Stanford Seminar - Modernizing the Shipping Industry

thank y'all for us mate um did you all know that every single time you see these big ocean containers container ships out here in the in the bay and did you know that every single time you ship a container there's a piece of paper that's actually flown across the ocean to serve as title to the goods is think about this for a moment it's madness that there's actually because every time you ship a container there's a new owner on the other end of the ocean and we're actually flying pieces of paper around the world to serve as title still thankfully we're starting to change some of that at Flex port others in the industry we're making it possible to use the internet for what it was made for is to do commerce across the world and fulfilling the original purpose of the Internet I first discovered that when I was a when I graduated from Cal go bears we I couldn't find a job it was 2002 I didn't really know what a job or a company was at that time although it was the middle of this dot-com boom that my interests were much more around global trade and economics and why some countries are poor and some countries are rich some people are poor and some people are rich and that there's not a lot of jobs in that space there should be more but there not a lot at that time at least and so I got a job working for my older brother actually my first job at at school was my older brother ran this business buying motorcycles in China and selling them on the Internet as well as through live car auctions in the United States and I moved to China spent two years working for him and working with sort of joining the company doing everything as an entrepreneur does we we didn't sell that's a Honda bike my marketing team made that we we didn't sell Honda's we sold a chili which G Lee bought Volvo a few years ago she leads the chinese car dealer a chinese car company that bought volvo at this time this was in 2005 when I was living in China Julie made motorcycles and they were they were not great motorcycles I still have some guilt on my conscience from selling these crappy bikes without enough spare parts except one of the things I learned however was that trade is just broken that it is so hard to ship something and you have a really hard problem if you're entrepreneur you have very hard any business actually as really hard problems I call them if you could categorize them simply as supply and demand in supply you have to make a great product at scale if it's a physical good this likely means manufacturing in a lower-cost country more and more it means making a differentiated product which is almost impossible look how many smart people are in this room and if you want to stand out how are you gonna do that around they'll and think about all the people in the world to stand out it's so hard to make a good product so that's the supply side of the equation demand you have to find customers you you've got to make in more and more that means building a following having a brand a community all of these things so you've got supply and demand my fundamental belief is that if you solve those two problems you should have a good business and we found over and over again even when we hadn't solved those problems even when something wasn't going right with our supplier we didn't have a great brand we would still get hung up on the part in between how do I get these products from the supply to the demand it was super hard we had complicated compliance customs like what documents do you need it's very confusing you need to you need to trust your freight forwarder your customs broker these freight companies and they're not the most trustworthy gang let's say there have been even since I started Flex port numerous criminal arrests for price conspiracy or what do you call it that price collusion fixing prices it seems every couple of years the industry can't help themselves they all collude and make the fuel surcharge the same for you see it on your airline ticket sometime so you couldn't really trust the people once they have your merchandise it's in their possession and you can't get it back so they can then charge you whatever they want it was a very frustrating experience as an entrepreneur because I'm Here I am I didn't have any money what we would do is actually buy the container of goods and we did you could you can in global trade you can basically place a down payment you can pay 30 percent down and then they'll just sip the stuff to you and your the seventy percent once it's on the boat but the boats already moving so really you don't know the seventy percent until it arrives so you've got like a three or four week window to sell as many of those things as you can get cash and then pay your factory and so we were very bootstrapped and lean in entrepreneurial running these cycles always a hair away from bankruptcy and so then when the great forwarder would hold your merchandise and not release it over some document that was flown across the country or across the ocean and the wrong you didn't get the right people to sign the document you need to send it back it was a real nightmare and I this was in 2005 and six is when I was living in China running the supply chain for this company and realized at that time that it was broken now I didn't start flex port to solve that problem for exports designed to solve this problem four companies make it easier more transparent give people data visibility control over their supply chain I didn't start flex port until 2013 as I only mentioned at that in that window in between there was like an eight year period and that's a period I would like to talk about for a minute because it there's I had that I had seen the problem I had experienced the problem firsthand it made me mad and I didn't do anything about it and that's I think that's a pretty common experience and one that might be a void a bowl if we just let ourselves to get a little bit more pissed off sometimes that it's not you know when something is not right and it it's broken you should let yourself get angry you should be like hey this is this is shouldn't work like this this should be easier I was a I was guilty of what Paul Graham the founder of Y Combinator my first investor my friend what he calls he has a great essay called shlep blindness it's a great Paul Graham essay you should you should read it if you haven't already a shlep is a Yiddish word for an arduous journey and slept blindness is when a problem seems so big and overwhelming that your brain your conscious brain just shuts down is like there's no possible way I could solve this and you don't even