Secrets Of Venture Capital Scott Kupor And Product Innovator Tracy Hazzard From The School For Startups Radio With Jim Beach

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24. 7 radio network broadcasting from AM&FM stations around the country. Welcome to the Small Business Administration award winning School for Startups Radio where we talk all things small business and entrepreneurship. Now here is your host, the guy that believes anyone can be a successful entrepreneur because entrepreneurship, entrepreneurship is not about creativity, risk or passion. Jim Beach.

Oh, boy, do we have a great show for you today, July 10, 2019. A beautiful Wednesday. I hope it is beautiful where you are. Yes, we do in fact have an amazing show for you. First up, we have Scott Cooper. He's author of a new book called Secrets of Sand Hill Venture Capital and How to Get It. For those of you who don't know, Sand Hill Road goes right through the heart of what we would call the money of Silicon Valley. It's over there by Stanford and it is just where all of the VCs and money people are located. So I'm excited to hear from Scott. He is also the managing partner at one of the most prestigious, if not the most prestigious, venture capital firms in the world, Andreessen Horowitz. You really just do not get any cooler or more prestigious than that. So Scott has got the pedigree and is in the position to give us some amazing insights and I'm excited to hear about his new book and to learn from him. Also today we have Tracy Hazard. She is an Ink columnist and a brand specialist. She has taken 200 products to market with something like an 85, 87, something like that percent success rate, which is a huge success rate. That would be like winning nine Super Bowls in a row, I think so. An amazing accomplishment. And we're excited to learn from Tracy. She does something really interesting. I want you to focus in on this part of the interview. Using Amazon as a test bed for other products, sort of as a proving ground to see if the product is going to work, if it's a good idea, if it's going to be successful, all of that kind of stuff. So just an amazing, an amazing resource and I am excited for you to meet Tracy Hazard as well. So great show today and as always, we sure do appreciate you being with us. You know, we have two goals, so we have three principles and two goals. The principles are bag creativity, forget about risk, avoid it at all costs, and keep passion for the church, synagogue, mosque in the bedroom. Right. Those are our three guiding principles. We also have two things that we hope happen with regularity. Number one, we want to give you the skill sets to be successful. So we're going to try to give you through these Incredible introductions to these guests. The skill sets to be creative, to be more passionate, to be better fiscally suited. We're trying to give you all the tips, the tricks and the techniques to be a successful entrepreneur. That is goal number one. And goal number two is to motivate you to get off the sofa and go out there and do more. Maybe you already have a business. Our goal is to help you take it to the next level, to go out there and do more with it, to be more successful with it and to push it harder. Or if you don't have a business, our goal is simple. Get you off the sofa, take that remote control, crush it underneath a bunch of rocks, quit watching ESPN and the Real Housewives of Stupidville and go out there and use that time to grow a product, grow a business, take control of your own financial destiny. That is very simply what we are trying to do. And we hope we can do that for you every day. You know, we're not all going to get rich, but we hope to give you the offensive skills to go out there and do that. We're not playing defense here. We're not going to show you how to get a cheap airline ticket, though occasionally we'll talk about that, but very, very rarely. Once a year. Our goal is not to play defense and teach you how to save money. Our goal is to play offense and go out there and make more money. Show you how in your spare time to make more money as you transition out of your full time job and into full time entrepreneurship. That is very simply our goal and show you how to get the money. So if you need a bunch of venture capital, our first get, Scott Cooper is going to show you how to go and get it. So we're giving you the entire basket, the entire skill set. Hopefully you can bootstrap the business, do it lean and get started and owned 100%. Sometimes you need to go get some professional money. We're going to talk about all of it anyway. Anyway, Anyway, great stuff today. Appreciate you being with us. And we'll be back in just a couple of seconds to get started. Be right back.

Jim believes being a guest on podcasts and radio shows is a great marketing tool and it's free. Jim has been on over 300 different shows getting marketing exposure for free. Check out Jim's newest book, Free radio market in 30 minutes on Amazon. It's five star rated and will teach you everything you need to know to get free marketing.

And welcome back to the show again. Thank you so very much for being with us. I am very honored to introduce you to my first guest today. He is at the absolute top of the VC profession. His name is Scott Cooper. He's the managing partner of Andreessen Horowitz, which I think used to be a venture capital firm, but I think they changed their format. We will ask him about that. Anyway, he has grown the business with the rest of the team from 250 employees to and about $7 billion in assets under management. He is also the co founder and co director of the Stanford Venture Capital Directors College and teaches VC and governance at Stanford and at several business schools. Vice chairman of the Investment Committee for St. Jude Children's Research Hospital and has also been chairman of the board of the National Venture Capital Association. The reason we're excited to welcome him today though is, is that he has just released a new book called the Secrets of Sand Hill Road Venture Capital and How to Get It. Scott Cooper, welcome to the show. How are you doing today?

I'm doing great. Thanks for having me.

It is our honor. So for those who do not know, Sand Hill Road is the road where all the VCs are located. Right there by Stanford University, right?

