Self-Funding vs. Outside Capital with Clint Greenleaf

Source: GeniusDen archive transcript checked against the recording. Administrative opening and closing material is omitted; the presentation wording is otherwise preserved with light readability edits.

Presentation

This is Demetri Martin's awesome graphic where he talks a little bit about success. Unfortunately, it's way too real. We always look at this and think, wow. Overnight success, so cool to see this happen. Usually it's about 20 years in the making. Usually we all put so much effort and energy into it, and we'll try and talk a little bit more about that today, but what I've found usually is bootstrappers spend a whole lot of time in the 'what it really looks like' part. They make it sometimes and sometimes they don't, and we can go through that a little bit as well.

Real quickly, let me talk about me a little bit because I like me a lot and I think I'm quite charming and witty, and the more alcohol everybody here has, the more you'll agree with me. If you haven't had at least two drinks, please go get some right now.

I started my first business when I was about seven. I grew up in Cleveland, and I spent a lot of time raking leaves because that's what you do in Cleveland; it's not like there's a lot of other things to do. In the fall, a buddy and I would go house-to-house for $2 a lawn and rake leaves.

The problem is your business is only useful about one quarter out of the year. I realized there had to be a better way to do this. My sister had a paper route, and what I realized was she delivers papers every single week. I could make money all year round instead of having this somewhat limited business.

At the age of eight, I did a leveraged buyout and bought my sister's paper route. She was 11, let me be clear. I wasn't taking advantage of her at all. I'm serious when I tell you this, she's actually a nun right now. The deal was so bad I drove her into the monastery. It worked out pretty well for me, and I enjoyed this business a lot.

As I grew up a little bit in the '80s and early '90s, I realized that baseball cards were probably the coolest things around. This is before I found out about girls by the way. I really liked baseball cards a lot and I would go to baseball card shows and I would realize that it was really hard for me to pick which players I liked a lot until they got really good. I thought I'm spending a lot of my money on players that I think are going to be good, and they're not and they fizzle out, and there has to be a way to try and find a way to make money in this game.

What I realized was the guys who ran the baseball card shows had it all figured out because I paid an attendance fee to walk in, and everybody that was there paid an attendance fee to have a booth. I thought that's a pretty good idea. I went to my gym teacher in 8th grade and said what I really want to do is rent out the gym or the cafeteria and have baseball card shows on weekends. I had no idea you couldn't do this and he didn't either, so I cut him in on the profit, and we gave away 10% to the United Way, and we started doing baseball card shows. Eventually, the school shut us down, but that was fine.

Then came the Abra CaBubble, and the Abra CaBubble is an awesome piece of candy. It's basically a Blow Pop without a stick. I was growing up through my pubescent years in a rather horizontal fashion, let's just say. I spent a lot of time getting fat. My sophomore year in high school, I was 5'4", 200 pounds. Yeah, hold on. We got more on that. I loved these things. They were really good because it was gum on the inside and cherry candy on the outside. It tasted awesome. What I realized was I could go out and start selling these things.

I was supposed to be studying, yada, yada, yada. I would take a backpack full of these things to school, and I'd usually have a few saved up in my locker, and then I would sell them to my friends. They were $0.10 apiece, three for $0.25, and on average I'd walk home with about 40 to $50 in coins, usually. I didn't do all that well in school because I wasn't paying attention to that. I was learning about marketing and profitability and trying to make sure I could buy these things at the cheapest possible price.

Eventually, the school shut me down. Became a standing trend in what I do. Then this page is left intentionally blank because obviously, the early year I was the short, fat kid, and I didn't really want pictures of those taken. You'll notice, still no pictures of me.

What happened was I was in the shower one day, I got out of the shower, looked in the mirror, and I had this really tight, come-to-Jesus-moment when I looked in the mirror and thought, boy, no one is ever going to want to date me. I thought, hmm. What if I change it? All right, cool. I'm going to change it. Pretty intentionally, I decided I was going to get in shape.

