Episode 14 | Part Two: Undiscovered Country

Gregory Shepard, an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, TEDx speaker, and Forbes author. This is The Boss Podcast with Gregory Shepard.

Thanks for listening to the second part of my conversation with Patrick McKenna, the founder of One America Works. Patrick has invested in dozens of companies, most of them outside of Silicon Valley. Patrick, I wanted to dig into some of those other companies that you've been involved with. In part 1, you mentioned Facet Wealth, the Baltimore-based financial management company that employs a workforce of remote financial managers. But you're also involved with a company called LiveOps. What can you tell us about that one?

Right. So, so LiveOps was the first company that I co-founded, and this was the work-at-home customer service. This is the company that innovated the whole market for work-at-home customer service. Before 2002, I remember going to our first kind of trade shows to show potential clients that you could work at home. Actually had like a setup of a home office with a computer, and it was actually a computer, not a laptop. And somebody sitting there showing them like, this is what it looks at home, this is how you would secure it at home. And that was like, call it 2003. It was completely a foreign concept and idea. It's just funny how now Nobody even would question any of that.

And I want to talk a little bit about NextRep, right? So this is another one of these businesses. You have this trend of working at this work from home, repeating, repeating, repeating, and you seem to be ahead of everybody else. It's like you forecasted COVID before it even happened. But like you said earlier, this was a natural progression in the first place, right? So tell me a little bit about NextRep.

So NextRep is like the, literally the next step on this evolution, right? So with LiveOps, we kind of said, hey, you have a home computer and high-speed internet, and you would apply some time, you can do, be a customer service rep. And we, the way we recruited, trained, managed all this kind of stuff, very innovative. And we did it from California, but then our people worked remote. NextRep was another layer up where we were doing more sophisticated type calls. The work was still business process outsourcing, but kind of the supervisor, the management, these are a little more sophisticated. What is really interesting here was the decision to put the company in Portland, Maine. So NextRep is based, and it currently is still based, in Portland, Maine. And you say, well, why Portland, Maine? Kind of this gets to my thinking about there's talent everywhere.

Mm-hmm.

Well, New England is full of people who used to work in call centers for the catalog businesses. So you had L.L.Bean and J.Crew and all these. So you had this installed talent base of people. Not only did they work as reps, but they worked as supervisors, IT managers, and they really knew the BPO business really well. But all that business had either gone to e-commerce or moved to the Philippines. And so there was all this talent that was being underutilized in New England and Portland, Maine made just a ton of sense because we were able to go in there, start the company. A lot of people work from home, but we had an office of 70 people or so that had the skills that we were looking for, and we found them in New England. We found them in Maine, which kind of leads to this idea that I have to say, well, there's all these skills and talented people, they're, they're all over the place. And if you can find a skill type, a category, a vertical that there's expertise in these different places, well, then you should be building the business near that talent source.

Go to the talent instead of trying to bring the talent to you.

Bingo.

Yeah, I mean, it makes a lot of sense. I know I cut my teeth in Silicon Valley. I built a company and sold it to eBay. And while I was trying to build the company, the whole time I'm competing against Google and Netflix and Yahoo and eBay and everybody else. And it was just awful because as soon as you get them trained, they leave because you just can't pay as much as these guys. So The concept of going where there is not competition for your talent and where there's remnant talent left over from a previous industry is just brilliant. It's absolutely brilliant. I want to mention this. You served as a lieutenant in the US Army. And by the way, thank you very much for your service. I really appreciate that. I'm sure everybody else does too. And I keep running into folks with military experience. Like, this happens on my podcast and in business all the time. And I wanted to ask you whether you think that your experience in the military had prepared you or had gotten you ready in some way for the dangerous world of entrepreneurship and investments.

Thanks for bringing up the military service. You know, I, I, it was, it was a real honor to serve and a pleasure. And, and, and, um, I, I learned a tremendous amount In my four years of active duty, I was very fortunate. Also, my background, my work in the military was technology. So I had gone to undergrad. Actually, I went to. I did ROTC in undergrad. Went to USC and ROTC. Then when I graduated, I was in the Army, and they trained me as a technology officer. So I was a Signal Corps officer, and I did communication security. So it was like encryption and all this like high-tech stuff, which was really cool. Of course, I still did airborne school, jumped out of planes, and. Went to Alaska, did northern warfare stuff. So I got to like do some survival, cool things like that. But my job was technology. And so for me, my military experience not only gave me leadership experience as, you know, a 22-year-old managing, you know, a team of 35, but also I was dealing with edge technology under very real-world circumstances where I was stationed in Korea and the mission was very real there. And I think that leveling up as a young person to take everything, to really understand what you were doing and to see the consequences, also to be very innovative, because if something breaks or doesn't go wrong, you don't just say, oh, I gotta, I'll see you guys on Monday. Right. You, you have to be very resourceful in the military to get your mission done. You don't see it as like the 9 to 5 or something like that, which is excellent training.

