The Startup Story - Fraser Hall

Fraser Hall: Hi. I'm Fraser Hall, cofounder of Article, and this is MY startup story.

James McKinney: Every wildfire began with a spark. Every superhero has an origin story. And every single startup has a moment that they point to as their beginning. And every founder has a purpose that drove them in the midst of all obstacles. THAT is The Startup Story.

[00:26]
James McKinney: Before we jump into this week's episode, I want to say thank you to the team at Fuse Dynamic Work Space for allowing me to use their podcast studio to record this episode. If you ever find yourself in the Dallas, Texas area, make sure to visit Work at Fuse. They have an incredible environment with a great podcast studio as well.

Each week, I've committed to reading an iTunes review and recently, a listener reached out to me asking if I ever read reviews from my international audience. Well to be honest, I had no idea I even had reviews from international listeners until recently. I discovered a site that aggregates all iTunes reviews from all countries. With that said, I have got some catching up to do. Never the less, this week's iTunes review comes from Evie Hirostova from Hungary. She gave the show a five star rating and wrote, "Hi James. First I would like to say a huge thank you for creating this podcast. I like how you never ask the same type of questions from the entrepreneurs. You tailor those based on the experiences of everyone. Also, you're asking those very hard questions that we, the current and future entrepreneurs, want to hear. I'm listening from Europe and I'm wondering whether you would interview an entrepreneur who started and stayed in Europe. Well, thank you in advance and greetings from Bulgaria."

Full transparency, Evalina's review was incredibly long with many different questions so I truncated a bit to accommodate the recording. That said, Evalina, I would absolutely feature the startup story of a founder that is based in another country. So if you have some recommendations, please contact me by visiting TheStartupStory.co and select the Contact word option in the navigation. If you do that, I'll be able to answer all the questions you had in your review as well. This goes for all my listeners. If you have some founders that you think I should feature on the show, please send me your suggestions by visiting TheStartupStory.co and selecting Contact in the navigation. I look forward to seeing which stories you want to hear about.

And now that I have visibility to all reviews from all countries please keep leaving those reviews on iTunes. If you do, please make sure you plug your brand, URL, or social media accounts. If you do that, when I read your review in an upcoming episode, it becomes a mini ad that lasts for years. It's just my way of saying thank you for taking the time to leave a review. The written reviews mean a ton for being discovered within the iTunes platform. I'm not sure if you've noticed, but Apple podcast has redesigned their navigation and finding great shows has become a bit more challenging. Climbing the charts in iTunes is not just about listeners, but about engagement. Listening is one way iTunes measures engagement, but written reviews have a multiplying effect. So please, leave those written reviews. And now, let's jump into this week's episode.

Our guest this week is Fraser Hall, cofounder and director of Article. Article is an online only direct to consumer company that offers beautiful, modern furniture that is really, really well made and I speak from firsthand experience as I have a few pieces from them. What is so fascinating about Article is that they are founded by a team of software engineers, not merchandisers or designers. I mean sure, they employ incredible designers but we all know that the founding team sets the vision for the startup and establishes the foundation for how the organization will grow and really what their identity becomes. So you can see how a software centered founding team has differentiated Article from many others in that space. But we're going to get into that much later.

Article started in 2013 and finished 2018 having reached $200 million in revenue and has only raised minimal funding. After hearing Fraser's story, it becomes so apparent why Article is having the success they are having. I believe it is Fraser's eclectic background that has contributed to the success. See, Fraser's story is not one where you would say, "Oh yeah, of course he started a furniture company," because his story started so far from that industry. In fact, his first startup was a heads up display company, and I'm sure that when I said heads up display you immediately thought of Google glass. Yet, Fraser's startup was in the market before Google glass. So much so that Google tried to buy them. And even before he started that cutting edge hardware company, he was sailing the seas protecting whales aboard the Sea Shepherd.

Now, if the Sea Shepherd sounds familiar to you, it should because they were the focal point of the documentary series titled Whale Wars on Animal Planet that ran for seven seasons. The show is incredible and the adventures are unbelievable. But like I said, Fraser's journey is so diverse and so incredibly fascinating. Okay, I've hyped this story up enough. I should probably just get out of the way and let Fraser unpack it all for us because his journey, like all of our founders, began long before Article of the Sea Shepherd. It began just like you and I, as a kid simply watching how his parents did things.

[05:01]
Fraser Hall: My father, he was a developer. He built seniors oriented housing developments, and then seniors facilities for Care, and my mother was the interior designer for those spaces as well as homemaker. I had a certain romance to business kind of daily. We would spend our weekends driving around, looking at job sites or looking at new building and development sites so we were always discussing business and finance. I guess entrepreneurism, that word probably wasn't in the vocabulary at the time. So I knew this is something that eventually I would want to get into and in my brain, I mashed that together with this idea of an MBA because my dad had an MBA. That seems to be the license to do that. Strange enough, I did end up going down that route but I took some strange paths to get there.

But my first experience with entrepreneurship was really way back. I believe I was 13 years old and I had a paper the year before. I had spent my money and bought a BB gun. This thing was awesome. All my friends wanted this BB gun so I said, "All you have to do is work. Spend a summer, and you can get this thing." They said, "Yeah, I don't know, I don't know." Then coincidentally, I toured a facility that assembled mail outs for a company because my father was getting mail outs done for his company. I learned that there was a large labor component in folding and inserting into envelopes. So I said how about I do that? I can do it less than whatever you're paying. I don't even have minimum wage, it's just I'm a 13 year old kid. So I took on this job that was too big. I went to my friends, I said, "I'll pay you guys an hourly rate to come out and do this with me." They're like, "Yeah, I don't know." I said, "You know what? Actually I'm not going to pay an hourly rate. You put in this many hours, I'm buying you my BB gun." So there we were, walking around this table stuffing envelopes.

[06:58]
James McKinney: That's awesome.

[06:69]
Fraser Hall: And got them the BB gun. So that was my first foray, and I got a taste for it. That was pretty fun. It was hard work, though. I was working way into the nights and then all my friends would go home, and I'd be there by myself packing envelopes. So that was kind of my first taste.