I started working out more, stopped eating Abra CaBubbles, which was a ... I went cold turkey and that was not cool, by the way. I highly recommend easing yourself off of those. I spent a good bit of time getting back in shape and focusing a little better. I stopped complaining about school, I stopped complaining about my weight and started to do something about it.

Got in shape, really enjoyed that part of my life, and then about my junior year, the country was going through Gulf War I. I remember thinking wow, I want to make sure I stay in shape forever, and then I'd see these guys coming off of their deployments, and they'd come out and there's a Marine with two [unclear] in his arms, and I'm like, wow, that looks cool. I like that these guys are able to get a lot of dates. I decided, hey, you know what, I'll be a Marine. Why not, right?

In '93, I went into ROTC at Holy Cross up in Wooster, Massachusetts, and by the way, if you're ever going to enter the military, right after a really easy war is a great time to go in before the next war. I got to do a lot of really fun things. I got to play Marine, it was a very different military, obviously, in those times. I don't really call myself a Marine because I didn't do that much compared to everybody else who now actually has served ... Anybody in the room serve by the way? Thank you very much. Appreciate it. Thank you very much. This was really a fun time for me.

I got to do really cool things. I got to fly that helicopter. Not very well, but I got to fly it. I got to hang out on Navy ships, which is really not very cool. I was really enjoying the process. There was nothing about college I didn't enjoy, and ROTC was by far the best part of it for me.

The problem is midway through my junior year, we were doing a pull-up-athon, like any good Marine, obviously, and about midway through number 30 or so, I got up and I heard a pop on my shoulder. I thought that didn't seem all that good. I got back down. As I started to go up, I heard a ripping sound. If you can imagine taking a piece of raw flank steak and trying to rip that, it's kind of how it sounded. I came back down, my left side went numb, and I thought, hmm, this doesn't feel right.

Over my ear, I could hear a Marine officer yelling at me, saying really inappropriate things that ... I've got three little kids. I wouldn't say these things in front of my kids. I wouldn't say them in front of my mom or mother-in-law either, but they were really rude and I remember thinking why am I doing this? This is 1996. We're not going to fight another war again, the internet means peace and tranquility forever, Soviet Union's gone, everything good is going to happen for us. At that moment, I had this sense of hesitation and thought I'm not sure this is the right path for me.

After we found out my shoulder was separated, the Marines said you can't be a Marine anymore, but if you'd like, we can get you in the Navy. Let's see, Marines, Navy? I can marry my dog. That's not really a good option. Hopefully you weren't in the Navy, sir. Awesome, good.

Audience member: I was.

Clint Greenleaf: I'm really sorry about that.

I was back at Holy Cross shortly after the injury and thought I got to find something new.

I was majoring in accounting because at the time I figured if after I go be a Marine Officer, I'll want to do something in business afterwards. Accounting didn't seem that bad. It was kind of fun, and my friends joked with me and said what are you going to do with your life now? I said, I guess I'll go be an accountant. How hard can that be?

They said let's think about this for a second. We all have 4.0's, we all applied to the Big-6 - they were the Big-6 accounting firms at the time. They said we all applied to the Big-6, and with our 4.0's, we got one offer. You have maybe a 3.0, artificially inflated by your Marine Corps classes, you drink about seven days a week, you don't go to class very often, you watch CNBC all the time, and at every turn, you're starting some new little business. You're not an accountant. You're not going to be able to pull this off. I thought, you're right, but I already got the interview scheduled, so I might as well go do it.

What happened was I went and interviewed with the Big-6, and luckily I got six offers, and all my friends said what the hell? How'd you pull that off? I said I did everything the Marines taught me. Keep in mind, it's '96, right? Grunge is a big deal. Everyone's got flannels and cut jeans and they're way too cool for school, and they're all sitting in their chairs, like this, and they're too smart for it because they're well beyond this whole dressing appropriately. I didn't have anything else to go on, so I tied my tie properly, I shined my shoes, I dressed the part, I said "Yes, sir", "No, ma'am," and all six firms offered me a job.

