 to the east. I'm Jay Fidel. This is Think Tech. Steve Zercher, the regular host of Looking to the E. He came in from Colbe, and now he's here in Honolulu with Alan Minor of Sunbridge Capital. Hi, Alan. Nice to see you. Good to see you. You guys are great because you're here for an entrepreneurial conference, what, at the Hilton? Right. And it's the East Meets West Conference. And Shanola Farnsworth sets it up. Right. And it's very important that she does this. Very important that people like you guys who are both into entrepreneurship and venture capital, that you come here and attend. And so today we're going to have a report from you guys about what happened yesterday at this conference. Alan, why don't you go first? Sure. What happened? Well, the first thing is I was surprised. I came most because I love spending time in Hawaii. I've been on panels for a lot of these conferences, hosted a few over the years. And to be totally honest, I didn't have a lot of expectations for the content or for the startups pitching at the event. And I was like, well, it's Hawaii. I'll go, have a great time, spend some time on the beach the day before and the day after. I was amazed with the quality of the content. And actually, myself learned quite a few things, particularly there's a morning session by a speech led by a lady out of Portland that defined an alternative goal for the startup ecosystem to creating unicorns. Her name was Mara Zepeda. And she and a few of her colleagues from Portland several years ago became very concerned about some of the sexual predatory behaviors that were happening that we're hearing about at Uber and some of the crazy waste of money at places like WeWork on private schools for the founder and wave pools and huge questionable potential for profit ever with the way the country. But carrying valuations in the billions of dollars. And so you said there's something fundamentally wrong about a startup culture and a finance culture that can see these as models to strive to replicate as opposed to problems that need to be solved. And so she and a few colleagues published a paper three or four years ago they called a zebra manifesto saying maybe we shouldn't be doing unicorns which are creatures that theoretically don't exist and are mystical and magical. We should probably be doing something a little more ordinary. So she defined a type of startup, a type of goal for the studies that they call zebra companies. And the zebra metaphor comes from black founders, female founders. More variety in the types of founders that we support. More variety and sustainability and community centricity for the businesses that something fundamentally needs to change. And I'd been struggling with the emergence of the unicorn idea in Japan because I'd seen some of the problems that I saw with that approach to startups in the US. And I did not want the Japanese to go chasing it just because it was getting a lot of attention and hype in the Valley. And so as people started talking about we need more unicorns in Japan. There are unicorns in China. There are unicorns in Silicon Valley. We need some in Japan. So that's a path we really don't want to go down here. But I didn't have a framework to think about the alternative. I didn't have a good alternative answer until yesterday when they brought Mara here to the event and she laid out their thinking about the kinds of things we probably should be trying to do more of as a startup because it feels so close to the way the Japanese treasuriously think about the role of business in society and the way a lot of the founders there think about their mission as people leading people to serve other people and to have a positive impact in the world. So there was a fair discussion with some of the people about whether or not she was maybe too left-wing in her thinking. Is this maybe a little bit extreme. But I think we pay attention to extremes. And we like simple metaphors that we can get her. And so not a unicorn is Ebro. It's a simple memorable metaphor. It's a clear and possibly extreme view of it. But I think we always need to have a few extreme views competing in the marketplace of ideas to have alternatives that have been thought through clearly and argued for eloquently to think about alternate ways. And so that for me that session alone was worth the trip to Hawaii. And then in the afternoon we can get it we have to have you maybe we have Steve look at each other in our windows. But there was there was another session in the afternoon that for me personally was enormously insightful and helpful and educational. It was well worth the trip the presentation the pitches in the afternoon the guest speakers. But if if Sheno and the team have been doing this for 60 to continue since another six years there's bound it's bound to have a really positive impact on the startup scene here in Hawaii. Steve reactions. Well yeah this is I think the third one that I've gone to and I also enjoyed the event very much and the quality of the outside speakers that came to the stage and those that are clearly interested in developing the infrastructure here for entrepreneurship. That was very impressive. But I have to say that over the years I've heard the same message. Many of the successes were outside of Hawaii and they're kind of coming to Hawaii to explain about their story. And there's still the kind of sense that we're still missing something here in the state. We don't have the iconic success that various locations in the United States and outside of the United States now because entrepreneurship is taking off on a worldwide basis. Sweden is a perfect example of that. Lots of very high valuation companies being generated there in Stockholm. So that's the story that I continue to hear through