The Distance Project

In The Weeds

Posted on March 27th, 2008 by Zach.
Categories: General, Industry.

I have been in The Weeds recently. It’s a place that start-up addicts know well because it happens to us all. In my humble opinion, The Weeds are that stage between the start-up frenzy and the full fledged company. I am not actually sure if other people use the term, but I like it because that’s exactly how it feels.

In our case the weeds have huge upsides - everything we have going, seems to be booming along: Reware and Juice Bags are going global with growing sales around the world, the PowerCube’s first couple of units are rolling off the assembly line and are due to be deployed this summer, and a couple of new projects are looking like they are set to pop in a big way.

That’s the upside of the weeds: If you make it this far, you have settled into a model that actually works. You have figured out your processes and managed to the survive the huge challenge of covering expenses. Every business in the startup frenzy has enormous obstacles that look like total doom. If you make it into The Weeds, then you have managed to avoid most of those. Congrats.

But there are serious downsides to The Weeds too. The vast majority of these arise from the fact that in The Weeds you suffer from having all of the problems of the start-up stage nipping at your heels, while at the same time “real company” issues are booming onto the stage for the first time. There are two that pop instantly into my head as I write this; the never-ending challenge of managing cash flow, and managing energy level.

Managing Cash Flow

In the startup stage you don’t really worry about this, you are so psyched to be selling anything, so excited to be in existence at all, that this doesn’t come up all that much in discussion. Overhead is lower in your garage, you beg/borrow from friends on an almost constant basis to get what you need done. Life on the cheap. The hustle.

The Weeds bring office space. Friends are not quite as excited to loan out their services the fourth time, and you are tired of asking. The Weeds bring cash crunches where larger transactions from customers and suppliers don’t always overlap in time to pay the bills. Cash Flow management is a fascinating thing to ponder from the outside and a total pain from within. You see plenty of money coming and going, there might even be a fair amount in the bank account, but there is also something always looming on the horizon that is going to suck that cash away. In The Weeds while your overhead is pretty mature, your networks of distribution and overall sales need to catch up.

Cash flow management is the single largest challenge to companies. Recently I have been talking to people who run successful businesses much larger than ours, and it is frightening to realize that these issues never go away. The numbers you are dealing with just get bigger. Oh Joy.

Founder’s salaries are always the first casualty of cash flow. The Weeds often force a decision between your own paycheck and something that will help the company grow. You own the company, you believe that it is a great investment in your future, so of course you are going to sacrifice a small, short-term paycheck for long term success. But there comes a point where you need to pay for the day-to-day of your own life, you can’t always be working for the future.

Reluminati, has had two points where we have had to make a leap of faith in the cash flow department. The first was a couple of years ago when we needed an office big enough to grow into. We were worried that our sales per month would not cover the rent, but the space made us a real company and so we took the risk anyway and made it work.

The second leap came recently in trying to figure out how to pay ourselves consistently, essentially factoring in our work as a cost to the company. We have taken that leap as well, and though it is stressful at times, it seems to be working. I’m not sure if this is as huge a step for everyone as it is for me, but I really think this is when a company becomes real.

Managing this has nothing to do with the amount of money coming in, because there is always plenty of that. It is about managing the flow of cash successfully. This is when it feels like you have a job, that playtime is over. It feels good.

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Why I Love ZipCar, by Zach L.

Posted on November 16th, 2007 by Zach.
Categories: Sustainability, Systems of the World, Urban Planning.

This title sounds like a 4th grade paper I wrote once. I was a good writer in 4th grade, my paper on the Tyrannosaurus Rex was Pulitzer worthy. Perhaps the highlight of my writing career - sadly it was all downhill from there.  4th grade talent notwithstanding, the ZipCar model really is cool.

If you haven’t yet, check out the concept of CarSharing. It is a fascinating model of managing the last mile (always the hardest piece) of public transportation systems. What is always frustrating about Public Transportation in this country is that often you are too far away for the train or bus stop. Getting to your final destination is expensive and difficult.

Parking Zipcars at subway, train, and bus stations solves this problem.  You still have the flexibility to go exactly where you need to, but you didn’t have to battle highway traffic to do it.  Plus CarShare programs  cover insurance and  the fuel for the time you use the car. Love this concept and I hope it spreads all over the country.  Recently the two biggies in this space; ZipCar and FlexCar announced that they will merge in the coming year.  This has to be the biggest no-brainer since XM and Sirius.  Oh right, those two still haven’t managed to figure out the merging process.

We support CarShare as a a key piece of the puzzle and this summer we signed a partnership deal with Zipcar to give all their members a discount on Reware products.  For us there is an interesting cross marketing concept here.  ZipCar and Reware both have been started with the hope that they will make changes to the system, while providing their customers a new service that they use.  Making change and making money. What could be better from a work standpoint?