Oddly enough, I was at a bar the next night, and my friends goaded me into writing a book, and they said there's no way that that actually works. I said oh yeah, absolutely it works. They said if you're so smart, you should write a book. As a joke, I put this together. 28 pages of brilliance. Or not. You can see the hand-drawn illustrations with a Sharpie. It's bad. I've got a good friend who claims that it was a crime that I charged $5 for this book. I put together the 28 pages, my friends had a good laugh, that was the end of it, and everything was good.

I went to work at Deloitte & Touche as an accountant, and I hated it. Anybody an accountant in the room? Okay, so you know. It's terrible. It's like the Navy on steroids. I put in seven really long, hard months before I retired and at 22 I was like, I've had enough of this. I decided I was going to get into the business of starting a publishing company because clearly, I had this book.

This book ... Let me tell you a little bit more about this book. This book started as the bad joke. What happened was I had about 100 of them laying around the house, and my dad said I can't believe you haven't started to try and sell these things. I said okay, why not. I put a small ad in Bottom Line Personal, and for $5, people could send me a check or cash and I would send them this book.

The first day I got two checks for $5 a piece. That's kind of cool. Next day, I got seven. Next day, I got 13. Within a month, I was selling between, call it, 50 and 100 a day. Remember, I was a really bad accountant, but I wasn't so bad as to know that the $30,000 I was making as a really bad CPA was a lot less than $500 a day for a book that was really bad. I realized I could probably make more money off of it.

Here I am with this little booklet, and why not start a publishing company. It's a natural progression: Marines, accounting, book publishing. You'd be stupid not to. I didn't go to business school, but I'm pretty sure there's a class on that progression.

In the book, I mention you need shoe trees. Anybody have shoe trees here? I'm sure most of you guys know what they are. Shoe trees help expand your shoe, keep them dry. If you're in a northern climate, especially, when they get wet, you want to keep your shoes in good shape. In the book, somebody said ... I mentioned you need to make sure you've got a good pair of shoe trees.

I got a phone call one day, shortly after I left Deloitte, and the guy says you mentioned in the book that I need shoe trees. Can you tell me where I can get them? I said, I'm sorry. Can I call you right back? Got his number, sure, hung up, and thought shoe trees, shoe trees. All right.

I called Nordstroms where I bought mine, asked Nordstroms where they got theirs. They got theirs from a company called Woodlore up in Port Washington, Wisconsin. This is pre-really good internet at the time, by the way. I call Woodlore, get their whole song and dance, find out that they do drop-ship shoe trees, get a price list from them, and about 40 minutes later, I called that guy back and I was like, hey, this is Clint. You called me about shoe trees. He's like, yeah. I was like, what kind can we get you and what size would you like?

In 1999, and I haven't verified this, but I'm pretty sure it's true, I believe sold more shoe trees online than anybody else in the whole world. We sold about $100,000 worth of shoe trees, all drop-ship, no inventory, and I thought there's something to this. As the publishing business grew, I got out of the shoe tree business, but it certainly was a whole lot of fun ... I guess the other issue was Woodlore got their own website. That shut me down.

I refocused on publishing and I started my book publishing group, Greenleaf Book Group. What I realized was that I wasn't really a very good author. I found out some ways to market books, I found ways to actually sell product, but I didn't know enough about writing, and I wasn't very good at it. Some would argue that ADD and writing don't go hand-in-hand. I started to grow my publishing business, and I started it in Cleveland in '98, and eventually moved it down here to Austin, Texas.

Over time, I transitioned my book and went from the first one that you saw ... I feel bad calling it a book because you've seen real books and that's not a book. I transitioned into the $12.95 paperback, yet another crime that we charged that much for it. I eventually sold the rights, called it a gentleman's guide, and in the 4th edition, I took the rights back myself and started doing that book.

This is all the same book. Always repurpose your content. I wrote that book once. I finally got professional illustrations, but nothing else changed.

Over time, I got better books, and we started to get better books for our clients as well. I moved the company to Austin in '04, and then the better books that we got started to sell more copies. We started to get New York Times Bestsellers. By the time I sold the company, we had about 40 New York Times Bestsellers. Wall Street Journal and USA Today were also quite good for us.

