Howard Marks - Founder of StartEngine & Co-Founder of Activision

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All right, what is going on everyone? Casey Adams here. Welcome back to the Rise of the Young podcast. Today we are joined by Howard marks, the the CEO and co founder of StartEngine as well as Activision and Acclaim Games. Thanks so much for coming on the show, Howard.

Yeah, happy to be here.

So where did this journey start, Howard? I know I've heard of Activision since I was younger, playing Xbox in my parents, you know, in my parents house. But where did this entrepreneurial journey start for you early on in your career?

Well, I started the University of Michigan when I moved there from Paris, France, where I was growing up. And I decided hey, I want to pursue an engineering computer science degree and started really tinkering with personal computers and met my business partner at the cafeteria. And then we got together and I talked about computers, what I was doing, trying to do a software. And next thing we know we're starting a company while we're in college, which is quite unusual at that time. At that time was not the culture of dropouts. Create your company, get VP money that didn't exist. But we did, we did start it. And our first company was making software for the Apple ii, which was the first real generation that Apple built en masse scale for computers. And then as we evolved the company, we went and worked with some other manufacturers that don't exist anymore, like Commodore and these kinds of machines to the point where we were doing well business wise, but we were not satisfied. We just didn't feel like we were getting any real traction after seven years of being in business. But we were resilient and we were not going to give up. But at the time we saw a company actually called Activision going out of business, literally making all sorts of bad moves and being punished by the market. And so we were like, okay, you know what, let's see if we can buy them. And found a way in for very little money, got control of the company and restructured it through Bankruptcy and started fresh, moved the company down from Mountain View in the Silicon Valley down to LA over here and decided, you know what? We're going to build a video game business that is based on really strong production values. Not the way games were made before, where they were based on cartridges and there were small pixels. Usually typically the same person would make the music, the animation, the programming. We decided we'll put a team together and start building high quality production value video games. And that was our start really of a career in the game business.

That's incredible, man. And I know one of your goals even to this day is making LA a startup hub. When you brought Activision from SF to la, was that your intentions back then as well?

Not at all. In fact, I don't think we had any idea what was in front of us in terms of moving a technology company, what it was. You know, you have programmers and you have 3D artists to LA. And realizing that LA wasn't ready, we had to hire programmers from jpl, you know, NASA. We couldn't hire people from ea. You know why? Because no one would want to move down to LA. At that time, differently than today, Northern California people felt that if they moved to la, it was the end of their career. They were not in the know of what's going on with Silicon Valley. They were no longer part of the buzz. So for them that was just too far to go down. So what we had to do, and we didn't know that we had to hire a whole new group of people who are not from the game industry. They were smart, college grads. They were smart.

Why?

Because they were gamers. They were well educated and they were passionate, but they never made a game before. They didn't understand what that meant. Some of them trickled a little bit in the entertainment industry and this and that, but frankly not from the game business. Now that became a silver lining in some ways because the idea that we couldn't bring in talent from the existing people who did these cartridge based games, we could define what we wanted, we could define what they did. And there were no barriers. No one came in and said, no, no, no, that's not how you do it. We just didn't know. Yeah. But we had a blank piece of paper. We could design a studio model for our games that was unique to the industry. And we strongly believed that the video game industry was going to move towards CD rom, which is pre dvd. Same concept. Yep. And we were right. But it, you know, there were a lot of naysayers.

Let me Tell you, of course, and especially like back then, like reinventing gaming and now seeing what it is today, like it's, it's such a incredible industry to see how it's transformed over the years. And me being a consumer and used to be a gamer back then, it's been awesome to see it come to where it is now. But I want to talk about Call of Duty. When did Call of Duty come in the picture in Activision? Did you play a role in the background there? And what are some stories that you could tell the people today about that one game itself and the franchise?

Well, unfortunately, the team I built and put together are the ones who did Call of Duty, but I was no longer there. I left just before that game. And then these, the guys who created Call of Duty actually were doing games.

