The tried and true 1M/1M theme of Bootstrap First, Raise Money Later rings through Dave Elkington’s story. He used services to bootstrap a Unicorn that has since raised close to $140 million in VC funding. Revenue has scaled 100% year on year the last few years.
Sramana Mitra: Let’s start at the very beginning of your story. Where are you from? Where were you born and raised, and in what kind of circumstances?
Dave Elkington: I grew up in Utah. I went to school here. My parents are both school teachers and worked for the state and federal government. It was a little bit atypical. My dad was a rancher growing up in Idaho. My mom is from Canada. When people asked what I wanted to be when I grew up, I would tell them I wanted to be a millionaire. They would ask why. I’d be like, “Not for the money, but purely for the sake of accomplishment of being able to do that.” I went to school locally. My education is a little bit eclectic. I have an undergraduate degree in Philosophy. I also have minors in Hebrew, Japanese History, and Business. I also studied, for about a year, in Israel. I decided I wanted to go get some international experience and I had family in Israel. I dropped out of school at BYU and applied to the Hebrew University. I got accepted and transferred credits. I did that for a little over a year, dropped out of school, and applied to BYU. I got re-accepted and then finished at BYU.
Sramana Mitra: What timeframe are we talking?
Dave Elkington: This is back in 1998.
Sramana Mitra: In 1998, the Internet was already in full swing. It was, in fact, approaching a bubble. What happened when you came out with your degree?
Dave Elkington: As you’d expect, the philosophy firms weren’t hiring as much at that time frame. As pragmatic as you’d expect somebody who’s teaching high school and worked for the state government, you’d expect a little more pragmatism out of their kid. When I graduated, I had to figure out what I was going to do. I looked at consulting, banking, and tech space. I interviewed and tried to get jobs with all of them. I ended up working at Alex Brown back at Baltimore. What I was particularly interested in was observing and learning how the machine works and how people function.
Banking seemed to give me a bird’s eye view of the entire process. I’ve already done and dabbled around with some technology. Even though I don’t really have an education in technology, I already taught myself to program to some degree. It was relatively familiar, but I really wanted that bird’s eye view. Coming out with a relatively non-pragmatic degree, I sent out 200 to 300 resumes. I got about 20 or 30 interviews and got four or five offers. I was turned down 99%. I was working in their consumer group. I was involved in the Krispy Kreme IPO all the way through to Outback.com.
Sramana Mitra: How long did you do that for?
Dave Elkington: Almost two years. Anyone who’s been a banking analyst, especially at that time, understands that even though you graduate thinking you’re going to make money, you’ll probably make less money on an hourly rate than everybody else in the road because you’re working crazy hours. We joked that we were the best worst paid people in the world. The job involved running spreadsheets to making pitch books and getting coffee for the Managing Director. It was truly a thankless and tough job, but that’s where I learned a massive amount in a very small time. When I graduated, I hadn’t taken a lot of math. There were two to three weeks of Excel training. I may have opened Excel three or four times before that point. I became well-versed in PowerPoint, Excel, and the toolset that an analyst at a bank typically uses. I came in from behind where a lot of my peers had Economics and Business degrees. I was totally in over my head.
Sramana Mitra: We are now in 2000 and you have finished your tenure at Alex Brown. What happens next?
Dave Elkington: It was interesting. I watched banks and bankers make insane money for really not providing a huge amount of value into the economy. There was a value to the company, but to me, the fees felt disproportionate to the contribution. At some point, I wanted to see and help companies more. At the same time, I saw companies that were ridiculous. There was a company that was doing $750,000 and raised over $50 million. It frustrated me. I would see people who I feel were not quite as engaged and capable of making huge amounts of money and were building things that were frankly not terribly interesting.
I next chose to join a venture capital firm. I actually got married at that point. I moved to Florida and joined a small venture capital. The focus of the firm was e-health. It was healthcare technology investments and was incubator-esque.
They got very engaged operationally with the investment. That’s what really appealed to me. I wanted to get more hands-on. As any associate of a venture capital does, I did lots of sourcing. Additionally, they had me go learn about the operational aspects of companies. For a period of time, I would take on a Director of Operations or a Director of Finance where they would have me move and take office with the portfolio company for a period of time. That’s what really appealed to me. I did that for about two years. It was after the crash. They were trying to help companies be successful. I saw a lot of great things and saw just as many bad ideas. Ultimately, that pushed me to the next step. I watched these entrepreneurs trying to build things and build value. More times than not, it felt like there was this discrepancy between what the entrepreneur was trying to build and what they could operationally deliver.
An example would be one of the investments that the firm made was with a company that was building an online medical supply distribution company. They hired these engineers who would close themselves into a room and lock the door. They would say, “We’re not coming out until this is done.” Then you walk by and you hear them playing ping-pong or pool. They consumed a lot of investment and ultimately, didn’t really deliver on the promise of what was espoused. I became disillusioned with venture market and with these venture-backed companies. I was equally frustrated with these programmers who were espousing this magical capability of code. I knew how to code, but I wasn’t great.