DO SOMETHING CRAZY: Part 3 of 5
I think I’ll start a company that teaches college students to discover and pursue their career dreams by hosting internship programs in the best cities all around the world. I think I’ll call it….University of Dreams! This is what my Dreamer self whispered to my soul in 1999. I was 29!
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Ok, so what was all that business gobbledygook I forced down your throat in Part 2 of this series? Did I need an Ego boost? Maybe, as our Ego’s work in mysterious ways to get us what it thinks we need. However, not my primary reason for writing it. Let’s get started on part 3 so we can find out together if I actually have a reason for writing this series.
By now you have figured out that I am sharing stories from each attempt at reinvention in my life, only in reverse order. Both stories so far have told tales of a rather competent entrepreneur who discovered a way to build wealth from assets paired with fun operating companies. Well, you are now going to meet my 35 year old self - Mr. Assetless Entrepreneur without a clue!
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“Sir, we can’t lend your company any money. This business has no assets! We don’t lend to receivables businesses until they are more mature.” the umptenth corporate banking relationship manager told me. “But, it’s really nice what you do for kids. Keep up the good work. Have a nice day!”
Which ‘good’ part were they referring to? I had bootstrapped my company, University of Dreams Inc., with duct tape and my own blood, sweat and tears to somehow make it to year five of existence. My little company that could had managed to grow its revenue over 100% every year since inception. We made the INC 500 list as one of the fastest growing companies in America. All my employees were super loyal, talented and locked in to the mission statement that a member of this group co-wrote with me (shout out to Evangelia Stavros Leclaire). We were growing so fast we had to get a new office three times and had even expanded to a second office in New York. Yet, no love from any bank. Just a few attaboys! WTF?
I thought to myself, why do they keep saying that? You have no assets? I’ve got a great team. I’ve got an awesome brand. I have a kick ass board of directors. I have a website that drives ten thousand applications a year just to get one of our couple hundreds spots, creating a wait list that most companies would die for. My revenue doubles every year and to top it off, I have fucking certificate framed on my wall that says are the 335th fastest growing company in America. I’ve done everything right! WTF are they talking about, no assets?
Welcome to the reality that most entrepreneurs wake up to when they start having their first nice run of success. Zero support from banks. You see, they won’t lend you money to grow until you no longer need their money to grow. Once you are huge, you you can have just enough money to stay huge and keep large deposits in their bank so they can lend your money out to larger companies that don’t need it.
My company would kick ass for four more years and actually start getting bank support in its eighth year when it had gone global and was already doing $10 mm in annual revenue. Even then, they would lend only enough to help us grow at our current pace, not faster. If we had proper bank support early on, we easily could have been doing $100 mm in revenue by then.
Why didn’t I go the venture capital route? Simply put, we weren’t a tech firm capable of making it to the b’s, as in billions. Also, even though I grew up a few miles from Sand Hill Road in Menlo Park, where over 30% of all venture capital is handed out, I didn’t have the pedigree. I didn’t got to Stanford or an Ivy so I couldn’t even get a meeting. Back then it was an old boys network and the doors were closed to outsiders.
If I knew the asset wealth strategy I explained to you in Part 2 of this series then, which I most certainly did not, what would I have done differently?Screw the VC’s. I would have found a real estate investor and bought a massive dormitory building in the middle of fucking Manhattan.
“Come on Eric” you say, “be more realistic! At the time, you couldn’t even secure a loan for a few hundred grand from a bank to cash flow your growth, and you say you should have bought a $50 mm building in the richest real estate market in the country? Come on! That’s crazy talk!“
My case: We were housing nearly a thousand interns per summer in Manhattan at an average rental fee of $35 per intern per day for sixty days. That’s over eight million in rent for just a two month period very summer. That’s $8.4 million in rent for just two months of usage. Think we could have bought that building now? Imagine how fast we could have paid off any mortgage if we rented the rest of the months to local college students during the school year. My calculations show that we could have bought a $100 mm building and have paid it off within seven years. Think investors would like that kind of return?
And we weren’t just doing this in NYC. We had summer internship programs in London, Hong Kong, Chicago, Los Angeles and my hometown of Silicon Valley. These are literally the best real estate markets in the world. We could have owned large buildings in all of them. Knowing what I know today, it’s reasonable to assume that we could have owned north of $500 mm worth of prime dormitory space in these markets, 100% paid off after about a decade. Instead, we paid nearly $50 mm in rent dorms one room at a time over a decade. I ask you this: which path was more crazy?
I didn’t know it yet, but my subconscious did. It was yelling to me.
“You should have bought the real estate and rented it from yourself dummy!”
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The photo below is of all my 50+ incredible employees at University of Dreams at its height. The hand signs represent the wings of Dreamers, which is how we called ourselves and our customers. Had I known then what I know today, we probably would have bought our own island and retired together a decade ago. I loved every last one of them. It was the greatest honor of my life to run this company. I wonder what we would have called our island? 😎
