Durable Value: An Investor's Podcast

How to Find the Right Problems to Solve as an Entrepreneur w/ Arik Levy

September 08, 2020 Graceada Partners Season 1 Episode 10
Durable Value: An Investor's Podcast
How to Find the Right Problems to Solve as an Entrepreneur w/ Arik Levy
Show Notes Transcript

On this week's episode, Ryan interviews Arik Levy, the entrepreneur behind Laundry Locker and Luxer One, which he scaled to over $40 million and 200+ employees before selling. Arik and Ryan discuss wealth management, finding business opportunities by solving problems, and how to network with other entrepreneurs.

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Start Transcript:

Arik Levy:

There's a big difference between having an idea and actually doing something about it. Right? And so, that doing something about it is really just having that confidence that you really believe in this idea and you think this is going to solve the next problem, or there's some type of market opportunity there.

Narrator:

This is Durable Value. Get investing and business insights from industry experts and successful entrepreneurs every week. Like and subscribe now.

Ryan Swehla:

So today we have Arik Levy and I've known Arik for quite a while now through Entrepreneurs' Organization. It's been a great experience, a great ride, and it's been very rewarding to watch you and your company's journey and your very recent large exit. And I look forward to the opportunity of being able to talk with you about your background and how you got there.

Arik Levy:

Yeah. Excited to be here with you today. Thanks, Ryan. Thanks for having me.

Ryan Swehla:

I really appreciate it. So can you maybe just give me a little bit about your background, your growing up and how you got to where you are today?

Arik Levy:

Yeah, yeah. It depends on how far you go back, but I'll start pretty far back. Let's see. Grew up on the east coast, went to school out there. I started my career at General Electric through one of their management leadership programs. And then got up into the startup world in the 2000 days and had a taste of that. It was out in actually Burlington, Vermont, and that was when the dotcom days are going crazy. And I had the opportunity to move out to San Francisco and really be in the heart of it and did that. And then about six months later, the market completely crashed.

Ryan Swehla:

What year was that?

Arik Levy:

That was 2000 or 2001 or 2002 or something.

Ryan Swehla:

Yeah. Okay.

Arik Levy:

And so then, I mean, it's interesting in San Francisco today and it's just incredible. But back then, it almost turned into a little bit of a ghost town. It was pretty hard to find jobs. Everyone left. I landed up taking a job about an hour and a half away up in Santa Rosa and really liked the city, tried living up there but didn't like it and so I was doing the commute and did that for about five years. And it was a smaller company, entrepreneurial company, I don't know, 20 million or so. But it was an amazing opportunity to see entrepreneurship and how to run a company well. And I came up with this concept and it was mainly doing the drive so I could literally never get my dry cleaning done. I'll leave my house at six in the morning, I go to the gym up there, I'd get home at seven o'clock at night. And my laundry, my dry cleaning would never get done.

Arik Levy:

And so there was actually a dry cleaner in my apartment building that had one of the retail spaces. And so I said, "Well, if I put my laundry in a locker, will you come pick it up, clean it, put it back in the locker?" And so that's kind of how Laundry Locker was born. And so that's my first company. It was Laundry Locker. We did pretty well with that, became the largest dry cleaner in San Francisco doing several million dollars of dry cleaning there, had lockers in hundreds of buildings. And then started expanding that service beyond. I mean the company, actually we sold Laundry Locker off about two years ago, but the software company that we built is still around and the software we built for Laundry Locker, we license that out to people all over the globe. I think we have about, I don't know, 15 different countries that are operating and some of the largest dry cleaners in the world run their locker based delivery solution through that platform.

Arik Levy:

And then I think it was about 2014 is when we really started seeing these apartment buildings where we had all our lockers for dry cleaning were starting to really experience issues with packages. And so that's when you really saw the influx on the Amazon deliveries and what used to be four or five packages a day, now 50, 100 packages. And they're saying, "Hey, is there some way we can use lockers to solve this?" And together, as well as all these different licensees we had around mostly the US but also the globe were saying, "Hey, we need to use these lockers to solve the package problem."

Arik Levy:

And so that's when it Luxer One was born. Luxer One is electronic package lockers. So they're kind of like the Amazon lockers, but much more third party, anyone can use them. We sell them to department building, UPS, FedEx, even Amazon comes, they put the packages in the locker. You get a text message that says, "Your package is here." You go down, it's secure, you type in your code and you pick up your package. So Luxer One is my current endeavor. Started that in 2014, brought that up here to Sacramento and scaled it. And then we sold the company the end of 2018 now.