think about it in the essay his example is stripe where anyone who ever sold anything on the internet who sold something on the internet before so if you would see for the Digi stripe were to use some platform if you had run a website before stripe you had to set up what's called merchant processing and these were done by banks usually like Wells Fargo was my merchant processor you had to apply and some three months later they would give you permission to charge people of credit card fees to charge people money with a credit card you had to get permission you had to apply please let me sell something um and if what's interesting about this is that every internet entrepreneur in the world went through that process like by definition if you sold something on the internet you had to go through this process so all of us saw that process all how painful it was and then went on about our business and sold cookbooks or in my case dirt bikes or whatever else you sold on the Internet you saw the problem it stared you in the face this is way too hard to accept credit cards and it's now I read today a twenty billion dollar market cap company so there was this idea that just stared everyone in the face with twenty billion dollars and we also had every single entrepreneur on the planet saw it and didn't seize that moment and and and Paul's new favorite example at least in private in an email that he sent me is Plex port which is anyone who ever imported anything which look around every almost everything got imported from another country and every single one of these businesses and entrepreneurs saw this experience this it's way too hard to ship stuff and just went about their way selling stuff instead of saying hmm like maybe I could be the one to fix this and I I think that that's a very important lesson whether you're starting a company or working for a company that you take that and say there's your brain is gonna shut down when it sees a problem being too big doesn't have to be in a company by the way you see it every day if you live in San Francisco what are we going to do about homelessness or other causes other problems that we in society let them get you should get pissed off about this stuff and and and know that like if you're not gonna solve it who is there's not someone else that's going to come and solve our problems in general so I I was guilty of this as well I learned about the problem of how hard it was to ship stuff in 2006 and I didn't start flex port until really made it my full time job in 2013 and in between I I wasn't I didn't do nothing I discovered that that same document that's being flown across the ocean is turns out it's a public record in the United States and no one had done a good job collecting all of these making it searchable and accessible and they're full of valuable data you can see every single product that's imported into the country who made it who sold it where is it where's it coming from and going to so I between sort of 27 2007 and 2013 I built this business where we collected now four hundred million of those documents digitize them and sell subscriptions to the database now that business has is it's a good business actually it's a very valuable product but it has a bit of a problem and that the data is maybe you can identify it for me we sell subscriptions to a database of public records there's a keyword in that sentence that's this challenging which is public and that means someday it will either be free or someone else government will make it actually searchable or it'll just go away and and it's not very defensible let's say so if you're talking about that those core problems of supply and demand on the supply side of that business you're you differentiated maybe not is it defensible and if you don't have a defensible business you're likely not to have a business at all in the future so I lived with some degree of paranoia for a number of years about I remember when Obama launched data.gov that I almost had a heart attack that day before I realized that they had not put these public records on dated iCub yet and so I started working on what are the other problems in this space I really love this space or the internet meets trade for me it seems like the the original core purpose of the internet the commercial internet the dot-com portion of the internet was to allow commerce they allow the idea of a seamless web of Commerce that any two people on planet earth could trade with each other and global trade often gets a bad name because it's usually done by big anonymous faceless institutions and we all know you make kind of most stupid decisions are made in big groups and and and yet if you were to have one person say a basket weaver in Guatemala selling her baskets to someone in Iowa like who would look at that and go this is horrible and and so when you when you bring humanity to the problem I think it's much more you realize much more how powerful trade is as a vehicle for Entrepreneurship or opportunity we can look at the stats in Asia over the last thirty four years especially in Asia but around the world we've looked at almost a billion people out of poverty with free-market economics yeah and allowing people to participate in a global economy and so I look at that and I learned about that at Cal and afterwards you look at that on the one hand yours appears a force for good one of the greatest forces for good I would say the two greatest forces for good or trade and in the internet and and we've got on the one hand this incredible powerful thing and I've witnessed firsthand how hard it is and why couldn't we make software to make this easier so I I came to realize that I could spend a lot of time though that it would be a very meaningful way to spend time and if there would be a great business for it and I'll walk you through a little bit of the story but I wanna talk a little bit more about trade and how important it is to humanity we we know there's evidence of trade that goes back at least 40,000 years older than the evidence for art for language for more or less all it is the thing that defines humanity to a large degree is that we trade where the animal kingdom does not trade Adam Smith has a great quote about this that no no man ever saw a dog trade a bone with another dog that we and so and yet here's this thing that's the essence of humanity that's extremely powerful that that brain we know that no two countries I still believe this is still true with the McDonald's have ever gone to war with each other so commerce global like the ability to connect the global ecosystem is good for peace anytime that you have two countries that are