Exactly right. It's, you know, if you're, if you follow, you know, country music and you know about, you know, Nashville row or country row. Yeah, this is a similar, similar idea. But it's, as a lot of these roads, it's actually not that exciting. It's a pretty. Stanford is by far the most attractive part of Sandhill Road, but it is where all the VCs tend to congregate.

All right. And the big secret is that you want to take over my firm, move to Birmingham or Tulsa or wherever and run my business and kick me out. Right? That's the big secret. I know it.

No, no, no. That's not, that's not it at all. In fact, actually.

As VCs, we want the same thing that you want as an entrepreneur, which is we're trying to help facilitate the growth and development of hopefully a very big and long standing and profitable business. So we're actually both on the same page here.

And the last thing you want to do is run my business, right?

That is exactly right. In fact.

VCs are not there to run the business. The only thing that VCs do is hopefully work with a CEO, provide kind of guidance and expertise about how to grow the business. And then there's VCs like ourselves who have made a big investment in what we call the post investment team. So we've got more than one hundred people here at the firm who think about, how can we help you in terms of sales and marketing, how can we help you identify new executives to hire new engineers? And so those are the mechanisms by which we try to help. But to your point, the entrepreneur is the magic here. And the last thing we want to do is mess with that magic.

But you understand the myth that I'm pointing to, right? That somehow the VC is going to screw me, right?

That's. Yeah, that's exactly right. And it's exactly why we wrote the book was I think there's just a huge amount of disinformation and misinformation in this business. And you know, what I hope people will take away from reading the book is that we all share the same goals. We all want to build companies. And again, the way that we can do that is obviously providing capital, but hopefully in more cases, also really being a useful partner with you as the CEO and the founder of the company and helping grow and develop the business.

All right, and specifically to my introduction question, you did you were a VC firm and now you're not. Did I hear something about this a couple of months ago? Can you explain what this is about?

Yeah, you did hear about it, and I'm sorry to say that as it's not. As it's sometimes the case, all the reporting wasn't actually quite as it seemed.

So you mean there was fake news about the VC industry?

Yeah, fake news is probably too strong of a term. But no, we just changed the way we're registered and regulated by the sec, which is a long story that's not going to be interesting to your listeners. But at the end of the day, we are in the venture business. We were in the venture business. We will be in the venture business for the next 10 years. We literally, again, change the regulatory structure that caused that news to seem like more than it actually was. But our job is the same as it was before, which is we look for great entrepreneurs looking to build great companies and hope that we have a chance to partner with them.

All right, so I'm already confused. You're looking for. And I can't even get someone at the company to answer my phone. I've sent five emails to associates there, and I don't know how to get in. I have this great business here in Des Moines, and I know you all really aren't interested in Des Moines, but it's really cool and you should hear about it. So the second part of the subtitle, how to get it. Let's Start transitioning into that. Scott, what are the first steps for someone not hyper connected already living on Sand Hill Road?

Yeah, so look, I think kind of the word connection is exactly kind of the way to think about it. So one of the best tests, I think, of your mettle as an entrepreneur is can you find through one or two degrees of separation, a way to get somebody to introduce you to various venture capitalists. Now, you will find venture capitalists, of course, do their own kind of proactive deal identification where we try to go out and find all the best entrepreneurs, but inevitably we're not going to be able to do that perfectly. So one of the best things you can do if you are particularly in a market that is not local to your venture capitalists, is use your set of relationships, use your network and say, okay, gee, do I know somebody who can actually at least help me get in front of the right person for a conversation. And I think what you'll find is venture capitalists are incredibly, the market is incredibly efficient in that respect, which is if you've got a good idea and you have a way to at least kind of, you know, find your way, your way in the door there, the market tends to be pretty efficient.

Okay. In other words, what I just heard is even if you are from Des Moines, if you're worth anything at all, you'll figure out how to find a way in.

Yeah, I wouldn't say it maybe quite as strongly as that, but I think it is important. Right. If you think about what you have to do as an entrepreneur, you've got to be able to knock down walls, you've got to be able to find customer opportunities. When people tell you no part of starting a company is a little bit of willful suspension of disbelief. A great way to demonstrate your stick to it ness and your creativity is to also show that you've leveraged your network to find a way to get into an organization that might not have been so obvious for you.

Right. And that's not really that hard, is it? It's not like you people are hiding, you know, and you have a list of your associates. Is an associate a good place to start? If I can get an associate to take my call, you know, I send them a one pager, her a one pager, they agree to a 15 minute call. Is this a good way for me from Des Moines to start?

Yeah, look, I think it's a fine way to do it. I mean, look, as with any selling, the higher you can get in the organization, the earlier the better of Course, but associates play a really, really important role. And I can tell you in our firm we don't use that title, but there are lots of people here who are meeting entrepreneurs for the first time. And we have a very structured process for how they then sit down with the rest of the general partner group and kind of help us get visibility into stuff. So I think there's no harm at all in going that route. And I think you'll find in most firms that actually it's quite an effective way to get to the broader general partner base.

And you want a one pager and a 700 page business plan, is that my understanding?