that. It's disappointing that there were not it doesn't seem to be that we're making progress in the state on that. Now they did have a business pitch and that was well done. The three companies that one one was from Hong Kong. One was local and had been assisted by Blue Hawaii and through the accelerator program. That was called Turnover B&B. They did a very good job with the presentation that came in second. The team that came in first was actually a very small startup that was categorized as being from Japan. But the students who started this business actually went through the UH Hawaii system. I talk with them later. So in a sense it's kind of a Hawaii company but they incorporated for various business reasons in Japan. So you had a winner from Hong Kong, you had a winner locally and then you had a winner from Japan just to give you a sense of kind of the mix of the companies that were pitching and the ones that the judge has selected. I know Alan had some interests in some of them. One was a recycling company, the one from Hong Kong. And also one that we thought might be interesting in terms of a collaboration with Japan was called Aloha Hospitality. They have a temporary service for the hospitality industry that's focusing on trying to train the people who are working on the gig basis to provide higher levels of service and focus on culture. So that was an interesting startup for us to see. So overall it was a good show but I was still left with this feeling like deja vu. I want to react I want to react to that because as soon as you said it seemed like the same thing I've been hearing every year. They keep saying the same thing saying the same thing. I don't feel like progress being made. There there's a really famous proverb in Japan which is Keizoku a chikaranari and it means persistence becomes power. And so I think no matter how long it takes continuing to do this event every year continuing to communicate the same message until something happens somewhere that changes. It's very hard to force change to happen but it's not so hard to recognize it when it begins to happen. And until it happens you have to keep tilling the soil, keep watering the plants, keep waiting for which seeds are going to sprout. And so I think the persistence and the consistency of continuing to communicate the same message, continue to bring the same kind of event. I tend to believe as the Japanese do that persistence will result in a powerful outcome at some point. I agree. I mean it's very important what they've done and it was a very impressive show. It's like you're tilling the soil and you're putting the fertilizer out there and you're waiting for the first sprouts to appear. Yeah exactly. So one thing that also I heard again and Alan and I were talking about that earlier. The people at the conference most of the organizers were talking about successful locations in not the most familiar place like San Francisco, New York or Austin and they talked about Utah. Yeah Utah came up several times yesterday. Yeah they did. So that came up as an example. So Utah has been able to create a very vibrant tech community there and Juan Malulu or Hawaii people looked at that because the thought is well if the state of Hawaii and the state of Utah we could potentially do that as well. No Alan, you have long roots in Utah. Yeah so explain how that happened. Well I've been hearing, I've been observing and hearing about the current state of Utah and how far it has come in entrepreneurship and having grown up there in Provo, Utah where half the population are students at Brigham Young and the other half of the students are somehow affiliated with Brigham Young the other half of the sits like Brigham Young University town. And I've heard been hearing about trying to think like well what happened, at what point in Utah did this begin to happen? And I can point back to very specific events from my high school and freshman year in college days when the IBM PC was introduced and there was a professor teaching assembly programming and a brilliant computer science students that we should build a word processor for these PCs. Word processors run on expensive mini computers and they had actually been doing work for the neighboring city of Orem to custom write a word processor for their data general mini computer and I was as a freshman assisting Drew Major who became the architect and brains behind the Novell network operating system. I was assisting him to write a word processor for a QM mini computer which was a they had something called a daisy wheel printer where the letters spin around and you get different fonts by replacing the wheel and this was a California company that had asked Brigham Young University to develop a word processor for us. There were two word processors happening for mini computers when the PC came out so we could build a word processor for the PC less expensive more people could use it and that became word perfect which until Microsoft Word was rolled out and tied so tightly to the government system until Microsoft dominated the PC software word perfect became huge a huge global company and Novell did the same they said well we can we can figure out how to get PCs to talk to each other and share data easily maybe there's something interesting there and so those two companies started by professors and students as the PC was born were both successful they learned how to sell software globally to do product management engineering sales raise funding created a significant amount of local wealth that went back into combination of philanthropy and angel investing and new startups so those the success of those two companies as the PC was rolled out formed the backbone for what is happening in Utah so by the internet bubble came