engaged in a dispute with each other a conflict you can be certain that the trading communities those who are involved in business and doing trade with each other will be passionate advocates for peace between those two countries is it's not good for business when you have conflict my there's a famous paper called eyepencil it's an academic paper from the 60s I am where a I presume an economist showed how there is no human who knows how to make a pencil that it to make a pencil you have to know first off how to make wood how do you make wood you need to be able to chop down trees how do you chop down trees you need to have steel so now all of a sudden you need metallurgy how do you do that that's that's a very complicated thing I couldn't begin to tell you how to do I think I know how to make a pencil I don't that's just for the wood you haven't mentioned the graphite we have to go underground and mine it the rubber you have to know how to grow trees create rubber maybe a synthetic these days but how do you there's no human there's a one human that could make something as simple as a pencil and so trade is how this all comes together is that we exchange not just the object but the ideas that go into that object every time you engage in trade so here's something this cord of humanity and it's just pretty broken I've lived it firsthand ask you ask you any family members who have been involved in trade trying to ship something they will they will regale you with stories about what a nightmare it is so I started thinking about this when when my last business was causing me a degree of paranoia and wanted to experiment I to see if in fact other people would would if companies would buy if I built this service would anybody buy there's a entrepreneurs or there's a there's an idea that entrepreneurs are risk takers and that's not because it shouldn't be true and I'm not I don't see myself as a risk taker we in fact I I want to make sure that people before I take any risk that someone's gonna that it's going to work I want to have a very high probability of success so I built in I once it was in 2010 well before I truly founded flex board I built a company I built a website just a marketing site offering an online service to help people clear customs to help companies clear customs so allow you to file the paperwork needed to get a product into the country I let that website run for a year I was still running my other company but I built this on the weekends and during one year of this website operating I got 300 companies to sign up including Foxconn which is the maker of the iPhone Cargill big AG company and then one day Saudi Aramco signed up for my website which is the largest company in the world the Saudi national oil company signed up for my fake website it was just a marketing site I didn't know how to ship anything I just wanted to see if this existed would someone buy and that was in 2010 or so and so it took me the better part of three years to get learn how to ship stuff how to do customs get licensed heavily regulated industry we had to learn a whole lot of things and and I think this was even I don't remember when that book the Lean Startup came out but we're there Plex port is that the ultimate lean startup that we have been from the start and I think we're now the world's largest lean startup that we are constantly experimenting would someone buy this if it worked if we could do this would you buy and that's beyond the art of sales the in sales is very underappreciated as an art as a science as it as the core driver of business the ability to sell something the ability convince someone that and and entrepreneurial sales means that you never get a no ever you get a yes if and then you know it might it may end up being no because the if is impossible but you always get it yes if yes I would buy from you if you could clear these cantankerous which I couldn't do but I at least I got a yes if from from Saudi Aramco and this is really underappreciated there are currently only three universities in the United States that offer a major in sales it's probably 20% of all the jobs in this country and an important part of every job even if you're a scientist you need to be able to persuade people of your ideas and we only have three universities Florida State Baylor and Weber State in Utah are the only three universities offer a major in sales I guarantee you graduates of that program going to make a lot of money and go on to be very successful because it is something you can study and learn and so those of you who are engineers here in this program don't discount the role of sales you have to get out there and talk to users and find out what is it what is your problem sales is get a bad word right we think of like the used car dealer that's like the image that you have as you think of a salesperson and I it's just wrong a sales persons job is to understand customers problems and figure out can I solve that problem and if you can solve it in a way that allows you to make money you've succeeded there's purest problem-solving so III don't know if I'm a great salesperson but I value sales very much I'm flex board has always been Sales Lead always will be sales lead because that means we're customer led we're customer obsessed going out to find customers and help them with this important problem of shipping things and making it easier for them so it's a massive industry freight forwarding is what we call it the art of shipping Freight across the world to ship one container across the world I mentioned that piece of paper but to move a container across the world you're gonna have as many as 15 companies involved in this chain it's basically a relay race of unstructured data being handed off from node to node by human information brokers people are going to look at it and it should be called Freight email forwarding you take you then you say okay what do I do next and then forward it to the next person in the chain in a relay race and what we've just what we've said is if what we what we are doing is building a platform to structure all of that data make it reusable connect all of those companies together to a single platform and allow them to do business together bring everybody together and make it seamless from end to end in the process we make crate cheaper to ship while giving a better user experience and if you can be cheaper and better in a two trillion dollar market you can grow quite fast and I'll show you some of our I do have a revenue graph in here somewhere but our mission as a company is to make trade easy for everyone I've mentioned already why I think this mission is really