Yeah, not quite. So look, all we need, whether it's one pages or 10 pages of PowerPoint, is we just need your articulation of why this opportunity is so interesting, how this can be a very, very big company. And then in particular the part that I think people forget about why you are the right person for us to back going after that particular opportunity versus any number of other teams that might back us. So yeah, we don't need business plans. We don't care about what the spreadsheet says for what your year 20 revenue is going to be. We're more interested in your thinking around the product and the market and in particular, particular, as I said, the fitness of your team for this particular opportunity.

All right, what is your sweet spot for investment? So how early and what is the average amount, please?

Yeah, so we are a multi stage firm, which means we will invest at the seed stage as the earliest. And that tends to mean, you know, kind of a million, $2 million is typically kind of where those kinds of investment opportunities will come. And then we will invest all the way up to as much as potentially $100 million in a company. So we really think about it as early stage, where you're trying to say, hey, what if this business could work? We recognize there's no product yet, but kind of what could it be to later stage stuff where the business is working, albeit at probably a smaller scale. And now the question is, can our money be used to help you actually go from a five, ten million dollars business to hopefully a hundred plus million dollar business business?

All right, that's so useful. So the. What could it be? I don't have any revenue yet.

Correct.

That'S exactly right. Yeah. So we are. Yeah, sorry, go ahead.

And so just to set the expectation for our listeners, right, It's a run of the mill average thing that you decide to invest in.

Right.

You're going to put a Million dollars into it. It has no revenue yet. What percent equity should I expect to probably, on the average day, all things being equal, give up?

Yeah. If you're a seed stage. So I'll go back to an example. So we invested in Instagram when it was still that stage company. Right. It was a very early company. In fact, it wasn't even called Instagram at the time. And at the time they were raising capital, and at that stage, typically for call it a million dollars, you're probably talking somewhere between 10 on the low end and maybe as high as 20% on the high end in terms of what you might sell to an investor at that point in time. That's probably the range to think about.

All right, so that's valuing the business pretty high.

Yeah. Now, particularly out here, oftentimes when somebody does a seed, this will sound funny maybe to some of your listeners, but there's something these days called a pre seed, which means oftentimes these companies have raised money even before they get to the seed level. They might have raised hundreds of thousands of dollars from friends and family or others. So, yeah, for something to kind of get that valuation, right, you're talking about kind of a 5 or $10 million valuation at the seed level. In most cases, they will have raised some money before. And so the product itself may not be working, but at least there's probably something there that we can diligence as opposed to purely just a PowerPoint deck.

All right. And length of process. So I'm. I think you and I are almost the same age. Roughly the same age. So we remember back of Napkin deals in 1998 and things like that. I have a napkin in my pocket, Scott. Let's do a deal right now. Is that still going to happen in today's world?

Believe it or not, every now and then that might happen. We certainly had deals that, you know, go down over a weekend sometimes, which is certainly not the preferred way to do it. But I think if you're an entrepreneur and you're planning for this, I think you should assume, look, it probably takes. You call it three months, kind of from start to finish in a process. Right. Because, you know, month one, you're probably meeting people and getting to know them and kind of talking to a number of firms. You know, month two, you're probably kind of deeper engaged in, you know, kind of what we call diligence. Right. Helping the VCs understand the business in a lot more depth. And then that kind of leaves you call it 30 days on the end Once you have a term sheet to get all the legal documents in order where you can actually close the deal and then fund the business. So that's probably, I think, the minimum timeframe that at least you should plan for as an entrepreneur and hopefully, you know, kind of you get one of those, you know, napkin deals that, that takes you out of the market a lot faster.

And what verticals do you prefer? And does it really matter? If I came to you with an incredible vertical that you weren't already invested in, but it was obviously a great deal, would you go there?

Yeah. So we, we'll do anything where software is kind of a core component of the business. So that would be. An example would be Instagram, as I mentioned, or Facebook or Twitter or a company like Slack, which is kind of in the enterprise application space. So anything that, where software is, the foundation will do it. We do life sciences and software stuff. We do crypto and software stuff. So anything. The real answer to your question is, you're right, is we're basically in the outlier business. So our job is less so to kind of be dogmatic about what we'll invest in and more to be open minded as to what entrepreneurs are doing out there and, and allow them to kind of take us into areas that we might not have realized were actually really good investment opportunities.

And is the investment strategy there the same that we hear about in the media that you're going to invest in 10 companies and one or two are going to be Instagram and make you billions and three or four are going to make you $100 million in some sort of merger or acquisition, and, and then you're going to have three or four that you can't figure out what the hell to do with, and they make you 1,000 bucks. And then three or four that just crash and burn and were an epic, stupid mistake. Is that a fair distribution?

Yeah, I think that's about right. So the way, the simple way we think about it is, look, probably 40 to 50% of what we do, unfortunately, are in that category of hey, great idea, turned out to be not a good business. And, you know, hopefully you get a few pennies back. But. And then you're right, you got a couple kind of, you know, kind of middle of the road outcomes. And then you have to have, you know, to your point, you got to have an Instagram or a Facebook or, you know, kind of hopefully an Airbnb or Pinterest or something like that where you can make, you know, you know, significant multiples of your Money. So that's the way this business works is, you know, very high risk, very low probability of success, but hopefully when they succeed, they really succeed. That's the only way to make the.

