This story was migrated from our old blog, originally published on April 1st, 2021.
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This blog post first appeared first on old medium publication (https://medium.com/startuprad-io), and was moved to this blog with the relaunch of our website in summer 2024.
Learnings from a Dot-Com CEO
You want to look for the right investor, that brings more to the table than just money.Frank Felker, Radio Free Enterprise
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The Founder
In this interview, we talk to fellow podcaster, former Dot-Com CEO, mentor, entrepreneur, and investor Frank Felker (https://www.linkedin.com/in/frankfelker/).
Frank has vast experience, especially in the printing industry. He turned this experience into a dot com business and started an online printing service DocumentPlanet (1999–2002). He even went on to list the company during the dot-com craze. He shares some of his learnings from this “crazy time.”
The Podcast
Frank podcasts with great guests on his podcast called Radio Free Enterprise. You can learn more here: https://radiofreeenterprise.com/
Here is the episode Frank refers to reverse merger vs. SPAC:
The Video Interview is set to go live on Thursday, April 1st, 2021, at 17.00 CET
The Audio Podcast
The Audio Podcast will be published at the same time.
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The Interviewer
This interview was conducted by Jörn “Joe” Menninger, startup scout, founder and host of Startuprad.io. Reach out to him:LinkedInTwitterEmail
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Automated Transcript
[0:00] Music.
[0:08] That I owe you were podcast and YouTube blog covering the German startups.With News interviews and Live Events,hello and welcome everybody this is Joe from startupradio your startup podcast and YouTube blog from Germany if you’re new to us all listen of you this podcast the first time go down here and hit the like And subscribe.Wherever youwatching this or listening to this today I welcome another podcaster as part of media exchange Frank from Virginia hey how you doing.
[0:47] Great Joe thank you so much for having me it’s a pleasure having you because I also appeared on your podcast and usually we do that to give,each other exposure to the other podcasts audience but you also a very interesting start up like guy that’s why I like to have you on my podcast because in the past you’ve also been working,in start-up in technology even as a CEO right.That’s right that’s right I created a startup back in the late 1990s during the.com internet explosion.And it was called document Planet I had a long history in the printing industry and I’d also been a very early adopter of.Online technology actually accepted print jobs online before the internet existed.
[1:40] So I thought it was when the internet boom came along I thought it was a great opportunity to leverage my experience and my.Brand in the industry my personal brand in the industry to launch a printing.com was called as I say document.
[1:58] And it was headquartered in Virginia Alexandria Virginia not far from where I’m sitting right now.
[2:06] ICC can you share a little bit with us your experience because at this time I do believe it was,you’re still talking about the burn rate at a start-up the amount of cash you losing like every month in a startup,at this point in time you said it was actually you needed a burn rate in order to show that you meet needed the money in the first place right.That’s right at things were different than this was before the The Lean Startup was written.And believe it or not the Paradigm at that time was the exact opposite the idea was to spend as much money as possible as quickly as possible.In an effort to show that you needed more money the whole thing was kind of crazy.Because it’s so far in the past now a lot of people may not remember that there was a lot of discussion about what was called the new economy.That traditional rules of Economics we have been suspended no longer applied you don’t have to make a profit you just have to grow etc etc and,you know all those things have been proven Incorrect and hence things like The Lean Startup.Which I adhered to and believe in 100% particularly having lived the exact opposite and seeing what a disastrous approach it was.
[3:29] But what I want to share I would like to share with people who are either currently the founder of a start-up or considering founding a.Is that you know there’s a pot of gold or potentially a pot of gold at the end of the rainbow.But you need to understand also that this is going to be probably the hardest you’ll ever work and the most stress that you will ever go under at least from a professional standpoint.Then in any other point in your career and certainly any previous point in your career these investors are funny that they want their money back and they’re not kidding.And they’re very serious and very serious business people and you need to be able to perform and as human beings we can’t always do what we had hoped or what we had promised,it’s very stressful and I have a few ideas on how you can keep that stress to a minimum and maximize the potential for success for yourself and for your startup.
[4:28] Would you share this with us before we get into the part where you actually list the document planet.Sure number one eye when I came into this I had never had.You know I was about to say I’ve never had experience in a start-up before but that’s not true I actually had been involved in a,that had an amazing run for about six months and then it was acquired by a giant multinational company and believe it or not the circumstances of that were such that I had to sign a nondisclosure that this transaction at ever even occurred,so that’s about all I can tell you about it.But it but I would say that my learning experience there was not really that instructive because the circumstances of this startup worse owner unique.In but I would recommend that you find yourself a job in a startup first.Get a feel for the Mania and the stress and the hours in the,and the fear and trepidation that goes on about are we going to get that next tranche of funding are we going to be able to get our be round or whatever it is how are we going to make payroll next cycle if we don’t,and so forth so that,you get a real feel for the environment it’s a very different working environment again as I say than any other place you ever worked after you’ve done that if you’re lucky if it was successful startup you might have gotten some options maybe you got some money out the door.