For ea and I think there was a bad, you know, I guess something happened and they were looking for a.

New studio, a new publisher and Activision was available. Right.

We always wanted to do war games.

But it's just you have to find the right team. I cannot give you those stories.

There are plenty of other people from.

The video game Activision days that could.

Probably tell you got it. Absolutely. Well, I want to pivot and talk about StartEngine. I'm a huge fan of just equity crowdfunding and crowdfunding overall. Number one, what is StartEngine? For the people that may not know and when did Starting StartEngine come into your life and why did you start it?

Alright, so StartEngine, our mission here is to help entrepreneurs achieve their dreams.

And what it means is we help entrepreneurs stay in control of their company.

And raise capital directly from the crowd.

It's a whole new concept, it's a new industry. Did not exist before. The way it got started was this. After I sold a claim to that ended up being purchased by Disney, I wanted to do something new. And that's where my idea came in.

Where?

Why isn't Los Angeles a tech city? Why we're not viewed that way, even though we have invented what, email first satellites, the first telecommunications satellites. I mean, you're talking about LA was pretty, pretty. Oh, by the way, we invented AdWords and AdSense. That's Bill Gross and Gil Elbaz. I mean, I mean the whole monetization of the Internet was invented here. So what's going on? And there were no accelerators. So I decided, okay, I'll create one. So I built one at the same time I launched three others came out. They were great companies. They were also trying to do the same thing. And we started getting applications and investing, and I was doing about 20 a year. You know, why not 20 groups? And I have to tell you, what we found very quickly was it was very hard for these companies to raise money for these entrepreneurs. Yep. I invested in women led companies, truly by them, minorities and people who were not from Stanford. And guess what happened? They couldn't raise any money. Now, I never understood what was going on in the idea that the VCs like to invest in people that look like themselves. I didn't know that no one came and said, hey, Howard, you're an idiot. You're a complete idiot. You don't get it. They're not. You're putting money in companies that will never raise a dollar. Right. Says, wow, this is very strange. And I decided, you know, after getting phone calls from these founders and crying and the real sense of loss for them, discouragement. It's pretty nasty. You know, if you're an entrepreneur and you're completely discouraged and you have to pack up, I felt there was a. There had to be a better way to do it. And I was always fascinated by Kickstarter because I thought Kickstarter had some real passionate group of donors and some people were using it for pre sales. And so one company on Kickstarter that inspired me most was Oculus Rift. And I looked at that and I said, oh, my God. They raised three and a half million from 7,000 crazy people who went out and told the whole world that this is the future. Unbeknownst to them, the company raises $80 million from Marc Andreessen and a bunch of VCs and later find out that it sold for $2 billion to Facebook, but they still haven't received their headset. And then they get the headset. But hold on a second. They created the company, they're part of that story. They put in money and they didn't get anything for it. At that time, the rules were pretty clear that they couldn't. And I felt just, just so this is just not right. This is not how things should work. And so finally, the Jobs act came out in 2012. And I read it and I went through it and I decided, you know what? This is a revolution in finance. It's not something people are talking about. But it was created by Congress for entrepreneurs so they can raise capital from the crowd. And the revolution in this idea was that for the last 80 years, you had to be wealthy to be an investor in Uber and Oculus Rift and any of these companies, because they Couldn't take your money or not. You know, most people don't know that, but it's very much protective of the crowd, the mass Main street investor, for being involved in these capital formations for companies. I mean, it's incredible. Anyway, that said, we launched StartEngine with our mission to help entrepreneurs achieve their dreams. And this journey started June of 2015, when this guy, Paul Ito walks into our office and says, hey, I want to make a car and I need money.

Okay. And now. And that's the day began.

It began then.

Wow.

And then he walks in, he needs money, right? For a car. Yeah. And he says, oh, I have all these pre orders and people are putting money down to buy the car. And we're like, okay, we need a customer. So he put him on our website and quickly we see, oh, my God, thousands of people pledging money. Right.

Wow.