[07:14]
James McKinney: When we talk about your childhood, your dad being an entrepreneur having these care facilities, you had a taste for it. As a child of an entrepreneur, we can either be enamored with it because of the journey of our parents, or like myself at a young age I rejected. I didn't want the challenges that he had. It wasn't until I became older I realized that's just who I am, I have to do that. So it sounds like you were enamored with it. So did your view of entrepreneurship within the realm of your dad's story, was there no hardship that you observed? Was it easy sailing in those years?

[07:48]
Fraser Hall: Yeah, there was quite a bit of hardship actually, especially in the early years. We went through a recession in the 80s and it really beat up real estate. My father's company survived, but most of the competitors didn't. So it was a tough time. I think I was kind of enamored with that challenge, frankly.

[08:03]
James McKinney: Okay.

[08:04]
Fraser Hall: I was never the entrepreneur that wanted to be my own boss for the sake of bossing other people around. I did take it as this is a responsibility, not a right from an early year. I'm not sure why that is. I always thoughts nights were fantastic. Characters. Night has pretty rough go. They just have to go into battle all the time. Yeah they get to celebrate a few times when they come home, a lot like [inaudible 08:28] I guess.

[08:29]
James McKinney: A lot like it.

[08:31]
Fraser Hall: But most of the time, you're just head down, trying to get something going and capturing a ton of resistance. But then you get to celebrate every once in a while when an award comes out or a revenue finally comes in or something. I think I was always enamored with it. I have a sister. She's done the same. Went to fashion design school then started a clothing line, and then found a problem with how clothing gets from a designer into a customer's hands. There's a lot of waste so she then opened a store and has a thriving clothing store. So it is in the blood I think.

[09:03]
James McKinney: That's awesome. So coming to the end of your high school years, that's one of those chapters where we try to figure out what it is we want to do. You had this thought that MBA was a license to run a business if you will. So was your natural next step into college and university?

[09:18]
Fraser Hall: It was. So grade 11, I opened up a boat gas station and ran that for two summers. It was the best job of my life. If the government hadn't bought the land, I would still probably be pumping gas today. It was fantastic.

[09:31]
James McKinney: Just for clarity, you started, from nothing, a boat gas pumping business?

[09:37]
Fraser Hall: Well, yeah. It wasn't exactly from scratch. It was a previously decrepit gas dock and I leased the land and refurbished it, and then launched… again, hired all my friends and ran this for two summers, and it was just fantastic. The local government bought the land and made it a provincial park and said, "Eh, you're out of here," but that was fantastic. So I did that and I made enough money to have quite… no issues through university when I went away to university.

In that transitionary period, I had discovered engineering. I say discovered because this was not a word that was common in my family. My parents were both liberal arts graduates and I said, "I want to be an engineer," and their eyes rolled back. "You mean like a propeller head? Like a nerd? One of those kind of people?" Like they pulled pranks. I said, "Yeah, that's what I think I am." So off I went to engineering school. Really enjoy it and I'm a technical person so I really enjoyed engineering. So four years out in Ontario at Western University. That was kind of lead in to my first kind of career I guess you'd say.

[10:42]
James McKinney: So here you are, engineering, and I assume it was computer sciences, technology. So a lot of those years as past founders we've had on the show, those are years where there is just so many side hustles, so many things that are just being hacked together with potential to resell or make something easier for themselves. Does that ring true for you in your time at university?

[11:05]
Fraser Hall: Yeah, I think I was a little more rascally. There were a lot of pranks and things like that, both digital and physical. We kind of had the world by the tail. So I was computer engineering was my specialty but that didn't exist, so they gave me and my classmates an electrical engineering degree because computer engineering didn't really exist. So I graduated in 1999 with a computer engineering degree. If you can imagine what it's like in 1999 to be a computer engineer, you had a certain kind of rock star complex. So I bought a Volkswagen camper and drove down the west coast and literally I would show up at like Palm and Microsoft and find a receptionist and say, "I'm a recent graduate engineer. Do you want to interview me right now?" and they would. They would.

[11:48]
James McKinney: That's amazing.

[11:50]
Fraser Hall: Yeah, so that was good fun. And then from there, I ended up taking a job in Vancouver at a company called Creo which was bought by Kodak after the fact, and worked there for only 10 months. I had a great job. I built these large laser imaging systems, about the size of a two-car garage, and I did all the coding. They picked up these aluminum plates and wrapped them around a drum and spun it in these 132 lasers etched them and created the plates that go on offset printing presses that print the magazines we have today. Very cool technical job, but while I was there I came across Sea Shepherd.

I think someone sent me a clipping out of a magazine or something about this group and was almost instant infatuation with this idea that, in today's day and age with civil society, people just go out there and just stop bad people. They don't really care about the law, they just like you're doing something that is seriously wrong, I'm going to stop you.

[12:47]
James McKinney: So before we go any farther, I want to unpack a few things because this is an exciting chapter. And listeners, I'm telling you, when we unpack the Sea Shepherd era of Fraser's life, it's going to be unbelievable. But before we get there, you're at university. You're computer engineering. Really in the late 90s, the world was your oyster. Rock star status is an absolute label that was applied to all those who had that degree and that knowledge base. What were you thinking you wanted to do with that?

[13:17]
Fraser Hall: I think I just wanted to work with really cool technology. The neater, niftier, gadgetier the better. I guess later in life I kind of kept on with that on that track. It was strange to actually end up in Vancouver. I travelled up and down the coast and there was lots of opportunity, and Vancouver wasn't a hotbed for technology and still isn't similar to the Silicon Valley area. But the idea of these robotic arms and lasers, and vacuum pumps, it just I felt like I was Q in Bond.

[13:48]
James McKinney: That is so good. I love that. You were referencing all pop cultural things that are relevant to me and I love every bit of it. So then, now let's talk about Sea Shepherd. So you're at this well-known company, Creo, again later bought by Kodak, doing some amazing things in both software and hardware. Which for a lot of developers, that doesn't come across often and it's incredibly exciting because things become tangible for you, right?

