18 ms·

A Former Tesla Staffer Became an Internet Millionaire in His Spare Time

132 points by pdog 8y ago

crsv 8y ago
Perhaps the most fascinating part (to me at least) in the article was his second step - he knowingly and purposefully created a vaporware product and took orders for it. He refunded the money from the customers, but used this as a validation step. I'm not sure if there's a moral judgement to be made here that's meaningful, but it's an interesting approach to product validation. I feel like we see this approach with Kickstarter style approaches, but without the refund step (and without ultimately delivering the product), but this idea of getting transactions and refunding them to validate interest is... well it feels a bit off-putting(?), but interesting none the less.
- faitswulff 8y ago
  I've heard this called shadow testing, and it's a fairly common trick.
- scoot 8y ago
  This approach was popularized (even if not pioneered - not sure who came up with the idea originally) by Tim Ferris in the book "The 4-Hour Workweek". He stopped short of actually accepting payment though, and took an attempt to purchase as validation.
- jambo 8y ago
  It's called "dry testing", and the FTC might come after you if you're not clear about what you're doing https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business https://www.ftc.gov/tips-advice/business-center/guidance/adv...
joncrane 8y ago
Seems like this guy hedged his bets every step of the way: - kept his day job while working on startup - did fake campaign on FB to gauge demand - got friends to try product - croudfunded the first batch This is a really risk averse guy who is making it big. Sort of the opposite of the bombastic risk-it-all founder we often see in SV hero stories.
- jonny_eh 8y ago
  It's rather inspiring. It shows you can swing for the fences without sacrificing much.
  - aaronbrethorst 8y ago
    "[Swinging] for the fences" literally means to swing a baseball bat as hard as you can at where you think a baseball will be thrown[1]. You're far less likely to connect with the ball, but you will propel the ball much farther if you do manage to. Swinging for the fences is more apt for companies like Magic Leap, Groupon, Gilt, Pebble, etc. I'd characterize this guy's approach as being more like "Moneyball." [2] [1] https://en.wiktionary.org/wiki/swing_for_the_fences https://en.wiktionary.org/wiki/swing_for_the_fences [2] https://en.wikipedia.org/wiki/Moneyball https://en.wikipedia.org/wiki/Moneyball
    - cpk5 8y ago
      This guy is the epitome of "that guy"
      - deleted 8y ago
        [deleted]
    - astura 8y ago
      "Swing for the fences" is basically the same as "go big or go home." You are going to either strike out or hit a home run. I'm not sure "Moneyball" fits here, the premise of Moneyball was using advanced analytics to take advantage of market inefficiencies. I would say the baseball idiom that fits here is "cover (one's) bases" https://idioms.thefreedictionary.com/cover+(one%27s)+bases https://idioms.thefreedictionary.com/cover+(one%27s)+bases >cover (one's) bases To ensure one's safety or success by dealing with every potentially problematic aspect of a situation or activity. A reference to baseball, in which the defensive players must make sure all bases (and baserunners who may occupy them) are accounted for. (I am fascinated about how many English (American?) idioms are derived from baseball and how I never really thought about it until a couple years ago)
nodamage 8y ago
Headline is rather misleading as neither 1) hitting a $1M in sales or 2) raising $8M in venture funding necessarily means he actually became a millionaire.
- mrkurt 8y ago
  Both of those things make a company worth more than $1 million. It's only wealth on paper, but it's legitimate to call a person a millionaire who owns a company who's done one of those.
  - zodiac 8y ago
    Well, he has to own above a certain percentage (about 3.04%) of the company, which to be fair he almost certainly does ;)
  - BigCatStuff 8y ago
    I would disagree, and I believe that others would as well. A 'millionaire' in my mind is someone with liquid assets of at least one million dollars. The company isn't worth more than $1 million until someone else exchanges shares or money for it for over a million dollars. VC funding does not make someone a millionaire, except in rare cases where founders are allowed to sell shares to 'take money off the table'. VC money is the hope that the company will be worth $X in the future.
    - mrkurt 8y ago
