Zero to Tesla

by Sanjay Singhal

  Walking into Ryan’s office after a particularly good earnings review with our CFO, I found him at his computer, browsing what looked like vacation properties. I asked what he was doing, and he covered his screen, asking me, “How much do you think a private island off the coast of the Bahamas would cost?”

  I shrugged. “I don’t know. A million dollars?”

  Ryan turned his screen toward me, exclaiming “What? You can’t buy a private island for a million dollars, that’s ridiculous!”

  I leaned in and looked at the screen. “Uh-huh, ten million.”

  Ryan grinned and said, “Yeah, for a small one. Want to go halfsies?

  LOOK AT THE PRICE TAG

  We didn’t go halfsies on the private island, but I did finally have the money that Scott had told me would give me independence—what he called “F U” money. I wasn’t running a startup any more.

  My father had told me a joke once with the punch line, “If you have to ask, darling, then you can’t afford it.” Despite my vow to spend wisely, I did intend to spend some money. And I wanted the experience of spending money without “having to ask” the salesman. One day I went to Harry Rosen, a place where I couldn’t normally afford to shop, and started looking at jeans and a pair of shoes. As I came out of the fitting room, the salesman asked me if I’d like a casual T-shirt to go with the jeans, and I said, “Sure, lead the way.” He led me to a rack of crew neck T-shirts and pulled out a black one with a texture to the material. I’d only ever worn T-shirts that were smooth, and I was impressed, so I said I’d take it without trying it on—I knew I was a size medium for T-shirts.

  I also knew the T-shirt must be expensive, maybe as much as seventy or eighty dollars, rather than the $19.99 or so I’d normally spend at Winners. I realized as we went to the cashier’s desk that, since I hadn’t tried on the T-shirt, I didn’t have a chance to check the price on the tag, but I was damned if I was going to ask. I even made a point of not looking at the paperwork as I paid for everything, “Just put the receipt in the bag.”

  When I got home, I put on the outfit and was checking it out in the mirror when my wife walked by and said, “Nice jeans, but the T-shirt neck seems a bit uneven. Where did you go?” I told her Harry Rosen, and she of course asked, “Well, how much did you spend?” I went to get the receipt and looking at it for the first time, I blanched. The T-shirt was a $350 Armani. And it had a saggy collar. I wore the shirt only once in the following two years.

  While making money was great, I went through a one-year period of lottery-winner mentality where spending money was fun in itself, the more inappropriately the better. From a fifty-dollar club sandwich at a hotel in Dubai, to a $5,000 free-fall airplane ride over Washington, DC, to Armani T-shirts with saggy collars, I was in the twilight zone of the newly rich. It was surreal in some ways. I bought so many slightly desired items at Best Buy that I lost all interest in shopping. My core personality didn’t change to make me a fan of expensive watches or original artwork, but I was suddenly willing to pay more for things I liked—bribing bouncers to get into a club or buying playoff hockey tickets on Stubhub for $4,000 a seat.

  About a month after my first large dividend check from the company, I had lunch with my friend Mala, and after a brief tussle over who would pay the bill, she threw an American Express Centurion Card down on the credit card tray. I picked up the piece of black titanium and weighed it in my hand. “I’ve never seen one of these in real life before. How did you get it?”

  “My company spends a lot through American Express, so they invited us to get the card this year,” she answered. “Initially I was really happy because it’s so prestigious, but now I realize that you don’t really get much in terms of services for the amount you pay.”

  “Really?” I said. “But surely the prestige alone is worth it, isn’t it?”

  Mala’s answer was, “Sanjay, it’s nice when you start making money, but trust me, you get over it.”