[14:13]
Fraser Hall: Exactly.

[14:14]
James McKinney: So you're in an exciting space, but now a social initiative and environmental initiative comes across your plate. And I probably have quite a few listeners that don't know what Sea Shepherd is, so can you unpack what Sea Shepherd is prior to us unpacking how you got into that world?

[14:31]
Fraser Hall: The easiest way to describe Sea Shepherd is a little bit of its history. So Paul Watson was one of the founders of Green Peace actually in Vancouver here and started as Don't Make Waves and protesting some nuclear testing, and then whaling, and so on. He would have been on the most radical side of the founder group. After some disagreements, he left Green Peace and started a group that would be direct action only. No banners, no nothing, just go out and stop people from doing wrong. That's the Sea Shepherd conservation society founded in 1977.

[15:03]
James McKinney: That is unbelievable. I believe the shows are still accessible for people, but something they can get more information about this. But how did you as a software developer, one how did you become aware of Sea Shepherd and what was it that said I want to do this? Because, and the reason I'm asking this question is coding is linear in a lot of ways right? You're connecting dots and you're putting A's and B's and I's and O's, and 1s and zeroes. There's some out of the box thinking, there's some abstract thought around certain problems, but for the most part it's pretty straight forward and a lot of developers, they have a certain trajectory. This is one I would have never have assumed for a developer. So how did all of this come to be?

[15:48]
Fraser Hall: Yeah, I think actually the Sea Shepherd is the more true to myself. Like I think any entrepreneur, you solve a problem that you just can't live with and you try to make that small set of problems so that you can actually have an impact. Coding and engineering is kind of more on the hobby side, like going in the garage and fixing something. It wasn't something I could simply not live with. But with Sea Shepherd, when I heard that this is taking place, it seemed surreal. I was grown in a you know western Canadian, a privileged place to be in the world. You trust the police, you believe that government generally were looking out for you and so on. To think someone just goes out there and takes matters into their own hands was so captivating to me.

I was a recent vegetarian. I believed that animals should be spoken for and so that was hitting me on one side. The sense of adventure. I'd spent a little time at sea in my childhood, so I thought actually I could probably help here. So it built and built, and I had to go. Getting on the boat was a little bit difficult. I wrote to them. They're actually based in Friday Harbor in Washington state. I would write to them and I would call them, and say, "Look, I just really want to crew on this boat." I believe they were quite suspicious of my background thinking kind of too clean cut, straight up engineering. There's a lot of government groups that send frankly spies on these boats, and I think that's what they thought I was.

I drove down and I met with Paul Watson and said, "I've got to be on your boat." Finally, I think he just couldn't take my pestering. I said, "Look, just tell me where the boat is?" because at the time, it was really one big boat, "And I'm going to go offer and clean the deck." He said, "The boat is in Amsterdam." So I went into my office the next day, quit my job, packed a bag and flew to Amsterdam. Found the boat, knocked on the hull and said, "I'm Fraser from Canada. I'm here to clean the deck." And that began quite a journey.

[17:42]
James McKinney: How long were you with Sea Shepherd?

[17:45]
Fraser Hall: I was with Sea Shepherd two years straight, and then I've been back for five campaigns after the fact, on an as needed basis.

[17:53]
James McKinney: What were those two years like for you? And I guess let me ask this q. how old were you when you went to Amsterdam and joined the ship?

[18:01]
Fraser Hall: Pretty young. 22 years old.

[18:02]
James McKinney: 22 years old. So again, back to the idea of just all the different elements of our story and the people in our lives, what did your parents think of this shift in your career? Maybe they thought it wasn't a career move. Maybe they just thought you just wanted to go on a wild adventure, but what was their thought as you were leaving a stable job after getting a degree, now you're wanting to go do this.

[18:27]
Fraser Hall: They thought I was entirely crazy I think. It's funny, I didn't get as much pushback as I thought. I think they realized this kids mind is made up, he's gone. We can say whatever we want, but I was passionate I was going on this, I was doing whatever I could. I don't think they were that keen. You know, it's dangerous too. Sea Shepherd is known, well their motto at the time was to sail into harm's way and what mother wants their child to sail into harm's way? So it was a two year stint. It was not what you would imagine. Of course, anyone that imagines direct conflict that it being heart thumping, exciting, most of the time it's not. Even in a chase situation, I learned from my years with Sea Shepherd that generally when I was in a chase, if that's the boat I'm chasing that's the time to go to sleep. You're going to catch them in about eight, nine, 10 hours and that's not what you imagine with the dagger in your teeth, swinging on the ropes. Everything happens much more slowly so you have to keep that passion alive. The boats weren't kept that well. We used to survive on donor capital so the boats are kind of partially sinking. We made it work, but it wasn't a comfortable life that's for sure.

[19:35]
James McKinney: What caused you to move out of that season and then, with jumping to where we are today with Article, what lessons from that period on the Sea Shepherd have been so applicable to the rest of your entrepreneurial journey?

[19:50]
Fraser Hall: Those are great questions. So I think there was a ton of learning. It was formative years even though it's 22, 24, I learned a lot about leadership there. Becoming the leader of that organization, having people depend on you really made me think about the philosophy of this leadership. I had the advantage of age so I'm 22 years old and the captain of the ship. Most of my crew were older than me by a lot. The advantage was that I had served many of their roles. In many cases, I knew their job better than them or as well. So that's a real advantage going into leadership. The balance of sailing people into harm's way and then one of my top responsibilities, probably my number one, was to keep them safe. How do you weigh those two?

I think startup is kind of similar in the sense that you're taking your employees, staff, and cofounders into a dangerous environment, a high risk environment. But you're supposed to protect them as well, but your role can't be just to protect them or else you'll never confront that whaler. It was an interesting balance. And also, doing things for the greater good of the crew often meant removing individual members of the crew or disciplining them when you really didn't necessarily want to, but it would make it more likely that you'd achieve your mission.

