457: Why This Generation Will Be the Strongest Founders with David Shein of OHF Ventures

31:23which I did. And then Merle called me and said, look, I don't know if I'm a bar of soap. I just can't thank you enough. She sounded unbelievable on the telephone. And I said, what do you know about marketing? Merle said, no, not much. I said, I think I've got a job for you. And she became my marketing manager and I'd say my right hand person for about 12 of those 14 years and stayed on in the company as one of the best people that I've ever, ever hired. And as I say, that was over a telephone conversation that I could just hear she had an amazing attitude and it was proved right. The person who took over me was a young guy by the name of Steve Nola.

32:02He was a customer of mine. He worked for Telstra and Steve treated me so well as a supplier. I thought, well, if Steve treats me so well as a supplier, they'll do the same with staff and with business partners. and Steve ran a Melbourne office. I think Steve would have joined in 1989 or 1990 and left the company. He became the CEO of CompTech or then Dimension Data after me. And I think Steve resigned in 2020 or 2021. So I think he was there for about 31 years and I hired him on my gut. I think sometimes when you know it's right, you've just got to pull the trigger and go with your gut. and that's, as I say, it's worked really, really well for me.

32:47I know lots of other organisations have lots of process and I don't want to say I'm right and they're wrong. I think I've been right. I've been wrong as many times as people who've gone through all the different testing. Yeah, it just worked for me. Yeah, that's a really different experience. So we talk about experience. it sounds like a lot of these people in the early days that you hired they they didn't have that much experience but they were able to go the journey how come i i still say today is that i i would hire for you know we hire for attitude and train for skills you know it's uh yeah and especially today in a fast changing world no one can have all the skills to deal yeah as i say if you're going to take what's happening in our environment today no matter what kind of a leader you were if you were leading a massive company like a CBA or a small startup.

33:43Nobody had any experience dealing in a pandemic. You have understanding what could the benefits be to your organization or what were the consequences. You know, if you were in e-commerce, it was a massive boost. And if you were in travel, it was a massive, yeah, it was catastrophic. so I think you want to hire people who you know are going to have the right attitude but obviously have the ability to learn and I think that's served me well and by the way what I do today is I run a partner in a venture capital fund OIFVC and we back early stage founders and what are you doing there? You can't back that founder on the numbers.

34:38The numbers aren't there yet. You're actually backing that founder on a bit of a gut feel decision on do I believe this founder is going to execute on the business plan that they presented. Hey guys, I hope you're enjoying this episode and learning a ton. As you know, in this series, we interview some of the greatest founders of our generation to find out how they did it. However, if you're thinking of starting your own business and you want to hear from some incredible stories from everyday people like you or I who are actually in the trenches, only been building their business for maybe one year or two years, like they're building right now and they're really in the early stages, but they're getting success.

35:20You should come and check out our new podcast from zero to founder hosted by our community manager, Molly Flynn. These are in the trenches stories from our very own successful students that have gone through some of our programs. People just like you who are deep within the process of building their very own successful business. These are the founders of tomorrow. You can find the From Zero to Founder podcast on all platforms. And remember, it's founder without the E. All right, now let's jump in the show. I want to talk about backing founders, what you look for. but before, talk to me about identifying the right business partners.

36:01If I take my business, it was actually really easy. And so OS Australia is 2 % of the global market. The US in technology is about 50 % of the global market. So for me, identifying the right business partner was quite easy. We'd look at a pie chart and it would say, the product that really, really put me on the map when I really knew I had a business with a company called Novell. It was the network operating system, the absolute hottest company in the world at the time. And Novell had 70 % market share, and there were honestly about 30 companies that then shared the remaining 1 % each year. One and a half and another half a percent.

36:47So I remember saying to my wife, I said, I'm sitting on this gold mine. I just don't have the tools to, she said, what is the gold mine? I said, it's Nivelle. So if you at the time said to me, would you rather have$5 million to build a network and communications business, would you rather have no money and have the Nivelle distribution agreement, I would have taken, which I did, the Nivelle distribution, I didn't have the $5 million opportunity anyway. But I knew, and I was absolutely laser focused on saying, if I'm going to build a long-term sustainable business, it has to be Novell. Because what happens in the US generally happens here.