Right.

For being an entrepreneur. So, you know, the course of my time in the military, I learned technical skills, management skills, resilience skills. And so by the time I was set up as an entrepreneur, I felt like I had a lot of the tools that would come in handy as I became actually more of a manager. You know, as you got further up in like understanding people and treating people with respect and seeing people from different backgrounds and seeing how they work together as teams, because the entrepreneur is only as good as the team they assemble around them. I think we agree with that, right? Like, it's about execution. Like, you're going to back an entrepreneur— if that entrepreneur can't attract a team and then manage that team and those resources, no matter how good that idea is, it's pretty hard to be successful. Because I'm a real believer in execution. And, you know, the military definitely is a good training ground for execution.

For sure. Yeah, absolutely. I studied, uh, the Navy SEALs and the First Fighting Wing in the Air Force. I've talked to the CIA. I did 1,200 interviews looking at process and execution. And the thing that I took away from the military specifically was masters at execution, just absolute masters at execution. So, I think that— I mean, I even look for military people all the time because I know if I get a military person and I give them instructions, I don't have to worry about it getting— they'll get it done.

They will innovate their way to getting it done in a way that surprises you. You think of hierarchy, top-down military, it's actually not like that. The military, the way it works is everybody gets the mission all the way down. So even if you're operating outside of your chain of command, you have the autonomy. You're used to having the autonomy to drive mission, which is what you need and what you just talked about. Right. So if you give somebody the mission, they understand where you're going. When you're not looking, they're doing the right thing and they're heading towards the goal line. And that's what's really key. It's what I love about military veterans also is that they're willing, you know, they'll take initiative. And they'll keep driving on even when you're not giving them direct input. Yeah.

And like, and to your point, they have a high pain threshold. You know, in entrepreneurship, you have to have a high pain threshold. Entrepreneurs are constantly being bombarded with focus and productivity. And one of the things I get requested a lot when I talk to folks like you is the question, how do these guys organize their day? How do they get focused? What are their processes? How are they so productive? And I wondered if I could focus that question on you.

If you don't mind, I start my day with a mindfulness meditation practice. So—

Oh my, I do too. I meditate 3 times a day. That's awesome.

Oh, great. So I'm glad I got— I'm in the right conversation. So I added meditation to my daily routine about 12 or 13 years ago. And, um, so immediately had a positive impact. I just, I felt more clear. I slept better, you know, like just made you smarter, but it also made me more empathetic and more compassionate. And the things that like, as you're going through your day, the stressors are coming. Like you have bad news, you have good news. Oh, bad news. Okay. That's news. Good news. That's news. And being able to navigate your day with more presence and Mindful flow is the key to conserving your energy. 'Cause you as the entrepreneur, you've done it many times, you're the energy source. You're the energy source.

Yeah.

So if your energy's running low, your organization's gonna run low on energy. So my daily work, my daily routine starts with a meditation. I'm pretty, I don't wanna say rigid, I'm pretty structured around parts of my day where I compress meetings so I don't— I get them done and I don't have big gaps in between because I'm really trying to manage my productivity. And then the thing that I do that I've learned from other very high productive people is to create blocks of time on your calendar where nothing can get scheduled. Your admin can't go in and grab that time without like a lot of it, without like permission. And that gives you, you know, 2 or 3 hours for unstructured thinking time.

Yeah.

Because you're also in charge of the creativity. And if you can't find time to read, reflect, do your own brainstorming, your own stuff, then I think you're underserving your organization. So that's kind of my 3 things is mindfulness. I compact my structured part of my week, and then I've got blocks of time for more unstructured thinking and creativity.

I think that you are fantastic. I mean, I've done so much reading about you and I'm like, this guy is a brother from another mother. And I wanted to, I wanted to close out by saying that in addition to that, my mission is to help entrepreneurs. You know, I've done 14 startups and exited them and all this stuff. And then I just decided I wanted to help entrepreneurs because I feel like there is a way there to change everything if you focus on the entrepreneur itself. And I like to ask this question of the folks that I have on the show. to help these entrepreneurs. You know, 90% of entrepreneurs fail, right? And they do it within the first 5 years. And so I like to ask guests, what do you do when you run into failure? How do you recognize when failure is approaching you? And what would you caution entrepreneurs on moving forward if you're a startup entrepreneur?