along there was a large cohort of people in the state who understood how to build a successful large global company from scratch and the wealth to support it my firm used word perfect okay and ultimately used Novell we were we were part of that yeah we saw that all happening and we admired what was going on in Utah but you know a question is uh you know you were there you were in that happening and yeah I guess the question is what you know as you learn from the Japan culture that persistence pays off what can we say that you learn from the Utah experience that would benefit Hawaii or any organ any any locality you know that's trying to develop a tech industry how I would say that the emergence of Utah came from a small handful of very smart people who who in some ways were extremely smart but at the same time did not consider the power of the committee they would there there's a fellow entrepreneur in Japan once said the only way he could figure out his success in the sense of some of his colleagues from college days was that they all have the ability to sustain unjustifiable confidence so they they're not particularly brilliant their ideas were not really great but they they were able to have confidence with no basis in reality and to sustain sustain that confidence the delusional confidence delusional confidence and says the common trait of me and my friends was delusional and I thought that sounds like Larry Ellison that sounds like Mark Binyoff that that and I think I think I think you I think it would apply to the professor and student that started word perfect it would apply to Drew Major there there was never any doubt that what they were building would would be attractive to customers and that people would use it and benefit from it and no matter what kind of difficulties they may have run into I actually when I I was interviewed to join Novel one was just six people the two weeks before this is after I'd done my mission in Japan returned to Provo and Drew remembered working with me as a freshman says you should come work with us at Novel there are six people I didn't take the job because they had just laid off 200 employees they laid they had shut down a word processor mini computer company and Ray Norda had just bought the company laid off 200 people said these these six brilliant network engineers are what I'm going to bet the future of the company on and they had no cash to pay salaries they couldn't pay me my six dollars an hour I wanted as a programmer and they said we'll give you a little bit of stock we can submit we should be able to raise some money and start paying you a wage an hourly wage in January but I thought I got textbooks to pay for and tuition to pay I kind of need my six dollars an hour I'm going to go work for it so I went and worked for another company that ended up going out of it so I experienced firsthand an attempted startup that failed for lack of ability to raise continue raising capital and to get traction in the marketplace so the product didn't sell as well as they thought and they couldn't raise capital for long enough while turning down the company that had just almost gone bankrupt had focused on one thing doing it well doing it better than anybody and then build it so I think Novell's ability to decide what where was the future going the future was not in mini computer word processing the future was in the pc and in doing something unique and compelling with the pc and it was networking and so that we have six people I can afford to keep paying the salaries of six brilliant engineers I can't afford to keep the money losing word processor business so that decision to focus on one well-defined emerging opportunity and then both companies confidence is we're just a bunch of students like how do we compete with IBM yeah it was never a question so we've got something we can build something really powerful and compelling you said that you've said that there isn't really that much of a tech industry here in Hawaii and you know you're associated with entrepreneurship to shy of a school and you can make this cultural comparison between what happens and why what happens elsewhere and I wonder you know what's what's the secret sauce we should be searching for and was it covered yesterday um no I don't think that particular issue was addressed and how to and encourage a culture of entrepreneurship here in Hawaii yeah there wasn't much talk about that no and I that's a very important point I can tell you and Jane I have talked about this previously on other broadcasts and also over beers the students in my entrepreneurship class when I teach in the summer they are interested in starting a business but but their vision for it is is very small scale and they don't think on a much broader they don't have this delusional belief or irrational belief in the prospects for a company they would start beyond Hawaii they seem to be somewhat limited in terms of their focus on tourism and local business um so I also see that in Japan frankly I recognize talent I mean now I'm I'm utilizing that skill adventure capital but I also I've been hiring people for decades now so I could look at someone and I can pretty quickly tell this person is something someone that I would put a bet on that could potentially do it and sometimes I see it here in Hawaii and in Japan and the students don't even recognize it when I don't recognize it in themselves no they don't so part of a teacher is to try and encourage students to achieve the level that you see in them I mean that's one of the fundamental things that I focus on as I teach but Hawaii does have this kind of limited mentality maybe comes from the island culture or the Asian influence to be somewhat risk averse so again this gets back to the point of having