37:27You're wearing an Apple iWatch because probably 70 % of the market that wears smart watches or wearables or whatever are using. It's not because the demand, Australia has similar market share to what there is in the US. So if you were running Microsoft in Australia, And as a recruitment company once said to me, because I often worried if I was the wrong guy to be running the company, because you sort of think, I don't know, I could ever, it was the first shot of running a company that I ever had. And sometimes you'd think, I shouldn't be running a company with 100 people or 500 people. And I remember Microsoft were looking for a new CEO.

38:13And I phoned the recruitment company and I said, it's going to be hard to replace Daniel It was Daniel Petri, who was the founder of Airtree, who then moved to the States to work actually with Bill Gates and Microsoft Exchange. So it's going to be hard to replace Daniel. And he said, look, without any disrespect, he said you could put a monkey in at Microsoft and it would still grow. And he was right because Microsoft had such momentum, as does Apple today, as does Google, et cetera. But I said the difference between Daniel and a monkey was that an average person, if Microsoft's market share in the US was, at the time, 70%, an average person would get 70%, a monkey would get 65%, but Daniel managed to get 75%.

39:04always outdo what. So when we selected our business partners, we only wanted to work with the market leaders. And when Navelle died, they eventually got killed by Microsoft. We became Microsoft's best partner because if we didn't switch business partners, we would have gone off the cliff the same way Navelle did and we didn't need to. So what does it mean to be the dumbest guy at the table? It's recognizing that hiring people that are so much smarter than you is nothing to be embarrassed about. If you have confidence in what you're good at, I just know that I'm able to add value in a small part of what's a big organisation.

39:50And yeah, it was never an issue for me. I'm so lucky to be working with people who are so much smarter than me. and it sounds like one of the things that you looked for with the people that you worked with was character over experience what key character values or traits were you looking for and do you look for so by the way if you could get character with experience you'd take that any day of the week. Both would be the best. But I think what we would always look for is for a team player. Someone who's absolutely going to know that it's respect for other people and it's respect for other roles in the organisation.

40:44Not thinking because I'm the number one salesperson in this company, I'm more important than someone who answers the phone in reception or someone who packs a box in a warehouse or someone adds, we respect everybody in the team. A team player is somebody who's willing to share their knowledge across the organization. It's making sure that a person is going to have the right attitude, that it's no use hiring someone who's got a PhD. I was just saying to Emma, I hired so many tech guys who were self-taught, I wouldn't have swapped them for PhDs in networking. Because not only did they have the attitude, but they had the ability as well.

41:27We used to be responsible for running the networks of Woolworths at Telstra. If the network went down, we literally, Woolworths would not have had a store network. So what would happen if I had this PhD networking who at five o 'clock came up, sorry, mate, I knock off at five. So you want to make, likewise, there's no use having someone working through the night, but not knowing what the hell they're doing. So it was, did they have the attitude and ability? And importantly, were they adding value? Would they add value to the organisation? And adding value to an organisation is not how many hours you work in a day.

42:13It's not how long you've been with the organization. It's your contribution that counts. And so as I said, we had to switch our main product. The product that put me on the map was a product called Novell. And when Novell died, we became Microsoft's best partner. If there was a technical guy, the best Novell guy, who wasn't willing to re-engineer the skills to become a Microsoft engineer, They may have added value for the first seven or eight years of our organization, but they then lost their ability to add value to our customers. So it's definitely being a team player, it's adding value and it's meeting objectives.

42:57You have to meet your objectives and share the values of the organization. How do you build an incredible company culture? So I think it always starts at the top. and the most important thing is that your actions have to match your words. My biggest fear in running a company was, you said it earlier, you said you take care of your customers, your staff and your business partners. It's easy to say that. I've never seen any organisation that says we couldn't give a damn about customer service or our number one asset is furniture and fittings, Number two is motor vehicles. Number three is computer equipment.