Wow. You and I definitely share this, this big ambition of helping entrepreneurs. You know, I feel so fortunate every day. You know, that practice we talked about also brings a lot of gratitude, just being grateful for the good and bad things that happen in your life. And paying that forward and helping others is such a big part of my life, and I know it is, is for you too. Um, I'm gonna take that into 2, 2 separate buckets. So the one thing that I want to talk to any entrepreneur who's here right now, like, like, here's my 4 questions as an investor when I'm thinking about investing in an entrepreneur, and this is the questions I, I think you should think about When you're starting a business or you're talking to an investor. And this is specific to outside of Silicon Valley, actually. So it's why this, why now, why you, and why here. And I just want to just put that in this, this conversation because it's so important for you as an entrepreneur to understand the answer to those 4 questions. Like, why this? Is it a personal connection? Is it a problem that I know? Do I have a special insight? Why this? And this also— why now? Like, there's a lot of problems that aren't ready to be solved, or maybe they were already solved. Like, why now? Is there a technical innovation? Is there a market innovation? Is there a social innovation? Is there something— is there a piece? Like, is the iPhone going to unleash the Uber? Like, something like that. Something has to say now. And then there's this really personal thing about why you. Like, why are you the person to do this? And it's not a question of doubt. It's really because you have to believe it. Yeah. And then your investor is going to believe it. But I want to know why you are the person. And I ask myself that question: Why am I the person should be doing this? Like, like with Facet, that we talked a bit about Facet. My mom had a bad experience with with a financial advisor. She was a she she was the the mailman, the letter carrier in my small town. Worked 34 years at the post office. Had a rental property. She retired from the post office and walked into a financial advisor's office, and he tried to sell her a A variable annuity with a 7% front-load commission, and fortunately she didn't sign that. She sent it to me, and it was like this guy didn't know that this small-town mailman retiree had a son who worked on Wall Street and was high net worth. And it's like I thought to myself, that's a huge problem. I'm the person to solve it because I know how to solve that problem because it's solving problem for my mom, your mom, your brother, everything like that. So why you? The other thing is just why here? Because a lot of people just think, oh, I gotta move to Silicon Valley. But why? But why not do it in Ann Arbor or Detroit? You know, you could be StockX up in Detroit. You can be, you know, One Medical. You can do all these different businesses. But telling me why here, not because you don't wanna move or, you know, you just love the climate of Austin. It's like, what is it about the place where you are that is special to help solve this problem? So I just wanted to get that in the record for your listeners because I look at a lot of businesses and I think that entrepreneurs who can answer those 4 questions, starting a business or when they're raising money, the stronger you can answer those 4 questions, the absolute better you're going to tell your story.

So, um, so change your pitch deck so it says why this, why you, why now, why here.

And do you agree with that? Like, I think that's super strong, right? Do you think that that's like— it's a really powerful—

I think it's incredible. I, I don't ask these questions. I ask why you, um, but I don't ask All this series of questions, but if you unpack this stack of things, you do get everything you need to know. I think it's incredible. I look at like 100 deals a month, and and I I mean I'm like sitting here taking notes.

So if you're listening, because I listen. So I think there's like I get a lot of this. Like I'm like wow, that's a huge problem. But why should it be solved now? Like I'm or like wow, that's a big problem. Like like why you or like like what is it so unique about being in in Nashville? Oh, wait a minute. Oh, there's like—it's like 65% of managed care happens in Nashville. Oh wow, that's really interesting. So it means all the most sophisticated buyers for this software are in Nashville. Well, I didn't know that. Well, that's a great reason to be in Nashville if you're selling health tech. You know, like so there's this here thing that I think that anybody who's starting a company or investing should should be really clear. And and I don't know if you want to still talk about the the the resilience and and failure because. You know, you have to live with failure if you're an entrepreneur. That's really important.

No, I do. I do. I just really want to make an impact for those listening about this. Why this? Why you? Why now? Why here? Please write that down, whether you're an investor or an entrepreneur, because that is good stuff right there. And I thank you so much for that, Patrick. But yeah, I mean, you know, so entrepreneurs, you know, they run into failure. It's a constant thing. And one of the things I get asked all the time is, Did you fail? How did you fail? How did you rebound and come back? What would you tell me to prevent me from failing? And those are the sort of questions I get all the time. And I try to ask guests that so they can hear all the different perspectives of people that are serial entrepreneurs, especially entrepreneurs turned investors, because they have a unique perspective on both sides.