[5:54] And then you’re ready perhaps to start your own keep in mind that when you do your first start up it’s not going to be your last startup let’s hope,don’t try to hold on to 51 percent of ownership ormaintain control I mean you should try and you should keep control as long as you can but keep in mind that this is your first go-round and the golden rule applies the people with the gold set the rules and if they want to bring in a professional management team or they’re going topush you out completely or they’re going to change the business model or what have youyou need to roll with the punches and just look at it as much of a learning experience as you can again if you’re fortunate.I don’t know exactly the statistics but I think it’s only one out of five or maybe fewer startups that actually succeed in turn into profitable businesses.
[6:49] If you’re one of those will not have five great eventually you will part ways with that company and again if you’re lucky you’ll have some money in the bank,when you go to do your next startup you’re going to be a much more experienced person than you had been previously you’ll probably do a better job with execution you’ll be able to attract a better team you will already know who to go toto ask for investment Capital you’ll just understand so many things that right now you don’t even know what you don’t know.And then eventually what happens and I think you’ll agree with this Joe is people who create startups stop creating.They end up with enough money in the bank that they invest in other people startups and they let those people work 200 hours a week and go through the stress and pulling their hair out and losing their marriage and Etc,and and then they are the person who sets the rules because they’re the one with the gold now.
[7:46] I see I found a few of you statements pretty interesting especially.Went five startups succeed actually I’ve heard more the number like 1 in 10 nonethelesseven even you’re more favorable statistic means that you have to try at least five times that istic Ali speaking to be successful once and it doesn’t make sense to investall your life savings take on credit as much as you can just to get this one startup of the ground because.Damn may or may not be for more because before you become successful right.
[8:26] That’s right you don’t know what’s going to happen in there a lot of exoticness variables and by that I mean acts of God like covid-19,and other things that can occur that completely unforeseen and completely out of your control but even without acts of God there are Market forces and other things like maybe your business model wasn’t such a great idea after all.
[8:50] That always reminds me of pets.com for everybody who does know that it would.com startup that basically burned a lot of money and they.
[9:02] I think they assumed that they’ll sell many many very.Pensive items to dark Corners like diamond colors and stuff like that in order to break even so that wasn’t the most sustainable business model but nonethelessthey got funding.Getting a little bit back to document Planet you right in your LinkedIn that you raised more than 3 million in venture capital and then you listed is that the way you went and how did you approach that.
[9:40] Thanks that’s a good question one of the important points about document planet was the timing we started into it,we first start to get Traction in the investment Community late in the.com boom and by the time we really did start to attract money.The.com boom was becoming the.com implosion.And it became increasingly difficult to raise Capital no matter whether you had the best business model in the world.So we became desperate and as a result my advisers and my investors.Insisted that we go forward with what’s called a reverse merger with a public shell company and this is similar to a speck in fact,there’s a an episode I have on my podcast Radio free enterprise if you just search for the word spak you’ll find it where.
[10:37] The differences between a reverse merger and a spec or defined but in any event we.Decided to do this reverse merger so that we could become a publicly traded company which meant that the trading in our shares became liquid there was a liquid market for people to invest in people to get out.And you know it was a it was a Hail Mary as we would call it a Hail Mary pass and it did not work out.But I did learn you know that the education I got from that was worth a few million dollars I went from never having any involvement,with a publicly traded company to becoming not only the CEO but the chairman of the board of a publicly traded company.Now we were a very small company but we had the same reporting requirements as any other publicly traded company and at least you know within certain parameters I had to you know run board meetings,I had a board of directors that were a bunch of hard-bitten money people and and it just you talk about an education I certainly received one.And it also gave me a great perspective on the difference between a privately held company and a publicly held company and one of those things and one of the reasons why.
[11:53] Becoming a publicly traded company actually impacts and impedes the execution of your business model is all the pressure from the public markets and from investors for short-term results.And in a lot of cases a public company and a startup company are almost like Alice Through the Looking Glass,it’s almost as if the rules of actual business are suspended you know we don’t care whether you’re actually making a profit we don’t care about this many things that would be important if you were private.You have other objectives that you need to serve like meeting Revenue targets.Yes well of course that’s important that’s always important but then you know revenue is great but what about profits,I had a meeting with a fund manager in Philadelphiaand this was again during the.com boom and everybody had money and everybody’s investing this guy had no experience being a fund managerand I came to him asking for five million dollars and you know for this next round of what we were going to do and how we’re going to expand and we’re going to increase revenues.He looked at me and he said.