      That's pretty much the age old debate about wealth. But the actual definition of millionaire is "someone whose assets are worth more than $1 million". A VC investment is literally the exchanging shares for money. No it doesn't make someone liquid. Yes it does set something sorta like a market value, though it's usually really high. In more meaningful terms, that company now has $8 million in cash. There's almost no scenario where it's worth less than $8 million now, because companies at that stage usually have very little debt.
      - 8y ago
codyzazulak1 8y ago
This is one of my most favourite "start up" stories ever. It almost feels like the "millennial" way of starting any business nowadays. Quitting your day-job, sitting in a co-op space, risking thousands of personal funds, building, and building, and building, and building, and then finally releasing something with no real idea of it's potential is an almost sure-fire way of failing, and risking your well being at the same time. This "prove-everything-at-each-step" side hustle method is how most businesses should be started. Take notes, well done.
- hueving 8y ago
  This method is how many small businesses are started. It's just not glamorous so we don't hear stories about it.
- tozeur 8y ago
  Yup, and the process has been crystallized in a book called The Lean Startup.
- tw1010 8y ago
  I don't get the obsession americans have with reducing huge demographics into single buckets. (I think part of it is historical, but another part of it might just be because the country is so big that you have to develop some way of reducing all that complexity.) I don't want to be overly negative in response to your largely optimistic post, but the behaviour of millenials lie in a hugely diverse spectrum which needn't be reduced to a single canonical element. Maybe a first good step is to dehabit yourself from always saying "demographic X always seems to behave in Y manner".
  - brandonhorst 8y ago
    > I don't get the obsession americans have with reducing huge demographics into single buckets. The irony.
  - slobotron 8y ago
    Baby boomers were/are a large economic force due to sheer numbers and similar age related needs as they progress down the histogram. But it probably doesn't often make sense to keep arbitrary grouping of generations after them, as you suggest.
neves 8y ago
The step by step guide is a really great "how to become an entrepreneur"
danso 8y ago
Kudos to Tesla for not only being OK with this guy having a sidegig but also not trying to be a jerk in demanding a cut. I know that seems like status quo for companies not to demand control over what employees create outside of work, but seems like that line can be blurred when there's enough money involved. (edit: not just having a sidegig, but being able to launch and run his startup for ~1 year while employed at Tesla) I also have a low bar after reading "Bad Blood", the book about Theranos. One of Theranos's chief engineers, on his own time, came up with a cool idea for bike lights and ran a successful KickStarter [0]. Elizabeth Holmes' response: > Kent told Elizabeth about his successful Kickstarter campaign, thinking she wouldn’t mind. But he badly miscalculated: she and Sunny were furious. They viewed it as a major conflict of interest and asked him to transfer his bike-lights patent to Theranos. The paperwork Kent had signed when he joined the company entitled them to any intellectual property he produced while employed there, they contended. Kent disagreed. He’d worked on his little venture during his free time and felt he had done nothing wrong. He also failed to see how a new type of bicycle light posed a threat to a maker of blood-testing equipment. But Elizabeth and Sunny wouldn’t let it go. In meeting after meeting, they tried to get him to turn over the patent. They ratcheted up the pressure by bringing Theranos’s new senior counsel, David Doyle, to some of the meetings. Eventually Kent, the engineer, was allowed to go on leave of absence to work on his bike-light. I don't think he ever came back, and he was the guy who was the chief architect of the piece of crap that Holmes would later describe as "the most important thing humanity has ever built". [0] https://www.kickstarter.com/projects/revolights/revolights-join-the-revolution https://www.kickstarter.com/projects/revolights/revolights-j...
- atomical 8y ago
  What could have motivated them to waste so much time on that? Ego?
  - notahacker 8y ago
    The bike light had more value than Theranos' actual "product"?
  - drzaiusapelord 8y ago
sorenjan 8y ago