a singular success to break through all of these cultural barriers or resistance points that exist in in Hawaii if there is a company that is able to do that then people will go oh it is possible but right now there's still a thought that this is too difficult to do and not possible to do and even if I tell them you have the ability to be successful on a global basis with students so what what is the what is the what is the is is there a big benefit in having a venture capitalist who attends for example a program like yesterday and Steve you said that Alan was had shown interest had expressed interest in some of the pitches yeah yeah we're going to follow up on Alan or you or any venture capitalist and I'm pitching I have an idea I may have some level of enthusiasm about it and a venture capitalist comes to me and says I'm going to wallpaper your firm with money I am going to make you feel I'm going to I'm going to show you how much I think you know you will succeed but how much does that help or is that just a recipe for a decline so Alan unfortunately he had a dinner appointment there was a reception afterwards and Alan had recognized a couple companies and I picked a one as well and I talked to all three of them um so one seemed to understand the potential that I was offering them in terms of a collaboration in Japan and the market opportunity in Japan another one was kind of uh this is coming out of the blue and the response was kind of neutral and the third one was totally unprepared and really didn't understand what I was talking to them about or what this potentially means so it was a little bit all over the map now are we going to continue conversations with them yes we are despite the kind of um not so strong response to investment and also the opportunity to take these products or services to Japan but we did it and we're going to move forward with this and maybe it will result in these companies establishing successful presence in Japan and maybe using that to become more global one of them was a local company one was a together two were formed that were outside of Hawaii so although one of the foreign ones you said it's a UH graduate so yes maybe once he gets his he's still only two people uh and once he gets some traction around product in Japan if if he were interested in moving back to Hawaii it's a purely technological play the sales and marketing higglers does not need to be near the cussers it could be anywhere and there's probably the kind of talent he would need to build the technology is recruitable here in Hawaii so depending on how strong his personal connection to Hawaii still feels I could I could imagine being just as comfortable investing in his business if he chose to move it back to Hawaii and just have a sales office on the mainland and in Tokyo as if he stayed in Tokyo I think for the for getting getting the first few customers it's helpful to be close to them while you're building it but he's small enough that a move of the full team back to Hawaii if it was something that that he might like as a life choice is something I could totally get behind um in in this in this world of fast uh there are a couple of companies that if if my instincts about the idea are reinforced by my conversations with the people and their personalities and and there is there's one which it's a very very extremely interesting company if it's for real but it's it's one that you approach with a lot of skepticism you know if this is for real it should be everywhere already sort of and you see those now and then and I always check them out I always want to understand and not walk away from them just because it sounds crazy because I I believe that every once in a while the biggest things in tech sound crazy at the beginning and you always should talk to them and and tell you until you have understood why it really is crazy why it's not economical or maybe technically feasible not economically feasible maybe it's technically feasible yeah I pointed I say well this is yeah yeah I say crazy good or crazy so I like the shark tank thing maybe yeah uh maybe maybe maybe maybe so there's a maybe too nice I may be too nice I may be too nice there's actually there's actually a company I'm working with in Japan right now that I'm extremely skeptical about but I also for my years in software I know that if it can be proven that this really works the way the founder scientist claims it is it will be huge everyone will be using it to build their software but I find it extremely incredible that it's essentially he claims I have software that could take any existing software product and analyze it restructure a little bit and prove that there are no bugs in the software and so yeah sure you can uh it would be wonderful if you can and so I went into the initial meeting and says I just and they're old guys who it's an old scientist and it's an ex IV retired IBMer and a retired so it's a bunch of old guys which also I find a bit skeptic a bit questionable but they're really enthusiastic about it and I said well I'm coming the first man says you need to know I only believe there's a one percent chance you can do what you really want to say and your job today is to move that one percent to two percent and if you can if you can convince you that there's a two percent chance that what you have is for real then I'll take more meetings so we can figure out if we if I eventually invest or how we grow it together and they persuaded me not with any kind of technical because the team was all very technical and here's the algorithm here's the mathematical proofs that this is true and it's been proven mathematically in the year I've heard that a hundred times before I've heard that about perpetual motion machines how many times I don't