LNC Eli Packouz | Instafloss

 

A ten-second floss might seem impossible, but Instafloss will prove you wong. John Solleder welcomes one of the persons behind the device aimed for a future with a brighter and healthier smile. Eli Packouz, the co-founder of Instafloss, talks about how he flosses into his business to brighten the world one tooth at a time. He reveals how to position his business to win and how he builds the team. Eli values the mentors in his career. Don’t just become a successful entrepreneur. Be a successful entrepreneur with a beautiful smile with Eli Packouz today!

 

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Eli Packouz, Instafloss Cofounder And Super Entrepreneur

Welcome, everybody. A new friend of mine and a great entrepreneur doing some amazing things in his life, Mr. Eli Packouz is joining us from Florida. Eli, how are you?

I’m doing phenomenal. I’m glad to be here.

Let me share a little bit about your background with the audience. You’re a serial inventor and two-time founder of companies. You started your first company, Singular Sound with your brother in 2013. You’ve since launched eight different blockbuster products. In 2017, you partnered with two doctors to create the first device that automatically flosses all your teeth in less than 10 seconds, which is extremely impressive. I cannot wait to try this product. After five years of research and development, Instafloss is ready to change the world one tooth at a time. Welcome to the show. I guess let’s start talking a little bit about the science of flossing.

Flossing is important and it’s more important than people realize. First, there are the obvious correlations that you’ll see in the sense that those who floss keep their teeth for longer, which is important if you want your teeth. Honestly, it saves you a lot of money because the average American spends around $50,000 over the course of their lifetime on dental procedures, which can be greatly reduced if you don’t need those dental procedures or if you don’t need as many or if you could push them off much later in your life. Those are the obvious benefits of flossing.

The less obvious benefit of flossing is that if you don’t floss, you have a very high probability of having chronic inflammation in your mouth. Acute inflammation is usually not a problem. It’s part of the body’s healing process. You need it. There are a lot of times you shouldn’t take anti-inflammatories but that’s a whole other tangent. Chronic inflammation can cause problems especially since it can spread and it can be stressful for your heart and can go into other places.

We see that not flossing is correlated with the worsening of various other inflammatory diseases. We see that not flossing links to cardiovascular disease, joint pain, erectile dysfunction, you name it. If inflammation or your cardiopulmonary system is involved, not flossing links to a worse outcome. Not only should you floss for your teeth, but you should floss for your overall health and perhaps the happiness of those around you as well.

Unfortunately, despite all of this being pretty clear. Only 30% of Americans regularly floss. I would say that there are two issues. One is that 70% of Americans regularly skip or don’t floss, which is in of itself a problem for all the things that we mentioned. Perhaps what is an even more disheartening problem is that the 30% who do floss almost universally are flossing incorrectly. We can look at the studies and see that they floss, but when they floss themselves, it’s night and day difference in terms of the results that we see when we compare it to a group of people who dentists floss for them.

Most people are not doing a very good job of it which can lead to a feedback loop of, “You’re not doing it but then you try and you don’t get the results so you don’t do it.” This is something that needs to be avoided on both ends. When I set out to create Instafloss, I knew there were two problems that we needed to solve. 1) For the 70% of people who don’t floss, can we get you to floss? 2) For the 30% who are flossing incorrectly, can we do a good job with the device? If you don’t care about the effectiveness of the floss, you could floss in zero seconds by not flossing. It’s only a ten-second floss if you are doing something for your health.

Let’s back up for a second. This is not your first rodeo, as they say here in Texas. You started Singular Sound with your brother a number of years ago. That’s a different product category, I believe. Talk about that a little bit.

There I was minding my own business in college, trying to get a couple of degrees. My brother is a musician and he had an idea for a guitar pedal that essentially would cue drum track. You use the guitar pedal in the way that you would communicate with the drummer being like, “Build up this part. Go to the next part. Insert a fill. Let go of this transition. At the end of the bar, we’re going to move into the next part.” There was nothing like it. The only drum machines that existed were things you had to use your hand for. If you’re using your hands for playing guitar, that’s not very useful for you.

We had the idea and we started working on it together. We got a lot of interest from various bass forms. Bass tend to be a lot more nerdy about the technology in their music, but guitar forms as well and various other musician forms. We decided to try to go to market with it. We launched a crowdfunding campaign. Due to our involvement with these forums, we had a breakthrough moment. We broke the record for the most money raised for musical accessories at the time. This was in 2013, I think. We launched the product. We got it manufactured. We brought it to people and people loved it. We won awards. We won Best in Show for NAMM, which is like the CES for music tech. We got into stores, we got into distribution, and we started having other ideas. We started coming out with more products.