Along the way, I realized that with a name like Greenleaf, I had to be a little bit better steward of our environment, and publishing, as you can think, is really not good on the environment at all. You chop down all these trees, and then you truck the trees around, you make paper out of it, you got the gas for that, and then you ship books ... If you know anything about the book business, you know that you get returned copies of most of those books, and then you have to deal with the pulping of that. It's really tough.

We looked at this Green Press Initiative, which was a really cool idea where you'd try and mollify your effect on the environment by cutting back some of the trouble you have by being so rough on the environment. I realized I needed a full-time person to track just about every bit of carbon that we took, and it was a big pain in the neck. I thought, look, this can't be that hard. What if I find out how many books we print every year, I find out how much paper we use, and how many trees it takes to make those, and then plant that many trees?

We started Tree Neutral, a nonprofit company that basically plants trees, and the Bastrop Fires, which might be too far south for y'all to know about, but a couple of years ago, Bastrop got ravaged right outside of Austin, got ravaged with some really horrible fires. We planted about 20,000 trees in Bastrop that year through the Arbor Day Foundation, one of our clients. Really cool idea. You pay $1 a tree to replant those trees, and all our books now are printed with the Tree Neutral logo, at least at the time I sold the company, they still were doing that.

I got quite lucky. Over the time, I've been able to pimp a lot of my exploits and this is some of the fun that I've had. I couldn't fit any more logos on here, but I made the ones a lot bigger, just to make sure they fit on here. It's been a fun ride.

The exit. I've got this book publishing company, it's 2010, and I'm flying on a plane, luckily, with my wife out to Hawaii. Life is good. We made it through the recession, we made it through the downturn, we were growing every year, still an Inc 500 company, life was great.

I looked around and everybody in first class had a Kindle. Kindles, yeah. I'm in the book business. Kindles are not good for the book business. I make about $0.80 per Kindle book and I make about $4 or $5 for every printed book. I looked back in coach, and everybody has printed books. The problem is, I realized this trend is going to spread. Everyone in first class is going to eventually get their Kindles for their friends in the back, and then I'm going to lose a whole lot of money, and I can't make up five times my margin by selling that many more books. It's not going to work for me.

It hit me that I probably needed to sell the business. I spent a lot of time trying to figure this part out. I can tell you that having bootstrapped it for 14 years beforehand gave me the ability to sell it, and I'm happy to talk more about that if that is of interest for everybody, but being a bootstrap company made it a whole lot easier for me. It was a big deal to me that I found a way to do that.

I ran a process once on my own, not knowing anything about a sales process, and decided not to sell to a company that had bought four other companies the previous year, they were in arbitration with two of them, and litigation with the other two. Again, I'm not smart, but I'm not a moron. I knew that was the wrong group.

The next year, we sold to a private equity firm. I got stupid lucky on a valuation that was way higher than it should've been, and that was 2011. We got out without any earn-out, which was a whole lot of fun. If you can do that, that's awesome. Again, lucky is way better than being good. I recommend being lucky if you can do it. I got the exit, and in 2014, I transitioned out of the company. I promised them I would stay on for a few years, and wanted to make sure that I followed through with that.

Yeah, isn't this great?

Kids is a driver for business. Somewhere along the way, we had our first daughter, and she likes football just like I do. She's got all the trappings of needing it. She's got the beer, the remote, but her clothes don't really fit. She's wearing this pink onesie, and I keep thinking, there has to be a better way. She has to look more appropriate.

I was holding her in the football position at Home Depot and I thought wouldn't it be cool if she looked like a football? I started Bambino Balls, which is a cute little business. You dress your kid like a football, so when you're carrying them in the football position, they look like the part.

My daughter is adorable and my wife is brilliant. What I realized was I got to make sure that keep this role of being husband for as long as possible. For me, it was very important to find a way to be able to make her financially [unclear phrase] as strong as possible. You've all seen the IRA chart on why you should start investing at age 22, instead of age 40 in your IRA and the value of compounding.