Financials work at the end of the day and succeed. That's an interesting word that has all sorts of different connotations and denotations. But for example, Scott, I would say that a company that has really cool software that allows cars to drive around and move people from point to point, so people don't have to own their own car, but loses money every time it does that transaction has not really succeeded. The market would say otherwise. What are your thoughts?

Well, I think you raised a really good point, which is there's a lot of companies that we invest in that are not profitable today. And some as you, as you reference that even when they get to be public, companies are not profitable. So I think the real question in those businesses is do you fundamentally believe at the individual unit level that those things work? So does an individual ride in a mature market actually produce a real sustainable profit? You know, from the data we've seen in those types of things, you're referring to or delivery services or others, the good businesses do, in fact, make profits at the unit level. These companies just tend to be investing in very significant growth, which obviously drives the overall results for the business negative. So that, to me, is the fundamental question. And if you believe that, then you say, great. If it can make profitable profits in this market over time, I believe other markets will look like that. And that's kind of. You either get comfortable with that or not in order to decide if you're going to make the investment. Investment case.

All right, Scott, we've gotten to know each other a little bit. Tell me a secret now.

All right, let me, let me give you, Let me give you a couple secrets. One I alluded to earlier, but I would say the biggest secret and misunderstanding I think a lot of people have is the way VCs evaluate deals. And as I mentioned, so much of the evaluation is about the team. So, you know, when you've got, you know, somebody like, you know, Brian Chesky who's starting Airbnb, the real question is not do you think Airbnb can be a big market? The question is, why back Brian versus any of the other folks who you might see. And so a lot of what we're trying to do, and unfortunately, a lot of where entrepreneurs don't spend enough time in their pitches is go to that point, you know, tell us about how are you going to kind of just, you know. You know, brutally take on this business? How are you going to recruit people when, you know, you need to convince them to quit their jobs and come work for you before you have anything to. To do? How are you going to help customers understand how to get there? So all of those things that I think people tend to underestimate and tend to kind of gloss over, which actually tends to be the biggest piece of evaluation, particularly at the early stage, for venture capitalists.

Yeah, but, Scott, I don't understand that standard. By that standard, I could always find someone better than the entrepreneur in the room. So if you and I are going to start a chicken gizzard company, the chances are, I think, 100%, that we could find someone who knows more about chicken gizzards than the guy who came in the room. And, you know, if we were to sit down for six months and do it, don't you think we could find someone better? Maybe someone that doesn't yell at his employees as much or someone that has a little bit. He's already had an ipo, but it was in a different industry, you know, don't you think we could find someone better?

Well, you certainly might, but I think the question is, what is it that makes this particular founder or founding team uniquely suited to go after this market opportunity? In other words, if we're starting the chicken gizzards company, maybe the answer is somebody who comes from that industry might be the least obvious person to start a new company because, quite frankly, they're too wedded in the ways of how the business works, and they can't think creatively. There's a. There's a great example, and I use this in the book of Herb Kelleher, who's the founder of Southwest Airlines. His biggest reason why he said he was the right person to start Southwest Airlines is because he had never actually been in the airplane business before, and so therefore, he had no preconceived notions. He had nothing to hold back the creativity of his thinking. And so in some ways, depth of expertise in a market might actually be the exact wrong thing for somebody who's trying to take on the market in a different way.

All right, give me another secret. We have time for one more.

You got time for one more? The other secret, and it's really more. It's a mistake that we see a lot, is people tend to not think critically about how much money they want to raise and why. And so a lot of times people come in here and they say, hey, I'm going to raise $8 million. And when you ask them that, they don't really have a good answer. And it's probably because the last three guys they ran into before they came into the meeting also told them they were raising $8 million. The thing that is so important in this business is when you're raising for the current round of funding, think about what the story is and what the milestones are that you're going to want to tell at your next round of funding and then back into the amount of money you need to raise in order to de risk that opportunity. The biggest mistake in this business as an entrepreneur is to get ahead of your skis and either raise too much money and therefore not be able to kind of clear that hurdle for the next round of financing, or to raise too little money, where you basically then kind of find yourself stranded in between financing rounds. And so I think this is a big area where, again, people give kind of fairly short shrift of thinking critically about that number, and it's got massive impact on the success of the business.

Final question, is the market frothy right now for iPodOS? What do you think the market as a macro looks like?

I think the market actually is pretty reasonable right now. So there is definitely some stuff that always gets traded at a premium valuation.

But the number of those companies is relatively small. And the market's pretty rational. I think you see this in some of the IPOs we've had, which is companies that are profitable or that are near profitability are getting traded at a premium relative to companies who are still consuming a lot of cash. And I think that's a reasonably healthy place for the market to be, quite frankly.