At that point, I had to make a choice to either come out with more products or drop out of university. I chose to come out with more products and we came out with seven different products over the course of the company, which is still going. However, five years ago, I couldn’t get out of my head the need to create a device that would solve the problem of not only that people are not flossing, but the fact that when they floss, they do it incorrectly. I couldn’t sleep for a month. I knew that this had to be created.

I started buying periodontal textbooks. I started downloading every published medical paper I could find on flossing and the effects of flossing. I learned a number of things. I learned that water flossing is more effective than string flossing, but the reason people don’t do it is because it takes even longer than string flossing. I knew that if we could somehow use water to floss quickly, we could solve both problems while still being effective.

After a month of not being able to sleep, I was like, “This has been amazing. It has been the best educational journey I could have had coming out with all these products in the music tech space, but I have to pursue this dream if I want to consider this vision or this product.” I partnered with Dr. Ralf Raud and Dr. Ana Mascarenhas, who is the Chair of the American Dental Association Council of Scientific Affairs. Amazingly, she answered my emails and we started talking. We developed Insta Floss. That was the journey to get there.

You somewhat identified it, but let’s talk about this for the audience who are interested. They say everybody has at least one good idea. Most people probably think they have more than that, but they probably never get past the starting point. Let’s talk a little bit about going from that idea stage to fruition where you fund it, and all the other factors that take place to launch a product.

It is a multi. There are many steps involved. I would say probably crucially the most important thing that too many people leave out is spending time validating that this is worth it to spend your energy, your time, and your money on. We’ve done research on Instafloss for five years, so this may be a large chunk of your life that you are about to commit. You first want to see that nothing like this exists. You want to see that you can patent it if it is an idea like a physical good like mine. If it’s software or a service, that’s a different story.

In terms of physical goods, you don’t want to do all the research for a big company for free where you spend all the time developing it and someone’s like, “Thanks. You did a good job here. Let me go and mass-manufacture this for you” without giving you a cut. You want to make sure it’s patentable. Most importantly, you want to make sure that it solves the problem. All inventions come from the need to solve a problem. You have to identify the problem and then see if you can solve it with this mechanism. If you can, no one else is doing it, and it’s patentable, then that’s step zero. Now, you can go to developing it.

The next stage would be the engineering. You have to understand, can this be made and can this be made in a way that will solve this at a price point that people are willing to pay for it? I’ve seen some companies fail because they had a good solution to a very real problem, but it was not able to be manufactured cheaply. They had to make a choice between compromising the product or making it cost way more than anyone would be willing to solve. It was maybe a $100 problem, but it wasn’t a $1,000 problem. If you’re trying to offer a $1,000 solution to a $100 problem, maybe it’s big enough. There might be some people out there. You might be able to not lose money, hopefully, best case scenario. Having a $100 solution to $100 problems is certainly a much better bet.

I would say that hopefully, you know something about developing a product in terms of building it and in terms of not just manufacturing but a prototype of that. If you don’t, then you need a co-founder who is an engineer in the space that is what you’re dealing with or you need enough money to hire people. Either way, you’re going to need a partner, whether that partner is a technical co-founder or that partner is a financial investor. You have to give a chunk of this to supplement the areas in which you’re lacking.

For example, when I started Instafloss, I had a lot of experience creating products from ideation all the way through distribution. I have come out with multiple products with Singular Sound. I had done the crowdfunding, the engineering, the manufacturing, the distribution, the sales, and the marketing. However, I knew that the two areas that I wasn’t exactly as well versed in as I would have liked would be the advanced fluid mechanics required to develop the Instafloss from a mechanical standpoint. The second is dental sizes.

As much as I were to read periodontal textbooks and read every published paper I could on flossing, that is not the same thing as doing twenty years of dental research or being a doctor. You would be crazy to convince yourself of that through your own hubris. That’s very dangerous. I’ve seen a lot of people who do a little bit of research and they’re like, “I know everything because I read everything I could find.” There’s so much that you weren’t able to find that someone with a little bit more experience in this field might know. That’s why I partnered with Dr. Ralf Raud on the fluid mechanics point, and Dr. Ana Mascarenhas on the dental research point. Good thing I did because I don’t think that I would’ve cut out the product like I have if I had not had those partners.

Did you know those two doctors or did you just reach out and say, “I have a concept, I have an idea, I have a strategy, but I need to fill in the blank on two very technical parts of a product like that?”

Dr. Ralf Raud, I knew prior to Instafloss. He has been my friend for many years. We went to university together. He finished. He went and became a doctor. I did not, but we stayed in touch for more than a decade since. I came to him with a problem because I was like, “I have not been able to sleep in this month. This is my concept, but this is the part I can’t figure out. Look at my diagrams, please.” He said, “I’m going to help you create this and I’m not going to ask for anything because it will come to a point where I prove that I am indispensable and you are going to beg me to stay.”