[13:08] You know I have a hundred and twenty five thousand dollars in my van that I had my responsibility is to invest and if I did it at five million dollars a shot I’d have to manage 25 deals and I don’t want to do that.So you’re asking for five million how about if I give you 15 million and I thought well you know that’s great but then he went on to say.If I give you 15 million dollars today can you roll this idea out Nationwide in the next 180 days.And I said certainly not it goes well there’s the door.
[13:40] So that’s the kind of you know as I say Alice Through the Looking Glass thing that you need to look out for and one of the important points there is for founded founders of startups,you want to look for the right investors not just any investors,you need to look for people who can bring value Beyond just their money in terms of their Rolodex connections their experience in your industry their ability to accelerate execution their ability to shorten sales Cycles,there’s so many things that a Strategic investment can do for you smart money Beyond dumb money which is just somebody who can write a check.
[14:22] So basically you recommendation,would be the actually had an American guest here who started a startup companyBerlin mental high-five to Luca and he said almost the same like,like don’t marry the sexiest people but the ones who bring those to the table I think that goes down here longer Ellie.
[14:49] That’s right that’s great yeah that’s exactly right another thing I found was there is no direct correlation between how much money an investor has and how high their IQ is.I met a lot of people I remember one time I was demonstrating our online order system to somebody using WebEx this is way back when.And this guy was so fascinated with WebEx that he couldn’t get past that he thought that’s what I was demonstrating.And in fact he said well no I I don’t know what you’re selling but I want to invest in this company and so I’m like okay great.Sorry it took me awhile tttt shift back to be there was there was just so funny.
[15:35] One one more point out one to talk about before we go on.I know the American mindset is a little bit different from the German one because here IPO is really big thing and most startups who do not IPO do it in the do it in the 10 200 million range,Auto one is actually looking at more than 1.5 billion years,at the time we were recording this because you listen to our recording life from tape of course and.At the time I assumed your your IPO was a little bit.Smaller what did actually drive you to do that was it getting access to public markets was it just the next logical step that your investors pressure you to do it or did you just want to try it.
[16:29] Well keep in mind a reverse merger is not an initial public offeringand again if you go to Radio free enterprise and look up IPO you’ll find this episode where the guy actually who was my partner in the in document Planet explains all the differences but in any event,no we did it totally out of desperation and in order to persuade other private investors to investit wasn’t really to go to the public market and try to get the public to invest it was to persuadenew investors that their money would not just be going down a hole that it would be going into a company where if they chose tothey could take their money back out again through the public markets.
[17:16] Did you and your partner actually sell a lot of your Holdings during this time.And this is another thing as I mentioned earlier for your first,you know they call it getting crammed down or diluted and this is something you need to be prepared for it’s really important that you go into this understanding,in your own mind why am I doing this.Am I doing this to become rich am I doing this because I have such a passion for the business what there has to be a compelling wine and you know it’s all arithmetic so I started out with.I think like three million shares.
[18:04] But if they’re not if a share is worth nothing then it’s it’s not worth anything by the time it was all done I had seven hundred and seventy thousand shares,and again if it’s worth noting it was worth nothing.But it did trouble me how I was being diluted and how other people were coming in but I had got a funny perspective on this job I think you’ll like this when I interviewed my partner here recently about this you know 20 years laterhe says his perspective on dilution is who’s really getting diluted,the investors handing you a hundred thousand dollars in your hand your butt stock certificate so who’s really experiencing dilution at that point and I thought that was important sothis is why I encourage startup Founders to realize this is not going to be your last startup on maybe not hopefully not so,go with the punches do what you feel is the right thing to do at the time try to minimize your concerns about your own wealth or well-being in it I mean but,the most important thing is your personal well-being and if you for example like me or absolutely miserable.