  ---

  I got over it soon after, literally coming back to earth as my feet alit from a spinning aerial carousel ride at an amusement park in Toronto. I had taken my now-teenage daughter, Nikhita, to the Canadian National Exhibition (CNE), and anticipating long lines, I had bought just enough tickets to last the afternoon, rather than getting an all-day wristband. As it happened, it rained in the morning, and there were no lines at the rides, so within an hour we had used up all the tickets. My last ride was the Chair-o-Plane aerial swing, and as I swung in lazy circles contemplating my immediate future, I realized I was going to have to either buy a large number of additional tickets or get a day pass.

  I felt ill, and it wasn’t the spinning chair. It was a complete waste of the original eighty dollars in tickets to get the hundred-dollar day pass now, but it was the only reasonable decision. Compared to the T-shirt, it was small potatoes, and I spent several minutes trying to console myself by calculating how much money I made per minute and how many seconds it would take to make up the eighty dollars I had wasted. It was a small number, but I still felt sick.

  CAN YOU SPARE A DOLLAR?

  As money began to come in, I received many requests for loans or investments from strangers as well as acquaintances, friends, and coworkers. There were two types of requests: those for loans and those for equity investments. My problem was that I didn’t recognize or appreciate the difference.

  When you make an investment, you mentally accept that the money might never get returned, but the trade-off is that if you do make money, it’s likely to be a high rate of return. My very first loan, made back when I was also investing in Simply Audiobooks, was to a software distribution business. John Buie was an entrepreneur with a commanding knowledge of wireless telecom, the latest gadgetry, and business software. When he walked into my office wearing a Bluetooth headset clipped to his ear, I thought he looked like he knew what he was doing. In my defense, this was before the Bluetooth in the ear thing was even common, let alone mocked.

  John had several contracts to supply business software with smaller companies and needed $25,000 to buy inventory and grow the business. I had heard somewhere that you invest in the entrepreneur, not in the business idea, and he was an impressive guy, so I just asked for some references. The business was too simple to require a business plan; besides, all I was really trying to do was come across as a big-shot investor.

  Because it was a services business, and because the amount was small, it made more sense to do a loan than an equity investment, so I decided on a 12 percent interest rate—a “good” return rate relative to the bank’s 4 percent—and signed a deal. I had the references, but I didn’t bother calling them, because I was a good enough judge of character, and I knew John could make this successful.

  A month later, I received my first payment, and I was quite happy. I was now making 12 percent on my money, something I could brag about to friends. But then the next month, there was nothing. Two months later, I tried to get in touch with John and wasn’t able to reach him. I called his references, and one number was out of service, but the other was to his accountant, who said, “Oh, you invested in John’s business, and he disappeared? I wish you’d called me. This isn’t the first time John’s done something like this.”

  I was furious at both myself and John. I hired a collections agency to go after him, but they came back quickly with the finding that he was working at McDonald’s now, and they didn’t hold out any hope they’d get the money back, so they were dropping the contract. It wasn’t fraud—he just didn’t know how to run a business, so he lost the money and then ran and hid rather than calling me to tell me what happened. Exactly what I did to my investors when I crashed Nikean.

  Not only was I a horrible judge of character, but 12 percent interest wasn’t enough of a return to offset the notso-small possibility that the whole investment would be lost. Maybe I should say no once in a while. I learned fast.

  “Sanjay, can you loan me $2,000 while I get back on my feet after a bad investment?” a
sked Vincent, my former coworker at Signal.

  I thought, “I don’t know this guy that well. How many people must have said no before he called me?” I said no.

  “Sanjay, can you loan me $30,000 to hunt down a guy who owes me $100,000?” asked another business associate. I thought, “If the guy is that good at hiding, I’m pretty sure you’re not going to find him.” I said no.

  I didn’t always say no. My talented assistant, Tara, asked me if she could borrow $10,000 to help start a hairdressing salon, and I said yes because I knew her well enough to trust her. Loaning money to someone you know and like isn’t a bad decision, as long as it’s not too large a sum. She paid it back on time with interest.