That is the way to do it. If someone else is doing a startup and you want to be part of it, demonstrate your value. Make yourself where they can’t get rid of you, and then talk about how you’re splitting this and what your role is. I’ve seen so many people who have been like, “I want to do this venture. I want to do this product.” They’re like, “I want X, Y, or Z.” It’s like, I don’t even know you. I don’t even know that you could do anything. Getting into hiring people and giving them incentives that align with what they’ve done is a whole other conversation that we can have.

You have to have a time budget if you will consider that takes into account that opportunity cost. Click To Tweet

Dr. Ralf Raud came over. We started prototyping. We started 3D printing things, putting them in our mouths, and testing water capacity. It was pretty garagey at that point. Eventually, when we had something after a few months of tinkering, I was like, “We need to talk about this with someone who is an expert in dental science to make sure that there’s not something that we’re missing. How do we test to make sure that this works? Here are all the papers that I could point to that say it ought to work but how do we confirm this?”

I sent some emails to some universities by looking at their faculty lists. I found Dr. Ana Mascarenhas who’s the Chair of the American Dental Association Council of Scientific Affairs. I was like, “This is the device I want to make. Can we talk about it?” She took a look at that and immediately understood. She was like, “Not only do I believe this could be more efficacious, but I believe this can honestly be more effective.”

The difference is that efficaciousness is what happens when people do things right. If you follow instructions, like if I take you into a laboratory and I do this experiment as I use it for 2 minutes a day or 10 seconds a day in the following way, does it have a better result than the control group? Effectiveness is what happens in real life. If we give you this device and you take it home with you, what happens? Something that is 100% efficacious, but is not used by anyone because it’s annoying is 0% effective. She was like, “I see this all the time where we do studies on products and we know they work, but people don’t use them.”

That is a huge problem for dental offices, where they’ll beg you to take the floss home with you. They’ll beg you to take the toothbrush. They’ll tell you what to do. You’re like, “Yeah, I’ll do it.” You then see them six months later and too often you lie about it. She immediately understood that there were two problems we were solving here, which is the efficacy and effectiveness. She was very interested. We started talking about various ways we could test it to see if we were doing what we claimed to do.

We had a period of time when we were testing prototypes. This is gross, so if you have any audience who are sensitive to anything, please plug your ears now. We were flossing decapitated pig carcasses because we were able to then cut away their gums and see how deep underneath the gums we were getting and how much plaque we were getting. We were then able to modify the device and make more iterations because pig tissue is very similar to human tissue. Before you start testing this on humans, you want to know fundamentally how many millimeters underneath the gum line are you getting and what percentage of plaque are you getting. Good luck getting any number of humans to agree to allow you to do that on them, and then cut away their gums.

That would be a hard sell.

It caused a little bit of drama because, at this point in our development, I was still doing my Singular Sound duties with that first company while I had this project of trying to create the Instafloss. I converted a room in our office to doing Instafloss research where Dr. Ralf Raud would come over and would be doing his research. When I came to these pigs, we would take them to one of the sinks because we didn’t have a sink in the room set up.

The marketing guy from Singular Sound was like, “Why are you doing science in the food sink? Do the science in the science sink. This is disgusting.” It’s because you have a decapitated pig head inside the sink. It’s cut vertically, so the brain falls out, and then nobody wants to use the sink. We’re just doing science. It’s good old-fashioned science. People didn’t appreciate it. Anyway, eventually we had to get our own space for the Instafloss project.

Let’s talk a little bit further on that because you’ve had not one but two record-setting crowdfunding campaigns in your career route. Was that with each separate business or is that with one? Tell us about that.

The first was the most raised for a musical accessory. The second was the most raised for a dental accessory in one day. One was the very first product that we came out with in Singular Sound back in 2013. The second was for the Instafloss.

Talk about entrepreneurship. Our audience or people who are entrepreneurs. Most of them are in direct selling. Some of them are in insurance. Some of them, we have people that have vertical lives going on too. They have other businesses that have nothing to do with that, but they’re in business. Everybody who tunes in to our show, for the most part, wants to do better in 2024 and beyond. Give me some of the things that you figured out as an entrepreneur that can help them do that.

I hope that’s their desire. I’ve never met a person who’s like, “I want to do worse.” That’s pretty broad. Meaning, how do you go and perceive your dream?

Let me rephrase it. I was talking to an executive the other day in the insurance industry. He’s a very successful guy out in Utah. He was talking about entrepreneurship and how people have to think like an entrepreneur. For example, especially early on in the year like this, what do they budget percentage-wise for marketing? What do they budget for whatever it is with their particular endeavor? If they’re recruiting a salesforce, how much are you going to dedicate time-wise, money-wise, etc?