I'm just enough of a CPA dork that I like to look at numbers, and I sat back one day and thought 22's a good time to start, but what if you could start sooner? Start at 18 and you take your college money. What if you start at 14 and you take your waitering money? Let's be stupid. What if you go back to age zero? Yeah, at age zero, you put in $5,000 a year into a Roth IRA, at 8% a year, at 65, it's $10,000,000.

I had my motivation. All I had to do was find a vehicle by which I could pay my daughter Roth IRA-eligible earned income. Okay, and I couldn't figure it out because you can't really be a functional employee that much at age zero. I'm feeding her from a thing of Gerber baby food, and I see the Gerber baby, and I'm like that's it. She's going to be a model. The real reason why I created this business was to have a legitimate shell by which I could pay my kids Roth IRA-eligible income for their likenesses.

Home Plate Peanut Butter is in every Major League ballpark, and it's been a whole lot of fun for us. One of the things that may or may not have convinced me to do this deal, a very good friend of mine, one of our co-founders, is the Assistant GM for the Cleveland Indians. I think now, looking back, it was a joke, but at the time, he said, hell, we could probably get you a ball-playing contract, and you could probably play baseball for the Indians for a day or something.

I said, yes, obviously. That hasn't come to fruition yet, but our peanut butter is online now. We're getting into Amazon, we're working with Great Harvest Bread and several other retailers to try and work on that now. That's taking up a good chunk of my time.

The other cool thing is that being in every Major League clubhouse, you get really good seats. If you ever need tickets to a Rangers game, and they're playing poorly, let me know. I can probably get you seats. If they're still in the playoff hunt, no one's getting tickets.

Three quick points. I figured the Three Little Pigs would work on this. Some quick takeaways for you, and then I'm more than happy to go into questions and we can talk about that.

The first is about teaching employees about money. One of the things that, I think, for me was really helpful was when I got my staff to understand the basics of personal finance. We had hired a girl from UT one day. Fantastic. 4.0, editor, she was awesome. She came to me and said on this new hire paperwork, I'm confused. It says ABA number and I don't know what that is.

I was like okay, yeah. On the bottom of your checks, there's a bunch of little weird numbers. One is your account number, and the other one is your ABA routing number. She looked at me, probably like my daughters will when they're about 16. Like checks? I don't have checks. Okay, how do you pay your bills? She's like, oh, it's easy. She pulls out her dad's AMEX, and she's like I put everything on here.

Then, like it was some sort of epiphany, this light bulb goes off in her head, and she says, oh, I've got it. You can put my paycheck on my dad's credit card. It's like drop the mic, I'm out of here. This is not going to work. I realize that, through no fault of her own, she had no idea how personal finance works.

We started doing brown bags every week for about three months, starting with the lowest possible common denominator, making sure that my staff knew everything they could know about simple finance, like how banks make money. They take your money and pay you a little bit, and they lend it out to someone else for a lot more, and they make the difference. We went through this entire process.

I did it because I'm a capitalist pig, and I figured that I would help my employees learn about money, they'd make better financial choices, and grow my business. That worked. The thing I didn't factor in was that they got awesome benefits out of it. The first, it's like a raise to them. Once they start making better financial choices, they're way happier. They got this huge benefit of learning about money and making better, personal financial choices.

The second was bill collectors stopped calling during the day, affecting them, which was really awesome. They didn't get stressed out as much.

The third was recruiting, they would go and tell all their friends about how awesome their company was because they learned more about money and they were able to go ahead and save money for their wedding, for their college, for their kids. That really brought me a whole lot of gratification. If you have the opportunity and you have the employees who need the knowledge, please teach them about money. Obviously, they'll help your business grow, but of course, it's great for them and it's a wonderful employee welfare and morale thing.

The second is vendors. This is a book I'm working on right now, and the title is, Vendors: They're Not Just for Screwing Anymore. The premise is that if you look at the Dell model, the big companies who are working so hard, Walmart, they're so good at twisting you just a little bit more. They want to get your prices down just a little bit more.