  “Sanjay, I need $10,000 to start a charity nonprofit,” said Courtney*, a budding entrepreneur I met at a pitch competition. I couldn’t make an equity investment because it wasn’t a for-profit venture, but I gave her the $10,000 and wrote it off in my mind, borrowing a page from Earl, the wealthy investor in my first venture, VideoDrive. A year later when the company went out of business, Courtney was distraught, calling me to let me know about the company’s demise and vowing, “But don’t worry, I’ll make sure I pay this back personally.”

  “Courtney, I appreciate the call,” I told her. “Don’t worry about it. I loaned the $10,000 knowing I might not get it back. Are you doing okay?”

  It was a rinse and repeat of my VideoDrive experience, except this time I was the good guy! The universe wasn’t done teaching me lessons about loaning money yet, though, so when Scott came to me for an investment in his unusual business, I was receptive.

  Scott needed $250,000 to professionalize and grow his medical marijuana business. He explained to me and a few other interested investors that medical marijuana was going to be fully legalized in Canada in a few years, and the small number of private growers following the current system of laws would be free to grow dramatically with ridiculously high, yet legal, profit margins. I was intrigued because other investors were mostly turned off, and I enjoyed being a maverick, but also because the payback period for a 200 percent return on the investment was only one year. I didn’t think “too good to be true” because early investors in my company Fusenet had made a similar return.

  The investment due diligence was going well, and it looked like my group was going to invest the money when Scott and his partner Ron came into our final meeting to discuss terms. I could practically see smoke curling off their jackets as the smell of marijuana pervaded the room. I glanced at another investor, who shrugged his shoulders, then back at Scott and asked him, “Are you high?”

  He looked a bit embarrassed, and before he could answer Ron responded, “We’re both licensed to use marijuana medically—”

  “Yes,” Scott chimed in. “So I guess we were just doing some product testing.”

  Later in the meeting, as it became clear that we were going to go ahead with the investment, Scott coughed a little and said, “Ron and I have to tell you about something that may make you reconsider your investment.” Nobody on our side of the table said anything, so Scott continued. “Uh, Ron and I were arrested last year for marijuana trafficking. Criminal charges have been filed, and the trial is scheduled for later this year.”

  Scott proceeded to explain how they were wrongfully targeted, why they weren’t going to be convicted, and why they were still a good investment. We decided not to make the investment, but amazingly, it wasn’t because of the criminal charges. After a lawyer in our group made some inquiries, we came to the conclusion that they were indeed unlikely to be convicted. The investment came apart because Scott and Ron decided their respective visions for the company were too different to create one entity for us to invest in.

  I felt guilty that we’d been doing due diligence for a month and in the end didn’t invest, costing them that amount of time to dig up other investors. I mentioned this to one of the other investors, who said, “So what? You don’t owe them anything.” Scott made a plea, though, to ask if we’d be willing to invest anything at all, and ignoring my own history, I offered him a $25,000 loan at 12 percent interest. After all, if I’d invested in his company, I’d have been willing to write off the entire investment, so how different was loaning money with the same mentality?

  Outdoing John by a couple of months, Scott made three interest-only payments before he disappeared. This time I had to hire a private eye to track him down, and I discovered that he was in jail. To get the remainder of the money he needed for his business, as well as to pay legal fees associated with his pending criminal charges, he had started dealing “a little on the side.” Ironically, while he was in jail, the prior criminal charges were dropped, as we had earlier determined was likely. While he was in jail on a three-month minor trafficking charge, his marijuana-growing business failed, and whatever money I had given him was wasted on unfarmed product in the field. I couldn’t even complain to anybody about how I was taken advantage of because they’d think I was an idiot for doing the loan in the first place.

  HELP ME TO HELP YOU

  I had made two amazing angel investments in my life: Simply Audiobooks and Fusenet. No matter how many bad $25,000 loans or $50,000 seed investments I made, I thought I couldn’t possibly lose what I’d already built up.