important and the way we do this technology so we've got a platform that connects all the parties this is much harder than I thought the bank lad didn't understand how hard it was I just when I originally started the company I was just thinking about my own problem it's too hard to ship stuff and I didn't know why that was true I could tell they weren't using tax because there were pieces of paper being flown around but I didn't really understand that there's these fifteen different companies in a chain all depending at any problem upstream results in all these problems downstream I've learned that once we got started and so what our technology platform looks like is interfaces whether it's a a web interface mobile apps now for truck drivers a lot of it is api's and an older standards of inner data interchange technologies to connect all these companies together let them do business the mobile app is probably one of the more interesting aspects of our tag where we now over four thousand trucks that we connect the a mobile app to allow these trucks to to us to dispatch the trucker so we don't have to call every time a container arrives in the port we can just dispatch a trucker we didn't have that when we started we started with a nice little clean UI when we were talking it was I hear I can a little bit of a one-man band but I can build an application that helps you as it as an importer as a brand manage your Freight and all the stuff on the back end we were doing manually and we've been going step by step building the apps for the for the different parties so tech helps a lot but tech is not enough at least in this business because there's a huge amount of infrastructure required we're talking about real infrastructure warehouses trucks planes ocean carriers ocean you know ships trains we ship up by all modes of transport and how do you connect that in some of it we own release we now have four warehouses and one 747 that we as flex force logo on the side is pretty cool and it we have but a lot of it we don't least a lot of this is business development it's going out and finding the owners of those assets of that infrastructure and understanding their needs and treating them as a customer and saying okay what how do you make money you make money when your ship is full you make money when and how do you fill your ship having predictable customers who will show up with the freight that they booked and so we've had to go out and and make those partnerships I think this is a something that a lot of technologists are afraid to do it was part of why this opportunity was still available is still available because technologists think that you can sit in a room and build technology and change the world a lot of the real world a lot of the world's problems you can't deduce from first principles at a whiteboard in a room yeah actually I have to go out there and talk to people and learn how it works there because it's not built on logic it's not logical that you fly a piece of paper across the world that's just how it is and you won't you could get geniuses in your room and they wouldn't be able to solve this because you've got to go out in in my case and drink whiskey and Hong Kong until 4:00 a.m. until you convince them to give you some space on their container ship and so it's not just tech it's also infrastructure and business relationships that go into that and it's also expertise clearing clearing goods through customs is something that technology just won't do it until we have real AG I you're not going to be able to classify a product by customs code it's it is very difficult for a it requires a lot of judgment because this is the law and the law is built on human judgment it's not built on algorithms yet so it is the combination of these three things that makes flex ports special that you're actually like pulling from multiple disciplines being cross-disciplinary is super important that you have to go out and pull the best ideas use tech but combine it with human expertise and combine it with real real world infrastructure and I like to sometimes say that flex Porter a bit of a decathlete in that sense that we're not the probably the best technology company in the world were not the best at infrastructure and I don't think we have the most expertise but in the unique ways that we combine that we can create a lot of value for customers and what our customers trying to do they're trying to ship Freight they're trying to have visibility over their products when I was a kid set that long ago I graduated from Cal in 2002 there was no Wi-Fi I did which meant there was a point of having a laptop I used to go to library to use computers because what was the point of a laptop if it can't connect to the internet I would there were no cell phones like this is weird it's not that long ago I don't feel that old and and yet the world has changed dramatically since then and one of the big changes that customers are now in charge consumers are in charge if you're when when there was only three television channels when I was a kid brands could get away with three week the Sears catalog mail order it took three weeks to get your stuff maybe six if you offer that today nobody will buy your products it's to day and more and more its two-hour delivery is the expectation when there was only three channels there were only two brands energizer and Duracell and you had to choose you want the Energizer Bunny or the copper top there weren't infinite proliferation of SKUs Amazon now you've got 80 million SKUs I think on Amazon you got the customer has so many choices and real-time on-demand what does that mean for a supply chains how is that relevant to this time well in the old world if you have three-week delivery time you can get away with one warehouse in the middle of the country and serve the entire population from that one site in the new world that we're heading into and that we are now living right in the midst of you've got if you want to our delivery what is that you need little small caches of inventory everywhere you're gonna see brands there's probably an Amazon Fulfillment Center within 20 minutes of here how else could they do to our delivery because they're out there not like leaving the warehouse for either running milk runs so if you're gonna have small tiny pockets of inventory everywhere you can manage that the old way with emails and pieces of paper you your you'll go crazy you're just not physically possible so that's what we're positioning ourselves for is like the world where you have small little bits of inventory everywhere and you have a dashboard to control it all and you have AI deciding