View from the ‘Loo: Confessions of a serial entrepreneur Anthony Reinhart January 30, 2014 Communitech, View from the ‘Loo Photo: Brett Shellhammer has co-founded five startups and worked with another three, in addition to filling roles at larger tech firms. When I joined the Communitech team in 2011, Brett Shellhammer was one of the first people I got to know. He was one of our Executives in Residence – in other words, a seasoned technology professional in mid-career brought on board to provide guidance to our startup entrepreneurs. I quickly realized why people kept telling me to get to know Brett. He’s plain-spoken, smart and extremely knowledgeable about the tech industry, whether here or in Silicon Valley, where he spent more than 15 years. In addition to all the knowledge I’ve gained from Brett, I have him to thank for the name of this column, View from the ‘Loo, which he suggested (and cheerfully hounded me to launch) before its debut last year. Now 48 and a veteran of eight startups – five of which he co-founded – Brett grew up in an area of Pennsylvania historically similar to Waterloo Region for its German-speaking, Mennonite heritage. He earned a degree in computer science at Penn State before moving to San Francisco, where he worked for several Valley-based firms including Taligent Inc. and Oracle Corp. A VP role at OpenText brought him and his family to Waterloo nine years ago, followed by stints with Eloqua and Coreworx before he took on mentorship roles with Communitech and the University of Waterloo’s Velocity program. In 2012, Brett jumped back into startup life when he co-founded Organimi and joined the first cohort of Communitech’s HYPERDRIVE accelerator. Not surprisingly, I’ve seen a lot less of him since then – the startup life is a grind, especially when you’re married with four young kids. Over lunch this week, Brett caught me up on his progress and shared some frank insights about his entrepreneurial adventures. Q – Where’s Organimi at now? A – Organimi is still going. We’ve gone to a virtual company now. We’ve been doing a bit of a technology rebuild, pushing into a couple of other areas. One of the big learnings was, not a lot of people are willing to pay for this kind of technology before they use it, so we’re retooling it into a free app until the point that an enterprise would buy something and customize it and use it at scale. It’s been really interesting. We still get a lot of people finding us; people who have the problem and are looking for the solution. We’re still just trying to find out exactly what makes them come back. We’ve always knew that it was more a vitamin than a cure kind of thing, so it’s a long engagement cycle with customers. Q – It’s a mantra among startups that you should make sure you have paying customers before you get too far down the track. With Organimi, did you simply overestimate how many paying customers there would be? A – I think we were a bit ambitious in our expectations of what the problem would be like. People still identify with the problem, so I think we got that right. We also thought there would be a bigger push to social tools in the workplace, which hasn’t really come around. That seems to have passed a bit. The social business way was the thing that we thought would really propel us, and that never really took off. That was part of the problem. And then, the people we were working with just don’t have any budgets; they don’t have money to spend, but they definitely have the problem. Q – What has this taught you that you didn’t know going in? A – There are always team issues; there are always things that don’t work as well as you thought they would. The team never gels as much or as quickly as you want it to and it takes more attention than you hope sometimes. But more so, on the ability to buy, people’s willingness to pay for things just seems a bit different than it used to be. The expectation of ‘free’ was a lot greater than I had anticipated. You’ve now got the expectation of, ‘Well, now I can have this thing for free,’ and there seems to be a very wide gulf between people who will pay a lot and people who won’t, for very similar solutions. If there’s an enterprise sales cycle, if there’s an enterprise reason, if there’s security, if there’s support and there’s a big machine behind it, people will pay a lot. But when there’s a small machine behind it, it’s really hard to get them to pay anything. And we’re also competing against some expectations from people who used Microsoft Office for that tool, which, although it’s not free, everyone perceives it to be free, because they have it. So, those are the things we struggled with more than we expected. Q – You’re not a 23-year-old university student; you’re a middle-aged married man with four school-age children. What’s it like to go through this as a more mature person with serious family responsibilities? A – It’s interesting, because I think I work as much as the 23-year-olds. Like, I work a lot. My wife doesn’t necessarily understand what I’m doing all the time, so that’s hard. When I worked at OpenText, and there was a worldwide sales meeting and 300 people were going to be there, it was, ‘I’ve got to go,’ and that’s an easy one to explain. But when I have to spend the weekend in the basement soldering stuff, or writing a test case, or doing a video that seems very simple, it’s ‘Why do you have to do that? Why can’t someone else do that? And why do you have to do that right now?’ Those are the things that are really hard as a startup, no matter how old you are. It’s just that with a family, you really have to sort of explain it and justify it, both to your family and to yourself. That’s hard, and not having income is tough. I’ve not been shy about telling people that I’m living off my RRSPs at this point, and that I need to get paid in a quick period with the company. I can put in a couple of months for free, and then we have to raise money and I have to get paid. So that’s a big difference, I think, with the younger guys coming out. The interesting thing is, my experience is a lot broader, and I think very helpful, but I’m not sure it’s all that relevant in startups. In startups, you’ve got your idea and you’ve got your market, and a lot of times early on, the idea carries the company. So, whether it’s a good idea or whether it’s valuable is what matters. The subtleties of marketing and management and operations and growth, those come later. What I’ve found is that a mechatronics grad who’s 23 is better suited to a lot of startup stuff than I am, because even though I have all this experience that’s valuable, it’s not valuable when I need to solder some pieces of stuff together. So it’s been interesting, but fun. My wife would love it if I went back and got a regular job at a company, but I think