If you can give an insight, like the way that you think running a company where that was the second company. In your experience, how do they think so that they understand that this is my business and the outcome is up to me? It’s up to the marketplace somewhat, but it’s up to me. If I don’t get in front of the marketplace, the marketplace can’t react. How do I put myself in the best position to win?

Getting yourself out there. That is context-dependent on what your product or service is. For us, when I say for us, I mean people in physical products, we need the margins of the absolute worst-case scenarios. You need to be able to manufacture the product for a third of its selling price because you need to manufacture it for $100, then you need to market it because a 3x row is probably around what you’re going to get. The next third is the margin that you have, which essentially goes to operation. Unless you have 3x of what you are manufacturing, it’s going to be very tough. If you could do more than that, that’s great.

To broaden that a little bit, I think you see a lot of people, especially when they first get into something where they don’t see that you need to have all those things accounted for in your marketing, in you’re getting it out, and in your push. They might think, “If I sell it for $300, I can market it for $200 and make it for $100. I break even and that’s fine, but you have operating costs and all sorts of things you haven’t considered.

It reminds me of a joke where a person decides to start a business by buying some good for $10 and selling it for $9. His partner comes up and says, “What the hell are you doing? You’re buying these for $10 and you’re selling them for $9. How the hell are we ever going to make this work?” He says, “Don’t worry. We’re going to make up for it in volume.” I think it’s not having a game plan to account for what all your expenses are going to be, especially the expenses that you don’t account for. I’m asking you to account for them, not account for the expenses. You’re going to find yourself in a world of trouble. You have to understand that from the get-go of what your costs are, including opportunity costs.

If you’re more salesy, how much time are you going to spend chasing one guy? That depends on how much else you could have done with that time and you have to have a time budget if you will consider that. That takes into account the opportunity cost. It’s hard to give a formula here for every single sector. I feel like if you’ve been doing it for some time, I would hope you have a good idea.

This is the toughest thing for a lot of people in our business and our audience when I talk to them individually, and some of them might do some coaching stuff with me. The biggest problem is they can’t allocate how much is for marketing. In other words, they don’t see that they have to turn that proverbial old water pump that Zig Ziglar used to talk about, which doesn’t exist anymore. He used to talk about how you could prime that pump in marketing.

To that point, let me ask you this question. Marketing-wise, what do you dedicate to getting the product out? What percentage do you look at and say, “We need to market, be it virally, be it retail, be it wholesale, be it Amazon, all the other ways that products are sold now?” How do you come up with your strategy for getting this product out to the marketplace continuously?

No more than a third of revenue. We try to be as efficient as we can. If we can get a lot more for that third, then we can. If we can spend less than a third, that would be great as well. If we go over a third, then we know we’re getting into manufacturing and we’re getting to operating costs. That is the budget. That budget can grow as revenue increases. That’s a cycle. If we spend some money and that increases our revenue, that in turn increases our marketing budgets. We try to give the majority of it to things that we know are giving a return.

This is more on the Singular Sound side because, on the Instafloss side, we haven’t done our grand market launch yet. A good chunk of it goes to things that we know are going to make a return. Let’s say we’re getting 4x on our Google, Facebook, and Instagram ads. Maybe 70% of the budget will go to that, and then the 30% will go to a little bit of an experiment or things that we think may work. If it doesn’t work, we’re still only spending a third of our total revenue and getting on average at least 3x. Hopefully more and not any less than that.

Let me ask you. Do you test small at first in a business like this? Give me an example of testing small. I know that Dan Kennedy for years has beat that. I’ve been a big Dan Kennedy fan. He’s almost like, “Test small because the small test is going to tell you what the big test is going to tell you.” You’ll run it without going broke. Talk about that a little bit. Give me an idea of a small test that you guys are doing now.

I have an amusing example. Before I go into that example, the one thing I’ll say about testing small is that the larger the effect size, the smaller of a test you can do. If you’re trying to see something that has a half of a percent difference, you are going to need a very large sample to tell it. You’re going to spend a lot of money and it might not even be a big result. First, you have to organize the test you want to do, but what do you hypothesize the magnitude of the difference is going to be?

If you think, “If we change this, it’s going to make a big difference,” then you could do two birds with one stone. You can make the largest changes possible with the smallest budget possible because you’ll see that a large effect size requires a smaller statistical sampling. That’s how it works. In order to tell something very small, you need a lot more of a sample size, which generally is expensive.