It seems like there are more and more companies trying to figure out this model, and I envision us partnering more and more often. It makes sense because the customer base is so similar. For the most part the target audience is very mainstream. They live normal lives, they are not out on a commune weaving their own shoes .  But they see the world changing, they see their lives as impactful and if they can spend money with companies that make them feel like their actions are part of the solution, they are pleased.

Call it the Whole Foods model.  I have to go to the grocery store anyway,  why not go to the one that is espousing the values that I want in my life?

There is a growing lifestyle concept that I feel like more and more people are trying to figure out. ZipCar and the other car sharing services fit right into this niche.

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The Matrix - Designing a Good Consumer Filter

Posted on May 14th, 2007 by Zach.
Categories: Sustainability, Systems of the World, Industry.

When Socially Responsible Investing (SRI) first started to grow there was inherent challenge that had to be overcome: If a company like Nike was recycling their shoes and a significant leader in waste reduction, but employed 10 year olds for 20 cents a day, were they an acceptable investment? Some people would say; “Yes, the environment is all that matters and Nike is doing a good job innovating on that level.” Others would say; “No, how can you claim to invest in a socially responsible way if you are abusing the labor force that is making the product?” To their credit Nike has made progress on their labor practices over the years, but the reality of these reactions is that both are correct and this ended up being a major barrier for SRI breaking into the mainstream.

The solution that was developed over a number of years was really quite ingenious in a free market sort of way - let the consumer decide what matters. SRI managers have created issue based filters for investing. Care about the environment? Here is a list of companies that are acceptable using that filter. Is labor your issue? There is a filter that fits. In many cases the filters have become even more nuanced allowing consumers to associate different “weights” to each issue based on their own priorities. Combine that with more traditional investing filters (Risk analysis, Diversification, Sector investing, etc.) and you have a very smart approach to the investment process.

This has been incredibly successful, and we have watched SRI fund management grow to exponentially as a result.

I bring this up because Reware is struggling with similar issues as a company. We like to think that we are part of a shift in product creation. We try to integrate concepts that matter in the world - local production, low toxicity, recycled material science, a little environmentalism, minimal packaging, and so on. Basically with every product, we would want a narrative that falls within our vision of next gen product design. This is what we believe is good for the world, and we know this is where the money is. We are after all in in this thing both to change the world and make money, pro-market force peeps that we are.

The annoying thing about being what’s next, is that the systems of the world are conspiring against you pretty much at every turn. As a small company we don’t have the resources to force our vendors to adjust to our needs. And this is a hard thing, something that I am sure Patagonia struggled with in the early days, that Nau is going through, and Arbor Sports has had to deal with. Everyone trying to adjust the status quo in product design runs into these systems like a brick wall.

A tangible example:

Right now we make three lines of solar bag. Our favorite is the ES line. With three styles (Daypack, Messenger, and Backpack) and three or four colors, we sew these bags in Texas. The quality is second to none and that is always an important factor. Plus the best part of this line is the fact that all the fabrics are made from recycled soda bottles. It is a bag that fits all of our goals - Production in the US, recylced fabrics, solar on the front to charge to gizmos - pretty great right?

Thank you, I will accept your humanitarian award, but please hold the applause.

A down side to this fabric is that it is not currently in wide distribution. What this means is that there is a limited supply in the marketplace, production keeps shifting from one factory to another, and the low toxicity dyes and process pieces don’t always work quite right. The company we work with to sew the bags struggles because they too are doing something that has never really been done and these barriers screw up production. This is a problem because often we cannot rely of a steady stream of bags. We then cannot offer these bags to larger clients because we worry we will not be able to supply them. I feel my ulcer flaring up just writing about it.

So problem #1: Production of the environmental fabrics is amazing, cool to be a part of, but sometimes unreliable.

The answer for us has been to use a more traditional system of sewing with a great company in North Carolina. Still in the U.S., but made for the most part from traditional Denier or Ballistic nylon. Still with the solar. So we have lost the recycled fabric piece with this style (we are experimenting with some organic fabrics), but gained reliability of production. This gives us the ability to sell more widely and have more faith that we can deliver. Plus making in the US we have a 4 week turn around for the most part, meaning that our response to the market is fast. Really fast. Speed and reliability comes at a price though and it is a steep one. The bag we sew in NC we could probably make in China for a 1/5 the price. That is a huge price discrepancy and effects the end cost to the consumer as well as our bottom line.

Problem #2: North Carolina is expensive

Anyone who manufactures overseas will tell you that product development is a headache - especially if you are a small company. The reality is, China is just far away and that leads to complications. No offense to Mr. Friedman, whose picture of the flat world is a good one, but in my experience it not so much seamless as navigating the seams themselves. You basically need a person on-site that you know and can communicate effectively with. Or you need to go yourself, and often. But there are huge benefits - the low costs are the primary one. This may seem cold because we all like to think that we would pay more for our stuff. The reality is that we will not. We have an idea about what things will cost and as consumers, we will not deviate from that. This is why China is booming, and industries like sewing are disappearing for the US. It just is what it is, and there is no avoiding it.

