Ep297: Kevin Maloney – You Don’t Have a Product Until You Get Paying Customers

Andrew Stotz 00:03

Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that the winning investing you must take risk but to win big, you've got to reduce it. This episode is sponsored by a Stotz Academy which offers online courses to help investors, aspiring professionals, business leaders, and even beginners to improve the finances of their lives and their businesses. Go to my worst investment ever.com right now to claim your discount on the course that excites you the most fellow risk takers. This is your worst podcast host Andrew Stotz, and I'm here with featured guests Kevin Maloney. Kevin, are you ready to rock?

00:45
Yes, I am, Andrew.

Andrew Stotz 00:46
Let's do it. Well, Kevin is a serial entrepreneur with 20 plus years of experience in business development, marketing, operations and finance. With early to mid stage consumer media, technology and real estate companies. Get this Ladies and gentlemen, he has led more than 1000 early, early mid stage investor presentations, conducted 100 and more corporate and institutional roadshows and raised more than $90 million in capital for a dozen early stage. companies. Kevin, take a minute and Philly further tidbits about your life.

Kevin Maloney 01:27
Thanks, Andrew. Yeah, I grew up in Southern California. So you know, parents were at Caltech mom was a administrator at Caltech for 2324 years, my dad got his PhD in physics from Caltech. And I grew up watching a lot of cars of a lot of scientists growing up, and was fortunate enough to be around a lot of science and always had a passion for solving problems as it relates to science. So I feel super fortunate. youngest of four, I have two kids, I live in California. And something interesting, you wouldn't read from my bio, I had, I had my team at an incredible fabrication facility, and we built an amazing shark cage. And that was taken down to Guadalupe Island in Mexico. And over a two year period where there's the my friend let us take his boat to different trips. And we were able to get in the water and dive with the sharks and the cage that my guys build. So kind of a fun. there's a neat YouTube video out there. It's a little shaky, but there's a great YouTube video out there on and that's trust. Yeah, exactly. So I don't mind a little bit of risk out there. But today we'll talk about how to mitigating risk

Andrew Stotz 02:43
Exactly. Well, one of my favorite professors out of the Caltech system was, of course, Richard Fineman. And who originally I believe, was at Cornell, where my father studied his education in science, but just love the reputation of you know, what the what they've done over the years contact and all that. So fantastic.

Kevin Maloney 03:08
Incredible, well liked by many amazing guy gone way too soon, I think he had throat cancer or something.

Andrew Stotz 03:16
Incredible. I mean, scientists, for those people that haven't, you know, tapped into the wisdom of Richard Fineman, just go on the internet and search for Richard Fineman. And what you'll find is some of his videos and videos of him speaking. But the thing about Fineman that was so great as a teacher, and I took a lot from what I observed when I watched videos and listen to tapes of him talking and read his books. He said, what he did in teaching, I think, was so cool. And I tried to emulate it in my teaching is the idea of instead of trying to explain something very complex, he tried to think of a way, how could I explain this is like, the most simplest way of like, you know, imagine, you know, you just would make something very complex in physics seems so simple, where even a simple guy like me would just listen to God, I'm really understanding this. And he knew that he would lose people as he went deeper and deeper into it. But he made science much more accessible to so many people. And so I think that's a lesson that I learned from him. And I would highly recommend for listeners that haven't, you know, heard about him to search, you know, maybe what I'll do is in the show notes, I'll put a little link to his some of his work.

Kevin Maloney 04:28
Yeah, he's got a couple of great books and super engaging and just really fun, very sociable guy, not the typical introvert. Just a amazing person did a lot of things for the scientific community.

Andrew Stotz 04:43
You know, I'm curious, before we get into the question, what I was curious about it said, you know, you've done a lot about raising money for startups and companies and mid stage and all of that, and I know there's there's a lot of listeners out there that are either startups, thinking about startups, or growing their business to be bigger. And then looking at the choices about raising capital and all of that. I'm just curious, like, what would you How would you summarize some of the core lessons that you learn from your experience?