That was some interesting learning I think I keep using, and just inspiring these people. Anyone that joins a startup rather than a large company generally has some fire in there that they want to prove to the world or make a dent in the world. I think you've got to foster that and we certainly did on Sea Shepherd. Everyone there, you can imagine the crew of Sea Shepherd. These are passionate people and then funneling them all in the same direction was difficult.

[21:27]
James McKinney: Almost like herding cats I'm sure.

[21:30]
Fraser Hall: Yeah, almost like herding cats.

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[21:32]
James McKinney: I hope you're enjoying this incredible episode. For the past few weeks, you have heard me mention that we're building a The Startup Story YouTube channel. Well, I'm excited to announce that channel is now live. On this channel, we will be synthesizing each episode down to its top key learnings, as well as sharing some thought leadership from the hundreds of hours I have spent with some incredibly successful founders. I hope you'll check it out and of course subscribe. Just visit youtube.com/JamesMcKinney. We will include a link in our show notes in case you can't remember that it's youtube.com/JamesMcKinney. All right, let's get back to this week's startup story.

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[22:07]
James McKinney: What was the cause to get out of nonprofit and how did you get back into technology?

[22:10]
Fraser Hall: I'm now going on four and a half years at sea. Coming back from time to time, but essentially at sea. I would come back for Christmases and so on, and I'd talk to old friends and they'd say, "Oh, I've got this job, I've got a girlfriend, I've got an apartment or a dog," and all these things that were very foreign to me. It started to kind of take its toll and I said, "I've got to try this land life." And for the average land lover, that doesn't sound that hard. Okay, just come back to land. When you've made it a life at sea, it's not that easy. Like how do you start? Do I just show up? Do I go to my old hometown?

So I remembered back to times in my life and thought, "School. School gives you something to do, a place to live, a friend group, like that." I was sailing through Puerto Rico and pulled into port and wrote the GMAT for the MBA. Turned out I did pretty well on it, so I got to have choice of where I went to school and I thought, "You know what, this experience is to try to try land. I want to try this Vancouver thing again." I had some friends there, I liked that. So I went to UBC and did my MBA there. One of my school projects, we got together and tried to build this heads up display, initially for swimming and then into snowboarding, skiing, snow mobiling. We were pretty passionate about it, thought it was really cool tech, but it was built from a need first. We wanted James Bond's eyewear. We didn't have any tech yet.

[23:41]
James McKinney: What year was this?

[23:43]
Fraser Hall: This would have been 2007.

[23:45]
James McKinney: So 2007. iPhone had just come out or is that 2008?

[23:49]
Fraser Hall: Yeah.

[23:50]
James McKinney: iPhone had just come out.

[23:51]
Fraser Hall: I think just.

[23:53]
James McKinney: Yeah. So I mean really, no one was talking augmented reality, so that's not what you were referring to your glasses. It was a display.

[24:00]
Fraser Hall: Heads up display, people at least knew from jet fighter pilots. So we usually called it a heads up display. That wasn't a correct technical term, it was more head mounted display. So yeah, it was a crazy idea. But then our founding group came together, did this for a school project only. Then it's funny. They had a competition and we came second to a ceviche restaurant in England. Anyway, total aside. We all went our separate ways. I ended up becoming a real estate developer working at a very large firm here, billing high rises. I had a billion dollars worth of real estate I was responsible for construction. Dan was off in Norway, Darcy was out in Toronto, and Hamid was at school finishing his master's in engineering. Weekends and nights, we would work on this.

Eventually, it started to get a little bit of traction. We thought we could actually get there. One by one, we quit our jobs and moved into this tiny little must have been like 200 square feet. We're all rammed in there, side by side, trying to change the world through heads up display technology.

[25:02]
James McKinney: So now you're 28 maybe?

[25:03]
Fraser Hall: Yeah, probably about that, yeah.

[25:04]
James McKinney: What was the funding process for Recon Instruments? Because you're hardware as well.

[25:07]
Fraser Hall: Yeah. So our funding path was ridiculous. I now have a venture fund, so I now understand how this works. But at the time, we thought okay, we're going to get a little bit of money, let's go and raise some. So I remember hard selling two guys, they're still investors of mine to this day, over many lunches for $7,000 a piece. Two guys, so we had $14,000. Then it kind of dawned on us, and at the tiny valuation, so we had this weird method where we doubled the valuation at the end of every month as incentive to get people to write checks. After a few months, people said, "Are you kidding? You're not serious," and then they'd see us do it. "So you mean tomorrow the values double?" "Yep. You want to put in a check today? If you want, go for it." It was ridiculous. If anyone is listening out there raising money, do not do this.

[25:56]
James McKinney: No, but it's hilarious.

[25:59]
Fraser Hall: Over the course of that history, we raised low $30 million for the business, so a significant amount of capital.

[26:06]
James McKinney: Over what time period though? We're talking 12 months?

[26:09]
Fraser Hall: This would have been over the whole life. So we raised money, it was an eight year journey. We raised money over probably the first five or six years.

[26:16]
James McKinney: Five or six years, okay.

[26:17]
Fraser Hall: So it's many rounds.

[26:18]
James McKinney: Within the five or six years, at any point in time did you have a product that you were able to sell? Which I assume your sales channels were probably enterprises and businesses, probably not consumer I would assume.

[26:29]
Fraser Hall: We tried enterprise. Their sales cycles are too long. So at one point we were in military. We had firefighting equipment, welding equipment, motorcycle helmets. But the only products we really sold were ski goggles for the first few years. So we did. We partnered with a group called Zeal Optics and we sold a product called the Transcend which is a heads up display for skiing. It sold quite well. Well, at least it sold into retail well. I learned a lot about retail there. Didn't necessarily sell through retail. So we had that product and the next year, we had two different products, one called Mod and one called Mod Live that snapped into eyewear. There was essentially five generations of product until we got to a sunglass which was our own product. We sold that primarily to cyclists and triathletes.

[27:11]
James McKinney: So eight year journey, so this probably brings us to 2013.