Problem #3: Overseas production is complicated for small companies. It has long lead times per order. We have to worry about labor conditions, and environmental usage.

So there is no silver bullet here that solves all of our problems. This is and will become reoccurring theme of the fundamental industrial shift we are going through as a country, as a world. There is no single solution in Energy, in Waste, in Water Conservation - in a every area it will take a basket approach to solve problems.

So our dilemma has been this - How do you quantify the narrative of your products? Is a future bag made in China of recycled fabrics better, or worse than a Denier Nylon bag made in the States? Is the fact that production is inconsistent for astounding products better than average products that are reliably produced?

What do consumers value most in their so-called “green” products?

For a while I have been agonizing over this, and in the end the SRI model that I love so much is a good starting point. We are attempting to create a matrix to products that allow the consumer to weight what is important to them. We will have products from overseas, we will have products made in the states. We will have expensive “Boutique” or “Limited Edition” uber green bags. We will have more traditional fabrics with solar on them.

In the end we will leave it all up to the consumer to work out what is most important. Hopefully we will grow to a level that we can dictate our needs to producers and get everything we want in one product. - and really what is more greenie-capitalist America than that?

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The Startup Addiction Defined

Posted on April 13th, 2007 by Zach.
Categories: General.

I was asked recently what it takes to start a company. Having no idea really, I had to think about it for a bit. What exactly had we been through recently with Reware? In the end I really couldn’t give a good answer, but here are some thoughts that come up when people asked things like this.

Someone once told me that every start up takes at least 3 years to even remotely feel like a normal business. You know - semi-regular paychecks, some pretense of business infrastructure, and that always elusive concept; cash flow.

Every new entrepreneur says the same thing when they get advice like this: “Yeah, but we are going to do it differently”. “It will go faster with us. “This idea is the killer app”. And on it goes. Typically you say this for about three years, until such time as the company takes off, or crashes in a horrible ball of flame taking your oh so fragile ego with it.

High stakes poker this stuff, and yet that is the appeal. The idea of going to the same workplace to do the same job day in and day out is too unfathomable for most startup junkies. I let you in on a little secret: essentially entrepreneurs are lazy. Not in the “lay on the couch and do nothing” sort of way. No, it is a more deceptive laziness - One where you work way too many hours and feel like there are not enough hours in the day to finish what you need to do. See? So Lazy.

OK so maybe that doesn’t exactly jibe, but here’s the thing: The startup is a project, not a job. It has a beginning, middle, and most importantly – a finish. When we started Reware for example, I am pretty sure I had my own project finish in mind. I didn’t know what that point was exactly, I just knew that I always have a notion that this is not forever. That there will be other adventures, other companies, other projects to come.

That is the startup addiction – work like crazy all day everyday, get to a point where the business is stable and plan to have much smarter, more organized, and reliable people run the thing. Maybe change your title from “Managing Partner” to “Creative Strategist”. Come in two days a week. Surf a lot. This is the dream that keeps you going. And it’s not the life of leisure that drives this, in fact that leisure is boring after about four days. No, it is the idea that the job or the project is done. That you worked like crazy to an end point. You achieved something. And then you took a much needed break.

This is a psychosis of some kind, I am not sure where it comes from, but there are some specific criteria of the disease:

Work can’t feel like work. It is part of everyday life, in my case the things I am reading at home pertain directly to the places I am traveling for quasi work/vacation hybrids, to the things I am doing in the office. It is the perfect combination of OCD and ADD, both obsessive and impatient, hyper-focused and scattered. I recently took a trip to Mexico where I did absolutely nothing related to work. A true vacation and it was wonderful – for about 4 days.

Denial. 90% of the work stinks, but the other 10% makes you forget that fact. Anyone who as ever been to sea for an extended amount of time knows this phenomenon. Most of the time at sea you are cold, wet, and tired. It’s that one sunset that is so beautiful it makes you tear up. That’s what puts you back out there again. Startups are no different, you forget the pain. I hear pregnancy has similar aspects, but I can’t actually attest to that. Maybe someone else can comment.

There is an inability to pace one’s self. I always wanted to be a teacher, and I think I was a pretty good one – for about 4 weeks. What I could never figure out was how modulate my energy level to last over a whole year, let alone a career. Not only that, but I didn’t want to. There is something fundamentally appealing about the project that swallows your life, and then lets you go surfing later. By the same token there is something horrifying about evenly paced work day in and day out. I just can’t do it. And this is why I leave teaching (one of the most difficult and important job on the planet, incidentally) to people more talented than myself.