Ryan Swehla:

Great. So I heard you mention GE there. So I know the GE management track is a very understood world. Why are you today not a big corporate exec? What made you shift gears there and what was the thought process through going off of the corporate track into entrepreneurship?

Arik Levy:

Yeah. GE was, their management programs were one of the best things you could get into at my college. When you graduated, they came on campus and recruited. It was during the Jack Welch days, so I had the privilege of being there during those days. I think I might've seen him once, but never really met the guy. And it was great. I mean, it was a great culture to be in, very interesting, tons of learning, tons of education, tons of development, especially being through that program. But realized I was just a small cog in the wheel and there was never any chance of anything I'm doing having any type of impact on General Electric. Even if I climb the ranks year after year after year, even then the senior senior managers I was working with had very little impact on what was happening there.

Arik Levy:

And to me, a lot of it was just proving to yourself, right? Do I know what I'm doing? Or am I just some schlub that's hiding in the cubicle here? And so that was what was really fun about moving to a smaller company is, everything I did had a direct impact. If I did something good, we succeed. If I screwed something up, we lost a client. And so, I really liked putting my money where my mouth was and doing that. And then when you build your own company, you're even taking that to another level.

Ryan Swehla:

Well, and you mentioned noticing a problem, your dry cleaning and what was the thought process through, okay, recognizing that problem and actually saying, "I'm going to take the risk and the capital or whatever necessary to go out and find that solution?"

Arik Levy:

Yeah. I mean, I consider myself a pretty good problem solver and literally, all day, all I do, I mean, we had a conversation here I probably came up with like 50 ideas. I don't know if any of them were good or not, but it's just my MO is like, I'm drilling into everything, try to understand it, how it works, where the opportunities are. But that's a learned thing over time, I think. As you become an entrepreneur, you become more and more obsessed with just solving new problems. So, with Laundry Locker, it was actually, so a lot of it came down to reading one book. It was Rich Dad, Poor Dad, or Retire And Retire Rich, I think is part of the same series. And it just changed the entire way I look at everything.

Arik Levy:

So I was like, how do I turn everything into a revenue generating asset? And I remember doing that commute for an hour and a half every day, going, "God, when I come up with a good idea, I'm going to quit this job and I'm going to do it." And finally I was like, "Laundry Locker is amazing assets. I can buy these lockers and just place them there and then they'll be generating revenue every time some transaction's happening through those lockers." And so I was like, "That is..." I told myself for years, I said, "If I ever come up with a good idea, I'm going to do it." I think you only, at least for me, I only have a certain window of time. I mean, I think once you cross that threshold of married, kids, responsibilities, when you're young and single and 25, it's a lot easier to take that risk and you know that if you fall, you'll be able to go get another good paying job. Or at least I did with my background.

Arik Levy:

So it was like, to me, the risk was high. I mean, I took every penny I had. I mean, I was eating ramen, sold my car, and collected my... Every penny I could get, scraping together, going to bars with bottles of my own booze because I couldn't afford to drink $8 drinks, right? And so, there's a lot of risk you take, but it's always a calculated risk of like, "Hey, what's the worst case scenario?" And I think us at EO, you're always like, "Hey, you've heard every story of every worst case scenario and the guy always got up off their feet and started again." So, worst case scenario, generally is not that bad depending, I think when you have kids and a family and a mortgage, the risks are a lot higher than they are when you're young and single and worst case, I was going to live in the basement of my parents' house. They had it all set up and ready for me.

Ryan Swehla:

I remember when I started out contemplating, "Well, I could always go get a job here. I could go get a job there."

Arik Levy:

Every day you're thinking about it.

Ryan Swehla:

Peace of mind. I can make it through.

Arik Levy:

And what's that bottom line. When it's this bad is when I'm going to quit. Oh no, it's a little deeper.

Ryan Swehla:

It's not that bad. Exactly.

Narrator:

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Ryan Swehla:

You mentioned EO a little bit, we talked about it. Could you elaborate a little bit on maybe what kind of tools or support networks or things like that that have been helpful for you during your entrepreneurial journey?