[27:16]
Fraser Hall: It was 2015 that we… so there was kind of a year that we just worked on it at nights. So it was an eight year journey. 2015 we sold the company to Intel.

[27:25]
James McKinney: So prior to that sell to Intel, where does the Google smart glass lay into that timeline?

[27:32]
Fraser Hall: Yeah. So that would have been around 2011 I think, 2012. That was a big announcement. So first of all, they were inquiring about acquiring us before hand and then we made mistakes on that, and they went quiet on us. Then six months later, they came out with what we felt was a competing product. We were mortified. We thought their tech was really good. But it turned out to be good for us because they were helping building the market. Who needed a heads up display? Well no one thinks they need a heads up display. You've got to convince them, so that helped. Then the whole glass whole thing happened, and then now we're painted with that brush so now we're on the decline. But we stuck through it all. So I guess, I'm not sure how it affected us in that net, but there were definitely some sleepless nights over Google glass.

[28:18]
James McKinney: I feel like as an outside observer, part of the sleepless nights would be, because really if anyone was going to create a consumable product that was attractive, it'd be someone like a Google or an Apple, or something like that. Watching from the outside, Google not being able to do it, as a manufacturer I would have been incredibly nervous because they weren't able to do it. Were you having that same internal dialog or were you having the traditional entrepreneur dialog where, "Oh, well we're doing something different and therefore it'll definitely take off in this market."

[28:49]
Fraser Hall: We were definitely the traditional entrepreneur, naive/overconfident. We had moments of fear, but we felt that what they did was try to take the mass market and they fell flat with how this thing looked on people's faces and how the people were interacting with it. So for a while, we said, "If you're not wearing Lycra, take our product off your face." So just to really say this is a performance product. When you get to the coffee shop, take it off. You can actually snap the pieces off if you needed eyewear. Don't be the glasshole. This is a performance product, not that. That seemed to work to some degree anyway.

The problem was this business was up and down, up and down, running out of money constantly. This bumpy, bumpy road. To get it to the proper scale was going to take huge amounts of capital and muscle, and retailing experience. I'm really glad we ended up exiting to Intel.

[29:43]
James McKinney: So now the exit to Intel, I want to ask about that exit process in light of a comment you made about some of the mistakes you made in the potential sale to Google. Because I think, actually I don't know, they're both incredible brands to have sold to. For those who are Google fans, they would have said oh, don't pull a Snapchat, sell to Google. So what did you learn from the Google process and how did it help you with the Intel process?

[30:12]
Fraser Hall: Yeah. I think the biggest learning was momentum. Deal momentums are a real thing and again, I'm a VC today so it's real. You've got to strike while the iron is hot. Google, their approach was so different because we also were approached by Microsoft between those two. Their call was just so, we're going to buy you. Isn't there usually an offer? This was our first go around, so we're not really sure, but it was just this very affirmative this is what's going to happen. Then we screwed it up on the back end. We had this no shop clause in a financing deal we were doing and it killed the deal. There were a lot of issues I had with VC's, and that's why I'm a VC today. That was the problem. And we felt that okay fine, wait until the end of this no shop clause and then go back to them. Turns out I think they were insulted by this silence.

[30:58]
James McKinney: Oh man. So let's talk about deal momentum because you're right, it is a real thing and I think for a lot of startups, it's hard to navigate that because as a startup we don't know how pushy we can be or how, I'm using air quotes, how "driven" we can be. Because I think a lot of startup founders, they look at the VC's as the ones who have their foot on the pedal or the brake. Now, you're on the VC side but having been an entrepreneur, how much control does an entrepreneur have in that dialog with a VC?

[31:30]
Fraser Hall: Being a VC, we're obviously pretty good at sensing what the situation is on the other side. So if they have a competitive tension that other people are interested or there's some reason why timing is now, we sense it and we move like crazy. But if there's not, it's so tempting to say let's just wait and see a little longer. This is something I really try to correct in what we do, because I don't think it's very respectful to entrepreneurs. But it's so easy to say I just need one more proof point. Why don't you go get that and come back at me? We call that yellow cell investing.

Everyone's got their Excel spreadsheet and they have the green cells they're in, red cells, and there's all these yellows. We hate being a yellow cell. So anything to avoid being a yellow cell we think is good. The firm no's early on are awesome. If you have the tension, you work it. If you don't, you set a realistic timeline that's respectful, sounds like you're shopped, it's going to take a month to come to a decision and a month to go through legal, I can work with that. Let's just keep you to that timeline and be respectful. I think that's probably your best bet.

[32:32]
James McKinney: And do you find the process that your VC fund goes through, how many other funds have you connected with that operate in a similar fashion? Because I don't find it to be that common.

[32:45]
Fraser Hall: It's not. It's not. It's very common to do this yellow cell investing because it's easy to do. We also don't like the current power dynamic, especially here where we invest, where there's such scarcity of capital that don't have to be a nice person. Now, that doesn't mean I shouldn't be a nice person. You should still be respectful of the person if you tend to be the one with the power, and I think that's we really try to turn it around. We actually tell all of our companies they have to do diligence on us as well. We're not closing unless you've done diligence on us. So to try to turn that power dynamic around.

And I think some people have disciplined processes where they say we run a six week diligence process, and for that reason it's somewhat respectful of the founder. But I don't think they do it to be respectful of the founder. They just say this is how we allocate resources. We try to take a very different approach where it's about respecting their time. The firm knows with tons of detail, early is the best thing you can do for that company. Leading them on is just not useful.

[33:41]
James McKinney: I wish I knew about you when I had a mobile startup a few years ago. The brush offs were just endless. It's like just tell me no.

[33:51]
Fraser Hall: Just give me the no.

[33:52]
James McKinney: I mean that was the narrative of my high school dating life. Just say no. Don't say maybe. Either we're dating or we're not.

[33:59]
Fraser Hall: Exactly.