43:38Number four are our people. Everybody says our number one asset is our people. My biggest fear was standing up in front of our company and saying those three things and people saying, what a load of crap. They don't give a damn about customer service. They don't care about our staff over here. And I used to think every single day, what more can we be doing for our team? what more can we be doing for our customers and uh yeah i told you why i left my company the first company or the first job that i had in australia and uh i made up my mind that if i ever hired a person that i was going to make sure that they love coming to work every day that that if they had valuable ideas to to contribute to the company i always say you know surrounding yourself being the dumbest guy at the table, I honestly say 99 % of the great ideas came from people other than me.

44:34And finally, you have to pay market-related salaries. And all three are important. It's no use paying people a bucket load of money to do something that they hate. They may stick around as long as they need the money. It's no use people saying, I love coming to work every day, but I can't pay my bills. So once again, good management is making sure you find the balance between all three things. And really, I think really with culture, what's critical is, and I think a lot of companies are going to find out now, it's not saying we do yoga every Thursday at lunchtime or we've got an open fridge or we do, you know, those are value adds in my opinion.

45:15You know, what really counts is respect for the person, respect for the role. And as I say, I can't emphasize enough, the quickest way to lose any credibility in an organization is when your actions don't match your words. You lose all your integrity. And I think it's really important that as you grow, you have to make sure that the management team that you hire understands those basic things. So that, as I said, not everybody's created the same. I always say, I mentioned Steve Nola. Steve ran our office in Melbourne. Alan Bradshaw ran the office in Perth. As long as our customers love doing business with us, as long as our staff love coming to work every day, the way Steve ran Melbourne and the way Alan ran Perth was up to them.

46:09So you have to encourage individuality, but you have to have core values and unbreakable, rigid values in organisation. and live and die by them. Let's talk about the tough times. So to grow a company like you did, first company as well, at that speed, I'm sure you've made a ton of mistakes and there were some really tough decisions that you had to make. Can you tell us some of the lessons that you've learned throughout your career about some of these tough decisions that you've had to make? Yep. So there's little bad decisions that you make, the wrong hire, the wrong product, the wrong, and there's catastrophic ones that can put you out of business.

46:57And I'm going to start off by saying I'll never forget we had our first bad debt and I was devastated. It was a company actually based in Melbourne, a company called Highsoft who was actually my biggest customer. And we had a bad debt of about$70 ,000. And I must say, my eldest brother, Stephen, who eventually took over the finance side, had scaled them back, their credit back, from about a million dollars down to$70 ,000. I remember coming for a meeting in Melbourne, sitting in reception, and the guy who ran the company, his guy, Howard Mary, I think, since passed away, I'll never forget, he said, here's the guys who don't want to do business with us and yeah under my breath I said we do we just want to get paid for it but we lost$70 ,000 I phoned my dad I said dad I'm so unhappy I'm so upset you've just lost$70 ,000 and my dad said how much business did they do with you over the years yeah I said probably about three million dollars and they said what was the profit margin you made and that's probably about 30%.

48:01So he said, so you made$900 ,000 and you've lost$70 ,000. But what he said next is my advice for any founder today. As my dad said to me in a true South African way, I said, and my boy, he said, if you chop wood, you get splinters. So I think if you're going to run a business, you're going to chop wood, you're going to get some splinters. and I think the key thing is when you do make a mistake is you have to recognize it and you've got to somehow you've got to somehow say made a mistake the sooner you you the sooner you acknowledge the mistake and move forward the better sometimes people don't want to move forward quick enough we made one really really bad mistake that could have been a catastrophic mistake so you know once again probably unfortunately only because of my age some of the companies I'm talking about you wouldn't have heard of but we had the dream team at the time um um we sold novelle as i said which was market leading network operating system there's a product called synoptics who invented ethernet over unshield the twisted pair set so when you see how you cable up your computer to you don't even use the cables anymore you use wi-fi most of the time and we at Cisco as a wide area networking product.