when to buy things where to buy them where to position them to be ready for the future so like if I if I was to flip this light switch this I'm taking a risk here I don't know if it'll come back on did I get it uh try you can imagine how do I turned off the lights there we go when I did that in real time I just activated a power plant it just got a little bit hotter in real time on demand your act there's an incredible most interesting thing I learned last year I did I don't know much about physics but you flip the light switch you are controlling a massive machine you personally it's responding to your demand and that's the way that's not the way it works in commerce and commerce you place an order on a website and there's a bunch of people making phone calls and duct tape and wires sending shuffling paper and three hours later you get some electricity and think about how much poorer we would all be in that world how much less power you would use and that's the way our commercial infrastructure works right now is you place an order on a website it does that the factory does not receive any signal about that order like ever there's many months later somebody with an Excel spreadsheet is deciding how much good how many goods to order the next quarter and so what we're trying to do is say okay let's build this network we we on board all the world's brands and every time we get a brand right now we got four factories on average so we this is where the ten thousand number comes from we've got about ten thousand factories in China on the network and when when a customer gives an order it's sending a signal back to that factory to queue up production for the next for the next cut and decide when to when to ship it how to ship it and where to position it to be ready for future demand and start being predictive about this is a great application for machine intelligence by the way you should not be humans should not be making these decisions it's too hard too many too many variables and so it is that combination when and what's very interesting about this this is our biggest rival in the United States called Expeditors Expeditors calm they were the flex board of the 80s and we you can see our growth we did five hundred million dollars in revenue last year and our first revenue ever was in 2014 we did two million dollars in revenue so we've had just the last four years we've been crazy at flex port and we we why is that how are we able to just like grow so fast it's because people are already used to buying Freight if you build a brand new piece of software and you have to sell software you've got to convince someone to that they need something new in their life and as hard it's hard to get people to change and want something new that they've never done before but if you're a company you already have a budget to but to ship right you ship Freight every day spend trillions of dollars worldwide on Freight so if you're just a little bit better you should get the whole market I think we're a lot better but you should get the whole market just by being a little bit better and so by taking that combination of adding technology to this infrastructure and expertise problem you can you can grow super fast and I would I would look very much my working framework for how to find good problems to solve it and not everybody has experienced firsthand these problems like where should you go look of course in your own life look for the problems and get pissed off about them but but one good framework is just take that global GDP pie chart and look at the segments of it and I would actually just take the GDP pie chart and divide each section by the number of hours of computer programming that have been applied to it and you have a pretty decent framework for like where do the opportunities still remain I think there's going to be huge opportunities and parts of the world the Internet hasn't quite turned upside down yet because you got to expect that software and the internet and these technologies are gonna touch every single aspect of our lives it's quite interesting to even look around we're in a pretty tech enabled place I see a lot of devices that are tech like connected in some way electronic but if you actually just like did a mental calculation of everything in my field of view right now not counting all of you people what what things are connected to the internet what are the objects that are connected right now it's not that many like this carpets not connected that ceilings not really connected and you should expect that with the tech in the future every single thing is going to be connected all the time and and so that that's the world that we're heading into and there's gonna be tons and tons of opportunities to find problems and when you when you find an area where people are already doing something but software can make it a little bit better you just create huge opportunities so this is a this is a something I shared with my team they didn't make this slide that just the way I wanted them to I should make my own slides but the on the left you have seashells okay and and the next column over is limestone so seashells when they are buried into the bottom of the ocean and they get pressurized and crushed by the by the weight of that ocean they become limestone there's also some microorganisms in there in calcium carbonate but it becomes limestone when that sea bed when that sea bed floor is submerged by plate tectonics if it's at the intersection of two plates like we are here one of them gets abducted and in the pressure of that it bakes it into marble and that marble can be built into something beautiful and so I use this a lot at my company to talk about how much pressure we're under you if you go and start a company you're gonna it's going to be ridiculously challenging it caused a lot of anxiety and your gut like it is not easy to get something going from nothing and you have to make sure as your team that if you're working with a team you can get ripped apart by this pressure you can get in fights and and and really rip each other apart so I I try to bring this to my team and say look we have to use that pressure we're it's so hard we have a thousand employees right now at Flex work and we're five years old can you imagine like uh-huh five years ago is me in a garage and now I have a thousand employees looking to me for guidance and I try to use this metaphor and say okay it's gonna be really hard and we have to use that to make ourselves stronger as a team and bring ourselves together so those are just a few of my remarks we they asked me to leave for Q&A so I would love to be available