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

https://www.bloomberg.com/news/articles/2018-06-05/this-former-tesla-staffer-became-an-internet-millionaire-in-his-spare-time

by pdog • 8 years ago

132 115 8 years ago

bloomberg.com

crsv• 8 years 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• 8 years ago

I've heard this called shadow testing, and it's a fairly common trick.

scoot• 8 years 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.

_ouxp• 8 years 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/adv...

joncrane• 8 years 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• 8 years ago

It's rather inspiring. It shows you can swing for the fences without sacrificing much.

aaronbrethorst• 8 years 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

[2] https://en.wikipedia.org/wiki/Moneyball

henrypray• 8 years ago

One thing that Adam Grant writes about in his book, "Originals", is how it's a bit of a fallacy that founders often dive head first and risk it all when starting their companies. Could be somewhat of a confirmation bias but he gives some great examples of how risk averse many founders actually are when starting their companies (Warby Parker was the main example if I remember correctly).

http://www.adamgrant.net/originals

oakejp12• 8 years ago

I came to say just this! He goes on to say that the great startup risk takers are confused with great "risk mitigators" who often hedge these risky bets. One example he gave was Woz who was working with HP when focusing with the creation of Apple.

erpellan• 8 years ago

To me, being able to play again is vital if you're going to play a high-risk game.

Eg. making 101 100:1 bets makes way more sense than risking everything on a single victory-or-bust gamble.

komali24• 8 years ago

This is play for play the 4 hour work week strategy. I keep meaning to test out something with it, just got no ideas :(

danieltillett• 8 years ago

This is how I built mark II of my startup. As long as you are willing to work hard for a few years it is the best way. Three years of doing nothing but working and sleeping and I was able to resign from my job and still owned 100% of my startup.

nodamage3• 8 years 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.

mrkurt3• 8 years 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• 8 years ago

Well, he has to own above a certain percentage (about 3.04%) of the company, which to be fair he almost certainly does ;)

BigCatStuff2• 8 years 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.

nodamage3• 8 years ago

Having seen too many companies raise millions in venture funding and burn through it to generate millions in revenue (at a loss) with the founders ultimately walking away with nothing, I think that's absurd.

codyzazulak1• 8 years 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• 8 years ago

This method is how many small businesses are started. It's just not glamorous so we don't hear stories about it.

tozeur• 8 years ago

Yup, and the process has been crystallized in a book called The Lean Startup.

tw10102• 8 years 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• 8 years ago

I don't get the obsession americans have with reducing huge demographics into single buckets.

The irony.

slobotron• 8 years 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.

vidarh• 8 years ago

I think it reflects different life phases. I did the "risk it all" approach when I was 19, when "risking it all" meant potentially being back to living at my parents and going back to university.

These days I wouldn't do that, because I have a kid and a mortgage, but I don't regret doing it at 19 - it taught me a hell of a lot of things that I'm not sure I would have if I'd only tried the cautious approach, and it still I think affects how I do things (e.g. it taught me that as much as testing and validating is important, sometimes it's better to just dive in, try, and fail fast - which is right depends how much you're risking and for what; you just need to actually assess your risks first).

deadmetheny• 8 years ago

Back in the day we just called this "starting a small business". It was the normal way of doing things before VCs were willing to piss away millions on mostly dumb ideas.

tw10102• 8 years ago

It's funny how quickly phrases become parodies of themselves after being repeated enough times. I can already feel the sarcasm machine weaponizing "back in the day we just called this starting a small business".

neves• 8 years ago

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

danso6• 8 years 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-j...

atomical• 8 years ago

What could have motivated them to waste so much time on that? Ego?

notahacker• 8 years ago

The bike light had more value than Theranos' actual "product"?

drzaiusapelord• 8 years ago

Elizabeth and Sunny are incredibly corrupt and dishonest people. They simply saw and easy mark in this guy and tried to fleece him. I mean, they've already fleeced millions from investors, whats another con job for them?

The work environment was incredibly toxic as well:

For example, Balwani took it upon himself to keep track of how long employees were working. In one encounter, Balwani brought up security footage that showed a software engineer only working an eight-hour day. He told the employee, "I'm going to fix you." The engineer promptly resigned and left the building, even as Balwani sent a security officer to try and stop him. Balwani then called the cops on the employee.

http://www.businessinsider.com/theranos-former-president-sun...

danso6• 8 years ago

The author's conclusion stops short of calling her a sociopath but "there is no question that her moral compass was badly askew...Her ambition was voracious and it brooked no interference".

One of the main themes of the book is her worship of Steve Jobs. Ripping someone for having a side project, instead of full dedication to the company, does sound like something Steve Jobs would've done.

FroshKiller• 8 years ago

Man, don't be giving a corporation kudos for NOT doing shit they OUGHT NOT do in the first place.

s2g2• 8 years ago

shit they probably can't legally do in California anyway.

danso6• 8 years ago

Why not? Tesla is seen as a company with ambitious grandiose plans. It's a common Silicon Valley cliché for startups and companies to claim they're changing the world. Tesla is one of the few companies that can legitimately claim an important mission. With all the stories (Tesla or otherwise) about SV companies overworking their employees in the name of holy missions, it's nice to see an example of what looks like an amicable parting.

