Maveriqs Profile: Doug Hecht, CEO & Co-Founder of Lymber, and Partner at Seed San Diego
It has often been said that, in order to succeed as an entrepreneur, a person requires a certain "it" factor. It may be their innate skill for connecting with others or their ability to rally a team together to accomplish a great goal. Sometimes it's their need to break from the norm and create a path all their own. Doug Hecht is an example of someone who's created his own path. From an early age he's been doing his own thing in the realm of business. He even started running his own company before he knew it was one.
Doug is the CEO & Co-Founder of Lymber, a fitness & wellness tech start-up based in San Diego, CA. He's also a Partner in Seed San Diego, an early stage investment group that helps guide promising companies to their next stage of funding and growth. He's a valued colleague, an experienced mentor, and someone with a wealth of knowledge to offer today's entrepreneur. We met at his Solana Beach office last week to talk about his latest venture and what aspiring entrepreneurs can do to attract investment in today's competitive space. Here's what Doug had to say:
Tell us about your background as an entrepreneur?
It started when I was 15 years old. I saw a band play at one of my high school events, and I thought, “Well all the girls really like these guys maybe I should start a band!” So I got together with a couple of friends and we started one. I played guitar and sang, but I also became the manager of the group. My job was to keep everybody organized. Within a year we had started playing school events. My mom used to drive us to our gigs. That happened all through high school and college. If we were to total it all up, I’d say we earned about $60,000 over the time we were playing. That was my first real experience as a 15 year old running a business, even though I didn’t realize it at the time. I was paying sound men, paying our agent, booking our gigs, and dealing with contracts. It wasn’t until the IRS sent me a form saying I owed them back-taxes for the money we had earned that I knew it was an actual business [laughs].
The band was my first experience. Then in college I started another business working with musicians. I rolled that business into some early work with the internet. We were doing business in digital music. I was about 19 at the time. That eventually evolved into my company Console in 1996. Console was a digital agency that dealt in high technology projects. We still did marketing agency work, but very little. It was about a 90% technology and 10% marketing mix. After about 10 years of business we would eventually merge with another agency that dealt in primarily marketing services to form a full-service shop called Digitaria. That was in 2005. When the merger happened we really became a 50/50 Marketing-to-Technology company. We were able to take on much larger projects with more prominent companies.
What is it about entrepreneurship that excites you?
Sometimes I wonder if it’s more my excitement about being an entrepreneur or more my discomfort with the standard corporate world format. I’m kind of an unstructured person in a way. I don’t do anything the same way any day. As much as I know I should get up in the same way every day, and have a routine, I don’t. That might be what makes me a bad golfer [laughs]. As an entrepreneur you have to wear a lot of hats, you have to be very iterative or responsive, and you have to be able to deal with curve balls every day. You also have to be able to deal with emotions every day. You’re not going to feel the same way all the time. Some days you feel like your business is the best thing in the world, and other days it’s the worst thing in the world. You have to be able to find that middle ground and realize, “That’s just the way it is.”
In the corporate world every day can be the same and the pace can be slower. You’re hired to do a job, there’s strict guidelines, and I just don’t function well with that type of structure. I love change and trying new things. Even when I was working in the digital marketing space I went from selling, to working on creative projects, to coding. I’ve been a programmer, a web developer, a creative director, and even a musician in the past. I think wearing all of those hats has made me a more well-rounded business owner. Even in my most recent venture Lymber, I’ve done everything from designing, to executing web development, to creating the marketing strategy. Understanding the back-end is important, too. The banking, the finance, the operations. All of those things play a major role. It helps to be a Jack of all Trades and a Master of None.
When did you decide to become an investor, and how was that decision made?
After we sold Digitaria (the company that I had merged with back in 2005), I was in a good financial situation. An opportunity came up with a friend of mine, and I decided to participate in it. I realized that I needed to continue building my finances, and that initial investment looked like a good opportunity for that.