49:24It was the dream team. All three companies, when you say, how did we choose our business partners, were industry standard market leading companies with about 70 % market share. One day I get a call from our supplier at Synoptics, a guy Steve Wood, also Melbourne-based. Steve said to me, Dave, great news. We've just merged with Wellfleet. Wellfleet was Cisco's biggest competitor. and I felt the blood drain from my body because I knew we were going to have to make a decision of do we go with this merged company and lose our partnership with Cisco or do we go with Cisco and lose the partnership with Bain Networks, which became Synoptics and Wealthy became Bain Networks.

50:10Businesses, when you make mistakes that are in your control, it's your fault. When things happen that are out of your control, it's really tough. So, you know, as I said, we spoke about the pandemic. You know, if you were running a travel business and it was really a tough challenge to deal with, but it was out of your control. And this was out of our control. And for a number of reasons, we decided to go at the merch company. It was a really, really bad decision. It was a shocking decision. The day we made the decision, I said to my brother, I said, we've stuffed up. and luckily 18 months later the CEO of Cisco came to see me and by the way the business was still going well and I think at the time he came to see me he was a guy John Chambers probably the best tech sales sales person I've ever met in the industry still to this day and I think we're doing about 165 million dollars and making about 14 million dollars of profit so when you looked on paper, it looked like we had a great business.

51:12But what I saw was Navelle and Bay Networks are laying off staff while Microsoft and Cisco were just announcing record quarter after record quarter. And I realized if we didn't do something, we would have serious problems. And the CEO of Cisco came to see me 18 months later and said, when you made your decision, it was a really good decision the market and I went John he was just being as I say he was a great sales guy he said the market's changed he said I'm here to extend the outer branch and thank God he did because I probably wouldn't be sitting in this studio today if we hadn't re-signed our relationship with Cisco because at the end when we sold the company I think Cisco was about more than 50 % of our revenue and And that's really what helped us achieve the outcome that we actually did.

52:09It was actually a really good lesson for me because, you know, when you think about Cisco at the time was probably about a$10 billion a year company, maybe even bigger. And the CEO still took the time to come and see me. And, you know, he thought in the best interest of Cisco for their business in Australia, it would be great to have a partnership with Comtech. I often wonder if I had a customer in Tasmania who spent$10 ,000 a year with me in Tasmania, it pissed me off. Would I go and spend an hour and a half? And probably at that stage, I probably would not have. But it was a great lesson for me that if something feels right, and obviously for Cisco at the time, the best thing was to have a partnership with Comtec.

52:52And I can tell you, for me, it saved our business. It would have been a catastrophic mistake had we not re-signed. I could talk to you all day, Dave. We have to work towards wrapping up. We have to talk about investing. You know, you have your venture fund. Red flags. What are the red flags you look for when investing in a startup? So, look, the first thing we look at is we back founders. So if I look at our fund, we don't have a thematic. We don't say we just invest in FinTech or EdTech or Martech. We are founder-led.

53:31And, you know, what we look at is, first of all, the founder, and second of all is what's the founder working on. and we look at our business model today and we say we have two customers. We have the founder on the one hand and on the other hand we have our investors who entrust us with their funds and we have an obligation to somehow generate the best returns for our investors. But when we look at a founder, if it doesn't feel right, I can tell you my biggest mistake was backing a founder that I knew wasn't the right person. I got talked into it, my own mistake. I met a founder and I said to the guy who introduced me, I said, Ryan, I just don't trust the guy.

54:20And he said, Dave, you've got it all wrong. I was at school with him in Zimbabwe. He's a great guy. Turned out I should have gone on my gut because it was the biggest mistake that I've made in venture. So once we ascertain that it's the founder that we want to work with, I mean, the things that you're looking for is, does the founder have energy? Because being a founder requires a huge amount of energy. We've just been chatting about the last few years and the amount of energy that you would have needed to, you know, you need energy anyway, but working through a pandemic, then the challenge with attracting, engaging and retaining staff, now trying to raise capital in a market that's turned unbelievably quickly.

55:06It didn't happen gradually. It was like literally went off a cliff. So you have to have energy. But I think what's absolutely critical is do you believe that founders are going to have the ability to energize? Energize everybody because you're going to have to have a founder who's going to be able to say, this is why you should leave your amazing job at CBA or at Google or at Amazon or at Atlassian and come and join me in this tiny little workspace or whatever I'm working. This is my dream. Will that founder be able to energize a customer to say the easy decision is to go with the market leader.