One way we saw this was a medium effect size. We were running an email campaign for Singular Sound. We noticed that the less corporate we made it, the better the click-through rate, the better the open rate, and the better the conversion rate. All of this was. We moved away from corporate logos. We moved away from corporate speak. We started signing it with personal people from the company. We moved them more in this direction. Every time we were doing experiments, we would split our emails. We would send it to maybe 5% of our mailing list. They would receive this type of email, and then 5% of the mailing list received the other type of email. We’d see the winner, and then we would send out the next 90% of the emails.

One guy in our company, Anthony, was like, “The more authentic we make it, the better we do.” I can’t think of anything more authentic than if it’s coming from a human, like a typo.” I was like, “That’s insane. You should not put this on anything coming from the company email. We’re going to look stupid.” He was like, “Let’s do a small experiment. Let’s send this to 5% of the mailing list with this one typo and we’ll see if we get a higher open rate.” He convinced me. We saw a statistically significant higher open rate when we had a typo.

It’s important to test everything. Don’t leave anything under the assumption that just because you think it will be one way, don’t look stupid and don’t make typos, doesn’t mean that the results are going to bear out with your assumptions. You need to test. You are smarter if you can test with the smallest amount that gives you a statistically significant result, and then use the winner of your smallest possible test on the rest of it.

Let’s talk about team building. You referenced it earlier with the one doc you knew and the other doc that you guys went after and got on the team. You’ve been very successful in building teams in both businesses. Talk about how you do that.

The first step is to be terrible at it for some time and learn the hard way about the sort of people that you made mistakes hiring. I’ve done that, especially in the beginning. I was very young and I hired people because I was like, “This person worked for a big-named company. That means that we’re going to have that success at our company if we bring them over,” without doing enough vetting. Talk about any mistake and I’ve probably made it in the hiring process, at least in the beginning years of Singular Sound.

LNC Eli Packouz | Instafloss

Instafloss: The first step is to be terrible at building your team. Learn the hard way by hiring the wrong people.

 

The lesson that I’ve learned from the tumultuous early years was to hire slow, fire fast, which is a mantra that you’ve got to live by. You don’t want to be bamboozled by anything early on that seems shiny. If they have a big-named company. The larger the company that they worked at, the more likely it is that their only real skill is office politics. Perhaps there is a useful place for office politics in a large organization. Getting hundreds of people to do something is perhaps difficult, but when you’re doing a startup, that skillset is not useful for you at the moment. You need somebody who can do the dirty work. You need a way of knowing that they can do the dirty work.

They’re like, “I was on this project and this project. I was part of this famous product that is relevant to you.” Should you not be impressed? Maybe or maybe not. You need to know what role did you play? How did you do it? You need to devise tests to make sure that they’re confident for the role and that they can apply to what you need. You want to go from the ground up rather than the top down. It’s a mistake I made. I hired someone. I’m like, “I’m going to hire this person who was a senior manager, CMO type of person for our startup, then he’s going to hire everybody in the correct positions. That’s how we’re going to be the company that we envision ourselves being.”

The number one complaint people have about their work quality and their work dissatisfaction is they feel that their boss doesn’t understand what they do and they are forced to make bad professional choices from a senior who is less competent than them. That is one of the most frustrating things that people experience. They have competence and it’s being overruled by incompetence. You are not seen. You are not heard. You feel like your years of professional development are flushed down the toilet. Might as well not be who you are.

LNC Eli Packouz | Instafloss

Instafloss: One of the most frustrating things people experience is that they are competent, and it’s being overruled by incontinence.

 

That is one of the top reasons people give for leaving a company. You want to hire people who can do the dirty work, and then when it’s too much work for them to handle, you can give them people who can help them out and then move them to management. If you get people from management first and you hire people to do the work, they’re like, “The management doesn’t get this.” If the management’s like, “I spent ten years in the trenches doing this,” that is a much more respected working relationship that people appreciate. They feel like they’re developing. They feel like they’re contributing, and you get much better work out of it.

Regarding the fire fast, one of the things we’ve done is no matter how much due diligence you do, no matter how much homework you do on people and you believe them, there’s a chance that you’re wrong. If you are wrong, very likely, you are not going to want to admit it to yourself and you’re probably not going to want to admit it to them. I’ve seen it happen many times where you hire someone, it turns out they’re the wrong person. It’s very emotionally difficult to fire them. They relocated. You have to tell everyone that you are an idiot. You developed a relationship with this person over a few months, and it’s like, “I want to give you a chance. I believe you can do it. I like you.”

One of the things we’re doing now is we give people early goals. There’s a probationary period for hiring. It’s like, “We hired you based on the understanding that you could do these things.” Here’s a very reasonable goal. If you accomplish them, you are then moved to a permanent employee status that comes with some extra perks and extra benefits. If you don’t, then the contract is not auto-renewed. We’re not firing you, you just failed to be hired.