That first investment worked out really well. We had a nice exit (when an investor liquidates their investment in a business for financial gain) on it. Some of my friends and I created a fund out of our profits from that investment. Then, through my network here in town, I met my partners in Seed San Diego. Seed is a small venture capitalist group in the San Diego area that invests in early-stage companies. We’re invested in about 85 companies right now. We’ll invest anywhere from $25,000 to $1 million in some cases. We share ideas, sponsor events together, and work together on the investments. Our portfolio includes a solar panel company, a stem cell company, gene sequencing tech, advertising, fintech (financial technology), and many other types.
So I really got into investing to diversify my portfolio and the types of businesses that I’m involved in. I recognized that there’s a lot of talent out there and people that have skills that I don’t have. However, if I’m able to team with those people we can grow something. If I can help them on the marketing side or the technology side I can bring value. In some cases I’ll act as a consultant for companies we’ve invested in. My other Seed partners will too. We all have something unique that we bring to the table.
How do you balance running a start-up like Lymber, with investing in multiple other companies?
It’s definitely tough. I think you just do your best. If I really wanted to maximize my investments, I’d spend more time on them. I just don’t always have that time. I have a family, I have three kids, I like to have a life. Sometimes it feels like I’m not giving any one thing the attention that it should get, but it really comes down to keeping the plates spinning the best you can. I try my best not to let anyone down. That’s the main thing. Don’t overpromise. As long as you’re not overpromising you’re gonna be in good shape. That’s from all perspectives.
What do you look for when you’re putting together a team?
The first thing is that it has to be a well-rounded team. That’s what I’ll look for in any company. If it’s just a bunch of engineers it’s going to be a tough road for them. Likewise if it’s just a bunch of marketing guys it’s also going to be a tough road. There needs to a be a balance in the company. Just like here at Lymber we have Chuck Phillips, who’s one of the best technology guys in San Diego while also having other team members that complement that. I think that’s the first step in building a team is having varied skillsets that work well with each other.
Next I’d say that, if you’re an entrepreneurial company, you have to have people that “get it”. There are some people who are just better off in a corporate environment. They don’t need to or have to juggle multiple tasks at once. That’s totally fine, but when you’re in a start-up you have to be able to juggle. You have to pick up a lot of things at one time. There are certain personalities that fit the model and ones that don’t.
People say that, “If you start a company, you’re an entrepreneur”. That’s just not true. Being an entrepreneur doesn’t mean you have a business license, or that you’ve filled out LLC paperwork, it means you have a certain quality. There’s a large percentage of people who will call themselves entrepreneurs because they did get the paperwork done, but they really aren’t entrepreneurial. They’re not true entrepreneurs. So when I look at a company I look for that certain spark that shows me someone will be a good entrepreneur as opposed to someone who’s just filled out the paperwork.
One thing I tell people whom I talk to about entrepreneurship is, “Talk to everybody, and then throw away 90% of it”. There are certain things that just resonate with people, certain ways of thinking. Some things will click and some things won’t. It’s that 10 percent that stays with someone that really matters. As an entrepreneur you have to listen. When my investor team meets with a company, and we ask a question or give some advice, and they don’t want to consider it, that’s when you know you’re in trouble. An entrepreneur has to be coachable. Even though I’ve sold businesses and been in the game for a long time, I’d like to think I’m still coachable. When you’re no longer coachable is when you stop growing.
An entrepreneur has to be coachable."
What is more important in an entrepreneur, talent or hard work?
I’ve never heard the questions asked that way. I’ve heard the questions asked as, “What’s more important, being smart or working hard?” So I think talent is another one of those factors. But let’s say it comes down to smart or hardworking. I’ll always bet on the hard working guy first. I know a lot of people who aren’t necessarily exceptionally bright, but they’ve worked at it for so long that it’s just worked out for them. I think there’s also a certain element of luck and timing. The bottom line is that you could be smart all day long, but if you don’t just keep trying then it won’t happen for you.