55:52the right decision is to go with this little startup. You know, you should commit your, yeah, we have a cybersecurity company where we compete with massive US companies and, you know, everybody knows how important cyber is. So, yeah, someone, if you were the CISO at Optus and you said, we use the best industry standard market leading products, we still got hacked, you know, you'd probably still be in trouble, but not as bad as you want. You went with this little company based in Newcastle with the founders from Newcastle. So founders have to be able to energise customers, staff and business partners.

56:34You also have to have the edge to make those tough yes and no decisions. Should I scrap a non-performing product? Should I get rid of my best salesperson because they don't share the values of the organisation? As I said in All or Nothing, the arsenal. And finally, when you look at that founder, they all give you amazing business plans that are going to lose quite a lot of money. Year one, year two, I'm going to get to break even. And by year three, I'm going to be printing money. Never happens that way, but that's what they all look like on those original pictures. But do you believe that the founder is going to have the ability to execute on the business plan that they presented you with?

57:14So it's all four things. It's energy, the ability to energize people, the ability to make the edge to make those tough yes or no decisions. And finally, will they be able to execute on what they've provided? Are you hesitating to take the next step in your e-commerce journey? FounderPlus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs, and weekly live mentorship sessions, Founder Plus is your key to success. Try Founder Plus today for just$1 for seven days and start building your dream business with confidence.

57:53You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. And tell me what's been your most successful portfolio company? So within our portfolio, I'd say we have a company called Instacluster. awesome founders out of the University in Canberra, ANU and absolutely loved the founders when we met them and I think we saw what a lot of people didn't see I know that we tried to help them raise money from other VCs and they were seen as more professional services company so we put in three and a half million dollars in our first fund which was a$37 million fund.

58:43And that one investment, we returned$70 million. So if you put a dollar into our first fund just on that Instacluster outcome, you would have got back two. And so that's been an amazing, amazing financial investment. But I think what's critical to us is that we still have an amazing relationship with the founders, even though they owe us nothing and we owe them nothing. I know that one of the founders was in Sydney the other day. They said, I'll be in Sydney on Friday. Can we go for lunch? So we still have, for the reason, as I said, we want to work with people that we want to work with. And my advice to any founders, make sure, as Ian Chappell said in my book, don't take the bet that will pay the most.

59:31Play with the bet that's going to get you the most runs. And it's the same. We believe work with, we want to work with people we want to work with and it should work on the other side as well, that a founder should want to make sure that the company or the VC fund they're going to work with is genuinely interested in helping them succeed. Awesome. All right, we're going to move the hot seat around. I don't want to take any more time. So what's the worst mistake a founder can make? Look, there's lots. I mean, timing is, yeah, it's if you, yeah, I'd go and say if Nick Molnar, for example, he's arguably been the best founder in the last 10 years, if you decided to start a buy now, pay later today, you would not succeed.

1:00:17The same guy, same motivation, same charisma, same everything, the boat sailed. So just make sure that your timing's right. But I think we have a lot of, and I think, and I'll actually say that one of the biggest mistakes a founder can make is losing focus. I always say you have to be as focused as a one-eyed dog in a meat factory. And I think Afterpay is absolutely evidence of, if you compare how Afterpay executed and then how Zip executed, and by the way, I love both founders. We backed Larry Diamond before our fund at Zip. But all is what Afterpay did for the first seven years was pay in four equal installments.

1:01:04And I'm sure, yeah, the interface looked better. I'm sure that the integrations became easier to point-of-sale systems. I'm sure the number of leads they were able to give to their customers grew. But the focus of that organization was just exceptional. I think sometimes founders try and do too many things. And, yeah, you go and look at Apple. When Steve Jobs came back to Apple, I think he had four products. and then develop the iPod, which became the tail that wagged the dog and the rest is history. So I would just say to any founder, stay the course and, yeah, your product has to get better and improve, but don't get distracted by doing too many, trying to do everything.