[34:00]
James McKinney: Awesome. So you sell to Intel. From an outsider right now, people are listening oh my goodness, he sold to Intel, life changing money. How did life change for you? Did you immediately go into something different? Did you take some time off? Did you go back to sea? What happened after the sale to Intel?

[34:16]
Fraser Hall: I did it wrong is what I did. Because I now come across founders and we've had exits in our portfolio, and I say, "Take the time." So I left Recon and thought I have some free time. So in that period, I started Article, started a venture capital firm, started two other e-commerce companies and started a real estate development company, and a co-working company.

[34:37]
James McKinney: All within-

[34:39]
Fraser Hall: Within a year.

[34:39]
James McKinney: Oh my goodness.

[34:41]
Fraser Hall: That was such a mistake. I've since shed almost everything. Now, my time is Article and my venture fund, and there's nothing else. I just love… exited from whatever you can get, just get it done, get it out the door. So that was a mistake. I think the gardening leap concept where you go away and just do something that you kind of enjoy, relaxing, I really recommend something like that as the next step. But you feel like you've got all this energy, like you want to use it.

[35:10]
James McKinney: Part of it, I'm sure part of the mental narrative as well is well, I slayed that, now it's time for the next one because obviously I've got the Midas touch.

[35:18]
Fraser Hall: Exactly. That's dangerous.

[35:21]
James McKinney: Yeah. So that was 2015 you sold to Intel you said? 2015?

[35:25]
Fraser Hall: Yeah. Sold in 2015. The truth was Article, we started just prior to that so there was overlap. We officially founded in 2011 actually and went live in 2013. So it was a fair bit earlier, so I was splitting my time there and just went kind of all in after the exit.

[35:41]
James McKinney: What was it, and I guess that brings us to the Article chapter, so before we jump into some of the dialog around Article, let's unpack for the listeners what is Article.

[35:51]
Fraser Hall: Article is a direct to consumer brand of modern furnishings. From the very early beginning, we felt there was a real mismatch between the value a customer receives and what it took to get that product to the customer. In the early days, we were quite focused on the supply side, less so on the creative and the product. Now we're very much focused on the product and having fantastic product.

All the founders had experience shopping for furniture and you have this inconvenient process where you go to these usually on the edge of town furniture stores. You walk down the aisles, pressure sales, the product is not even in when you want it. Then when it comes, it's very often damaged. A high percentage of the time it's damaged. The customer service is lacking, the quality of the product is not what you'd expect. It's just fraught with issues. We felt that this is something that we can't live with. This is something that we want to really solve. It's strange though, coming from Recon which is a sexy product.

[36:43]
James McKinney: Yeah, and technology based.

[36:44]
Fraser Hall: And now you sell furniture on the internet.

[36:46]
James McKinney: That's the part I'm trying to figure. Okay, now we're jumping all in on Article. So here you are building a product. You said 2011 to 2012 is when Article started. A product that Google just came out and said we're going to make this mainstream, this display smart glass, and you were in that industry before it was cool and somewhere in that, you said, "We're going to get into furniture." I just can't connect the dots, and it's not, to me there's got to be something else beyond just, "Oh, furniture shopping sucked, we've got to make it better." What was it?

[37:17]
Fraser Hall: You know what's even crazier is I am just as passionate or more about selling sofas online as building James Bond's eyewear. And I even look at myself and say, "How can this be?" There was a real problem that was so juicy and you could just get your hand on it, for one, and we got to build a company we wanted from the ground up. So the founders own the majority of the company. The only external investor is me so I wouldn't even call that external. It's our own fund. We got to build it just right and with real economics.

Coming from let's minimize how much money we lose every year so we don't have to raise as much to what should we do with this free cash, it's like this relief and this… and now we're with the business more than anything on that side. And delivering amazing products to customers, our customers love the products so we get to feel this joy every day. I felt like with Recon, people liked the idea of Recon more than actually wearing it to tell you the truth. Oh yeah James Bond's eyewear, that sounds fantastic. You put it on, you see how fast you're going down the hill, and sometimes the interest would wane whereas I feel like this is snowballing, and people are more and more interested in how we are delivering such better quality product to customers.

[38:29]
James McKinney: Is part of it, as you're talking now I actually can see some of the mental mapping on how you get from James Bond eyewear to furniture. Is part of what was interesting as far as a problem goes was the fact that you get to communicate directly with your end user, and being able to really understand their journey?

[38:52]
Fraser Hall: Yeah, and you can make these iterative changes so much faster. That's the problem with hardware. Hardware can be really sexy, but you generally spend three years designing a product, somewhere around there at least for Recon, and then eight or nine months producing. So something you thought of three or four years ago, now it's in customer's hands. I remember when we first our product, people said, "The strap is not stretchy enough," and I felt like saying, "Are you kidding me? You have the most advanced eyewear in the world on your face. It tells you speed, time, temperature, altitude, position, call display, text messaging, and you're worried about the elasticity?" so it can just fall on your face.

In our world especially because we gather so much user feedback and we deliver our own products, we're on the fly changing our products. We had a Chanel chair and people were saying, "It's just a little too narrow." Well, we had that changed right away. The Chanel chair now an inch wider and now those people are happy. So you can tune it underway a little more, which I really enjoy.

[39:50]
James McKinney: What has been the greatest learning from 2013 when the site went live and you're now shipping product to people, and your reach is global now. Article is huge now. As a customer, I loved the experience from online to getting the product delivered and setup. What has been the greatest learning for you in that? Coming off of technology, Sea Shepherd, all the different… Creo, like all the different jobs and businesses you've had. Everything leads you up to where you're at now, right? What has been the greatest learning for you in the Article journey?

[40:27]
Fraser Hall: It's tough to stich all of those together. I guess the one that I had never really known or felt before was product market fit. I know that's something people say all the time, and I say it as a VC all the time, but I thought I had it in life. But when you actually have it, it's like running downhill. People genuinely want this thing. The eyewear, people liked the idea but no one needs a heads up display on their face. But people genuinely want our prods at the price point, at the value we deliver. So that was really eye opening and something that I look for now in venture. If they can find product market fit, it's just worth so much.