know um and I but I actually I actually I actually I haven't yet I haven't yet but I I will I will continue to always take at least one meeting with someone who claims to have invented the perpetual motion machine and I know the physics I know the physics says it's not true but there are plenty of things that physics and science were saying were not possible not conceivable at some point but turned out to actually something in the something in the underlying assumptions and paradigm for the physics of that pay turned out to be incorrect so reaction to their project yeah a product can be very valuable for them even without any venture capital at all well and the fact that they were willing to take so they end up having me name the company for them in the last meeting we had so we were there so what what convinced me to have meetings with them is they had had one very who seems to be a very reasonable credible senior executive from one of the biggest systems integration firms in Japan said we're going to use this and see how it works on a project we're going to pick a project use it see what the impact is and so basically what each meeting we have we get together once a month and he tells me the progress of the problem how much have they done what's the result so far does it appear like it's going to produce and and he's quite positive that may in fact dramatically reduce their cost of maintaining software and if not maybe not eliminate all bugs but dramatically reduce the number of bugs that are introduced every time they introduce new features to software so they're actively evaluating it right now so the fact there's an act a customer actively evaluating it who can give me a customer's point of view on whether this really adds value to their development it's a series it's a series we've got together once a month yeah we get together once a month much progress they've made yeah exactly so i want to see if they're continuing to making progress and at some point right now i'm i probably believe about 15 percent now this is for real and if i get to a point where i believe when i have a 35 50 percent belief that it that it is real in terms of value added then i i understand how you can build the development structure for how much to fund it how to market it how to position it in the market so there's a lot of value i can bring but it's early do they really need alan they need alan because because you know they always say i mean i when i started getting interested they don't need my money if if if if if if what they have is for real they'll figure out how to sell it my question is the money though yeah uh you know you you spoke before alan about how in utah the experience was uh bootstrap right anything but adventure capital contribution yeah can i can i make a company uh in the modern well there was without any venture capital so we'll just get back to the bootstrapping one question we had when we talked about earlier yes it's possible to do that but you don't need to do that because there is just so much money out there right now that is no longer an issue um well and there was there was venture capital behind word perfect and ovale once the products have been proven to some point in the market and they said this could be really big we need to hire our sales and market organization quicker than we can do that through organically financing it so when when when the business got to a point where they said this could be really really big but it will be bigger faster and we'll survive longer if we can grow faster than we could organically and so it started bootstrapped and the the biggest and best internet companies in japan all bootstrapped at the beginning and then and you know there are i think i think the best comes you're almost always bootstrapped to a point but now in japan there's a tremendous amount of venture capital yeah there is so just getting back to the shark tank the the session closed with kassidy crowley who is a senior yeah presented there who was on shark tank and while the judge is there so i have to say the influence of shark tank on entrepreneurship especially with my students that's a huge number of students taking entrepreneurship class have gone up 50 percent nationwide in the United States because of that program interesting so i have necessarily that's a good thing but it certainly had a profound effect on education for entrepreneurship i was really sad i had to leave for the dinner before that and and so i want to end with a question do you think kassidy could potentially become the word perfect to novell the person the person that that creates the first huge tech success on the way she's only 10 she's an elementary school so but she certainly would be a candidate for that breakthrough entrepreneur for this state and just a wonderful accomplishment for her the 10 years old well we need this we need to focus on it we as a country and for that matter we as the world this is the future of developing business and making our our society sustainable it's the way of dealing with social issues as you mentioned some of these speakers dealt with social issues and you guys both of you are in a situation where you could have a tremendous effect on that generation of entrepreneurs that's coming up and they in turn can have a tremendous effect on our world anyway thank you very much guys i want thanks for having an ad that alan is going to be the poll chung speaker oh yes yes i'm really looking forward to that for late august and steve and i are going to continue our looking from the east every couple of weeks on monday we are so excited about connecting with him in japan and whenever he goes you can run see but you cannot thank you very much for appearing thanks so much it was a lot of fun thank you aloha