I suppose you can get away with that for a little bit of time, but what I learned along the way, especially from book printers, is it's not about saving $0.20 a printed copy on a book. What it is about is making sure that when you get a book and something goes wrong, either the client's not happy, the bookstore's not happy, UPS messes up, how do you get that fixed?

I've found that everyone's going to make mistakes, but if i have a good relationship with a book printer, they're going to make my life a whole lot easier. I was more than happy to pay a couple of extra points rather than try and twist them to make sure they didn't make any money in the deal. I wanted to leave as much meat on the bone as I could and still make a profit myself because along the way, they made me so much more money by being polite.

I spent as much time as I could becoming their best customer, and when I first asked them that, they looked at me like I had six heads. I said how do I do it, and they said you can't. Random House is our best customer. You're a wart on the backside of us. We don't want to hear about this. I said okay, but fine. Let's say I was your best customer, how would I send you my pre-press files? What would I do that would make you realize that this guy's easy?

I went to their printing offices and sat through with their graphic designers and learned exactly how they wanted to receive their files and we changed our employee manual to make sure that all of our pre-flight work was done exactly the same way they wanted to get it. Made it easy for them.

I found out that everybody tries to short pay them and/or slow pay them, so we paid our invoices the day we got the bill. Because 30 days afloat wasn't a big enough deal for me. I found out that people would try and hammer them so much on price, and sometimes it wasn't worthwhile. Usually, if I didn't need to hammer a price down, I'd let it slide knowing that it was a fair and reasonable price.

Along the way, they had this pool of wisdom that I was able to tap into. Think back to about 2002. Poker wasn't yet a big deal, but these guys started printing a lot of books about poker for one of their clients. They asked me if I had any poker books. I said no, I've seen a few more come by recently, but I haven't done much with it. They said something's up. This trend is going gangbusters. These guys are printing a lot of copies of really simple, bad books on poker.

I started to accept a lot more books on poker. The next five years, the five poker books we took were all in the top-10 of our book sales because we were able to capture that knowledge. Had they not cared about me, had they not really given a hoot, it wouldn't have mattered, but they wanted me to have that data. They figured I could do something with it and give them the business. They made a lot more money and I made a lot more money because of that. Treat your vendors well. It's really not worth it to try and hammer them for a few points here and there.

Lastly, if you have kids, please take your kids on a business trip with you. This was the first one I did with my daughter. She's now eight. We went to New York and Boston and I did a book reading of my kids book in Boston, gave a speech at Holy Cross, and then flew down to New York and I was doing some TV at Fox, gave my daughter the anchor desk, and you can joke about the idea of Fox hiring young blondes all you want, but they did a pretty good job with that.

If you can share what you do with your kids, you'll understand a whole different level of their livelihood and they'll understand where you're coming from too. They'll be able to capture the idea of why you're on the road.

I'm hit Marriott Lifetime Platinum years and years ago. United Lifetime Gold and it's really empty. You think it's going to be some brass ring. You watch Up in the Air ... By the way, I thought that movie was a documentary until I realized it wasn't. You travel so much for work and you get so used to that, you realize that it's vapid until you're able to share that with somebody.

Taking your daughter on business trips and letting her see this and go do fun things as well, but see what you do and how you make money and the ways that you spend your time when you're on the road, it gives them a whole new understanding about you being gone. For me, traveling as often as I do, it made my life a lot easier.

If you have kids, if you're going to have kids, I highly recommend you do this. This trick was taught to me by a good friend of mine here in town, Vince [unclear surname]. Does anyone know Vince? Okay, we have one person who knows Vince. Vince does this with his daughter and it's a fantastic thing. Vince taught me this, it was an awesome trick and it made me quite happy.

I just did it a couple weeks ago with my second daughter. We went down to Georgia, and she saw us make honey squeeze packs of peanut butter and it was a trip. The best story I've got from that was as we're heading out of town, they asked if we needed any volunteers for the flight because the flight was overbooked. She jumped up. She was so excited. She's like I want to volunteer! I want to volunteer!