It’s like in marketing when you have opt-out versus opt-in. Even though there’s that check mark in the process on the website that people could either click or unclick, the fact of whether they have to click it or unclick it makes all the difference in the world. Famously, France did this thing where you are automatically an organ donor unless you say you’re not. They multiplied by some giant multiple the number of organ donors that they had because people, instead of opting in, had to opt-out. If it works in the marketing funnel and if it works in your checkout process, it also works in the hiring process.

It sounds to me like you’re growing your people organically into management versus hiring the management and then saying, “Go get the people” and the people grow themselves, so to speak, which is smart. That seems to be the new model of creating career good-level managers. I know some of the IT companies that have done similar on the West Coast. It makes total sense. I love your thoughts on that. Is that kind of philosophy? Do I have it right or am I off track?

That’s true. That’s how I think it makes the most sense to do it. You have to build from the ground up rather than the top down, in my opinion.

I couldn’t agree more. We’ve both seen it both ways. I’ve seen in my industry, people come in with these huge resumes from huge companies. Unfortunately, they’re so used to having staff who know what they’re doing. They come in and all of a sudden, they’re in a much leaner company situation and they don’t know what to do. Versus the person who comes in and says, “I came from here. Let me grow into the job.” They seem to be much better off on a corporate side. Anyway, don’t get me started on that issue.

Let’s talk about this though. Initially, when you start these companies, you capitalize them, crowd-funding your money, other people’s money, family money, and friend’s money. The difficult way businesses start, but then you get to a point where you’re growing, and then you need to go back to either the original investors or if the number is much grander, obviously fundraising. Talk about that. How do you go from, “We’re doing X amount, we proved our model, we’ve proved this thing works, we proved the consumer wants it, our price point seems reasonable, but now we need real money to get it out there.” What do you do then?

I would highly recommend that anyone who finds themselves in this position or anyone who thinks that they’re going to find themselves in this position. By the way, you may find yourself in this position in the very early stages of your company, depending on what it is. You might be able to do a proof of concept, but depending on what it is, it’s like, “I need $2 million to develop this.” There’s no way around it, depending on your idea. Hopefully, you can prove it.

The more you can prove, the better of a deal you’re going to get. An investor is a lot more likely to invest in you if you can prove you don’t need it. The investor is going to be a lot more likely to take a risk on you if you can prove there is no risk. The more risk factors you eliminate and the later stage you get to, the better deal you’re going to have because the earlier it is and the less that’s proof, the more risks there are for the investor. It’s reasonably set.

The investor will be more likely to take a risk on you if you can prove there is no risk. The more risk factors you've eliminated, you get to the better deal. Click To Tweet

If you think you’re going to be in this position, I highly recommend you read a book called Venture Deals, because you don’t want to be having this conversation without some kind of literacy in the conversation. If you don’t know what a valuation cap is, a safe, a convertible note, and these sorts of things, don’t even have that conversation because you’re either going to make terrible deals or someone inadvertently by accident or you’re going to lose control of the company or someone can take advantage of you. Know what you’re talking about first in this space before you do anything.

Let’s assume that you’ve at least read Venture Deals and you’re familiar with the concepts of raising capital and what that involves in terms of economics and ownership for your company. There are multiple ways you could go about it. It depends on the business, the space, and how far you are. Traditionally, there are venture capitalists who have a lot of criteria. You need to fit a certain mold to qualify for venture capitalists. They need to think that you could do 10x of what their investment is at least. Not all companies are venture capital backable.

That doesn’t mean they’re necessarily bad ideas that you shouldn’t do for your company. For example, a pizza shop is probably not venture-backable because it takes some capital to raise, but you’re probably not going to sell that pizza shop for 10x what they put in. That’s very unlikely. It’s not a fit for them, but this could be a very good path for you if this is your idea and your passion. There are lots of other deals and lots of other paths you can take besides Angels, friends, family, and your own money if you’re so privileged.

Another class that is interesting is equity crowdfunding. It’s similar to what we did for the product that you offered on pre-order, except you put this out to the general market to sell your shares instead of selling the product. There are a lot of websites there. There’s Republic, StartEngine, and WeFunder. There’s a bunch of them out there where essentially it’s a platform where you make the arguments or the pitch that, “This is the company, this is the price I’m putting on it, this is what I’m selling shares at, and this is what I think we can do with your money.” That is a lot more accessible for some folks.

However, I would say the caveat here is that your business needs to be interesting to the public. There are certain classes of businesses where they might be very niche and they might be great ideas, but they’re only going to be recognized as great ideas by very niche individuals. That might not be a very good candidate for equity crowdfunding. For that, you probably will need to find niche investors depending on your situation.