Scott, congratulations on the book. I am on that Amazon thing right now. Who would ever have thought that would have worked, huh? And right now your book is selling very, very well, and it is highly rated and has got some amazing reviews from, you know, people like Eric Schmidt, CEO of Google, and stuff like that. So great stuff. Thank you so much for coming and sharing this information with us. Well, let me ask you one final question. What about this? So I call up an associate and said, hey, I bought your boss's book, Scott Cooper's book, and I read every word of it, and I think that I'm ready to present now. May I have 10 minutes, please? Does that get me 10 more minutes, yes or no?

I think. I think that's a surefire way to get in the door. So I would highly endorse that, yes.

What about, I bought 100 copies of the book and gave them to all of my friends. Can I have lunch with you now?

Now you're talking, right? Exactly. That's great. Yeah. No, like I know, absolutely. Look, I hope, I hope everybody reads it and takes away something good from it. But yeah, by all means, if somebody calls me with that answer, I'll certainly listen.

How do we find out more? Get a copy of the book, follow you online, visit some URLs, all that please.

Absolutely. So you can follow me on Twitter Kupor. You can also go to secretsofsandhillroad.com to find the book and you can also go to our corporate site a16z.com and find it there as well.

Scott, thank you so very much and hope you have a fantastic rest of the summer. Take care. Thanks a lot.

Thank you. Bye bye.

And we will be right back.

If you are enjoying the show and would like to learn more about Jim's philosophy of low risk entrepreneurship, please check out the School for Startups book on Amazon. Over 95 reviews have given it five stars. It argues that anyone can be an entrepreneur when learning a new way to think about creativity, risk and passion. Full of stories of low risk entrepreneurs, School for Startups is a great read.

And welcome back to the show again. As always, we sure do appreciate you being with us. I am really excited to talk to my next guest. I think this is something right up our alley. You know how much I love selling on Amazon and how I just think it's an ideal, perfect model for all of us low risk entrepreneurs. And you know how I hate that E Magazine, the, the one that entre something magazine. And therefore we love Ink magazine. We're going to roll all of this up into our next guest, Tracy Hazard. She's an Ink columnist and an Amazon launch specialist. She does all sorts of other things too about helping brands launch, scale, build, supply, source, all of those things. And she and her team have done. Is this true? A billion dollars in sales, Tracy, Is that true?

Two billion for my clients.

Damn. And you made 700% of that, right? So you brought in 14 billion. Yeah. That's a pretty impressive model. Anyway, she runs a company called Has Design after her name, Hazard. Get it? And in that company she is a product launch expert, 3D printing expert and we're going to talk about that in her innovation work as well. She and her husband also have a podcast business which we're going to talk about. It's got some unique things going on there too. Tracy, welcome to the show. How are you doing?

Thanks so much for Having me. Jim, I'm so glad to be here. I'm a big fan of the show, as I told you before.

Yes, well, you were very polite. You had me on your show a couple weeks ago. I think the podcast Switch off is one of the best free marketing tools out there. What do you think?

I absolutely do. I love it. And you know what? There's no reason for us to believe that podcast listeners don't want to consume more content. They're eager to have more shows, more information, and learn more. So why not?

Exactly. And I don't think that there's anything at all like competition. There's only 600,000 podcasts to choose from, so I don't really call that competition. Do you?

No, not at all.

Exactly. All right, but let's talk about the practicality of it. How do you make a podcast switcheroo happen? Assuming, of course, you have one? And do you think that who would not have a podcast at this point? Right. Everyone should. My mother needs one.

Everyone absolutely should. It's a quick and easy way to market, and it's very thorough. Right. You can do your networking and relationship building and get your content out there. So I love it. But from a. From a podcast, I mean, I've never been turned down. When I've invited a guest, they always say, yes, it's free publicity. Why not? So it always works.

Well, that's because you're famous and stuff, and write for ink and stuff. And, you know, have your paper or your picture on money and stuff.

Yeah, well, you know, that helps.

Yes. All right, so the podcasting, you went through three things really fast. I wrote them all down, that the podcast has a. It's a great marketing tool, number one. Number two, it's a great networking tool. It's an awesome way to meet somebody. You and I are now friends because we've spent two hours talking and chit chatting and finding out what we think about philosophies of entrepreneurship and stuff like that. And then, number three, it's a great content creation tool. You get to publish the podcast. You then get it transcribed and published it that way. You then take a bunch of transcripts and put them into a thing called a book.

Seems to me that podcast is the most perfect marketing tool ever created on the face of earth.

Well, and we go one step further. We do a lot of video to start. So we go from video to podcast to blog and book, and usually we foray that into speaking engagement. So we're kind of covering everything we need to do, all in One task.

Yeah, but the video, it's the whole pants thing. Are you wearing pants right now, Tracy?

Am I even actually have my hair done? Even though you can't see it?

No way. You've done your hair already today, too. It's late in the day, too, so.

Well, I'm getting ready for a boot camp I'm running tomorrow, so I have to look good on camera all day tomorrow.

So you have to prepare a day in advance. I don't. That doesn't make any sense, Tracy. I'm sorry.

Oh, yeah, well, you know us girls, we got to take our time.

But your hair is going to get messed up when you sleep, aren't you? Isn't it?

