An Interview with Entrepreneur & Angel Investor Robin Elenga

Robin Elenga is a serial Entrepreneur having founded and ran multiple technology-based companies including RevelHMI, Revel Body, MobileGIS, Trakleads, ETS Consulting. Robin is also an angel investor who invests in new and exciting start-up companies. Currently has investments in 14 companies.

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Devathon has built software for companies backed by the world's leading investors like Betaworks, Greylock, Andreessen Horowitz, Accel, KPCB, Lightspeed and many more.

In the following interview, Robin talks about his firm Sketchfab, his entrepreneurial journey, struggles and the lessons learned along the journey.

When did you first discover your entrepreneurial spirit and how is your entrepreneurial career developing so far?

I started pretty early, when I was around five years old I found an advertisement in a magazine for bulk garden seeds. I ordered several boxes and started selling them door-to-door. After a successful first day, I recruited my siblings and their friends to help. We quickly covered our town and sold all of the seeds. I pocketed more money than I had ever seen.

I continued my entrepreneurial activities through school selling candies, newspapers, cars and other things.
While I had several jobs after business school for some of the Big-4 consulting firms, I was fairly independent and sold and ran projects without much support from my employers. After leaving Deloitte & Touche Consulting Group, I started my own consulting firm and then several successful boutique software firms before starting RevelHMI.

What has been the biggest success and biggest failure stories you went through?

I probably define success differently than other people; most people define success as making a lot of money. While I have made a lot of money over my career, I have always defined success more in terms of successfully developing solutions to complex problems and then delivering the solutions.

My consulting career gave me a lot of opportunities to solve big problems, one of my favorites was a huge system integration project for Microsoft’s OEM group which generates over 60% of their revenue. I managed several projects and developed the architecture for the project that allowed us to build a great solution. Unfortunately, there was a battle in progress between the division I worked for a Microsoft’s internal IT group who started to interfere with the project. Despite the ITG group’s active interference, we were very successful and I was particularly proud that John Connors, Microsoft’s CFO, stated that my projects were the only successful internal IT project of the year; a particularly painful statement coming from the ITG group’s boss.

In terms of failures, I have developed solutions for markets that were not ready for them. A great technical solution does not always win (look back to the OS/2 versus Windows 1.0 battle), timing and execution are critical. I was once part of a team that developed a system that would have enabled much better software for location-aware devices, unfortunately, we were several years ahead of the curve of location-aware devices and the e911 initiative, so the effort eventually failed.

What has made you so successful as an entrepreneur?

I think my enduring curiosity and a strong desire to develop and test solutions is part of it.

Another critical part is my ability to put off immediate gratification for long-term flexibility. I tend to defer consumption in favor of saving capital, which has allowed me to build a nest egg to allow me to work on and finance projects I am interested in. If I did not have the capital to focus, I would have been forced to take a job to pay bills.

A third component is that early on I built a lot of technical business skills which allowed me to make better decisions and avoid pitfalls which would have killed my business. I have a deep understanding of accounting, finance and business law. These skills have helped me avoid many of the things that cause companies to fail; running out of cash, making bad legal decisions and so forth. The longer a company can stay alive, the better the chance it will succeed.

Tell us about your latest endeavor, RevelHMI. How did you get the idea for this project?

When I was in Business School, I had an entrepreneurism professor who required that we carry around a notebook for business ideas, each week we would go around the class and give our best idea and discuss it with the class. I have maintained this through my life and still have a notebook by my bed. This notebook is part of the story.

One of my last consulting projects was with Phillips Sonicare. When Phillips bought Sonicare, Sonicare was a very innovative and fast-growing company. Phillips originally wanted to keep Sonicare independent and to extend Sonicare’s culture throughout Phillips in an effort to inspire growth.
After Sonicare’s growth stalled, after Oral-B launched a competitive product, Phillips decided to integrate Sonicare into Phillips larger efficiency-modeled business. They hired my firm to help break up Sonicare and integrate it into Phillip’s operations and systems.

I spent a year learning about Sonicare and Phillips to develop the best way to integrate Sonicare. In the process, I learned that one of the top consumer calls Sonicare would receive was from consumers who were calling in to say that the Sonicare was a great sexual vibrator. I also learned that the Sonicare was the number one sexual device at elderly care homes, presumably because a toothbrush is a very discreet sex toy. During this period, I also attended several dental tradeshows and was amazed that several show attendees approached me in the Sonicare booth to tell me that they use the toothbrush as a vibrator. I approached the CMO of Sonicare and said: “you want growth to help ward off Phillips from integrating Sonicare right?” He said yes, so I responded with “you know your leading call from consumers is that we should make a sex toy, right?” He responded with “yes, but we are a dental company and we would never make a sex toy”. I could not believe that he would ignore such a large opportunity that was being yelled by consumers, but I made a note in my notebook and moved on with the project killing Sonicare as it was previously known. Ironically, Phillips launched a line of sexual massagers several years later that used traditional vibration motors, which completely failed. I imagine the designer of those products was probably sitting close to someone who understood the Sonicare technology, but they did not bother to ask.