In the end I don’t understand the point of work. I understand the value of projects that will fundamentally change the world and I can get into that idea, that is what drives everything else. But work everyday, just sounds horrible. Don’t get me wrong, I have friends for whom work is just a mechanism to do the other things they love. Work is not a calling, but a way to pay the bills, put food on the table. It enables the real passion for them - creation of art, travel, sailing, whatever. Work is just a means to an end, and I can respect that - even if I could never put in that kind of time.

No, give me something that swallows my whole life for three years. Give me something where I will be alternately swearing and whining because I am trying to make things happen that have never been done before, but I think they should be easier. Give me something that sucks my savings and credit down to nothing. Give me the chance to make the big change.

And this is called entrepreneurial. Or stupidity, they really are pretty hard to distinguish.

2 comments.

The Breaking - More Martha Stewart or Road Warrior?

Posted on March 30th, 2007 by Zach.
Categories: Systems of the World, Industry.

We are beholden to tentative social systems like never before in human history.

Usually when that idea pops into my head, I am freaking out about the coming Oil crisis. Oil dictates so incredibly much of my world, it is crazy. The success of Reware for example is utterly and completely dictated by fossil based fuels. We build Solar Bags in which, let’s say for argument sake, 80-90%% of our process is dependent on Oil – The photovoltaics include materials refined using fossil based energy, they are then sealed in a special plastic coating (all plastics are petroleum based), they are then shipped (Using diesel fired trucks, trains, and planes) to a factory whose machines, heat, lights, and arriving workers are all powered by fossil energy. They cut rolls of various Nylon Fabrics (and if you own nylon, you own a nice little piece of woven oil my friend) into bags that incorporate the solar. Bags are then shipped to a warehouse, and then shipped to your doorstep. Let’s see, is there any step that isn’t totally dependent on the oil economy for us? Nope.

Think Oil price fluctuations matter?
And we are not special, you can take apart any industry and see the exact thing.

The systemic use of Oil in the world is astounding and we have two brand spanking new industrial behemoths developing in India and China. There is no question that there will be some shortage in availability will effect the cost of doing business AT EVERY SINGLE STEP for us, and the US economy at large.

Not convinced? Talk to Matt Simmons – a former Bush energy advisor - about what he thinks about the Oil that exists in the oilfields of the Middle East, or what he anticipates the growing demand to do to our own national security. Or how about James Woolsey, former CIA head under Clinton. Or Amory Lovins, who has forgotten more about this issue than I will ever know.

All of them will tell you that the coming Oil shock is a big deal. Interestingly though, it is not the only system we hang onto by a thread. There are other examples; among others Food Distribution, Clean Water Access, hell Traffic Volume - are all systems that stand precarious if you start to analyze them.

Imagine for a second all communications stopped on the planet. It is not that hard to spin a scenario where all satellite communications were knocked out, and not just from a rogue missile system Take this story about a coming solar storm.

Oh yeah, you read that right, Solar Storms! As if we didn’t have enough to worry about right? But I don’t bring this up in a doomsday mood – we’ll leave the killer asteroid we should worry about for another time. No, it looks like this storm won’t disrupt much, but it served as a mechanism to think about how critically important global communications are to the world we live in, and are only getting more so.

The question I find myself asking is what would be the impact of this. Seriously this is what I am wondering – what happens when the systems of the world come to a grinding halt? The easy answer is that I need to start buying leather chaps and spiked collars for my posse of punked out 80’s style post-apocalyptic warriors. We could drive around in dune buggies looking for trouble.

As exciting as that vision is, it seems like there might be a more nuanced answer. Will it be Road Warrior, or Martha Stewart, this world where systems break down. Is there good in system breakage? A rise in local economies, a subsistence workday, a return to natural fibers and a lessening of mass produced goods anyone? Any takers?

I don’t have all the answers, but I am curious. I can’t help but think that with all the doomsday projections, there are some serious unrealized positives. And I don’t call me a Luddite, I am just spinning the question. The Amish live a decent lifestyle, with happiness, family, and healthy economy. Is it unreasonable to look at that and wonder what would become of us should the systems we rely on so heavily disappear?

My current lifestyle personally would come to a grinding halt, especially workwise. I count myself as pretty handy, but the reality is I like the creature comforts of our systems. I don’t want to work in the fields dawn til dusk. I am a product of the digital age. I don’t remember what it was like before email – partly because it has become so ingrained in the business and personal world, and partly because I never worked in the pre-digital age. I have some vague recollection about how you do research without the internet, but sourcing materials for Juice Bags?

Now how would I go about that exactly? No really.

Update 4.5.07: It appears the Solar Storm will screw up systems. GPS and general global navigation may feel the heat. Sorry about the pun.

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