Why are we singing his praises here? He sells a hangover drink, and in order to not have to get FDA approval he calls it a dietary supplement. Chances are this does not work at all, and he's selling something with false promises and no regulation. Are we praising snake oil salesmen for their businesses acumen now? The Tesla connection seems like nothing more than click bait since it's not related, except maybe gave him connections to be able to raise $450 000 from angel investors.
- protonimitate 8y ago
  I think that's an overly negative view of the article. People are more interested in how he got where he is, not the product itself. Just because it's not FDA approved yet, doesn't mean its garbage. Not to mention the countless harmful and down right useless products that are pushed and approved by the FDA every year. Tesla connection is important because people have been on an anti-Tesla tear lately, and this paints them in a pretty good light as far as big companies go. He is being praised for his cautious and systematic approach to building a start-up, versus the rockstar/reckless founder meme that is prevalent these days.
  - dragontamer 8y ago
    FDA approval is actually relatively lax as it is. To pass the FDA, you pretty much have to do better than a placebo. There's no comparative studies, there's no cross-drug studies, there's no major side-effect studies. FDA testing is almost purely Drug vs Placebo. So if things aren't FDA approved or otherwise are avoiding FDA studies, you need to be cautious with those products. The reason why so many "harmful" products get past the FDA is due to the lack of testing btw. Its a known problem, but no one wants to make FDA testing harder for some reason. I guess the drug lobby has done a good job at making people distrust the FDA. For more details, look up "Phase IV Clinical Trials", which are the studies people want to standardize that go above and beyond the FDA minimums. (Including cross-drug interactions, better studies into side-effects, comparative studies, cost-benefit studies, patient-centered surveys, etc. etc. There's a LOT of studies that simply aren't done)
s2g 8y ago
Seriously? For a hangover cure. The shit I can walk into half a dozen different convenience stores and whole foods and find half a dozen varieties by the front counter. This person must have been a good PM.
wfbarks 8y ago
I hate that word "Staffer"
deleted 8y ago
[deleted]
foobaw 8y ago
I've followed this company carefully since its start and also know the founder when he used to work at Facebook. He's a talented PM. I'm always curious how this company will truly scale? Having this club at nightclub and bars is cool but what's next? How is it going to deal with multiple competitors coming out with "better" drinks?
- spdionis 8y ago
  Does it have to?
11thEarlOfMar 8y ago
One factor that seems to have played in his favor is the unlikely pre-launch competitive threat. The fact that no beverage company has emerged in the US as a hangover cure till now gave him time to move deliberately, snake oil or not. Many other startups (I'm looking at this week's LiDAR fundings) live in a headlong footrace as they try to get to market sooner with a better solution. No time to measure twice. However, now that the cat's out of the bag....
schnevets 8y ago
This kind of side-hustle is much more exciting to me than the "quit the day job roll the dice" entrepreneur stories. It reminds me of the Shopify features where team members proved the product by creating dropshipping side-hustles. https://www.shopify.com/blog/75644165-how-i-imported-gaming-glasses-with-alibaba-and-made-2-416-51-in-5-weeks https://www.shopify.com/blog/75644165-how-i-imported-gaming-...
brianbreslin 8y ago
He should be distributing these in Ubers/Lyfts for late night on their way home riders. $10/bottle people would eat it up.
not_that_noob 8y ago
The number one thing that kills a startup is lack of market demand. His real genius is in determining market demand ahead of time, and in a low-cost way. This separates true entrepreneurs from the wannabes.
tmaly 8y ago
Is it me, or does this process sound just like the one outlined in the 4 Hour Work Week?
kchr 8y ago
Seems to me that 50% of the news lately has been business clickbait lately. What's happening to HN? :-(
kwillets 8y ago
You can buy Hovenia Dulcis tea at any convenience store in Korea, or at most Korean markets in the States. The studies do seem to show that it works for hangovers. http://item2.gmarket.co.kr/English/detailview/item.aspx?goodscode=702630162 http://item2.gmarket.co.kr/English/detailview/item.aspx?good... https://examine.com/supplements/hovenia-dulcis/ https://examine.com/supplements/hovenia-dulcis/
tohmasch 8y ago
Great way to build something in a very risk averse process. I wonder how effective this will be as a 'supplement'?