that would be really hard for me to do. Working for someone else and working in the big machine would be pretty hard for me. I’ll do it when the RRSPs run out, but until then, I’ve still got some runway. Q – My next question was going to be, what drives you to take the kind of risk – which many people would describe as crazy – of giving up something secure for the uncertainty of a startup? Are you crazy? A – I’m not crazy. Making the standard, corporate wage is not enough for a family of six people, when I have no retirement savings. So, I have to have something that either is a hit and makes me a retirement plan, or I’ll just have to continue working. Even though I’m approaching 50, I don’t have to really make that decision just yet, until I’m completely broke. An interesting story – when I left Oracle, you could still put all of your retirement money into Oracle stock, so I did that, and that’s almost 20 years ago now. I had lost track of that account and I just found it, and it was a significant amount of money. It wasn’t hundreds of thousands, but it was enough to get another year out of a little bit of money here and there. So that’s going to be gone this year. Some of those things I did back in the day have helped put us in a position to do that, but I’ve been in a negative cash flow situation for the past five years, which only lasts so long. I’m 48. Q – How are you feeling about the Waterloo Region ecosystem and your decision to be a part of it? A – I still love it. It’s fascinating to me. My wife is British and my brother-in law just moved to Toronto for a construction project management assignment and he’s struggling a bit with Toronto, because it’s January. And we were talking about it, and I said, for what I do, Waterloo is awesome, but if I wasn’t in the tech space, it wouldn’t be that different from other places. Being in the tech space is definitely special, and having been here now for almost nine years, I’ve seen it really come from not much to major significance. The university just puts a lot of talent and vibrancy into the community. I have some friends who are professors, and I talk to them all the time and say, ‘Hey, we should start a business,’ and ‘What’s your area of research?’ I ask them about their research and I try to find opportunities to do something with that, and I talk to them about business. And the young people who come out of school today are just really impressive. I don’t feel like I shouldn’t work with them because they’re kids; I embrace the skill set that they have and I love working with them. Sometimes it doesn’t work out; sometimes it does work out. But Waterloo, as a community, I still think is definitely on the rise. And if we get the money thing figured out, it could just be really, really nice. We can never fix the weather, though, and that’s the hardest thing for me. Q – What do you mean by the money thing? A – There’s just not enough capital, and I think it’s a Canadian problem. It really hits home for me in the area of startup funding. I’ve managed to get to know more angels than I’ve known recently, and having that open up has been very helpful, but the lack of a risk-taking mentality is a big problem. There seems to be plenty of money at the later stages, when the investment decisions become banker decisions; they become mathematical, they become historical and bankers make those decisions. When you’re making investment decisions on early-stage companies, bankers will never opt to invest in those companies, and I’m still amazed at how they let some of the opportunities go by. I think that’s where you need people who look at things the way Paul Graham looks at things, in the sense that, ‘I understand enough about that market, and I understand enough about technology to know that when you describe that problem you’re solving, that it is a real problem and there’s a real opportunity there.’ Whether or not it will work or whether you will be able to capture that opportunity remains to be seen, but I think if you look at it from a banking mentality, you never see that, and you never understand the subtleties of that market enough. That’s where I think we are, certainly in the Greater Toronto Area. There are a lot of people taking a banking lens at investment. So you’re finding some of the higher-net-worth individuals who are willing to take more risks, simply because traditional investments aren’t returning that much. I think that could be turning, or maybe I’m just meeting more of those people, but there’s still that ground somewhere in the $20- to $40-million VC funds where it’s just got to be high-risk, high-reward, and I think that’s where the big problem is. Q – At the same time, we’re seeing more American VC coming into Waterloo companies, and those companies consciously choosing to stay here to build rather than move to, say, Silicon Valley. Is that a sign things are improving? A – That’s a sign that if you have a good idea, and you appear competent and you can explain it, there’s money to be found. Where I think the problem is, we just won’t get the best companies, because if we’re not willing to take the risks, then the American investors will. If you get to meet enough people and they go, ‘Wow, that’s a really good idea; I’ll invest in that,’ and you’re somewhere where there’s access to talent and there’s decent governments and decent rules – and Waterloo’s definitely on everyone’s map now – that helps. I can go to San Francisco and say, ‘Invest in my company’, and work those channels and they may do that. But why can’t I just go to Toronto and get the same kind of money, and the same kind of networking? The American VCs are vicious in the way that they manage their portfolio companies to work together and share ideas, and I think there’s definitely a clear model there. It’s great that we can access that (American) money, and I never thought that we couldn’t; it’s a bit easier now, but there’s no reason that we should have to. That’s my point. Q – What can you tell me about your future plans? A – Well, I have a new startup. Organimi is still going, and I’m still spending a bit of time each week on Organimi. We’ve got a small team there, and we did raise some money last year. What we did was back off our expenses, so now we’re running with mostly a developer team to rebuild some of the core product thing, which is going quite well actually, and hopefully we’ll hit on the right formula as a free product, and be off to the races. I’ve got a new startup called The Quiet Coach that I’m working on. I’ll tell you about that in a couple of months. Q – And your wife knows about this? A – Yes. She’s involved, and she’s kind of helping us out where she can, but she still balks when I try to hand her the soldering iron. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.