  When Fusenet became successful, Ryan and I decided that we didn’t want other entrepreneurs to go through what we went through at Simply Audiobooks—having to leave the company to pursue their entrepreneurial dreams. Why didn’t companies realize the wealth of ideas and talent they already had in their buildings and invest in their own staff? We agreed that we weren’t going to let what happened at the old Simply Audiobooks happen at our new company. No longer would an employee with a good idea have to leave the company to make their vision become real; we would welcome both professionals and entrepreneurs and embrace both corporate growth and the creation of new ideas.

  In the spirit of Google Labs, we created a program that encouraged our staff to work on their own ideas one day a week, and going one step better than Google, we would allow the employees to retain the intellectual property from their creativity. In return, we would have first right of refusal on investing in any resulting startup. It was a revolutionary concept, and we dubbed the resulting entrepreneurial activity “Personal Pet Projects,” or “P3” for short.

  Being an entrepreneur myself, I thought that in my various corporate roles I was remarkably productive, and despite having been fired four times, I was an asset to the organizations I annoyed. So, I believed that entrepreneurs made the best employees, and P3 would attract more of them to work at Fusenet, as well as make us more productive and profitable in the long term. I wasn’t the sort to get annoyed by people who believed in what they were doing. I thought I could handle the entrepreneurs and get the most out of them.

  ---

  On the recruiting front, the program was a smash hit. Ryan and I were interviewed on both CBC and CTV, several newspaper stories were written about us, and there was a steady stream of visitors who wanted to find out more about what we were doing and how we were doing it.

  The interest was so abundant that I started to write a book, Lighting the Fuse, to tell the story. I wrote the outline and created a fake dustcover to motivate myself. It had all sorts of hyperbole about Fusenet being “The most creative little company in the world,” and how we were going to transform the way employees expected to be treated. I was excited!

  As soon as I had my dustcover, I sat down to begin the grueling task of actually writing a book. I started out by describing the moment when our first P3 company became successful and put in a “fill in the blank” under the description of the business. I was sure I’d be able to declare at least one success before I finished the book. As I proceeded with the so-far fictitious story, I started to get a creepy feeling. I was enjoying writing; in fact I was enjoying it quite a bit—perhaps because I hadn’t yet met a book editor. But I couldn’t get away from the nagging thought that perhaps I was wri
ting about my chickens before they were hatched.

  I decided to stop writing after only one page. It was a hell of a page, but it will never see the light of day, because of course Zero to Tesla is my first book. I shelved Lighting the Fuse, putting the dustcover on another book so it would stand up straight on my bookshelf while it motivated me, and got to work on the one-year P3 experiment that was going to define the future of Fusenet.

  Our first formal P3 project was a collaborative photo-sharing application called “Shwink.” Even before Instagram had a trillion users and got acquired by Facebook, photo sharing was a crowded field, but Shwink had an innovative angle: it allowed users to contribute to shared albums. Flickr and Picasa and Facebook all did photo sharing, but they didn’t do collaboration well—or at all. The two entrepreneurs who came up with the software, Ned* and Ray*, both joined Fusenet expressly because of P3 and our support of entrepreneurs.

  Ryan and I agreed to invest $200,000, and Ray and Ned came on board. To validate the idea, I had done a series of Google searches like “collaborative photo sharing,” “contribute to a joint album,” and “share photos of the same event,” and nothing had come up. The idea seemed like one that should have existed, so I also called a couple of friends who were professional photographers and asked them about it—both thought it was a novel concept. Ryan and I were excited; P3 was going to unleash a steady stream of new products and new ventures. The future looked bright.

  iBundle was a software application that let users share their media accounts. You could access my Netflix account when I wasn’t using it, and in return I could use your Spotify account. Brilliant.

  Whambox was a set-top box version of our video search software. How could it fail?

  Present Feedback was a mobile application that let audiences rate speakers in real time and let speakers communicate back to audiences with polls and targeted commentary. Everyone we spoke to loved the prototype.