The other item is, I think I've done this well my whole life but do things that you really enjoy because you just get good at them. Again, kind of like running downhill. If you really like what you do, and I loved doing the high level business strategy at Article… You know, I wake up in the middle of the night and I'm jotting things down. It's just exciting. You can't help but becoming kind of good at the things you really like. I think there's some commonality there. I'm pretty good at chasing things I like, as you can probably tell by my background, and giving it a shot.

[41:33]
James McKinney: You know, one of the questions that I ask founders is if you were to start your business in 2019 what would you do differently. What I find interesting about being able to ask you this question is as an investor, there may be someone that comes to you with a online furniture solution, or online anything solution, and you have the experience from 2011 to now. So if you were to either see a potential startup in the space or want to restart something entirely, what would you do differently in 2019 versus 2011 to 2013?

[42:11]
Fraser Hall: That's a difficult question for Article. Article has made a lot of good moves. We're very thoughtful about every move we make. If you were to ask me with Recon, there's infinite things we could do differently where we were just wasteful with capital.

[42:22]
James McKinney: Well let's reframe the question to be an online consumer brand and product. If you were to start something, or again investing in something, what would you do differently?

[42:33]
Fraser Hall: I believe it's important to move fairly slowly into these markets. It's so tempting, especially when you've had a previous exit, there's time and capital accessible, to just say, "I think this is going to work, let's scale it massive." But you really need those iteration loops. So you want to start small. We actually did that pretty well at Article and we were quite fortunate in the sense that we didn't ship from inventory at first. It was not drop ship but it was overseas shipping and so our cash conversion cycle was fantastic. We had all this cash from our customers, and then we said maybe we should try shipping from inventory. Turns out, customers way prefer that.

So suddenly it all turns around and now we're at a negative working cash cycle which is difficult. I don't know if you could do that again, but if you could I would go that way. I think maybe I would build more organic content right from the get go. We really worked the paid channels very early. It seemed more mathematical to us. We were engineers so starting a furniture brand sounds strange. We now have fantastic designers and so on, but in the early days we did not. It was nerd alert, computer guys trying to launch a design brand.

Also, want to be careful not to pander to whatever the economics are of the day. If we had talked to a VC on day one, I think they would have said, "Spend, spend, spend. Raise, raise, raise. Get huge traction and you'll figure out profitability down the line." I think that's a great way to take a roulette chance at a big company, which is fine because that's a lot of what I invest in as a VC. But we did it very differently. We took it slow, iterated, iterated, iterated.

I think this whole idea of iteration is so important because a lot of the time, even as founders you think I'm going to do this one thing fantastic and the problem is solved. Well, no it's not. There's a new problem the next day. You solved one small business and now not everything is perfect. Fortunately, my co founders are that type, just head down work horses. So it's hard to find fault in the Article approach. I'm sure there's many things. I guess one thing is building for scale. We're all startup guys and so now with 350 people, 5 locations, this is the harder part actually. How do we build out this really strong team that can execute really well? I think we're on that road. We've now brought on some great execs, but this is probably the most foreign part to us.

[44:54]
James McKinney: You've alluded to a little bit the challenge of just scaling, but if you were to look at, if we were to have a where are they now episode in five years we'll say, so one half of really how old Article is, what would you be saying Article is doing now in five years from now?

[45:12]
Fraser Hall: Five years we're still pro working with similar technologies, at least in terms of the product. I think we're going to have instant inspiration. You're going to arrive on our website probably already pre inspired somehow, and then it's going to be a much more customized experience. We're going to be very much in tune with your preferences and we're going to serve those. We'll have delivery same or next day on almost all products by then. I think we'll be taking away your old furniture, packaging. I think it's really going to be about serving all those customer needs that people are so used to. They're used to the pains. They're used to the pain of having to assembling a product. They're used to the pain of lugging up stairs. They're used to the pain of waiting. Of it's not quite right but I don't want to move it out.

Probably the largest pain of those is a lot of people don't really know what they want when they come in the door, and I don't want to force feed them what I think they want, but I want to help them and coach this out of them. So I think there's going to be a ton of opportunity there and you're going to know it fits your space. There's not going to be any last minute oh, it couldn't go in my elevator. Of course, we should be able to adjust for that with technology. So I think that will mostly likely be what the experience is like. I think if you go way out, I love self-assembling furniture. Can modify its color and shape. I think we're getting far beyond that horizon.

[46:27]
James McKinney: That would be awesome.

[46:28]
Fraser Hall: That would be great. Software downloadable furniture. That's getting crazy. But those are the things we're actually talking about. The founders get together and we try to think of what the world will be like in those worlds.

[46:39]
James McKinney: I think it's just amazing too that part of what makes Article so unique and so incredible is because you are software oriented founders. Like everything you just listed right there, those are the subtle user experience things that if you come from a logistics background or really not software, these are things you just aren't thinking of all the time. It sounds like you are definitely laser focused on the user experience side of it, and that has directed the products that you bring to the consumer so that is incredible.

[47:13]
Fraser Hall: Yeah. It's quite an outsider view. All of our competitors are generally led by merchandisers or designers. That's kind of where the vision came from and so on. Four computer guys, we take a very different approach. We also know that we're not the experts. We really have to listen. We're not going to come up with the next design for the greatest products. We're great designers, but we have to listen, listen, listen. So we're obsessed with customer feedback.

[47:37]
James McKinney: That's incredible. Well as our time comes to an end, there's two questions I want to make sure that I ask, because I ask them of every founder. The first one is about gratitude. The reason I ask that question is because I believe that if we lose perspective of all the people that contributed to our story, to where we are today, we'll begin to think we did this ourselves and we begin to isolate ourselves out of our arrogance and our pride. Then that will ultimately lead to our failure because we've just isolated ourselves.

So when you look back from your life story and all the various businesses, and the Sea Shepherd years, who do you point to with just incredible gratitude for their contribution to your journey?