I was like wow, that's pretty cool. We got $800 apiece for travel cash, and that's a good deal, so we did that, and then we got on the plane, and she looked crestfallen, and I couldn't figure out what had happened. It had been a couple hours and I figured she was tired, but she looked at me and said I thought we were going to volunteer. I was like, yeah, we did. We're on a later flight. She's like, but that lady's still pushing the cart. She thought volunteering meant that we get to hand all the stuff ... It was all I could do not to go up and ask the flight attendant if she could go out and pass out the snacks and the drinks.

When you get to share that kind of time with your kids, it gives you a whole new bond on a whole different level. Please try and make time for your kids no matter what it is that your business is. For me, it's business trips, but no matter what it is, share that with them.

When it came to our peanut butter concept, I knew that peanut butter was a consumer packaged good, much more intense on capital than a book publishing company. Although I bootstrapped the book publishing company, it was much easier for me to do that. You basically take money from the authors as you build the books, you get paid, you eventually hand it back to the author. It's easy cash flow process.

Peanut butter, you got to make a lot of peanut butter, and you got to float the grocery stores, and they're not actually good about paying, oddly enough. Then you wait for a while, then you get cash back eventually, in theory.

We went to the baseball playing community and we talked to a bunch of baseball players and we got five baseball players to invest and we raised some cash from them. It was infinitely easier than I could imagine, and I'm sure most people don't do it like this, but we would call up some of the friends of my co-founders, and we said, hey, we're starting a peanut butter company. They said cool. Send me the wiring instructions. That's how everybody raises money, right? Doesn't it work like that?

We'd get wires in, and we didn't know who it was from, and we didn't have any paperwork until we'd finally go back and trace it and figure out who it was, and we said, hey, we ought to probably talk about terms and the basics. Yeah, send it over, I'll sign it. Like, sign what?

I have a bit of a skewed model. I know a little about convertible debt, and A rounds, and that sort of thing, and I'm very happy to talk about it, but the majority of my knowledge comes from being dumb lucky and falling ass-backwards into a whole lot of success simply because I aligned myself with the right people.

Knowing that, I'll be happy to talk to you about funding options. Generally speaking, my take on it is if you can bootstrap it, that's probably the best way to go, unless you need to add rocket fuel to your growth for one reason or another. I like the idea of slowly ramping up and starting as you go, but every once in a while, you can't slow this up.

Our peanut butter's a natural, no-stir product. It doesn't separate like a lot of the all-natural brands do, but it tastes a little bit better than the Jif you grew up with. Our plan early on was if we make this a little bit too available and slowly ramp it up, we're going to have way too many competitors who are able to knock this recipe off. We needed to have a lot of cash, a lot of capital to make a big go of it. That was our driver for accepting capital, but there is no one size fits all. You can't just be a bootstrapper or just a VC guy. You've got to take a very careful look at what each business is and why you want to do it and find the right tool for it, whatever that is.

Audience Q&A

For those of you on the video, Kelly asked is there anyone else in my family who is an entrepreneur or who helped guide me. Yes, absolutely. This was not about me. Again, I've been very lucky my entire life. From marrying way above my league, all the way to my business life. My dad is a money manager, worked at Merrill Lynch for a year and a half before he started his own firm. My grandfather was an electronic sales rep. My other grandfather was a car mechanic who started his own firm. We are a family of unemployable people who eventually found a way to feed their families.

Entrepreneurship was something that was taught to me as a good thing from a very early age. It's something that fits my nature. I would say I probably have an unhealthy relationship with arbitrage. I absolutely love the idea of finding something and selling it for a whole lot more down the line.

I don't know if you know this, but if you have kids, you may or may not have purchased a toy called Legos. If you do have kids, and you do buy Legos, do not just buy them on Amazon. There are some really shady characters, and I'm not going to mention any names, who can buy Legos on Lego.com and resell them on Amazon for two or three times the actual purchase price, and because people don't know any better, they'll happily pay that Amazon price. We try not to double our prices. We take about 50% markups and we're more than happy to do that.