And in a matter of three weeks, we raised $17 million.

No way.

Seriously. And I'm like, okay, this is something a lot bigger than we thought it would be. Yeah. And then our journey continued. And it took us a while to get another hit like this, but we realized that the demand for capital is just intense. And we've been growing the company, and every year we raise more than the previous year and previous years. So last year we raised more than the previous four years, and this year we may raise more than the previous five years. It's just incredible. It's growing really fast. And we had to innovate a lot of things because we're defining a whole new marketplace for capital. Yeah. The same way, you know, Activision, for us, it was defining a new way to make games that are richer in entertainment. We're defining a whole new way for capital that didn't exist before.

I love that. And when you. When you guys are looking at different deals or even just the last six years, how many different businesses are raising money on StartEngine annually? And what determines how many?

Well, since inception, we've done over 600 deals.

Wow.

But we're raising right now on our platform today, 150. And we launch about 20 new companies a month. Love that. So it's growing. And our goal by the end of the year Is to launch 100amonth. I mean, it's insane. Every time we set a goal, we always find a way not only to reach it, but to surpass it, exceed it. The pandemic, in many ways, was a silver lining for us because we never wanted it. We never thought it could happen. But what we realized, it was a defining moment. For us because a lot of capital disappeared. We did, you know, a lot of the VCs ran for the hills for a few months. You know, they were hugging angels. And we just went and pressed forward. We hired Kevin O' Leary to be our spokesperson. Yeah, Mr.

Wonderful, I've seen him all over. I wanted to ask about that, how did that come together and you know, what's your relationship with Kevin?

Well, it came by, you know, it's a small world in this universe. And you know, one of my golf buddies was running one of the agencies and said, hey, yeah, we represent him. And so we found a way to get a hold of the agent and explain what we're doing. And he calls us back and say, let's have a meeting. And right away Kevin got it. It did not take more than a few seconds. He knew exactly what we're doing. He said, look, I've been looking for this because I have tons of companies I invest in and they all need capital. I get what you're doing. You have the scale. I mean you have hundreds of thousands of investors. You've raised hundreds of millions. This is perfect. And we're just, we're looking at and say, yeah, it is perfect because he's a very well known shark. I mean he's been on shark tank for 10 plus years. He's very popular, people like him and we needed that credibility, the ability. He has a unique ability to communicate. He's very good, he can speak in very simple terms and people really enjoy listening to him.

I love that when you think about startups and raising capital, so I'm currently, I've been a startup, I'm raising a million dollars where you have like 700k already raised. And we're just doing it based off of relationships and strategic investors. But when I think about equity crowdfunding, like it breaks down that barrier of needing those relationships and puts the power back in the hands of the people. When you think about like different ways of raising capital and the power of crowdfunding long term, how do you think crowdfunding will play into just fundraising the next decade?

Well, obviously you're not, you know, you're going to hear from me a different picture that you'll hear from the VC community or even the bankers out there. Yeah, I think there is something special going on. I think when you looked at the Gamestop crazy journey from, you know. Well, I mean I'd say a company was shorted by all the smart money and next thing you know the Main street investor comes in and takes over billions of dollars from their funds. It was a defining moment. That is it. Is the consumer out there back in control? Is there something going on? Is it still the elite and the insiders? It's the small guy versus the big guy, David versus Goliath. What is going on? In many ways, when you look at StartEngine with our investors who are in our community, they want in. They're sick and tired of hearing that they can't participate and that they are dumb money. And then all the guys who raise money from the pension funds are smart money. Yeah, they just don't. They don't. They, you know what, they're not okay with that. They just like, hold on a second. I've earned my money, I can risk it. You know, I could go to casinos if I wanted to. I could get on a startup and put $1,000. What's, I want to be part of that journey too. What's, what's wrong with that? And I think this pandemic amplified the need for capital because a lot of new kinds of businesses got formed and we saw the number of business starts exploding here in the United States, demand for capital exploding. And so for the first time, there's a new option for these entrepreneurs. Now what we're doing is a lot more than just getting capital in the hands of entrepreneurs. And the reason is this. An entrepreneur, when they start a company, that's a defining moment at the beginning, they need control, they need flexibility. They don't have that when they raise money from VCs who ask for control board seat, preferred stock and all this stuff. And that puts a lot of weight on the company. And they can't do this, they can't do that. And there are different agenda being discussed. An entrepreneur needs to move forward and fast and grow the business. And if they need advice, they can certainly pay for it if they want it. But most of the entrepreneurs, they don't listen anyway. And if they did that, probably wouldn't succeed anyway. So they go for their journey, make mistakes and learn from them. And the idea that we can get them the capital they need from an army of investors who become brand ambassadors while they stay in control and pick their terms is incredible. It's an absolutely incredible idea. And so the question is, why wouldn't every entrepreneur want to do that?