Many of the most successful people I know have failed more times than they’ve succeeded. That’s just part of it. You have to be willing to just keep going back at it. You can’t get discouraged. If you’re not consistently working at it, you’re not going to make it. I’ll pick hard working every time -- although I’d love to have both!
What do you look for in a business that will make it an attractive investment?
The people is obviously one of the things I look for. You have to have a good team. There are also some minor things. Generally I like to be able to help. I mean, I’m not gonna be able to help with gene sequencing, but I can help with other parts of a business.
As an investor you want a company to have realistic projections and a fair valuation. You’d be shocked at just how many times a company’s valuation is way off track. It’s interesting too, that as an angel investor, you are going to fail more than you are going to succeed. You want business that you’re investing in to have a chance at being a really good business. If you look at a company and say, “Well, they’re pretty good. They might have a nice return,” then it’s too risky. If all your business investments simply have a nice return, then you’re never going to win. Seven out of ten of the investments will likely fail. How do you make up for those seven if the the three that do win are only winning with a “nice” return. You need some businesses that are gonna hit home runs. You need the home runs to make up for the failures and the OK returns. It’s rare that you find the home run business, but you at least need to have a shot at it. The home run business can be the “fundmaker,” the one out of ten that pay for the other nine that are just not as good.
Additionally when you’re in the early or seed stage like we are, you need to invest in companies that aren’t going to need a lot of money to show value or traction. If they take your money and then aren’t able to use it to increase the valuation of the company, when they go and get more money everyone is going to be more significantly diluted. With each dilution, you have less and less chance of seeing a decent return. On the other hand, if they’re able to take that initial investment and triple the value of the company, then go get more investment, you may still be getting diluted, but at a much lesser rate.
What advice do you have for today’s entrepreneurs who are seeking investment from people like yourself?
There are some general things to think about. For instance, go as long as you can without raising money. You want to hold on to as much of the business as you can. The longer you wait to raise money, the higher your valuation will be, and the less your business will get diluted. Also, when you do decide to raise money, I’d say that you should raise more than you think you need. I was talking to another venture capitalist recently who told me, “I’ve never had a company tell me that they wish they wouldn’t have raised so much money”. Companies always need more money than they think.
Finding a mentor is also very important. We see a lot of businesses that have not had good guidance. Sometimes just showing well, being professional, and having the right answers to the right questions goes a lot further when it comes to investors. You have to be prepared, and as a new business owner you just can’t know what to expect. You have to get a mentor somewhere who will help you.
There are a couple schools of thought around speaking the lingo and playing the game. On one hand it’s great to know all the verbiage and be able to speak to investors on their terms. On the other hand, if you have a fantastic product and a great team, then you may not need to speak the lingo, and it can be refreshing to investors because you aren’t like everyone else. So it does depend on who you get to for investment. However, I will say that the companies we’ve seen that come from the Bay Area, tend to be a little bit tighter, because the competition in their area is tighter. They’re playing in a bigger pond. At Seed San Diego we try to instill that level of polish in the companies that we work with. Basic things like being able to communicate what your company does in a couple of sentences or having a competent pitch deck are really important. You need to be able to say and show how your company will be successful in a simple way. Answer that question of “What problem are you solving?” If you can present to a group of investors and tell them about the problem you are going to solve and they all say, “Hey! I have that problem!”, then you know you’re onto something.
You need to be able to say and show how your company will be successful in a simple way."
What are the most important lessons you have learned upon your entrepreneurial journey?
I’d have to say being honest and respectful of who you’re working with or the people around you. You never know where you’re going to end up or other people are going to end up. You want to make sure that you’ve made a good impression. I’ve tried to give back. I was a mentor at Techstars, I was a mentor at StartR at UCSD (University of California San Diego), I’ve tried to help entrepreneurs wherever I can. There’s a book called “Give and Take” by Adam Grant. It’s a fantastic book. It talks about how the more you give, without asking for anything in return, it will come back to you tenfold. If everything you do is quid pro quo, you will only experience returns in the short-term. It’s better to have returns in the long-term and for people to be your ally. For me, being honest and giving as much as I can without expecting something in return is important.