There are models where you can do that. I've always loved arbitrage, whether it was buying concert tickets and reselling them after the concert was sold out, doing that with sporting events. There may or may not have been times where I bought beer for my guys on my floor and marked those prices up, but I always loved that kind of thing and I think I learned that a lot.

My parents were always entrepreneurial. My grandparents on my mom's side escaped Stalin in World War II, and they came over and they were scrappers, and they did a whole lot of work learning that whole process. It's certainly been part of my lifestyle and entrepreneurship was always something that made sense to me.

My wife's asked me if I can turn it off and I can't. It's frustrating, I think, to be married to me based on what she said.

Wonderful. Are my kids selling yet? Yes, my kids ... They wear Home Plate t-shirts to school, and luckily our school in Austin just started ... The girls' school in Austin just started carrying Home Plate peanut butter, which is nice. They also help fold onesies for my baby onesie business, Bambino Balls. They are paid models inside the Three Little Pigs book, coloring the banks with their own logos on there, and they also set up lemonade stands and they do that sort of things too. We have a ranch and they pick pecans there and sell those around Christmastime too. I am making sure they're inundated. They're probably going to be so far away from entrepreneurship and tired of it by the time they're 18, but they're certainly going to know what it is.

Good question. Home Plate Peanut Butter is not locally in the sense of Austin-produced. It is locally in the sense of United States of America-produced. They make our peanut butter in Georgia where all the peanuts are, and we looked at trying to source peanuts. The problem is I could go with a really all natural product. I can get rid of the palm fruit oil, which is a really good oil we use. What I can't do is make it not taste good. I'm not going to spend my time and my energy on something that isn't the best tasting peanut butter you've ever had.

For me, a big step of it was having the best possible product at a reasonable price. I can do organic peanuts and sell those for about $12 a jar. That doesn't really work, but I know that Jif is about $3 a jar and I can sell mine for $4 because we're a lot better than Jif, but I can't go much more than $4. In order to do that, it had to be Georgia peanuts, but we are all-made in the USA. Our palm oil is sustainably farmed, and the sugar and salt are healthy sugar and salt. Four ingredients, but yes, that is one issue we've got on local.

On the record, it's only luck. Off the record, Michael Caine, the actor, has mentioned many times that the best thing you can do is be like a duck, and ducks float along. You look at them on the surface, and they're hanging out on the surface of the water. Underneath the water, they are pedaling like mad, as hard as they can. If you ever get to see a split frame of a duck, they are pedaling like crazy.

I don't sleep very much. I'm constantly trying new things and I fail as often as humanly possible. I try a lot of different things. I've got really stupid ideas, and again, I only told you about the successes because we don't have enough time for everything else, but I try a lot of different things and I throw a bunch of stuff up against the wall and I'm still a numbers dork, so I measure it. If I can measure it and see what really works, I'll try it again. If I see something that fails, I'm going to stop doing it and take it out of my repertoire.

I'm hitting well under .100. I'm probably 1 in 12, as far as success goes. I don't spend a whole lot of time on failures. Having a really short attention span, this is where the ADD pays off, I think. Having a short attention span makes it really easy. I move onto the next thing and the benefit of bootstrapping is a failure doesn't have to be that expensive. You can keep it small and test and test and test.

One of the jobs I had that I didn't mention was market research. I was one of those really annoying people in a mall who would sit there and ask you questions about what you think about these four different products and what do you want to buy. I learned rejection better than just about anybody. The number of people who want to answer those questions are few and far between and the people that do are not the people you want to talk to. I learned a lot about rejection and self-selection.

That's a great question. Is crowdfunding bootstrapping? I think crowdfunding is a great hybrid between getting capital outside ... If you crowdfund by a Kickstarter where there's no real equity tied to it, I think that's more like bootstrapping. It's almost like a donation, I think. I think it floats in a hybrid space. I don't mind crowdfunding as long as it works. The success ratio of crowdfunded projects is [unclear phrase]. There's a whole lot of ones that fail miserably. [The accepted restored master ends during this answer; its final clause is preserved from the contemporaneous human transcript.]