[48:12]
Fraser Hall: I'm a collaborative worker. You'll notice I have cofounders in all my businesses and I have partners in my venture fund. I've been just absolutely blessed with the greatest cofounders. It's their drive. It's their intellect. But probably most of all how we communicate.

I find the groups that are most successful, we develop this language of incredible trust. It's almost a difficult to understand language I think for a third party person to come in. We use all kind of logic theory and things like that in our meetings. Just it sounds like a bunch of guys nerding out. So we have the communication, the trust, and I guess similar risk profiles as well. But I wouldn't say, it's funny, I wouldn't say I'm a really high risk person but I've done things that are very risky. But I weigh them carefully. But I am just so grateful for my cofounders. So that's Recon, that's Rhino Ventures, and Article that I get to work with these amazing people that we get to do such awesome stuff.

[49:07]
James McKinney: That's awesome. I love that. If I had to bring The Startup Story down into a 20 minute episode, that's one question that would never get cancelled. I love that question because entrepreneurship should not be done alone. It is such an anomaly, those massive success stories of someone who just took care of business hacking away in their garage or whatever solo. It's so rare but somehow that has become this persona of entrepreneurship where we just we take care of business on our own, we grind away, and it's like you can't do this alone. You need the people. You need people.

[49:39]
Fraser Hall: You do.

[49:40]
James McKinney: So I love that question. And our final question, and we've been talking to tens of thousands of listeners that have been hearing your story and being encouraged and inspired from it. But I want to take the perspective from the 10,000, I want to bring it down to just one. A conversation of just you, an entrepreneur and maybe the person of the entrepreneur you want to talk to is someone who has been doing it but just frustrated by the lack of traction.

Or maybe it's someone who's got a 9 to 5 and they have these ideas of things they want to do, but there's things they tell themselves like I have a mortgage, I have a spouse and kids. Maybe I'm 60, I'm too old to do something. My ship has sailed, I can't do anymore. Or maybe it's the entrepreneur that's been punched in the gut time and time again and just ready to give up. Whatever those personas, I'd like you to just picture yourself having coffee with that one entrepreneur. What do you say to that one person?

[50:29]
Fraser Hall: Yeah, I've had those coffees. I think it comes back to what I was saying about doing things you love. Passion gets you through all of these tough times. Passion sent me to sea and chased after whale hunters and so on. And I think a lot of people think passion is something that just they wake up and they have it. I'm passionate about surfing and surf every day of my life. It was never like that for me. I never had that. I always had to foster it and say is this something I'm passionate about, let's try this on. Yeah, I'm liking this, let's go harder on this topic. I hope that made me good at those particular items. Even if it didn't make me good, it gave me the power to persevere because I was at least enjoying some element of it.

So I think it's so important to find something that you are really driven and passionate about. Even if you think oh, the next thing is another social network and I'm going to develop that. It's just going to be a bummer anyway. Just build something that you're going to have a lot of fun with. When we invest from Rhino Ventures, I founder market fit and founder passion is top of the list because you'll survive. Going back out and raising a down round, it just sucks. You've got to really want that. Find that passion, incubate it if you have to, whatever it takes to bring it out of yourself and push forward, and then you can take all those hits and punches in the guts, the rejection that comes with founding businesses.

[51:48]
James McKinney: Many of our founders have spoken about the importance of pursuing something that you're passionate about, but nobody except for Fraser has ever shared the idea that passion can be developed. Or as a developer would put it, incubated. I hear from so many people that are not sure what they are passionate about, and I think that is partly due to not having tried very many things.

Many people set a course for themselves going into or coming out of college, and never stop to reevaluate things for themselves. Think about that for a moment. Would you ever allow a 22 year old to dictate what you are to do for the next 60 years or so? No way. A 22 year old still has so much life to live and so much to learn, yet that is how we navigate life ourselves. We need to stop thinking that we need to have it all figured out and start trying more things, and sharing more experiences. It is in our varied experiences that we become crystal clear about the things that bring us joy as well as pain.

As we unpack those experiences, we gain clarity on our passion. We become crystal clear about the things we find important as well as the things we want to contribute to this world. It is in our experiences that we better understand what we were designed to excel at. Fraser's journey is incredibly varied and those experiences have flavored how he built Article, as well as his new venture capital firm. It has also helped to contribute to his success in both of them.

I hope you found some real value in Fraser's Startup Story episode, and if you've been around The Startup Story for any length of time, then you know how much emphasis I put on the idea that entrepreneurs support other entrepreneurs. So for that reason, I hope you will help support Fraser by visiting article.com/startupstory. If you visit that link, you'll get $50 off your purchase of anything on their website. Seriously. How often are you given free money? Just visit article.com/startupstory. Take a look at how unique Article really is and then give them some feedback about your experience. This type of support is so helpful and is the least we can do for all the value Fraser brought to us today. Like always, we will include a link in our show notes. Again, entrepreneurs support other entrepreneurs, so let's show up for Fraser in a big way.

And now for my personal ask. The Startup Story community has been so incredible about sharing our podcast with others, but we have more stories to tell and more people to reach. We too are a startup and word of mouth is everything, so please follow us on Facebook and Instagram @TheStartupStory or on Twitter @StartupStory_. If you're on LinkedIn, please search for The Startup Story and follow our company page. LinkedIn is a really powerful way to raise awareness of the show. But the most impactful way you can help us grow our audience is to leave a review on Apple Podcast. Or if you listen to the show via Spotify, then please simply share the podcast directly from your Spotify app or wherever you listen to the show.

These simple actions can make a huge impact in getting these amazing founder stories out to the masses. And please make sure to tag or mention The Startup Story when you do share so that we can connect with you and say thank you directly. I'm so incredibly appreciative of the fact that you listen to the show each and every week, and I look forward to sharing these amazing stories with you every Tuesday with hopes of encouraging and inspiring you to start your story.

If you like this podcast and are thinking of creating your own, consider talking to my producer Danny Ozment. He helps thought leaders, influencers, executives, and authors create, launch, and produce podcasts that grow their business and make a real impact in this world. You can contact him today at emeraldcitypro.com/startupstory.