According to the article, Lee was able to launch and his own startup for a year, while still working full time as a product manager at Tesla. Would most startup or startup-like (trying to reach stable profit) companies be OK with that?

mygo• 8 years ago

If powerful people are butt-raping people left and right you betcha I’m giving kudos to any person I see who decides it’s a no-go

trhway• 8 years ago

i think (IANAL) that CA moonlighting law protects the [small] guys in both cases.

benmanns• 8 years ago

Yep, as long as you're doing it on your own time, own equipment, with none of your employer's trade secrets.

maxxxxx4• 8 years 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. "

Please don't give them kudos. This has to be normal behavior. Being employed by a company doesn't mean being owned by them.

ryandrake• 8 years ago

Sadly, I think the bad behavior is relatively common. Two of the last three SV companies I’ve worked for assert ownership over everything you do or invent, even on your own time and on your own equipment at home. I don’t know if this is super common or not, or whether or not it’s legal, and I’m certainly not going to spend $XXX,XXX on a lawyer to find out!

sincerely2• 8 years ago

Or, more realistically, since societally we are ok with companies doing pretty much anything that is within the bounds of the law and this behavior seems to be legal, maybe we should be giving them kudos?

vonmoltke• 8 years ago

Unfortunately, there are quite a few "abnormal" companies in that regard.

gamblor9562• 8 years 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.

No kudos for Tesla. In California, they're not allowed to demand a cut of employees' side income streams if that income is unrelated to Tesla's business. The CA Dept of Labor punishes such things very heavily.

(This is why Theranos failed to acquire Kent's patent. In California, the IP assignment clause in his contract legally does not extend beyond inventions within the scope of Theranos' business lines if developed independently.)

danso6• 8 years ago

FWIW, found this useful thread 2011 HN thread about the topic: https://news.ycombinator.com/item?id=2208056

Though it's not just about trying to grab rights. Here's a blog post the founder last year, which describes in detail what he was doing from 2016 to June 2017:

https://blog.usejournal.com/how-we-made-1m-in-3-months-the-s...

He sounds like a hard worker and seems to have been at enough places (Facebook and Uber) to know not to mix hobby with work. But it sounds like he really hustled over the year to the point of his startup being a second job. He doesn't say anything more about Tesla, but I guess I'm assuming his startup passion couldn't have been a total secret. And despite his likely well-paid role at Tesla, they seemed to have tolerated his work-life balance to the point that he got to pick the time of quitting.

Yes, I agree that's the way things should be, that companies don't have any influence what you do once you've put in your 40/week. But that doesn't seem to be the status quo in tech, especially at highly ambitious companies like Tesla

sorenjan• 8 years 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• 8 years 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• 8 years 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)

Retric• 8 years ago

There are a wide range of thing you can do that reduce or eliminate Hangovers. If he was using Gatorade it would 'work' which IMO is a step beyond the classic snake oil.

aqme28• 8 years ago

Even water "works."

Come to think of it, how do you test a hangover cure drink? What is your control?

modzu2• 8 years ago

hn eats up get rich quick clickbait

modzu2• 8 years ago

(yes i realize i clicked the article too). but really this is on the front page?

ps: the cure for hangover is breakfast

exolymph• 8 years ago

Not just HN, either. The audience for business "news" absolutely loves this shit. It's really depressing to work in business journalism (my previous job) and see what gets the most traffic.

paulpauper• 8 years ago

agree. found this article lacking and click-baity. I dunno why it got so many votes

rukittenme• 8 years ago

A great many things the FDA has approved have been recalled. A great many more things do not have FDA approval at all but have the approval of regulatory agencies in the EU, Canada, and the rest of the world.

My point being we should not rely on government agencies as our source of truth.

Additionally, the misuse (or overuse) of "snake oil" is becoming cliche. This hangover cure may work or it may not. But it certainly isn't snake oil because it has a limited scope of operation. And, until proven otherwise, was created as an honest attempt to alleviate hangover symptoms. Rather than being a callous money grab at the expense of people's health.

komali24• 8 years ago

Because it's capitalism and that's how capitalism works.

I don't like capitalism but I like games, and this guy played the game very well. If we don't like the constraints/rules why are we blaming the people who followed those constraints when establishing their algorithms, especially when culture tells them to do so?

Basically, don't hate the player, hate the game.

(Also let's go ahead and get post scarcity asap please starting to get tired of capitalism)

anon8082• 8 years ago

"don't hate the player, hate the game."

Why can't I hate both? That's how values work, I don't value his methods, and I don't value the person that chooses the methods I don't value.

jlgaddis• 8 years ago

Why are we singing his praises here?

It seems that on HN -- and in the startup culture, in general -- this is considered a "hack" and is something to be proud of.

Kinda like how Uber skirting around those pesky laws and lawmakers was seen as clever and inspirational.

kchr3• 8 years ago

It's disgusting, really.

diogenescynic• 8 years ago

Honestly reminds me a lot of the Sharktank episode where the guy with SEO experience was selling magnetic healing bracelets. He was making money, but all the sharks passed on his business because as you said it was all a scam.

s2g2• 8 years 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• 8 years ago

I hate that word "Staffer"

foobaw• 8 years 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• 8 years ago

Does it have to?

11thEarlOfMar• 8 years 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• 8 years 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-...

brianbreslin• 8 years 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• 8 years 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• 8 years ago

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

kchr3• 8 years ago

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

kwillets• 8 years 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?good...

https://examine.com/supplements/hovenia-dulcis/

tohmasch• 8 years ago

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

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

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