132 points by pdog 8y ago

crsv 8y ago

Perhaps the most fascinating part (to me at least) in the article was his second step - he knowingly and purposefully created a vaporware product and took orders for it. He refunded the money from the customers, but used this as a validation step. I'm not sure if there's a moral judgement to be made here that's meaningful, but it's an interesting approach to product validation. I feel like we see this approach with Kickstarter style approaches, but without the refund step (and without ultimately delivering the product), but this idea of getting transactions and refunding them to validate interest is... well it feels a bit off-putting(?), but interesting none the less.

faitswulff 8y ago
I've heard this called shadow testing, and it's a fairly common trick.
scoot 8y ago
This approach was popularized (even if not pioneered - not sure who came up with the idea originally) by Tim Ferris in the book "The 4-Hour Workweek". He stopped short of actually accepting payment though, and took an attempt to purchase as validation.
jambo 8y ago
It's called "dry testing", and the FTC might come after you if you're not clear about what you're doing https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business https://www.ftc.gov/tips-advice/business-center/guidance/adv...

joncrane 8y ago

Seems like this guy hedged his bets every step of the way: - kept his day job while working on startup - did fake campaign on FB to gauge demand - got friends to try product - croudfunded the first batch This is a really risk averse guy who is making it big. Sort of the opposite of the bombastic risk-it-all founder we often see in SV hero stories.

jonny_eh 8y ago
It's rather inspiring. It shows you can swing for the fences without sacrificing much.
- aaronbrethorst 8y ago
  "[Swinging] for the fences" literally means to swing a baseball bat as hard as you can at where you think a baseball will be thrown[1]. You're far less likely to connect with the ball, but you will propel the ball much farther if you do manage to. Swinging for the fences is more apt for companies like Magic Leap, Groupon, Gilt, Pebble, etc. I'd characterize this guy's approach as being more like "Moneyball." [2] [1] https://en.wiktionary.org/wiki/swing_for_the_fences https://en.wiktionary.org/wiki/swing_for_the_fences [2] https://en.wikipedia.org/wiki/Moneyball https://en.wikipedia.org/wiki/Moneyball
  - cpk5 8y ago
    This guy is the epitome of "that guy"
    - deleted 8y ago
      [deleted]
  - astura 8y ago
    "Swing for the fences" is basically the same as "go big or go home." You are going to either strike out or hit a home run. I'm not sure "Moneyball" fits here, the premise of Moneyball was using advanced analytics to take advantage of market inefficiencies. I would say the baseball idiom that fits here is "cover (one's) bases" https://idioms.thefreedictionary.com/cover+(one%27s)+bases https://idioms.thefreedictionary.com/cover+(one%27s)+bases >cover (one's) bases To ensure one's safety or success by dealing with every potentially problematic aspect of a situation or activity. A reference to baseball, in which the defensive players must make sure all bases (and baserunners who may occupy them) are accounted for. (I am fascinated about how many English (American?) idioms are derived from baseball and how I never really thought about it until a couple years ago)

nodamage 8y ago

Headline is rather misleading as neither 1) hitting a $1M in sales or 2) raising $8M in venture funding necessarily means he actually became a millionaire.

mrkurt 8y ago
Both of those things make a company worth more than $1 million. It's only wealth on paper, but it's legitimate to call a person a millionaire who owns a company who's done one of those.
- zodiac 8y ago
  Well, he has to own above a certain percentage (about 3.04%) of the company, which to be fair he almost certainly does ;)
- BigCatStuff 8y ago
  I would disagree, and I believe that others would as well. A 'millionaire' in my mind is someone with liquid assets of at least one million dollars. The company isn't worth more than $1 million until someone else exchanges shares or money for it for over a million dollars. VC funding does not make someone a millionaire, except in rare cases where founders are allowed to sell shares to 'take money off the table'. VC money is the hope that the company will be worth $X in the future.
  - mrkurt 8y ago
    That's pretty much the age old debate about wealth. But the actual definition of millionaire is "someone whose assets are worth more than $1 million". A VC investment is literally the exchanging shares for money. No it doesn't make someone liquid. Yes it does set something sorta like a market value, though it's usually really high. In more meaningful terms, that company now has $8 million in cash. There's almost no scenario where it's worth less than $8 million now, because companies at that stage usually have very little debt.
    - 8y ago