1:01:54If you go and take Apple, they first did the iPod, which then became the iPhone and then the iPad, and then they didn't do all together. When the iPod was printing money, they said, where else can we be investing? When the phone was printing money, let's give the iPad a go. What's the best choice a founder can make? Choose OIFVC as their business partner. I think the best choice a founder can make is choosing the right co-founder. It's making sure that you align yourself with, with, yeah, I was just with one of our founders today and that, yeah, been struggling a bit to raise capital. And I said, the best thing is the two of you have got each other because, yeah, I often found even when I ran my own business was, yeah, on the days that I was feeling down and it would be very normal for a founder to feel down.

1:02:51Yeah, my brother was generally feeling up and the days that he was down, I was feeling up and it was a good Yeah, mate, don't worry, we'll work through this. I think just surrounding yourself with the right people. And yeah, I think that could be my best advice. What industry excites you the most right now? We hope that founders take us to areas that we may not have thought of investing in. So I don't want to sound naive, but as I said, in our fund today, at the one extreme, we have cybersecurity companies and a company that literally provides the most sophisticated navigation or position equipment in the world.

1:03:30Red Bull used their technology for tracking their aerobotic flights and whatever. And the other extreme, we have two founders who are digitally transforming the funeral industry and everything in between. So if you had said to me, do I think we would invest in the funeral industry, the answer would have probably been no. The founders were phenomenal. And then we have everything in between. And so I've no doubt that we'll be involved in, if I had to do an interview with you in a few years' time, I'd be unbelievably surprised if we didn't have something in the clean energy space, which is a massive growth area.

1:04:08We just haven't met the founders, the right founders to deploy CAP in that area yet. What's something you've learnt today? It looks like you're higher for attitude as well, because I was lucky enough to spend a little bit of time with Emma, and I think you made a good decision to bring her on board. So, yeah, I've just noticed that the people in your, I went to the bathroom and I forget the guy's name, but I can just see people, looks like people love coming to work every day. Thank you. Last question. Is that true, guys? Last question. If you could have dinner with any entrepreneur, dead or alive, who would it be and why?

1:04:44It would probably be Elon Musk because I think he's out of, he's not the CEO that I would aspire to be. The CEO that I would aspire to be would probably be a Satya Nadella or a Bob Iger from Disney because I think I'm more of an empathetic leader than, yeah, I think I'm an empathetic leader. I think that out of, and in our lifetime, we've seen most incredible founders, from Steve Jobs to Jeff Bezos. I think Elon Musk is what he's done. And the way he does it, I talk about focus. One of the things we're absolutely obsessed about when we back founders is that this is literally 120 % of what they do and how someone is able to do what he's done as effectively as how he's managed to be the CEO of Tesla, of SpaceX, now of Twitter, you know, of the boring company is amazing.

1:05:43And, you know, I read his book many, many years ago. And, you know, before I read the book, this guy's going to populate Mars and you think the guy's a nut. And then you read the book and you say, I reckon he's going to populate Mars. So, yeah, that would probably be him. Awesome. Well, David, thank you so much for taking the time to share all of your incredible experiences and wisdom. Congratulations on all your success thus far. and if anybody wants to find out more about yourself and the book and OIF Ventures, where do people go? So the book's available on Amazon and BookType here and I know I saw it at the airport.

1:06:21It's weird when you're walking through the airport and you see your own book there and the best place is probably on oifvc.com is where you can find out more about our fund and myself and obviously I'm on LinkedIn as well. Awesome. David, thank you so much. Thanks so much for the time. Hey guys, I hope you enjoyed this interview. As you might already know, our mission at Founder is to help tens of millions of people every single week with our content, either start or grow their business, which is exactly why we're partnering with world-class founders such as Damon John, Alexa Von Tobel, Greta Van Riel and so many more to teach crucial skills such as negotiation, finance, e-commerce, and so much more.

1:07:10So if you'd like to get access to these free exclusive trainings, please go to founder.com forward slash free. These are 100%. We go super in-depth on teaching a particular topic, and I know that you're going to love them if you enjoy this podcast. So just go to founder.com forward slash free. All right, guys, I'll see you in the next episode.