I would say read Venture Deals, understand the lay of the land, and get as far as you can without needing investment as you possibly can. If you can build a prototype without needing investment, do that first. Prove that it works. Give something somebody to hold and say, “I like this device.” If you can somehow find out that there’s consumer demand, like you did surveys or you did a test run, you can then go to someone and be like, “Here’s the data. Customers love it. You just need to give me money. We could scale this,” you’re in a much better position than if you are being like, “I had an idea. Give me a bunch of money,” with all sorts of risk factors.

I’ve been on both sides of that. They’ve given money sometimes and you have to think, “What do I do after the fact? Some have worked out well. Let me ask you two last questions here. You’ve been mentored by people. You’ve grown. You’ve probably hit your head a bunch of times and hit your nose a bunch of times. We all have as entrepreneurs. We’ve all had our bloody noses so to speak. Was there a mentor or mentor perhaps in your career who helped you to get started and who gave you guidance along the way?

Many. Innumerable, it’s hard to count. The first was my brother whom I started my first company with. I was younger than him. He had started other companies before and I learned a lot from him, but we both learned a lot on the way too. I’m incredibly thankful for the lessons that I had early on from him. Other mentors, I would say are peers. We went to industry trade shows and we met people who were in the same position as us.

Some of the best friends I have now today were people whom I met at conventions who were like, “We made this product and you made this product. It’s in the same space. We don’t compete at all, but we’re doing practically the same thing. What mistakes are you making? What mistakes am I making? Let’s talk.” I’ve been friends with some people for ten years, simply based on meeting in the space. Some friends, I met while we were doing manufacturing in China and I met some other people who are doing their manufacturing in China. I was like, “What’s going on with your manufacturer?”

Over time, this becomes a very genuine friendship where you’re trying to help each other navigate these murky waters and distill all information like, “You have a mentor. I read a book. I’m going to tell you what I read in this book and you’re going to tell me what your mentor said.” Having people in that position is incredibly useful to know people who are going through the same thing as you. This works professionally as well as personally. Find people who are going through the things you’re going through and learn from them. You’re going to have a whole lot of trouble if you don’t.

The one piece of advice I would give here is to seek out these friendships, cultivate these friendships, and be earnest in them. I’ve seen some people who are very much trying to get information, but they don’t want to give information because they feel like, “If I help someone else, they may be a competitor one day. I just want to learn from you. I don’t want your business to succeed.” That’s not going to work. People are going to sense if you’re genuine or not from a mile away. The best way you could get genuine advice is to have a genuine friendship and to want the people around you to do well as well.

LNC Eli Packouz | Instafloss

Instafloss: Seek friendships, cultivate these friendships, and be earnest in them.

 

Let me ask you one last question here, then we’ll wrap up a couple of things here so people know where to get the product and find out more about it. Let’s not leave that out, which will be the first time I have, so you have to remind me. I have a 20-year-old son who’s an entrepreneur in the IT space. He’s still going to college, but he went out and he got a full stack coder degree. He fell in love with the internet and he’s had some success. He runs around like what you’re describing. He has friends who are in the same mindset. They’re doing different things, different businesses, but they all want to be self-employed. They all realize that that’s the best way, whether Robert Kiyosaki said it or whether it’s the reality. We favor economically people who are self-employed when we’re successful.

Having said that, when I was probably 15 or 16, I had a neighbor and I used to hang out with his two older sons. They told me that their dad was an inventor, like yourself. My dad was a construction worker. I wasn’t going to learn anything about business from him. I learned other life skills from him, but I wouldn’t learn anything about business. It wasn’t what he did. He worked for other people. I said, “Let me go down the street and talk to Mr. Reich.” He was always under his car hood. I grew up in New Jersey. At 3:00 in the morning, you could go out, the snow could be blowing, you’d look down the street, you’d see him with the light hanging off, and he’d always be playing in the car.

I went down one day and I said, “Mr. Reich, can I get a minute or two of your time?” He said, “Sure, what’s up?” I said, “I want to ask you.” He had become very successful. His company had gone public and they did very well. Their product is called Tuf Oil. It’s still in the marketplace. It helps in big engines, in particular, bring the viscosity down or up. I’m not an engine guy. Anyway, whatever this did, it was effective and increased gas mileage.

I went down and I said, “Congratulations. I want to know how did you do what you did.” He was smoking a cigarette. He put the cigarette to the side and said, “I had gone to Syracuse University and graduated in engineering. When I started my career, I worked for some companies, and then I quit and started working for myself. I had patents and products that never made me any money until this one.” I’m guessing at that point he was probably late 40s, maybe even early 50s.