codyzazulak1 8y ago

This is one of my most favourite "start up" stories ever. It almost feels like the "millennial" way of starting any business nowadays. Quitting your day-job, sitting in a co-op space, risking thousands of personal funds, building, and building, and building, and building, and then finally releasing something with no real idea of it's potential is an almost sure-fire way of failing, and risking your well being at the same time. This "prove-everything-at-each-step" side hustle method is how most businesses should be started. Take notes, well done.

hueving 8y ago
This method is how many small businesses are started. It's just not glamorous so we don't hear stories about it.
tozeur 8y ago
Yup, and the process has been crystallized in a book called The Lean Startup.
tw1010 8y ago
I don't get the obsession americans have with reducing huge demographics into single buckets. (I think part of it is historical, but another part of it might just be because the country is so big that you have to develop some way of reducing all that complexity.) I don't want to be overly negative in response to your largely optimistic post, but the behaviour of millenials lie in a hugely diverse spectrum which needn't be reduced to a single canonical element. Maybe a first good step is to dehabit yourself from always saying "demographic X always seems to behave in Y manner".
- brandonhorst 8y ago
  > I don't get the obsession americans have with reducing huge demographics into single buckets. The irony.
- slobotron 8y ago
  Baby boomers were/are a large economic force due to sheer numbers and similar age related needs as they progress down the histogram. But it probably doesn't often make sense to keep arbitrary grouping of generations after them, as you suggest.

neves 8y ago

The step by step guide is a really great "how to become an entrepreneur"

danso 8y ago

Kudos to Tesla for not only being OK with this guy having a sidegig but also not trying to be a jerk in demanding a cut. I know that seems like status quo for companies not to demand control over what employees create outside of work, but seems like that line can be blurred when there's enough money involved. (edit: not just having a sidegig, but being able to launch and run his startup for ~1 year while employed at Tesla) I also have a low bar after reading "Bad Blood", the book about Theranos. One of Theranos's chief engineers, on his own time, came up with a cool idea for bike lights and ran a successful KickStarter [0]. Elizabeth Holmes' response: > Kent told Elizabeth about his successful Kickstarter campaign, thinking she wouldn’t mind. But he badly miscalculated: she and Sunny were furious. They viewed it as a major conflict of interest and asked him to transfer his bike-lights patent to Theranos. The paperwork Kent had signed when he joined the company entitled them to any intellectual property he produced while employed there, they contended. Kent disagreed. He’d worked on his little venture during his free time and felt he had done nothing wrong. He also failed to see how a new type of bicycle light posed a threat to a maker of blood-testing equipment. But Elizabeth and Sunny wouldn’t let it go. In meeting after meeting, they tried to get him to turn over the patent. They ratcheted up the pressure by bringing Theranos’s new senior counsel, David Doyle, to some of the meetings. Eventually Kent, the engineer, was allowed to go on leave of absence to work on his bike-light. I don't think he ever came back, and he was the guy who was the chief architect of the piece of crap that Holmes would later describe as "the most important thing humanity has ever built". [0] https://www.kickstarter.com/projects/revolights/revolights-join-the-revolution https://www.kickstarter.com/projects/revolights/revolights-j...

atomical 8y ago
What could have motivated them to waste so much time on that? Ego?
- notahacker 8y ago
  The bike light had more value than Theranos' actual "product"?
- drzaiusapelord 8y ago

sorenjan 8y ago

Why are we singing his praises here? He sells a hangover drink, and in order to not have to get FDA approval he calls it a dietary supplement. Chances are this does not work at all, and he's selling something with false promises and no regulation. Are we praising snake oil salesmen for their businesses acumen now? The Tesla connection seems like nothing more than click bait since it's not related, except maybe gave him connections to be able to raise $450 000 from angel investors.