to you to think about how many people here get planning to start a company raise your hand if you want to start a company when you write when you graduate few of you and how many what are there what are some of the reasons why people would want to start a company who's who raise their hand right there what was the reason why you want to start a company to have independence and build your own things yeah any others like what are some good reasons why people would want to start a company childhood dreams a dreams of what being the boss fame and fortune others to solve a problem yeah that's where I would focus completely all my energy even if it is fame and fortune that you seek nothing wrong with that fortunes probably better than fame but and there's nothing wrong with that money is awesome and I trust me I used to have no money and now that I have a little money it's so much better but there are some things in life where the more you want it the less likely you are to get it and and if you focus on the money nobody nobody wants to give money to people like that you know you're like greedy and self-centered and not not you you're cool but yeah it's not the best way like it's not who you give money to people who solve your problem right and so even if what you're after is to solve money to be independent you have to focus on what's the problem how do I create value for someone else is if you're creating value for someone else you'll get money it's one of the greats I've always been enthralled by this paradox because I also want money less the fame but more the fortune and I've wanted money but I realized like the more you focus on the money less likely you are to get it there are some things in life that are like that and those are the really interesting things love is probably one of those things like the more you want it like start being creepy and stuff and nobody's so your focus instead I'm like whoa what how could I make someone love me maybe I should hit the gym or like learn be more interesting work on my cheeks and so that would be that would be my biggest piece of advice for those of you who are in this entrepreneurial mindset it's awesome there's no better way to learn about the world and solve problems than in solving and starting a company that you'll entrepreneurship you learn about every aspect of the human experience in starting a company it's not the best way to make money frankly like go try and get a job at Google you'll make more money but well on a risk-adjusted basis but you probably won't learn as much because if you're an entrepreneur you're every day having learned something new you've got to learn about leadership and persuasion and sales and accounting and finance and marketing and technology and all its like the amount of things that you're gonna learn in entrepreneurship far outweigh any other field they might at least in my experience um and so I would focus on that as like how could I learn the most that's true for any job even if you want to start a company you might not be ready yet because I couldn't have done this if I didn't know about how hard it was to import stuff and I couldn't deduced that without going out there and getting a job and doing things and learning about the world so it's even if you want to start a company and you're not yet there that's cool go and focus on how do you learn the maximum amount of stuff so that because you never know where you're gonna find out that and then let yourself get pissed off when you learn something that's just like wrong so that would be my big advice for y'all my big parting words but I would love to take some questions from the audience who has a question yeah I think in the back recent Packer news interview with Vinod and he has this concept of building a zero billion dollar company over a zero multi-million dollar company basically give like 15% of your equity to your first three founders even if you hired them after I was wondering to hear your thoughts on weight again so it's building a zero billion dollar company so the talent is like that high of a caliber and you carve out most of your equity versus a zero million dollar company basically the engineers you can find to help you build it hmm is the idea to give more equity to better found I'm not sure I understand stay fit the whole rapid growth that you're anticipate hiring talent is like in credits for a question hiring talent is incredibly hard especially when you're nobody yeah and getting convincing people to come on board I I highly recommend that you not musics as an excuse that you can't find a co-founder and that you just get started and do it yourself it the same is true like if you need investment money and you can't to get your business off the ground you need an investor maybe you should maybe there's a different business that doesn't need an investor because there's a lot of problems in the world and they're not all and and you can do I did flex for my third business that's worth talking about the third one that that generates profits and what doesn't generate profit yet but third one that generates some real revenue didn't use any VC for the first two I had co-founders for the first two and flex board I found it by myself solo founder in part because it's so much easier like number one reason that startups fail is that founders getting a fight so I you know if I'm gonna fight with myself that we have a different problem and so I but then what I did I basically have co-founders at Plex sport I got ping off the ground got some traction even raised some money got some customers and then i attracted talent a co-founder level talent but it was four years out I didn't they didn't get the title co-founder because it was four years later just the first four years was me in a basement and so but but I was very generous with equity for them and I think that that you yes you shouldn't owning a small a big piece of something that's not worth very much isn't isn't that valuable so I would recommend getting started getting some traction nobody's gonna join you if you're just talking and you have a PowerPoint like they'll join you when you've got customers and the customers are like showing it saying that good things about you then you'll get much better people for Less equity that if I my co-founder one of them was a partner at Boston Consulting Group my co-founder my CEO oh he was he partners at Boston Consulting Group make a lot of money and he walked away from that because I had a lot of traction we had a lot of trust amongst each other but I had gotten somewhere if I tried to recruit him in the beginning he wasn't gonna quit that job to join