So, after starting a software company and doing several years of Angel investing, I had the itch to start a new company. It seemed like every entrepreneur I knew was trying to create a knockoff Facebook or linked-in social app, so I wanted to go the other way and work on something physical that could leverage the many new embedded electronic components that were being launched on the market.

I went through my notebook and kept coming back to the idea to develop a new sexual vibrator that worked better, using technology similar to Sonicare’s, but with many improvements. There were several issues with the Sonicare that made their heads very expensive to produce, I had ideas on how to fix this issue and a side result would be a low-cost vibration motor that would be extremely reliable while providing a wide range of vibration that no other motor could match. And from my discussions with vibrator users, I knew that different people like different vibration.
So, after several years of development in the shop, we developed a new vibration motor that had the most power, range, and reliability of any motor that was available.

I started Revel Body and launched our product. In two years, we dominated the industry awards for technology, design, and branding. We also developed an international distribution network. We were growing rapidly when we had a major issue with our manufacturer because one of our partners wasn’t making payments on time. This caused our factory to shut down and we were effectively out of business.
But, when we first launched Revel Body on Indiegogo, we started getting calls and emails from designers of smartwatches, mobile phones and other devices looking for better vibration motors for their haptic response. These designers would complain about the same issues in the same order; the existing motors were too big so they constrained the miniaturization of the device, they had a terrible performance so they could not do anything meaningful with them and they cost too much.

About a month after we launched Revel Body we started working on miniaturizing, de-costing and extending the performance of vibration motors. So, when our sex toy factory shut down on us, we were able to pivot to focus on haptic actuators, drivers and software. We developed our solution with guidance from some of the biggest electronic brands in the world, it is amazing how easy it is to get in front of the customer when you have a solution that solves a big problem or allows them to do something great that they could not do before. I think we will make more money in the sex toy market providing motors than we would have with Revel Body, and we will have an opportunity to displace the existing technology in mobile devices, which is a much bigger opportunity with 25M vibration motors shipped a day. Just one company, Samsung, ships more than 1 million handsets a day.

So, we have developed a smaller, cheaper and much better technology and have five patents granted and counting. We can enable smaller devices that work much better now. In the future, we will have the capability to provide haptic systems that communicate information where existing systems only alert users that an issue exists. By enabling the performance required for haptic communication, we will be able to define and own the world’s first haptic language; a huge achievement which will fundamentally change how people interact with devices, the types and forms of devices themselves and the utility that devices provide. We are working toward a day where your device will communicate with you using a high bandwidth language that is secure; your watch could read you the news while you sit in line at a grocery store.

How did you get involved with Angel investing?

After a long consulting career and starting several companies with my own money, I wanted to learn about the angel and VC funding, how companies are positioned for exits as well as a break from pretty onerous workloads. So, for about three years I got very active with a local angel group called the Alliance of Angels. This is one of the largest angel groups in the country. It allowed me to meet many angels and VCs and to review and invest in several startups.

I have made around 20 angel investments and have had some great returns and some painful losses. I now know how people look at investment, why they invest or pass, how to position deals, etc. This was a very valuable experience which unfortunately a lot of entrepreneurs might not be able to do because you have to be an accredited investor to do it.

What do you look for in a startup as you evaluate it for a potential investment?

I look at the team, the opportunity, the terms and the ability to exit.
For the team, I look for domain experience, motivation, creativity, ability execute.

I also look for honesty, transparency, and humbleness.

For the opportunity, I look for an approach or solution that would be the basis of a great company. I try to filter out deals that are really a product or a feature of a product and look for a company that can leverage a technology into a long product line. The market is important, I look for a large market, with a big problem that the company solves, short selling cycles and budget to buy. I also look at IP and focus on details way beyond “do they have a patent filed”.

The terms of the deal are critical because they will determine value in the exit, the ability to raise future rounds and will part of how the team is motivated to build and sell the company. I have to give a lot of credit for membership in the Alliance of Angels for teaching me many lessons here. I do not know how you could be successful in building and selling a startup without this knowledge.

How does someone get you excited and willing to commit?

That is a good question. Part of it is the opportunity, part of it is the team and part of it is probably my mood and position in the investment cycle.
One thing I try to avoid doing is responding with greed or fear in any financial deal; I have seen people invest in companies who know that they have issues because they see others investing and they don’t want to be left out (fear), I have also seen people make investments because they think there will be a huge payout that is really improbable (greed).

Besides providing capital, what additional support do you offer as an Angel investor?