[19:18] Working with the investors and trying to struggle.It just wasn’t worth it Joe and I ended up with nothing I ended up I’ll shoot I personally guaranteed the lease on our offices and it up having two,go to court and settle that I guaranteed the lease on our computer equipment,that with if we’d Gone With The Lean Startup method we never would have had any of that and I ended up I remember sitting in a courtroom and could I’m going to settlement and making those payments it was a miserableit’s situation and let me give you just one story that I think can can emphasize how important it is to,be true to yourself and not get in bed with investors that are going to make you miserable.911 September 11th the Attacks of September 11th occurred while I was the CEO of document planet and you know Alexandria Virginia is quite nearby to Washington DC,we were not far from the Pentagon a lot of people who live around here their parents are they work for the defense department it was a terrible terrible day here in this area.At about one o’clock in the afternoon I let everybody at my office go home and be with their families.The next day I got a phone call from one of my investors who said hey I called your office at three o’clock in the afternoon yesterday and nobody answered the phone what kind of an organization are you running over there.
[20:43] And I thought what am I doing why am I dealing with a person like this and but once you take their money.You got to take that call hmm ICCvery very interesting perspective plus we are talking here for another topic because a lot of my audience isnot from the u.s. approximately 1/3 of my listeners and viewers are from the US and Canada.Even for the people in Canada John Oliver called so nicely North North Dakota it may be of interest.When you are looking to enter the US market is it worth a look around the area DC Alexandria can you talk a little bit about what is going on there in terms of tech companies startup companies in general.
[21:42] Churn this area is where America Online originally started.And many many moons ago actually went to their first headquarters in Tyson’s Corner Virginia,did not meet Steve case but he came into the room when I was meeting with some of the people there,and they then move to another nearby location in Northern Virginia and as a result because you know I don’t know if you recall but at one time AOL was the,internet provider in the world by far and AOL and some ways was the internet had obviously is long in the past now.But as a result they attracted a lot of other similar companies in this area of Northern Virginia they also brought with them a lot of Internet infrastructure.I remember during our interview previously you told me that Frankfort has the world’s largest internet not.
[22:37] And I’m not sure how large the one is that’s in Ashburn Virginia,but it’s pretty big and they’re constantly building new data center so as a result there are a lot of data centers here in Ashburn Virginia and they’re building more all the time,since you said there’s such a large not there in Frankfort you probably seen a lot of these big.Boxes that you know huge million square feet and only 10 people work inside.So that that continues to grow here so Telecom is a big investment area here cybersecurity anything that lays on top of all those servers and all those wires,is Big Government Contracting is a huge area of investment here in the DC area if you go to again my podcast and search for the word London,you’ll find an interview I did with an angel investor who only invests in cybersecurity Military and government startups,so as with any where else in the world you’ll find startups you know you’ll find a printing startup you’ll find all kinds of different startups but primarily Government Contracting cybersecurity,and Technology.
[23:53] That’s very interesting and of course they get about cybersecurity the headquarters of the NSA as well as the CIA are not too far away from you so that there’s like a big Demand right.
[24:06] Yes and the CIA headquarters is an interesting place I in the totally different job in fact a job I had to take with a home improvement company after document Planet exploded,I ended up on the campus of the CIA out in Langley Virginia on a construction job I was involved.
[24:26] Can you actually talk about this are you permitted to say I was there.
[24:32] Yeah I was there anyway but yes yeah clearly the CIA the NSA.All of those there’s in fact not far from where I am here there’s some kind of a surveillance installation at an army base.That they don’t even talk about what goes on over there but I know that there’s a lot of satellite dishes a couple of them you can see the top rims of them above the trees but yeah there’s some serious,reconnaissance and surveillance and intelligence activity here in the DC area and,you know a kid in high school or somebody who knows how to code a white hat hacker you just never know who’s going to come up with an idea,that somebody in the government it’s going to glom onto and the difference with the government as a client is you can go from zero revenues to hundreds of millions of dollars in revenues with the stroke of a check or the stroke of a pen on a.That’s one of the reasons why Government Contracting startups are so attractive to investors.Aunt you could go from writing one 1/2 of one presentation after another after another four years with our money as well.
[25:44] Yes you could I’ve been there done that made a lot of investor presentation.
[25:50] While Frank it was such a pleasure having you here we talked about your experience as adot-com CEO we talked about what’s going on in Northern Virginia Washington DC and,horse everybody who would like to learn more about you will have,podcast we did together down here in the show notes I’ll look for the podcast with the speck.You talked about with your former partner that will be down here in the show notes and everybody would like to learn more of course there will be a LinkedIn profile as well as your podcast website where people can reach out to you.Thank you very much was a pleasure having you as.
[26:34] Thank you so much Joe the pleasure was all mine if you are a professional looking at the European startup scene Germany is a place you cannot miss.
[26:43] Music.
[26:52] Interviews each week most likely you have never heard or read anything only startups before in English but you will in the future be ahead of the curve And subscribe to stay.
[27:03] Music.
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