Arik Levy:

Yeah. I mean, being an entrepreneur is lonely, right? I mean, when I started my company, I tried to find friends and other people I respected to come start my company with me and they weren't willing to take the risk. So I started it myself and I didn't have a partner or anything like that. And so, finding resources and people you can lean on and if you talked about being single, it's great from one side, but now my wife is a great resource for me and we talk a lot. But prior to that, your friends and they're in a very different space. So it's really hard to find people that understand you and know you. I had some investors and they were slightly, a little helpful, but you have to be guarded with them and careful what you tell them.

Arik Levy:

And so, I found an Entrepreneurs' Organization, it's a peer group of people who have started and founded their own companies, got to do at least a million dollars in revenue. And that, honestly, for me, was probably, I credit so much of my success to that organization just because it was an outlet that helped me develop both professionally, but also personally as well, because those two are so tied together and that's something we learn pretty quick in the EO. We're going there thinking, it's going to solve all our business problems, and it ends up solving a lot of your personal problems and your family problems and stuff like that. Because as an entrepreneur, they're all so interwoven, right?

Ryan Swehla:

Yeah. Absolutely.

Arik Levy:

That. Audible's great, especially, I mean, just driving around, listening to books is a powerful resource. Through EO, there's lots of training programs, things like that.

Ryan Swehla:

And I've heard you mentioned EOS as well.

Arik Levy:

Yeah. So, at Luxer One, that was a pretty rapidly scaling company and we were starting to build an executive team and really looking for a process for how do we run this thing and scale it? And you could see all these things that we were looking for, how do we implement structure? How do we have company culture? How do we drive accountability? And so through EO, I've learned about a thing, it's unrelated, but it's EOS, Entrepreneurial Operating System and it's based off a book called Traction. And it's really just, for me, I love just the formula. "Hey, do A, B, C and you'll succeed." EO, "Run your form like this and it'll work out well." EOS it's like, "Do A, B, C, and your company's going to run well."

Arik Levy:

And we run our company textbook EOS. And every single person in the company has got scorecard metrics, our customer service agents have rocks, everybody's got rocks that we're achieving. We've got quarterly all hands meetings and VTO and we've taken that and expanded upon it as well. But the culture it's driven through our organization is just incredible, really smooth running company and allowed us to scale incredibly fast on top of that.

Ryan Swehla:

You mentioned scaling from what to what? I'm just curious to know, and over what period of time?

Arik Levy:

Yeah. So I think we did about... We went from like a million to eight to 16, to 30, to 40. And it was like four years we went from about zero to 40 million without raising a single penny. Yeah. We started with a loan from Laundry Locker because it was kind of a spinoff of that, $250,000 to design the lockers and get it going. And then, yeah, I mean, we were profitable pretty quickly out the gate. We had a lot of our customers pay a deposit in order for the lockers for us to produce them, and that helped us do the production of the lockers and keep that inventory. I mean, building millions and millions of dollars of inventory, not easy, but yeah, we really were able to grow that company without, I say not raising, we paid that 250 grand back within a couple months and scaled at that quick.

Ryan Swehla:

And then what about employee size? From zero to one.

Arik Levy:

Yeah, from zero, right? Me and my house and I remember, I still have vivid memories of hiring one person in particular here in Sacramento. He would come over and help me put together the kits. So we had an iPad and a controller board and stickers and we'd put them in a box and then we'd ship them to the location where we had the installers. I mean, I used to fly out and do some of the installs. He would... So yeah, one person in my house with one or two to, we're about 200 employees right now in Sacramento, 100 person call center staffed 24 hours a day, seven days a week. Sales team, product team, pretty large product team, 20 or so people, developing our new products, our next generation lockers and software and stuff as well.

Ryan Swehla:

So obviously you're in the package delivery business essentially, which it's not hard to see that you look like a savant that here we are today in the COVID world and the number of package deliveries has gone through the roof. Do you have any advice for entrepreneurs as they're trying to find that thing that they're going to pursue? Obviously, looking back the choices made along the way have been really instrumental to where you are today, but do you have any thoughts on, as people are trying to formulate what business they're going to go into or what opportunity they're going to pursue?

Arik Levy:

I mean, I think of business ideas on at least one a day, but there's a big difference between having an idea and actually doing something about it. And so, that doing about it is really just having that confidence that you really believe in this idea and you think this is going to solve the next problem, or there's some type of market opportunity there. For me, it was more around just the joy of business. I didn't really have any necessary tie to lockers. Now I do. I mean, now I'm very passionate about lockers and packages and dry cleaning. And in those industries that I've immersed myself in quite a bit. But prior to that, I just wanted to solve a problem. And I think most entrepreneurs, or at least a lot of entrepreneurs are just, find a problem that irks them and they want to go out and solve that.