If somebody says, “Hey can you help me?”, and I just don’t think I can be effective, I’ll tell them that I would love to, but I can’t. I’d rather not let them down. It’s a matter of setting expectations. I think that’s important. You give what you can, because you will see those people again. It’s good for your soul.
Tell us about your company Lymber? How did the concept come together and where is the company headed?
Sure. Lymber is like Expedia for fitness and wellness. We’re aggregating information about fitness studios, wellness studios, sports activities, surf camps...etc. What we do is measure real-time inventory, and look at how long until a class starts. Based on those two factors plus historical information we vary the price for the class dynamically. It’s basically a yield management system for those markets.
The idea is that, in most cases, these studios or activities will have extra inventory. In some cases they are too busy or sold out, in which case they can charge more, but if they do have that extra inventory they’ll need to vary their price. A fitness studio is essentially the same as a hotel or seating on an airline. If you went to a hotel person and said, “Hey! I’m gonna set the price for your rooms, and they’re gonna be the same everyday. Regardless of weekends, holidays, or peak times”, they’d say, “You’re crazy!” Well studios do that today. They may have popular classes or less popular classes but they charge the same. We think that’s ridiculous. So we’re basically applying the same mentality that hotels and airlines do, which is the thought of perishable inventory. When a studio class starts, the inventory is dead, you’ve lost that availability. Since every class is variable, we’re applying that variability to every single class.
Just like in hotels or airlines, it’s really the consumer demand that sets the price. That’s how a free market works. The value of something is what people are willing to pay. It’s how studios should be, right? If you can’t fill your studio, maybe you’re just charging too much. There’s a price that somebody will pay. We measure the information about the supply, the demand, and price in real-time and give that back to the consumer through our app. You can see every studio or activity in your location, sort it by time, distance, or price, and then receive a dynamic price in real time. That way the studio get the best rate they can for their opening, and the consumer gets the most fair rate available for that class.
So that’s the premise. It came about from discussions with my Seed San Diego partners, my business partner Chuck, and seeing other organizations or solutions that we felt weren’t doing it right. A lot of companies are selling the solution of a membership model. With a membership somebody is always going to lose. If you are a consumer and have a membership, you lose when you don’t show up to the gym. You’re paying for something that you are not using. In our model there are no losers. The consumer pays what they’re willing to pay, the studio is setting the prices they want to receive, and the market dictates the fluctuation. Finally we get a percentage of the class fee. We help studios price their classes like a hotel does so that they don’t miss on opportunities to fill seats or make additional income when they’re busy.
How big is Lymber?
We’re currently a team of 10. We’re based in San Diego and Los Angeles. We’re working on moving into Seattle very soon. There’s a minimum number of studios that we need in a market to launch. We wouldn’t want someone in Seattle to download the app, and have it say there’s only one class available and it’s 18 miles away. Until we get to that minimum threshold in a market, it basically says we’re not available. So we’ll probably be in Seattle within a month, and then we’re going to start test marketing in Denver, Austin, and San Francisco in the very near future. We hope to be nationwide by the end of the year.
How can our readers learn more about Doug Hecht and Lymber?
You can follow us at our website www.getlymber.com. All of our social media accounts are available there. We’re very active on Instagram, Twitter, and Facebook. My personal Twitter handle is @dhecht. Since I feel that giving back is a key thing in business, if someone wants to hit me up on Twitter or Linkedin I’d be open to that. If anyone has questions that I can help with, I will.
Lymber on Social Media
We want to thank Doug for taking time out of his busy schedule to meet with us. He has shared some invaluable information that we can all use to grow our enterprise. We wish him all the best of luck with Lymber and Seed San Diego. What other questions would you ask a successful entrepreneur and investor like Doug? Please let us know what you'd like to know in the comments below.