The advice that he gave me was very interesting. I’d love your thoughts as a super successful young CEO inventor/entrepreneur about what your comment or thoughts would be to our younger audience on this question. Here’s the question. What he said to me was, “When everybody else told me to quit, I didn’t listen. I continued to do what I was doing and eventually, I finally found the success that I wanted to find.” I’m sure this hasn’t been easy. Two companies, as a fairly young man, what would your advice be to that next generation coming up? Those 20-somethings, even teenagers perhaps, who are looking at a guy like you, they listen to our interview, and they’ll say, “I want to do what Eli did. I want to find a product I’m passionate about. I want to run it out in the marketplace.”

You gave some great advice already and some how-tos, but in terms of all the naysayers, and I’m sure you’ve had them. Friends, family, and relatives are always the worst. Strangers give us the benefit of the doubt more so than the people who supposedly love us. What’s your advice? What are your words of wisdom to them?

I know exactly what you’re talking about. My piece of advice would be that the best way to have a good idea is to have a lot of ideas. Out of 1,000 ideas, 999 are going to be terrible. Your best bet is not to spend any time beating yourself up over the crappy ideas that you’ve had, but to get to idea number 1,000. Sometimes as an exercise to be creative, I’ll be like, “I’m trying to solve this problem. What’s the worst way I could solve this problem? Let me have a bad idea. Let me make a bad business to think about it to get the creative juices flowing.” You have to come up with 1,000 different ways of trying to think about how to do something before you stumble upon the right one.

LNC Eli Packouz | Instafloss

Instafloss: It is even more important for you to stumble upon the right one.

 

It certainly has not happened to me where you get out of bed in the morning and you’re like, “This is it. This is my first idea. This is a great idea. I’m going to go do it.” I’ll do it, and then it’s phenomenal. Almost everyone I’ve talked to who has ever come out with a product or started a business had many thoughts beforehand that went nowhere. Myself included. I said I came out with seven products before Instafloss. Let me tell you about the products I didn’t come out with.

Not only the ones that were written in my journal that I thought were great ideas, and then shared around with other people and realized the glaring flaws in them. Unfortunately, in some of them, I sunk a lot of money into and got started to develop before I came across some pitfalls before realizing. I was trying to come up with a software thing and then realized after hiring some developers that the Google API doesn’t even let you do this. “This was dumb. I didn’t check that.” There are so many things like that or, “This is a great idea,” but it turns out it’s going to cost $2,000 to manufacture. At least we learned something along the way.

The thing is for every bad idea that you have, it gives you a stronger skillset for when you come to a good idea because you realize, “When did I think this was a good idea? When did I find out that was a bad idea? Now I have a test that I could apply to my next idea. Could I have done that test sooner? Could I have done that test cheaper? Could I have done that test better?” Where you didn’t have to put a year of developing a crappy idea that no one wanted or something like that. Maybe you learn some fundamentals from manufacturing. Maybe you learn how to get advice from people for free before you commit to something. Maybe you learn how to find out some customer feedback. Maybe you learn how to prototype it yourself before hiring an engineering firm to do it.

All these little things that you can learn from your bad ideas. You’re going to be in a much better position if you’ve experimented with a bunch of bad ideas before you get to your good idea. The more experience, the more knowledge you have, the more likely you are to succeed. It’s hard enough to succeed as it is, even if you are experienced and even if you are knowledgeable. Succeeding with a good idea is hard. Succeeding with a good idea with no experience and no skillset is almost impossible. Why don’t you develop that skillset on some bad ideas first?

You will be in a much better position if you've experimented with a bunch of bad ideas before you get to your good idea. Because with more experience, the more knowledge. Click To Tweet

That’s great advice. It makes total sense. It’s what he said all those years ago. He probably was one of my inspirations to become an entrepreneur as well. It was the idea like you said. You had some things that you did, but you probably had notebooks full of ideas that you’ve never done that maybe you will in time, or maybe the marketplace will need something of that stature at one point in time. This has been a pleasure, but before I forget, I want to get your product and I know some people in our audience are going to want to get your product. How do they get your product?

If you have teeth and you’re interested in keeping them, I would recommend you go to Instafloss.com. Check out the product, check out what we can do for you, and if you like what we do, pick it up for yourself.

Eli, this has been a pleasure, my friend. I appreciate it. Tremendous words of wisdom. Tremendous success. I’m not only going to use the product because it makes sense. I’ll be honest with you, I’m one of those 70% of Americans who don’t floss. You’re right. You go to the dentist. They give you a bag of stuff to take home and it sits on the counter. My wife is religious about it. We’ll get two of them. Thank you so much, my friend. Any last words?

Remember to floss. It’s the key to happiness.

Thank you so much, Eli.

 

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