the guy with the PowerPoint so I don't know if that answered your question exactly but all right yeah so the question was how long did it take me to get real money from customers with the company I think we got our first revenue about six months after I made it my full-time job and we there was that period where I was signing up people but it was just a marketing website it wasn't a real company yet once we got licensed by Department of Homeland Security and actually started a business before that it was just a website it didn't really exist it wasn't even a business entity once we were off the ground six months to build an MVP of the product and then what I figured out was that on Google AdWords I could acquire a customer for $40 and there were several thousand dollars in my estimate at that time this is even the smallest one so Google AdWords and we just increased our AdWords spend exponentially whenever we needed to raise money so the question was over the past hundred years been mostly businesses doing trade and I you see consumers starting to participate in trade and well I think the difference between a consumer and a business is blurring and you shouldn't import something as a consumer you should set up an LLC it'll cost you like a couple you know not much money and a boom now you're a business so what it's on some level that distinction isn't that real the real thing is wow it's so easy to start a company and participate and the Internet's made it so participatory in the United States the top one percent of companies import eight as of 2006 the last time I've seen this data last night the last date I have the top one percent of companies import 80 percent of all the merchandise instead of 80 20 it's 81 1% imports 80 percent that was in 2006 I would love to see a refresh on this data The Economist who did it it was a paper from 2006 and I got to Commission him maybe to make it to update it but my hypothesis is that now that long tail because of Amazon because of EJ because of the internet more broadly it's now possible for anybody to participate in in trade my own story is that like when we were importing goods from China we found all of our suppliers on the Internet we're going Holly Baba and other web sites and identified suppliers and we found all of our customers on the Internet you couldn't have done that business without the internet so yeah we're the Internet's bringing us closer together it's so amazing that almost every human whether what's our mobile phone number now it's like 4 billion or 5 billion people have mobile phones which is crazy if you knew the number you could call almost everybody on planet earth you could just have a conversation with them right now and what is that going to do for us and the idea that everybody in the world has Wikipedia and all the knowledge there so I yeah I think it's there's gonna be more and more trade we want it we want to make it possible because those big companies have the resources and the knowledge and the know-how of how would it trade and the the individuals shouldn't have to think about it they should focus on making a great product and finding customers and then like all the operational stuff in between make it easy so it was the question was around much for being a lean startup and how we went from doing customer discovery getting out there and talking to customers and convincing them to try us out we um I call it entrepreneurial sales there's two kinds of sales there's regular sales and there's entrepreneurial sales regular sales your goal is to get to know as fast as you can because then you can move on to somebody else who will say yes entrepreneurial sells you can never get a no you got to get that yes if yes I would buy from you if you could do this and what you would actually do is go on site we convince people to take a call take a meeting get on site with them and add a whiteboard we the the best example was the world's largest watchmaker we got their head of supply chain he responded to a cold email like a spam email basically spam hi there right and and so we would get him we got him to agree to take a meeting and we put it at a whiteboard and put him at a whiteboard with a what with a with a with a marker and said draw for us your ideal supply chain dashboard what would you like it to look like and he drew it like okay I want I want to see on a map every dot all the icons for all my products that are in motion and if it's and if any of them it's gonna be late it should turn red it's gonna be more than 24 hours late having read and I forget what else he asked for um and we came back a month later and we had built that that you know and he was like whoa I've got a ship some freight with you guys turned me into a computer program I didn't know I could do that and they said okay I will ship Freight with you if you can hit this price and the price that he asked for was half of what we were buying Freight for so like I you know almost there we then took but we got his commitment that if we could get that price then he would ship great so we took that to the ocean carrier and said hey I'll bring you the world's largest watchmaker if you can give me it wasn't a crazy price it was just way lower than our prices we were nobodies but the ocean carrier was happy to have their business gave us that price and so it's like going back and forth and we it's a chicken and a lot of chicken and egg problems that need to be solved with creative thinking and getting the yes from one side and then yes if from one side and then see if you can solve that if and recognizing that you should not try to solve every year people ask for crazy stuff right and so didn't but bring that back your art so it's a bit dangerous for a startup just to hire our sales person because regular sales people are used to trying to just turn through the lead and get to the one that's gonna say yes and and ignore all the ones who say no this is what's very special about salespeople is that they can handle rejection in a way that would like be brutal for the rest of us but it's sales persons like I don't care they're very happy they're very self-confident and and and that's a little bit dangerous what you need is an entrepreneurial salesperson someone who's really creative thinking on their feet and this your job is it boundaries to be that person most of the time it's going to be you and be able to get in front of the customer and really listen to their needs and understand it and then be able to bring it back to your team explain it and say could we solve this problem or not most of the time it'll be not yeah a couple more I won't have time to get to everybody