Arik Levy:

And now every day in different. And that's what happens as an entrepreneur, especially when you're the CEO, you're seeing so many problems, right? And you're doing so many different tasks, you're doing payroll, you're running electrical wires, you're dealing with hiring. And so every single one of those, when you peel a layer back, there's a business opportunity in there somewhere. And so just how do you find that one that you have some passion around? And it's also got to be a skill set match too. Laundry Locker was a fantastic skill set match for me because A, I was a software development guy, so I knew the software, I'd been working at a hardware company so I knew how to build the hardware. We had sourced out of China, so I knew Chinese sourcing. We'd done some customer service.

Arik Levy:

So this was really just the perfect overlap of my skill set that was one that I could do myself, because everybody talks about having a great team, but most companies, you're starting by yourself with very little money and you got to do everything because if I'm going to pay you to run electrical wire for a thousand bucks, I'd rather watch a YouTube video and figure out how I can do it for 20 bucks. So at least that's my mentality, I'd definitely roll up my sleeves, I'll do everything myself. And then you start to build a good team around you once you hit scale there.

Ryan Swehla:

Yeah. So you had Laundry Locker, you have Luxer One. What is your next step? I'm guessing with a large exit, you are a little bit at a crossroads in terms of what you do next, where you go. What are your thoughts on your future, your next five years, 10 years?

Arik Levy:

Yeah. I mean, it's not something I ever really thought about or planned for. We weren't actually planning on selling the company. We were out trying to raise money, we brought on some investment bankers to help us through that process. And we actually landed up receiving multiple offers to buy the company. And so I was like, "Oh, okay. I guess we're selling the company." But that was almost two years ago and I'm still there, 10 hours a day, grinding away and pushing on it. So, at this point in time, I'm very involved in the business and running it and driving it forward.

Arik Levy:

But you actually have a whole nother side of stuff now that, just from an investment perspective, from a money perspective, how you're managing that money. And then what's the next step? I think it's something I struggle with a lot. I probably won't be at Luxer One forever. Like I said, I have a lot of business ideas. Do I do that? What's my motivation for doing it? Now my motivation has really got to be for fun. And so, that's a fun place to be in is, what's something I'm really passionate about that I'd really like to understand a little bit more? And how can I create some kind of business around that that... Because the business side of it to me is fun as well.

Arik Levy:

So developing that business, solving problems. People saying, "Wow, this is cool. I love using what you guys build. You're the guy that built that. That's awesome. I use those lockers every day." So that's rewarding, giving people jobs, giving them hope. A lot of people that work for me have become entrepreneurs or been inspired and will become entrepreneurs. And how do I invest in them and give them the tools so that they can succeed? That's what's a lot of fun for me now.

Ryan Swehla:

That's great. We've talked a little bit about your investing activity. If you don't mind, I'd love to hear a little more elaborating on that whole thought process of how you are allocating money and what avenues and what you found interesting and what insights you have as you're investing?

Arik Levy:

Yeah. I'm definitely not a professional investor at all here. I mean, I can't give anybody any good advice here. I think we all have our own method to it. And a lot of it is honestly how much money you have, right? I mean, are you trying to... Is it about gaining wealth? "I've got a million bucks and I need to turn into 10?" Or is it about, "I've got 10 million bucks and I don't want to lose any of it?" So wealth preservation. So I think it really depends on where you are in that spectrum, but I didn't realize how much work it was going to be.

Arik Levy:

I mean, you get this big check in your bank account and you go, "Okay, don't lose it. This is going to last you the rest of your life." And where are you going to put it in? And boy, the phone starts ringing off the hook with investment advisors who want to trade stocks for you and this and that. I think I've taken a very conservative approach. I think, obviously it's some crazy times we're in right now and who knows where the market's going? For me, I want to make sure I don't lose my money. So, I've tried to put it into things that are inflation, that can handle inflation like real estate and such. Personal investing, people that I know, different types of funds, crowd funding areas are really interesting ways to diversify your money, so you put in 50 grand, but put it across 1,000 different investments. So it's $50 in 1,000 investments.