No, not. Not mine. Mine will still be good tomorrow.

That's weird. Okay. I don't have hair and it still looks bad in the morning.

Okay, so let's change topics. I want to talk about Amazon and the whole launch experience there. So let me tell you where we. And by that I mean my wife and the audience are. Tracy, we've talked a lot about on the show, finding a product, putting it on Amazon and hoping that it sells. Right? And that's our model, and that works. That makes a ton of money for people, right?

Take us to the next level.

I don't believe in hope. I think hope is not a plan. And so we like to be more calculated about it. So we've done 250 products, not just on Amazon, in mass market as well, over the last decade. And we have an 86% success rate, commercialization rate. That's almost nine out of 10 product successes instead of seven out of 10 product failures, which is very common.

The way you flip that is that you do a lot of market testing sooner market proof that people will buy what you have to sell. So I do like the Amazon model because it is actually a pro. Pretty inexpensive and easy access test run. But I don't like to dive deep into inventory or do or make anything innovative, inventive, creative, required tooling until I'm absolutely, positively sure the market wants it.

Okay, so how do you go out there and test? So I have developed a new chicken gizzard which is 18% better than prior chicken gizzards and 12% more cost effective. So that's pretty good. 18 and 12 add up to 30, which is, of course, my favorite number, between 31 and 32. So now what do I do? Okay, so how am I going to test that the gizzard is done? I can't change my gizzard.

Okay, well, yeah, so the, the real issue with that is, is a price play when you're talking about food products or some kind of product that has taste or style, like color choices, when you're talking about something like that, you absolutely have to test it at parity. So in other words, you need to test it at exactly the same price as the closest equivalent product on the marketplace. Because if you test it for cheaper, the assumption is that it tastes bad or its quality is not good. So at minimum, you have to test them side by side. So what I usually recommend is sell both. So sell the current product, sell your new one, sell them side by side and see what's going on.

But won't the current product outsell simply because it is the current product and therefore has some industry awareness and customer appreciation, that kind of thing?

Yes, initially. But as you start to get people who buy that current product, you can start to serve them up. Suggestions for the new, like, why didn't you choose this one? Did you know it, you know it tastes better? Did you know it functions better? Did you know it does this? And so you can serve that up. And now that you have them in your database of clients, you have an ability to have a conversation with them about what would make your new product, your better product sell and what would compete more heavily against that entrenched product. So we like to have both going at the same time because then it captures the people who didn't choose us and we can learn more about how to make them choose us next time.

Okay, but again, I can't change the chicken gizzard that I have now. I can change the packaging. Maybe the promotion. Is that enough?

Most of it is positioning. Most of it is positioning. Right.

Okay.

How you market it, how you, how you talk about it, how you're presenting it to the market, most of it is that. And so you know, and what you may find out is that you actually do need to raise the, the price. And that is a strategy in the initial days of a product launching is to raise the price and make it a premium because then they want to know what they're missing out on. They think go in with the low cost.

And.

I love high price strategies. And I think that it's by far one of the best ways to differentiate yourself. And the low price strategy is just a downward spiral toward, you know, oblivion. Right. You know the old Walmart joke. Do you know the Walmart joke, Tracy?

I, I, I haven't, I haven't heard it, no.

So I, I haven't told the Joke a while. So let me pester you with it. So the most prestigious thing you can win is the Walmart Partnership Award, which is for whoever reduced their price the most during the year. And if you win it two years in a row, they give you a super thing called the Sam Walton Award for reducing your price two years in a row. And if you reduce your price three years in a row, they have another special award. You know what it's called? The Gone Bankrupt Award.

Bankruptcy. Yep. That's so true. Well, you know, this is the thing that we love to talk about in our industry. And I've done a lot of retail. I've done products in Walmart and Target and Costco. Love Costco better because you can always do a premium play much easier than you can anywhere else. But it is the case where the bigger brands play heavier and it is harder to compete there. So you have to prove yourself before you ever get on the shelf. And that's where Amazon has come in and made this opportunity for small brands to make that play, to prove, prove themselves, and to really show up on the shelves later in relatively quick order. So we've had a lot of success going from Amazon success into store success, or.com success into store success.

All right. And then when you're on Amazon, do you pound the ads to drive the sales or something like that?

So we don't really handle the marketing side of the advertisements. We support it, but we don't handle that ourselves. Our job is to solely in the product design and development side. So we get involved really early on. So, you know when you were talking about your chicken gizzards and stuff like that, well, this is an example of what we would do. So someone comes and they want to make an amazing portable juicer blender, because, you know, they're in the juicing industry and they're, they're healthy eaters, and that's what their brand is all about. They probably have a podcast, they've got recipes, but now they want to have their own branded juice or blender, and it doesn't exist on the market. So we would have to come in and design it, and we would have to come in and create a whole new mechanism housing. And it's an expensive undertaking, easily $100,000 in inventory and tooling. And so we look at that and we say, well, that doesn't make a lot of sense early on. Why don't we make sure that we've got exactly the right product before you dump $100,000 into it? Let's Go buy an existing juicer and an existing blender. Let's get you started with our partners to get an Amazon listing going on those two items. You're going to get customers and then as we develop it, we're going to send it out to them with images, we're going to have discussions with them, we're going to give them marketing information and we keep going back and forth. We even choose colors this way when we dial down into a juicer blender where we already have fans ready for it, ready to buy it, pre sell, ready to go, and we're absolutely sure that when we spend that 100,000 and maybe we've already earned half of it back in the profit from the sales of the current juicer blender, we're already absolutely sure you've got a market for it. And that's how we shift and move people into it. And from that point, you're sure you can sell, you know how you're marketing. You've got those ads dialed in, you've got them optimized and you're ready to go and hit the ground running with a brand new product that's innovative and yours.