Yeah, absolutely. What's your advice to like when you're investing in deals personally or just looking at a company, what's your advice to an early stage entrepreneur when starting your company outside of the fundraiser, the fundraising component.

It'S the most important ingredient is grit. And the reason it makes sense is because it's the intersection of passion and resilience. I tell entrepreneurs, look, if you're going to start a business, you better be passionate about what you're doing. You know, I've been in several businesses in my career. Once I started a business I was not that passionate about and sure enough, it didn't do well and lost money. And I analyzed it in a way, you know, my analysis was, you know, I liked the business because I was doing it, but it was not my thing. Yeah. So passion is so critical. But then resilience. Most entrepreneurs quit. They quit because they run out of money. They may quit because they have a founder dispute. They quit. The true power of entrepreneurship is resilience. When things look the worst, you know, this is it, we're done. When things are the worst, that's when it gets started. And that's when by sticking with it. And there's another day, the next day, and the next day you come out of it. You come out of walking in desert for years into a huge success. So for those entrepreneurs, they have to understand this. It's hard. It's extremely hard. Most can't do it. So if you're going to do it, have the grit to stick with it and see it to completion and have the flexibility to pivot when you realize that you're running into a wall.

Yeah. Did you guys like, speaking of pivots and changing and you know, being open minded at Activision or even StartEngine, can you talk to us about an example of like when you had to pivot or when you had to think through a strategy differently and how you were able to do that efficiently?

Well, absolutely. So in Activision world, we had to realize that, you know, the whole world was cartridges, these big things you put into the consoles and play the game. Then that's what everybody wanted and retailers wanted. And we said no. And it took some time, right? So we had to build some cartridge games and pivot and say, okay, look, we'll, we'll go with it, but we have an eye on the CD rom. And the CD ROM was just an accessory to a computer. It was not even built into the computer. So we had to go through that.

Pain.

With the eye to the future. Right. So you have to be flexible.

In.

Terms of start engine, in terms of pivoting. The obvious pivot is we started as an accelerator to help 20 entrepreneurs a year and see them fail. And we pivoted into an equity crowdfunding platform that is, that's raised over 350 million for these companies, hundreds of companies. It's just incredible. That is a big pivot because when I started Accelerate, there was no way.

I could imagine that I'll become a fintech company.

No way.

Absolutely. When you think about what was I going to say, just equity crowdfunding and the model of founders now coming across it, I know recently the, the cap on equity crowdfunding went from 1 to 5 million, is that correct? And then, so what, these different laws and changes that are happening in the space, do you think they will continue? Like, for example, will 5 million go to 10 million or 15 million? Or what determines those dramatic changes in the industry of crowdfunding?

Well, absolutely. Let me tell you how it happened. So the JOBS act happened because a bunch of entrepreneurs went to Congress and.

Lobbied Congress, people who were powerful enough.

To be able to write a bill.

Called the Jobs Act.

And the 2007 Great Recession was a great catalyst because a ton of money was lost from consumers and banks, and it was just a mess. And access to capital was even harder.