So the most important asset that we have in our lives, and it's true as an entrepreneur too, is your time. Your time is the most important thing. We have a limited amount of time on this earth, a limited amount of time to do what you want to do. And so failing, in my mind, is a lot about time management. If you have a really good idea and you start working on it, you start executing, and it starts to— it's not going the way you want. And so there's a lot of stories where you just hunker down and they just stayed with it, stayed with it, stayed with it, and then eventually it was successful. And that happens. Yeah. It's possible, but also a lot of times, like it's just not the right time or the right business, or you're not the right person to do it, or somebody else did it. I think you have to be really honest with yourself about whether this is the right business for you and be willing to walk away. So my second company, we didn't talk about it in this conversation, but it was called Kenix, and this was a data company focused on tying TV and offline advertising to online. It was a little outside of my wheelhouse. I started the company. I saw it was pretty good. It was actually quite successful, got a couple million of revenue relatively quickly, but it turned into an agency business where we were basically just being hired as an agency to buy online ads for, you know, marketing companies. And for me in that one, I was like, I don't want to be in this business. Yeah, because my time is the most important thing. I walked away from that business and I sold the business and kind of settled it somewhere else because my time wasn't being well spent. So sometimes failure is the businesses didn't— it didn't even like go to zero. It just like isn't the business you want to be in. And I think that's another thing for entrepreneurs to say, where am I spending my time? I could have done that business for 5 years, it probably would have been fine. But that would have kept me from doing something else. And so I think, as an entrepreneur, you really need to think about where you're spending your time, and is it the most use? And then if you do have a failure, this is just— this is like very obvious. I think everybody's either heard this, and if you haven't, then It's a good time to hear it again, is it's not that you failed, it's what you learned. And I say, it seems so obvious to say, but as an investor, if somebody comes in and their last company or 2 failed, sometimes I think, wow, I'm getting somebody else's, you know, couple million dollars investment because this guy learned something, or this gal learned something from those losses. And this next one is going to be built on that. And that only is true if the entrepreneur that's coming in can clearly describe what they learned.

Yeah.

what they would do different and why they're going to apply those to the next thing they're doing. And being super honest and transparent about it is, I think, a really successful thing that investors like me, investors like you who've, you know, have seen failure know that's really true. Failure is just part of the process.

I agree 100%. So in closing, first of all, thank you again so much. And one final question, what would be the single piece of advice that you would give to an entrepreneur who's Starting a business, like early-stage entrepreneur?

I'm going to use one of my favorite mental models. It's called living in the future and reporting back. If you want to— if you're thinking about starting a business right now, do this exercise. Imagine the business that you want to be in. Go forward 5 or 10 years. Look around the world. Look around this place that you're at. You know, we were talking about Zoom. Go up there, look around, see what's missing. And then basically report back, come back and say, "Can I start a business that's going to actually fill the world that I'm seeing in the future?" It's a little mental model that I think that if you have an idea, you know, test it. Okay, here's my idea. Let me go in my mind to go and live in the future five ten years down. How does this look in the future? And then come back. And you know that idea actually might not look so pretty. You know what I mean? Like so you may be able to actually. If you're, as an entrepreneur, if you're not saying, like you said, you see 100 businesses a month and you probably invest in 1 or 2. And it's like, if you as an entrepreneur aren't thinking of 100 businesses and you're like just going after 1, like you're probably not doing the diligence again, 'cause time is so valuable. That's what I would say is like, you really need to build tremendous amount of conviction in what you're going to do. And the more you can actually see how it's gonna flow in the future, the more you're gonna make better decisions early on. And then the better you're gonna be able to paint the picture of what that future looks like, which is both gonna attract investors but also gonna attract collaborators. And like, your core startup team are gonna be buying into this vision.

Fantastic. Thank you so much again. I really appreciate it. I hope all the entrepreneurs listen because this guy has some really good stuff to say. One of my better guests on the show. I appreciate it very much, Patrick. Thank you.

Enjoy the conversation.

Thank you. So if you want to connect with Patrick McKenna, you can find him on LinkedIn or follow him on Twitter @Patrick_Mckenna. That's it for this episode of the BOSS Podcast. Until next time, namaste, my friends.

Learn more about the BOSS Business Operating Support System at bossstartupsience.com, or you can reach Gregory Shepard at gregoryshepard.com. This has been a production of Forbes Books.