I have a lot of experience and technical skills to draw upon, a lot of contacts for funding and help and I love helping solve problems. I like to help when I can; I have even provided help to company founders even when I have not invested.
So, I help and advice where I can, but I am aware that entrepreneurs are constantly getting advice, a lot of it based on poor information and most of it contradictory. Entrepreneurs also get a lot of other signals from the market, their team and investors. So, it is important that entrepreneurs know that they need to filter advice and make to choose the best path, that could mean ignoring advice that I provide.

What are the red flags for an angel investor?

That sort of depends on the investor.

One investor I know, who is very detail focused, will walk away from a deal if anything in the deal is different from what was described in previous discussions, even if it is better (e.g. if founder offered an 8% interest rate on a convertible note, then when the docs arrived, it said 9% he would walk). I did not understand his approach when I first saw it, but now I see the genius in it. When people don’t know the details or they change them, they tend to have other problems downstream.
Other investors I know are almost completely deal-terms-focused and will walk away from any deviation from standard terms and valuation. This is important because even if the founder is sure that they will not need more capital, they almost always do and if any terms in deal block future rounds, it could kill the company.

Others dig in deeply into the technology, customers, market, etc. I read a really interesting study from Willamette University where the author correlated angel returns with due diligence effort. The study found a high correlation between hours spent on due diligence and return. As I remember it, returns would climb to about 5.9X for people who did high diligence and about 1.1X for those who did less diligence. The study did not look into what the effort was, just the hours. What this told me is that more is better, I tend to go pretty deep before investing and I like to share notes with others whom I respect.

There are also a lot of reasons that an angel might pass on a deal, even if they like; timing, portfolio, personal issues, lack of time for diligence, etc. An entrepreneur should not think that because an investor passes that their deal is bad.

I have developed a different approach:
First, I look at the traditional things that other angels look at; team, the market, the competition, the acquisitively of the market, etc.

Second, I question the founder of how I will recoup my investment.
If the founder wants to build a company that would be fun to run for a long time, I am not interested. If they say that they will give big annual dividends, I am not interested because I know they won’t. I am looking for a company that can be started and grown without a lot of capital and that will be purchased for a lot of money.

Third, I look for hairballs; hairballs being problems or issues that are not easy to fix or will kill the company. These could be internal issues with the team, the corporate documents, issues with the cap table, financial issues and potential legal issues. The biggest and easiest hairball to spot is a founder who has little financial skills and is not cash flow focused. Running out of cash will kill any company and I am amazed at the number of startups that run out of cash and then the CEO acts surprised. I am obsessed with cash flow almost to the point of ignoring profitability; I will walk away from a deal if the leader does not know exactly when they will run out of cash and where the cash is going.

Fourth, I look for a team with a lot of skin in the game and who share a strong desire to see a deal through. It would be easy to let a company die to move on to a different opportunity, I am looking for someone who can work around any obstacle to make their company see another day and in the long run find an exit.

In summary, I look for a highly probable return from a near-term exit in a company that is run by people with strong technical business skills and a strong stick-to-it-ness to ensure it survives.

In your opinion, what are the hurdles that keep people away from starting an entrepreneurial career?

Fear of trying, lack of confidence, lack of technical skills, and an external locus of control.

Entrepreneurism is not an easy path and people should not enter it unless they are prepared to struggle and face tough lessons and long periods of failure. A common thread of successful entrepreneurs is their ability to keep going despite repeated failures and rejection, so if a person does not think that they can handle that, they might want to reconsider starting this journey.

What advice would you give to the new entrepreneurs?

  1. Save your money – if you get into the habit of saving, you will lower your consumption habit and you will build capital that you will need.
  2. Build your skills – do an honest assessment of your skills and build the ones you don’t have; people, negotiation, business skills, technical skills, whatever. Always be learning.
  3. Build your network - it is amazing how easy it is to get connected to someone, even if you just asking for advice. Don’t be scared, reach out and do it.
  4. Fail fast and cheap – if you have an idea, don’t spend years and all of your money building before you test it on the market. Do it fast and cheap, it might be a failure, but you might also find a winner you would never have thought about in the process.
  5. Study others so you can learn from their failures and successes
  6. If you fail, keep trying.
  7. Don’t burn bridges – there are a lot of people that will do things to hurt you, avoid making enemies out of them.
  8. Be humble, but think big
  9. Take responsibility for your failures – a lot of people want to look like winners all of the time, so they don’t want to admit any failures. But, we learn by failing, and by admitting mistakes you will be more likely to not make them again.
  10. Start now – a lot of people talk about doing things in the future and the future keeps moving away. If you want to be an entrepreneur, start now. The sooner you do the sooner you will get there.

Are you an entrepreneur looking for your MVP built? Get in touch with us at hello@devathon.com

Devathon has built software for companies backed by the world's leading investors like Betaworks, Greylock, Andreessen Horowitz, Accel, KPCB, Lightspeed and many more.