All right? And one thing I didn't understand about that is getting the feedback after you've sold something through Amazon, do you contact your Amazon customer afterwards and say, hey, I need your help.

Do you even know the email address of the Amazon customer? I'm lost here.

No, you're technically not allowed to contact them except to send them a thank you note and ask them to leave a review through the Amazon system. You don't have their email. I mean, you technically have access to it, but you are not allowed to email them directly. So what we typically do is put pamphlet postcards, things like that in the box of the item we're selling. So the blender. And we invite them to get free recipes, get something free off of our website and invite them to come back in and join a community. And so typically the active people, the people in the lifestyle, they do that. So now you've got your early adopter fans, the ones who are active and are always looking for something new. So you've got the right audience to start having that conversation with.

You know, there's a big juicer community here in Atlanta and I tried to get in it and they just ostracized me and kicked me right out. Tracy. They wouldn't have anything to do with my juice. So I was really upset by that. That hurt. And so anyway, I just wanted to let you know that as an industry.

Insider, I'm not much of a juicer myself, so I wouldn't know.

All right, well, this is really interesting. So how do you work then with that juicer company? You are the. You drive the entire.

Through the whole.

I'm sorry, go ahead.

We're the ghost designer. We're going to be their designer, we're going to be their developer. We're going to help them figure out what to make, how to make it, what it should look like. We're going to handle getting customer feedback through that, client groups, if that's what they've got, to make sure that it's the right thing. We're going to go and source it for them and help them make sure that it goes all the way through first run of manufacturing. So we start at ideation, so coming up with an idea, if they don't have one, all the way through to that first run, getting out there and the production run of the item. So we handle that stage of it. And then marketers and other people, we work in concert with them to make sure that it gets out. We work in concert with.

Facilitations of distribution, warehousing, freight, forwarding, whatever you need on that side. We have partners that we always work with to make that happen. So we handle everything all the way through that first run. And we find that critically important because if something goes wrong in the very early run of a manufacturer, that's where it will go wrong, where quality problems will show.

Again, we are speaking with Tracy Hazard about her innovation business. What's the best way for you to find the creativity? Is it. You know, it sounds to me, and I hate to say this, Tracy, you might get mad at me and hang up. It sounds to me like you're not. That you're relying on the marketplace to outsource your creativity almost. Is that an unfair, mean thing to say?

No.

No, it's not mean at all. But no, we don't rely on it to come up with our ideas. We come up with our ideas pretty much from needs, from resources. But I mean, the reality is if you're not mining bad reviews and you're not understanding use cases, why it's not working, why people are choosing not to buy something, or what's missing in the marketplace, then you're not doing the industry a service. But we like to use our market to understand and verify if we're right. And when we verify if our right, if there's market proof there's a market product fit, then we know we're more likely to be successful in launching this product. And we can advise our clients to spend money because I mean reality is product launching is expensive and we don't want to make a mistake. And it's also, it has a Really, I mean 14 out of 50 Home Shopping Network QVC style products typically fail. So it has a high failure rate in many parts of the industry.

Really, even if you've made it to qvc, your chances are still to fail.

Yeah.

And usually it's not a failure of like it didn't totally sell, it just didn't move based on their metrics or your profitability is way off because of being on QVC or hsn. And similar to our conversation about our joke about Walmart. It's very similar. HSN can kill a product. Yeah, A new product brand instantly. It's my, I've never brought a product in there first. It doesn't happen. It's, it's a, it's, you know, nail in a coffin already. And so we don't like to do that. We also not fans of Kickstarter for most products.

Yeah, you, I was going to ask you about that. You don't like Kickstarter, but you're about to kickstart yourself. Explain.