Because again, every time there's a crisis like 2007 or the pandemic in March, all the investors run for the hills and entrepreneurs are left holding the bag. In many ways, that was a defining moment for the JOBS Act. It was voted into Congress and signed by in April 2012. And then it took them to Security Exchange Commission four years to implement. Now you ask, okay, they make some improvements, right? They went from 1 million to 5 million. And there's other improvements that were made that's going to continue. Why? Because the financial industry, similarly to the technology industry, evolves, ideas evolved. So what we're seeing and what we believe is in the next few years, you'll see improvements constant coming out from the sec, helping the marketplace improve itself, offer better services for its customers, raise more money. And the real key for us in the whole story was liquidity. You're asking for an investor to put their money, put their credit card in, spend $1,000, get some shares, and what do they do with it? What are they supposed to do? Do they wait five years, seven years, or can they have early access to liquidity? And to. For us, that was our defining change that we wanted to introduce to the marketplace. Even though the rules were very clear to raise money, it was not very clear how you can trade. And we found a way.

That's incredible. And you talked about this earlier, but when you see like, you know, the event with Robinhood or all These different cycles. I think personally that's great for a platform like StartEngine because it reminds people that the power is in their hand and the community, by the thousands or even hundreds people can make a real change in financial markets or for businesses overall. And you see that with these big publicly traded companies. But even for the small company that's looking to raise a million dollars, like there's real influence behind these investors. How often do you as a CEO get to speak to these investors that are coming on the platform? And how have you guys at StartEngine been able to build a culture with inside the organization?

So yeah, we do speak because then we have the Zoom meetings. We invite our community investors to come and listen. It's me and Kevin o'.

Leary.

We talk about our own financials that.

We disclose because we're very transparent in terms of culture. We have six values at StartEngine and those values are very important on how we operate our business and work with our investors and the entrepreneurs. And the first one is own the mission, which is clearly helping entrepreneurs achieve their dreams. We ask every person who works at StartEngine that they have to live by these values or it's not gonna work. So own the mission. The other one is exceed expectations, team player, be curious, care about others, and finally do the right thing. These values, you don't see them in financial firms at all, those exact values, because think about how a banker works. You know, make the most money for themselves, doesn't matter about the others. Once in a while they cut some corners, get into the Wall Street Journal, pay big fines. It's non stop. And our view as a fintech company is that with those six values, we can do anything. We can seriously challenge the status quo, come out and define what the future of finance is, what it should be. And our view, our belief is that the future of finance is the crowd. And you saw that with Robinhood. It shocked Wall street in many ways. They just couldn't believe this. And guess what? It's the little guy again. It's always the same paradigm, right? We believe that equity crowdfunding fits it very well. It empowers investors as a crowd who has a voice, unified voice, to make a difference.

I love that. As a CEO, what are some of the principles that you would pass on to CEOs that are scaling companies or in the process of building out a team? I know that you talked on those six core values and I personally find those very valuable. But outside of that, like if you were speaking to an early founder, there's a lot that. Listen, what's your advice to them when it comes to maintaining that community and building a brand that people know, like and trust?

Well, you have to go back to what makes sense, the essence of a business. So a CEO is building a business. They have to build a great foundation for themselves, for their, the employees of the company and for their customers. It has to make sense. It starts with the values. I mean, you know, it took me 35 years to figure that out.

It was a long time.

In being made. You have to start with a mission. A lot of the new entrepreneurs are mission oriented people. They really believe in their missions and they want to accomplish them. That's important. Then you go for the values, you go for the goals. The vision. You set a very large goal for 10 years out and then you set a three year roadmap with yearly reviews, quarterly reviews, monthly reviews, and then you give everyone in your team very clear monthly, quarterly, yearly goals that are measured, reviewed constantly. Now, one way to do it, there's a thing called the Entrepreneur Operating System. Eos, not the crypto. And that is a foundation that we use that we recommend because it simplifies things, it simplifies your life because as an entrepreneur you have a lot of things you need to do.

Yeah, absolutely. So what is the Entrepreneur Operating system or what can you speak on about it?