protonimitate 8y ago
I think that's an overly negative view of the article. People are more interested in how he got where he is, not the product itself. Just because it's not FDA approved yet, doesn't mean its garbage. Not to mention the countless harmful and down right useless products that are pushed and approved by the FDA every year. Tesla connection is important because people have been on an anti-Tesla tear lately, and this paints them in a pretty good light as far as big companies go. He is being praised for his cautious and systematic approach to building a start-up, versus the rockstar/reckless founder meme that is prevalent these days.
- dragontamer 8y ago
  FDA approval is actually relatively lax as it is. To pass the FDA, you pretty much have to do better than a placebo. There's no comparative studies, there's no cross-drug studies, there's no major side-effect studies. FDA testing is almost purely Drug vs Placebo. So if things aren't FDA approved or otherwise are avoiding FDA studies, you need to be cautious with those products. The reason why so many "harmful" products get past the FDA is due to the lack of testing btw. Its a known problem, but no one wants to make FDA testing harder for some reason. I guess the drug lobby has done a good job at making people distrust the FDA. For more details, look up "Phase IV Clinical Trials", which are the studies people want to standardize that go above and beyond the FDA minimums. (Including cross-drug interactions, better studies into side-effects, comparative studies, cost-benefit studies, patient-centered surveys, etc. etc. There's a LOT of studies that simply aren't done)

s2g 8y ago

Seriously? For a hangover cure. The shit I can walk into half a dozen different convenience stores and whole foods and find half a dozen varieties by the front counter. This person must have been a good PM.

wfbarks 8y ago

I hate that word "Staffer"

deleted 8y ago

[deleted]

foobaw 8y ago

I've followed this company carefully since its start and also know the founder when he used to work at Facebook. He's a talented PM. I'm always curious how this company will truly scale? Having this club at nightclub and bars is cool but what's next? How is it going to deal with multiple competitors coming out with "better" drinks?

spdionis 8y ago
Does it have to?

11thEarlOfMar 8y ago

One factor that seems to have played in his favor is the unlikely pre-launch competitive threat. The fact that no beverage company has emerged in the US as a hangover cure till now gave him time to move deliberately, snake oil or not. Many other startups (I'm looking at this week's LiDAR fundings) live in a headlong footrace as they try to get to market sooner with a better solution. No time to measure twice. However, now that the cat's out of the bag....

schnevets 8y ago

This kind of side-hustle is much more exciting to me than the "quit the day job roll the dice" entrepreneur stories. It reminds me of the Shopify features where team members proved the product by creating dropshipping side-hustles. https://www.shopify.com/blog/75644165-how-i-imported-gaming-glasses-with-alibaba-and-made-2-416-51-in-5-weeks https://www.shopify.com/blog/75644165-how-i-imported-gaming-...

brianbreslin 8y ago

He should be distributing these in Ubers/Lyfts for late night on their way home riders. $10/bottle people would eat it up.

not_that_noob 8y ago

The number one thing that kills a startup is lack of market demand. His real genius is in determining market demand ahead of time, and in a low-cost way. This separates true entrepreneurs from the wannabes.

tmaly 8y ago

Is it me, or does this process sound just like the one outlined in the 4 Hour Work Week?

kchr 8y ago

Seems to me that 50% of the news lately has been business clickbait lately. What's happening to HN? :-(

kwillets 8y ago

You can buy Hovenia Dulcis tea at any convenience store in Korea, or at most Korean markets in the States. The studies do seem to show that it works for hangovers. http://item2.gmarket.co.kr/English/detailview/item.aspx?goodscode=702630162 http://item2.gmarket.co.kr/English/detailview/item.aspx?good... https://examine.com/supplements/hovenia-dulcis/ https://examine.com/supplements/hovenia-dulcis/

tohmasch 8y ago

Great way to build something in a very risk averse process. I wonder how effective this will be as a 'supplement'?