how about you right there yeah so the question was whether we how do we measure I think how do we measure the impact that we can have in the value that we create for our customers lots of different ways to measure it our biggest customer is one of the world's largest paper makers and we eliminated 60,000 emails from their supply chain team in their first year with us so that's and we did that because they they sell raw paper materials to their customers and we were we actually this is again a very entrepreneurial salesperson at Flex port her name is Julie and she convinced the she hacked our system basically and on-boarded 75 customer service reps we're not customer service software but she realized that if their problem was companies were their customers were calling them asking where's our containers and they were having to email their supply chain team who would then email a freight forwarder and then like it was taking them four days to get a response to tell the customer where's their stuff and Juli realized she's not a vice-president flex four because she realized if you could onboard all these customer service reps they could just answer that question in real time and so it's like being super creative like whoa the platform actually does things it wasn't designed to do it's always a good sign when people start abusing your platform to do different things that's one really good example another one one of our customers sold Amazon last year for over a billion dollars at the time they sold they were doing hundreds and hundreds of million in revenue I don't know the exact figure and with only one one person in their supply chain team and a comparable company would have had seven or eight people we know because we meet comparable companies with similar revenue they would have had seven or eight people there it's not like this company didn't hire faster they've we didn't displace these jobs these people are working in other parts of their company but they're not doing bs they're creating value finding customers or making a product better and so there's a bit of an AWS analogy there where in the old days you had to run your infrastructure you had to run your own servers DevOps and all this stuff and now it's like I just don't worry about that part there's lots and lots of metrics on transit time is another one so when Freight flies on our own 747 there we go two days a week from Hong Kong to LAX and one day week Hong Kong to Chicago when when it's on our plane we do it in two point two days door-to-door and if it goes through someone else's plane and someone else's warehouse and all the confusion in that process it takes five days doesn't seem like much but let's say you're a giant phone maker and you your phones are worth what does this thing what did I pay for this thing I like $1500 and so if a 747 hold a couple of hundred thousand phones so think about three days worth of 100,000 phones times $1,000 a lot of money sitting there and it's so it's real money and if you can speed up a supply chain you can you sell those products faster and put cash back on their balance sheet so it's another way to measure the impact that you can have it's just like giving them back money and people love you when you do that when you're keeping time for me so I don't than to part I'm very happy to say it talk but make sure get cool over here yes what what sort of legal barriers did I did we encounter and how did I overcome them lots we are licensed by the Department of Homeland Security Customs and Border Protection specifically so the first one was getting that license that took two and a half years including an FBI background check which I passed we we've we've got a license by the Federal Maritime Commission to sell ocean freight can't sell ocean freight without a license we've got were licensed by IATA for selling air freight a now licensed by the Chinese Ministry of calm or get the name of it but licenses all over the place that are required to do this business heavily regulated for good reason because this is on some level where the front lines against all kinds of stuff drugs terrorism counterfeit goods like you you have a an obligation to report things to the government and they want to make sure that there's no bad actors in this in this very sensitive part of the world economy and we're not like you know there are other startups that are I call them test cases like uber and airbnb and these startups that there's sort of operating in this gray area of the law to test case should you be allowed to sell the backseat of your car to somebody else and I believe you should but the law is not on it is that it's a little ambiguity there in the law that's not us if like sport are the law is very clear about what you can and can't do sometimes hard to understand but it's not black it's not gray it's black and white and you have to learn it and so we've we have to take compliance super services probably our biggest risk as a company and we in our industry the tech industry doesn't have a great reputation on compliant so that's something that we have to overcome okay I'm gonna do just one more question how about you right there yeah I didn't sign up and then nothing ever happened which is okay you know um we're in business so I went to business school I have an MBA and I remember in a marketing class in business school the professor was asking how would you know how do you know how to price your product and and and everybody they had all these complicated matrices and survey methodologies and you could do different you know algorithms to test what someone I was like what if you just listed it for sale at a different at two different price points and then see which one sells more or see which one generates more revenue or what if you listed a fake product and see if they would buy it before it exists and it was literally laughed out of the room as though it was a joke like this was like they laughed at me they said this is the dumbest idea ever to list a fake product to find out what price you should sell it at and then turned out that's what we did and it and it works so there's you know the Internet's a beautiful thing because it there's no cost to creating a page if you were to do that in a retail store you couldn't how would you do it you'd have to have the prototype but Photoshop is a beautiful beautiful piece of software okay with that thank you very much safer [Applause]

Channel: Stanford Online

Views: 28,382

Keywords: Stanford Online, Seminar, MS&E472, Entrepreneurial Thought Leaders, Ryan Petersen, Flexport

Id: MGNbdrcKzGA

Length: 54min 15sec (3255 seconds)

Published: Thu Jan 24 2019