internet or using a survey.

Deck (aka Pitch Deck) 
A presentation that covers all aspects of your business in a succinct and exciting way. If you ever need inspiration for a good deck, check out how Elon Musk uses his to demonstrate the TESLA Powerwall.

Frequently used in marketing to describe the age, gender, income, schooling and occupation of your ideal customers.

Digital Nomad 
Typically a web or app developer who travels the world while coding. There are forecasted to be $1 billion digital nomads by 2035.

Disruptive Technology

Any tech that takes an industry, forces consumers to think differently and then adopt that technology as the new norm. Examples include Uber, Lyft, Airbnb and JetSmarter.

Early Adopters 
The first users of your product. They will typically be key influencers and active on social media. They will give you your most honest and sometimes overly direct feedback. If you can identify these people effectively and have them interacting with your startup from an early stage, you can get lots of free exposure.

As with an ecosystem in nature, a startup ecosystem has its food chain. There are the hunters, the herd and the bottom feeders. Work out where you are and where you want to be then get involved in your startup ecosystem. If they city you are in doesn’t have incubators, accelerators, co-working spaces, mentors and investors, you should a). move to another city, or b). start your own ecosystem.

Equity Crowdfunding 
Just like regular crowdfunding but instead of getting money in return for a fee, you pay a fee to the crowdfunding site and a % of the company to investors.

Someone inside your organization who is your number one fan. They love your company so much that they often go above and beyond their expected role to help promote your company. If you find an evangelist, hire them!

Exit Strategy
How you plan to sell your company to give you and your investors a return on their investment. This ranges depending on the industry but a standard multiple with technology investments seems to be 10x.

FMA (First Mover Advantage) 
The first to market is not always the first to capitalize on the industry. One reason for this is that it can cost a fortune to educate potential users or customers. That said, if you are a company like Disney, you lead and by innovating you stay ahead of the pack.

You give your basic product away for free and then try to upsell other features to your customers. It is a common and proven technique to acquire more users.

If you “gamify” something, you add a game layer to your product¬†that encourages people to use it with rewards of various kinds. See Foursquare and how they used virtual badges and the “Mayor” badge to encourage people to use their app.

Growth Hacking 
Growth Hacking was a term first used by Sean Ellis (Dropbox) to describe a marketing technique that focuses on quickly finding scalable growth through non-traditional and inexpensive tactics such as the use of social media. Other companies that have effectively used this technique are Airbnb and Foundr.

Using your computer science degree and your entrepreneurial flare to create disruptive technology. Look out for “hacker houses” and “hackathons” if you want to join the tech community.

Hockey Stick
Used by investors to describe the shape of the growth curve they want to see in businesses they invest in. They want to see their startups grow quickly and at least double sales every year.

IP (Intellectual Property) 
This covers patents, trademarks and copyrights. It is a good way to protect your “secret sauce”. Generally I remember them like this:
Patents – the DNA of your product. They are typically used to protect your design.
Trademarks – they are used to protect your brand and depending on which one you register, you can add a “‚ĄĘ ” or “¬ģ” (Registered Trademark) next to your logo.
Copyright – they are used to protect your creative content (like film, music or art) and it allows you to use a “¬©” symbol on your content.

This means to try something, refine it, try again and keep trying using small steps until successful.

Users who join your movement or buy from you much later than other customers.

To start a company, website or app. It is the euphoric moment when you feel that the blood, sweat and tears was worth it. Companies can either have a “soft launch” (minimal press exposure and staying in beta) or celebrate with a “launch party” which can be at major startup events like CES or San Diego Startup Week.

Lean Startup
Launching a company with as little startup capital as possible while getting data that can be used to improve the product. Speed is the key factor here.

Using something to accelerate your growth or success. This is often found in the form of technology or partnerships. Think about a Formula One car getting in the slipstream of a car in front of it so it can be catapulted out at a faster speed and overtake it.

Loss Leader Pricing  
Using deliberately low pricing to gain market share. The key here is to tempt your users with the low price or free offer and once you have acquired them, focus on how you can get repeat business from them.

Low Hanging Fruit 
The things that can be identified to quickly bring cash in the door. Your first customers will keep you afloat and help you get to your cash cows (reliable and consistent revenue generators) and whales (your accounts that make you big bucks).

Market Penetration
You will frequently hear the line “how much of the pie are you trying to get?” from investors. What they mean is how much market share will be yours and in what time period?

When two companies join forces and become a joint entity.

How you make money. Do you sell online, offer consulting services or sell face to face? Without a way to monetize, most businesses die. The only exceptions are well funded tech startups where a bet has been made that the site will get enough users so that a monetization strategy can eventually be executed. This is highly risky but the reward is high.

MVP (Minimum Viable Product)
The simplest form of your product. This can be used to attract Beta users/early adopters or to pitch for funding.

OPM (Other People’s Money)
Funding your startup using the “Three Fs”: friends, family or fools.

A change in direction as a company. This is a key moment in the life of a startup and can make or break it. A well known pivot is when Fab went from being a gay social network to being an e-commerce curator.

PR (Public Relations) 
It is useful to have a PR firm if you have a marketing budget. If not, you might want to spend some time reaching out to your local and industry specific publications.

Ramen Profitable 
An expression frequently used by Paul Graham of Y Combinator, it means  you are making just enough money to be able to pay for basic living expenses.

Responsive Design 
A site that has been built to function well across all devices. Your site might appear completely differently on the web compared to mobile but as long as your end users are always considered, you will be fine.