What I can say is the Entrepreneur Operating System was created by a guy called Gino Wickman in Michigan and he was an entrepreneur and felt strongly that there needs to be a framework the same way as the engineers have this framework called Agile that everybody is using. This is another one. And he went on his journey and I think There are over 15,000 companies are using it, including us. Wow. It's amazing. It truly is embraced by everyone in our company. That's incredible.

And how have you guys reacted to things going remote? Are you guys full, remote, half, half and half, or what does that look like at StartEngine?

So we went 100% remote like everybody. And we made a decision that as the pandemic is getting solved and people are getting vaccinated, that we're going to be a remote first company. It's not something we decided to do prior to the pandemic. It's something that came as a consequence because the real new normal is not what we had before. I don't think you can go back to exactly where we were before, before the pandemic. I think we're going to a future. I think the pandemic accelerated the future by five or ten years.

Yeah.

You know, again, it's. You have to look at it, the idea of progress, you can't stop, you can slow it down, but you can't stop progress. And for us, progress is to give people work, flexibility, the ability to work from anywhere they want and live anywhere they want. And so once we made the decision to be remote first, we've been hiring people from all over the country.

That's incredible.

It's amazing to watch. And now we have to define new things. So now we have to define what that culture looks like. Okay, so you're remote first. Some people go in the office, others not. How does that affect their careers? Yeah, we haven't answered all those questions. I'm reading papers all over the place. Coinbase decided to become remote first and they're pretty high profile companies. So we're reading a lot and we will in the next few months as the pandemic looms and it goes away. We're going to define this and we'll make it public and we'll publish it.

I love that. Well, two more questions before we wrap up. One is just what have you, what's the number one thing that you've learned over the past year? Just not only just about the pandemic, but through this fast shift of 5 and 10 years of advancements, as you said.

I think the number one thing I learned was that the pandemic taught us that people want work. Flexibility, the idea that they have to be hours in commuting does not have to be. That was part of our industrial revolution where people went into the factories because you can't stay at home, you're not going to earn anything. Right?

Yeah.

When we're in the agriculture world, you know, before the industrial revolution, people were at home, working at home on the fields. So that was a natural setting, the idea of offices, wasn't there? Industrial revolution comes up, everybody's at work in cities, and then the information revolution comes in with the computers and the Internet and everybody's still in cubicles and. And then you come this very weird thing called the pandemic. Yeah. And now finally we're able to realize what a lot of people already knew but didn't do anything about. It is that work flexibility, life balance is meaningful. So I think that is one of the things that's going to come out is this concept that, yes, you can work from anywhere you want, live the life you want to live and still earn and be part of a company and succeed.

I love that. Well, last question before we wrap up, Howard, and that is, if you were to tell your younger self one lesson about business, entrepreneurship or life, what would that lesson be and why?

You know, I'm 59 and I have a young side of myself inside of myself that's wondering what happened and because I, I feel that same 30 year.

Old entrepreneur right now.

I feel it. I feel that same. I don't look like it, but I feel it. My, you know, I'm from a different generation and yet I've embraced a lot of the things that this new generation is looking for. I want to lead. And I think that what I would say is being authentic is something is very hard to do. Very, very hard. And I think being authentic early on will help the entrepreneur, help you, anyone, really have a better chance of success and not do things that don't make sense. Follow your instincts, follow your vision, be authentic about it and you'll find out that your customers feel the same way. And that helps.

I love that. Well, Howard, I just want to say again, thank you so much for coming on the show today. I know I learned so much and I'm sure the audience did as well. So thank you so much for taking the time today.

Great, Casey, great to talk to you.

Legacy of Monsters An Apple original series. The world is on fire. I decided to do something about it on November 17th. This place, it's not ours. Believe me. The most massive event of the year arrives. If you come with me, you'll know everything. I promise.

Oh my God. Go, go, go.

Monarch. Legacy of monsters streaming November 17th only on Apple TV.

Plus.