Yeah, so it's a really good example. So we developed a new product that came out of a need. So as you know, I'm a podcaster. I do a lot of live events and I was doing a live event where I was backstage, really dark backstage, interviewing Gary V. And I only had like three minutes to interview him. I had to drop my zoom device and had my microphone. I had to drop it down to the floor, floor. I hand him a microphone, we get started, we go. And when I, when it was all over and I picked up the zoom device, it was, it had died, the batteries had just died. And so I had got zero recording of, of this great Converse three minute conversation I had. And I was so furious. And so I called up my partner, who's my husband Tom, and said, this is ridiculous. There's got to be a better way, like the whole thing. And you know, about 30 days later we designed a whole new microphone. So that's what we're about to bring out. But my, I'm against, I would say Kickstarter, Indiegogo, that style of crowdfunding, not because it's not viable, it's viable, but it's viable for a very select group of products. So over 85% of retail is bought or controlled by women. So bought or influenced by women so women decide what's what what plays at retail. But Kickstarter and Indiegogo is 70 to 80% male, so it's not an indicator of whether or not you'll actually sell at retail later. That being said, a microphone, a tech device like that is, is a lot more male oriented product and we've already done an algorithmic test to prove that that's the case. It's already showing high probability for success with marketing to that male audience that's matched to the demographic of Kickstarter and Indiegogo. So that's the only reason we're going to go through it. So we're really doing it for marketing play, not because we need to, because we can pay for the launch of this product. I'm already very certain based on pre sales that I've already conducted on my own that it's going to work.

Tell me about the microphone. Convince me as a podcaster I need to buy one.

As I mentioned that my interview, I lost the recording. What we designed is a self recording microphone. It's called the Brancaster self recording microphone and it has a branded mic flag so it'll have your show name on it. And in that mic flag we have an SD card that lasts for all day. We have a light that goes on so if your SD card is running out of power, the light will start flashing at you. It has battery, so it's not run by wires, cables, there's nothing in it. It's just got a simple battery that you can replace if the battery runs low and within 10 minutes of running out, another light will flash so you can end up your close your conversation or pause your conversation, replace your battery and keep going. Additionally, you can string two together so you can capture two track recording and then you can hook it all straight to your phone and drop it in the Dropbox for your production team to take care of. So there's a little cable that will attach it and you can download straight from the SD card into your phone or onto your computer. So it's all self contained. The only thing you have to carry around is the microphone and maybe an extra battery and there's even an extra SD card in the bottom of the mic flag.

Price point.

I'm sorry, say that again.

Price point. What's a cost?

Oh, price point. So we'll probably do a $199 feature, $199 and $249 retail. It'll include a book on how to podcast and some free a free month on our productized Platform, so it'll include some extras in the box.

Really cool. I like the idea. Sure. I would buy one of those.

Yeah.

Yeah. Makes a lot of sense.

We've been getting a lot of good feedback from live streamers and people like that because it's a lot to carry around. There's a lot of equipment and most all of us are solos. Right. We're solo hosts. We don't have a team, we don't have a big staff following us around with boom mics and video cameras and the whole thing.

Yeah. What do you mean you don't have a staff? It takes 12 people to make one of these things.

Well, I have a staff of 50 worldwide, so. I do. Yes, it does.

Okay. And 12 of them are full time on the podcast, right? Just like here.

No, no, I have 50 people full time.

Oh.

On the podcast itself.

On my podcast network. Yeah. I have over. I have over. We have over 200 shows. We manage, so we have full time on that.

Ah, very cool, Tracy. It's a really cool story. I love what you're doing and I love the way you are helping entrepreneurs and innovators. How do we find out more, follow you online, all that stuff, please?

So the best place to follow me on Social is LinkedIn. I participate heavily there, but you can find me pretty much anywhere. You can find me has design and that's with two Z's. You can also reach out to me. I'm emailable. You can find My column has design.com. you can contact me directly through that and you can find our information on our company for podcastingodotize.com and that's monetize but with pod at the beginning.

Very cool. Tracy, thanks so much. Great, great, great, great stuff. And we'll have to have you back soon and get some follow ups.

Sounds really good, Jim. Thanks for having me.

Thank you. And we will be.

School for Startups Radio hopes you will reach out to us if you have any questions or comments or if you need help with your business at any stage. From Concepts to Exit, Jim accepts all connections on LinkedIn. He tweets from entrepreneurjim and he responds to emails@james beachtt.net. thanks for listening and we hope you enjoy the show.

Well, that's a wonderful question actually, Jim.

Oh my gosh, I love the opportunity to do this. Thank you, Jim.

Wow, that's a great one. You know, that is a phenomenal question. That's a great question and I don't have a great answer.

That's a great question.

Oh, that is such a loaded question. And that's actually a really good question.

School for Startups Radio and we are.

Back for the final seconds of the show. I want to thank my great guest today. Really enjoyed both conversations. And I wanted to also let you know who is coming up here on the rest of the shows this week and next week tomorrow. We're going to be talking a lot about money. We're going to talk with Kidma. Oh, about target funding. A whole new way of looking at funding, throwing in that target word there. I think you're going to really learn from this. And then we're going to have a crowdfunding update tomorrow from one of the country's very top crowdfunding lawyers and gurus. We're going to meet a real estate empire that's going to blow you away. A huge, huge company built very quickly with Tim Bratz on Friday. And then next week we have the lead Blue angel, you know, the flying group for the Air Force that does all of the stunt flying and all of that cool stuff. He will be with us. And the founder of the improv comedy club also next week. So huge guests next week. Very excited for them.

We appreciate your time today. Thank you so much for being with us. We will be back tomorrow with more great School for Startups Radio. Bye now. Take care. Have a great day.

We've been taking care of business.

Taking care of business.

Taking care of.