Arik Levy:

So that's fun. So yeah, I'm just kind of dabbling with it right now. I honestly, like I said, I have a full time job. I'm pretty busy over at Luxer One. I don't have the time to sit there and go out and try to find active investments for my money. But I think over time, you start to build that portfolio and those relationships and a lot of it's relationships. That's how you and I know each other. We've known each other for years, you said you're working on this thing, I said, "Okay, great. I know Ryan like this, I feel like is a much safer place to put my money than..." And I know exactly what he's doing with it, how he's doing, because I've heard about it for years. Versus some random person you meet on the internet or something or some investment advisor you just met.

Ryan Swehla:

When you said, it's hard, can you elaborate a little more on what's hard about... I think people think, "Well, gee, if I just had money, I'd be fine." But now you're stuck with this, "Okay. I have money. Like you said, I don't want to lose it." How do you navigate that?

Arik Levy:

Yeah. I mean, you just... To me, the way I navigate is by spreading my risk. So, I mean, there's a lot of opportunities that come my way. "Hey, Arik. I want to buy out my business partner, can I borrow $200,000? Hey, Arik, I'm starting a company. Can I borrow? Or do you want to invest in it?" Right?

Ryan Swehla:

Yeah. Invest in it. Yeah.

Arik Levy:

And so a lot of it is a personal network. I mean, honestly, that's the best thing. And they always say that. I mean, when you're trying to raise money or you're trying to invest money, it's like, "Who's your personal network?" It's the same on both sides of it. And do I know these people or know somebody who knows this person? Is this a safe place for me to park it? It's also around diversity. How do I... So the ones that I don't know well, I'm going to put maybe a little bit of money in and... Worst case, I lose it, but also worst case they do really well and I should have put a whole bunch more money in it. But you can't lose sleep over that stuff. And hindsight's 2020 on these things.

Arik Levy:

So yeah. It's scary though, because to me at least, my wealth is my future and I don't want to have to, when I'm 70 years old, be like, "Oh, crap. I made some really bad investments and now I got to go back to work or something." So, you got to... I've got a great wealth manager I work with. He's awesome. But he's one data point, right? I say, "Hey, Matt, let me hear your data points." But you're actually making those decisions yourself. I could give him all my money, but like I said, I'm very roll up my sleeves, hands on, that's in everything I do. So it's the same thing with wealth management. I'm not just going to give it to one person and say, "Good luck."

Ryan Swehla:

Yeah. Yeah. That makes sense. Well, first of all, I appreciate you taking the time today and coming out to be interviewed. I thought maybe we could close by giving some insight on a person that's been influential to you or an insight that's been influential to you that you look back and say, "That person or that insight at that time really made a difference in my career."

Arik Levy:

Yeah. I don't know if there's a specific person. I mean, there's definitely people throughout my career have touched me in different places. I'd probably go back to EO. And honestly it's like some of the formees, forum is a group of 10 business owners that we sit in there and we struggle. We talk about our struggles and people share experiences of how they solved similar problems. And so I can look back and every person in that forum shared something with me that I guarantee helped me make a decision in my life. The Luxer One, our whole VAR model, reseller model was built off of this guy who was a Cisco reseller. I was really struggling with hiring a VP of Finance. One person said, "Hey, I used a recruiter and here's what they do." I was like, "God, I never even thought about recruiting." I was going down these other directions and boom, we call up that recruiter and we got our CFO and she's fantastic.

Arik Levy:

So it's those little nuggets and what they say in each one of those meetings, if you get one or two nuggets, you're going to look back five years from now and go, "That little nugget is what actually changed the entire trajectory of my company." And so to me, those are my... It's the people in EO honestly are probably by far the biggest influencers on the path of my journey.

Ryan Swehla:

That's great. Well, I appreciate you taking the time today.

Arik Levy:

Yeah. Thanks Ryan. It's been great to chat.

Ryan Swehla:

And thank you.

Narrator:

Thank you for listening to Durable Value, An Investor's Podcast, where we demystify commercial real estate with safe, sound investment strategies to help you balance your portfolio. If you enjoyed this podcast, be sure to rate it on iTunes or wherever you get your podcasts. To learn more, visit graceadapartners.com where you'll find more information, investors' tools, case studies, and more. This podcast is hosted by Joe Muratore and Ryan Swehla. It's produced, edited, and mixed by Melodic with interim music by Ian Post. Thanks again for listening and we'll see you next time.