ROI (Return On Investment) 
When an investor puts money into a company, he wants to know what he will get out. This is called the “Return on investment”. The investor(s) will also want to know how long it will take to get their ROI?

How long your cash will last and when you think it will run out. The key here is knowing when to start pitching for investment so you can time it to come in before you run out of cash.

SaaS (Software as a Service) 
A subscription that is sold so that your user can use your software.

How big your business can grow, how much market demand you have and which markets you can grow into.¬†A common question from investors is, “How scaleable is this opportunity?” If you cannot scale, you might fall under the “Cottage Industry” or “Lifestyle Business” category.

Serial Entrepreneur 
Someone who launches a number of businesses either simultaneously or one after another.

Sweat Equity 
Shares of your company given to early employees or contractors in place of cash. This is very common in the startup world before funding arrives. If you take a chance with a startup, your shares might become lucrative when the company sells.

Target Market 
You need to identify who will be buying your product, their demographic and their location. Once you have this data, you have your target market.

Term Sheet
When an investor makes you an offer to invest in your company, the term sheet is a document that outlines what they will get for what they put in ‚ÄĒ including % ownership and voting rights.

Proof that your executive summary (hypothesis) is working. People are actually buying your product or using your service. This is one of the most exciting times in a startup!

Thought Leader
Someone who is seen as being a leader in their field and who probably has done a TED talk.

A company that gets a $1 billion valuation. As with most unicorns, they are extremely rare.

UI (User Interface) 
How the user and computer system interact. If you hear someone say “they need a new UI guy”, it means the user has difficulty operating the product.

UX (User Experience) 
The process of enhancing user satisfaction with a product by improving the usability, accessibility, and pleasure provided in the interaction with the product. Think about any site or app you have opened. How did you feel? Was the site’s aesthetic appeal at the forefront of your mind when you used it? ¬†If so, their UX person has done a good job.

What your company is being valued at. ‚ÄúPre-money valuation‚ÄĚ is the value before you take investors‚Äô cash. ‚ÄúPost-money valuation‚ÄĚ is that amount plus the investment put in. I would definitely recommend speaking to other Founders and accountants about how to accurately get a valuation for your business. If you are selling your company, typically the Buyer is trying to get the lowest valuation so he can acquire your business for cheap. As the Seller, you have to establish a fair valuation (typically a fair multiple for your industry) with a slight margin. Example: if your net profit at the end of the year is $100k, it might be 2-3x ($200-300k) if the company has plateaued. If it is a tech business with rapid growth, the multiple might be 10x ($1 million).

Value Proposition
What makes your business uniquely attractive. Also known as USPs (Unique Selling Points).

VC (Venture Capitalist) 
If you are an entrepreneur, you might think of VCs as corporate, evil money hungry vultures. Some of them are and will screw you! Do your diligence on them (as they would on you and your startup) and make sure you have investors who align with your beliefs. Do they want to change the world like you (get them on board) or just want a steady return (yawn).

An entrepreneur who sees the change in the world before it has happened. Many say that these people have an ability to peer into their crystal balls and then develop something that we will eventually need. Famous examples of visionaries include Richard Branson, Elon Musk and Walt Disney.

leather boots dirty bootsrapping laces

WTF Is Bootstrapping?

There are two paths entrepreneurs typically take when starting a business:

1). The X-Factor path.
With no proof that your business can actually make a dime, you pitch your heart out X-Factor style to get VC (venture capital) funding, almost lose control of the company, and have your balls in a vice until the VC firm gets its 10x return. Your napkin business plan and straight-As co-founding team is what gets you the funding but if you don’t give an ROI (return on investment), good luck retrieving¬†your soul and getting funding¬†for any future¬†projects. Play with dragons and be prepared to play with fire.

2). The FFFs (Friends, Family and Fools) Path. 
This direction is reserved for people who have a belief that their idea can become a self-sustainable venture by growing it in an organic way. This process is called “Bootstrapping”.¬†Cash flow is the focus and actually generating revenue from day one.¬†This is more of a mindset and requires a disciplined approach to all facets of the business. You¬†spend money, like it is your own, negotiate everything hard and take pride in keeping the overheads as low as possible.¬†Once you have done this, you know you have a solid foundation to build a business on top of.¬†The¬†Bootstrap Austin¬†movement is run by a friend of mine Bijoy Goswami¬†and in a city that is trying too hard to be the next Silicon Valley¬†(people call it “Silicon Hills”), it is refreshing to see the bootstrapping movement alive and well.

I would love to hear how you have bootstrapped your business to success. Leave comments below and tweet me @davidjlowe
leather boots dirty bootsrapping laces

blank canvas billboard white businessman

The Art Of The Start

When people talk about startups, they often pigeon hole them in the broad category of business. I categorize them as art. Sure, “creating multiple revenue streams”, “watching the bottom line” and “maximizing the ROI” are important, but it really it starts with a blank canvas. As the artist, you want to paint beautiful things onto this canvas and then sell it to the world. The capital generated is a bi-product of the art you and your team created. There is no coincidence that the word “art” is in stARTup.

Ai Weiwei is a great example of a entrepreneur who just happens to be an actual artist. He uses his work as a channel to make a statement on the state of society. Most people thought Steve Jobs was in the technology industry. But he wasn’t. He was in design and with Apple, wanted people to “think different”. That was the way he changed the world.

How are you bringing the art into your startup? Comments welcome below and tweets to @davidjlowe
Jackson Pollock convergence art canvas