Kevin Maloney 05:16
You know, raising capital is difficult, I don't like it, I don't think I'm good at it. Um, but it's a necessary evil. And, like, I tell my kids that are seven and nine now, learn how to be great listeners, and great public speakers, and learn how to do whatever it is you do. Learn how to include, if it's natural and authentic, a lot of passion. So find something that excites you, I don't care if it's free, like music, sunset, or artwork, find something that's free that you're passionate about. And when you speak about it, speak with absolute conviction and passion, because that does resonate with investors. And they appreciate that also, there's many other things be transparent, understand your strengths and weaknesses and, and figure out what the customer needs and how you're differentiating your solution and how you make money, of course, but at the end of the day, it's passion and conviction and really having a good network of people that believe in you and want to help you achieve your vision. And, and so I think that passion really resonates so know your stuff, right? Um, you know, that's kind of connected with some scientists that weren't great speakers had great ideas. And I became sort of the spokesperson for the science people. And I got really enthralled with the science and super engaged in it and became very passionate and obviously quite knowledgeable over the years during my journey. But, you know, investors want to know that you're open, honest, ethical and coachable, and you are absolutely convicted, to get this thing done. Whatever it takes, you know, yeah,

Andrew Stotz 06:57
it's a great point, as I teach, in my one of my courses about how to become a great presenter and increase your influence is that numbers do not convey emotion. And the mistake a lot of people do is they go to finance people, and they try to present something to them, they try to present a lot of numbers. But numbers are not going to hook someone into a story. And ultimately, you want, you want to tell your audience, particularly, you know, investors, that, that I have a special opportunity here, I'm going on a journey of a lifetime, to change the world with what I'm doing. And today is your chance to join in that. And I'm telling you, if we leave this event today, and you don't join in, trust me, tomorrow, I've got other people I'm presenting to to get in this journey, and your spot is going to be gone. So today's the day to make your decision of whether you want to go on that journey with me. And I think that that passion and that journey, and you know all that is what people really want to buy into, that's what any investor wants to be able to say I'm behind this guy and the mission and the passion that he's got.

Kevin Maloney 08:12
I believe it's spot on, I think having a good well thought out and defensible, Excel, financial model shows discipline. And I think you need you don't have to be an expert in Excel, but you should have someone on your team you can partner with to deliver a defensible model that is well thought out. But I agree, the engagement of the customer. The time you engage that customer, having good advisors, coaches mentors around you, and really getting customer feedback, and then iterating quickly with passion to deliver that clear, concise, compelling value proposition is really key. And we can talk more about that in a bit. But I agree it's really passion about the project and the potential to deliver value, massive value, and change the world. I mean, what else are we doing? That's why we get out of bed.

Andrew Stotz 09:10
And that's the beauty of business. We are trying to change the world with our products and services. So now it's time to share your worst investment ever. And since no one goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it then tell us your story. Again, Andrew, thanks

Kevin Maloney 09:28
for having me. And so my story is really a journey that ironically starts at about age 29 before I was married before I had kids and that journey went to age 44. So my journey to a massive failure in this particular investment transpired over you know, a decade and a half. So clearly there was enough milestones being hit at some point along the way, where a normal person would be thinking You know, we've got a really good chance here. And, and so that's, that's the irony is that, you know, I probably wouldn't take the same risk again today, married with kids and, and a few things like that but but I encourage everybody in their, you know 20s and 30s and 40s, which I believe it's still young, to take those risks and engage with experts. And I'm talking about the super risky things in your 50s and 60s, absolutely continue to take the risks. But I think we get smarter with time and age. And we're just better at vetting. Some of these opportunities continue to take the risk, but I think we just get more knowledgeable along the way. If you fail enough times, I think eventually you get more smarter. Hopefully we do. So we don't repeat those mistakes. But again, my journey started at age 29. I just finished I was about to finish graduate school, I thought I knew enough to really get on my own and start something exciting. I was fortunate to connect with some scientists that were working on a process to produce nanomaterials, very small metallic powders at the nano scale about 1000 times smaller than the diameter of a human hair. And those materials were basically converting the periodic table to something larger, like micron size, like something the size of grains of sand or salt to something nanoscale, literally smaller than a human hair about 1000 times smaller, so really small stuff. And if you take iron, copper, silver, nickel, palladium, cobalt, zinc, in grains of sand, or salt sighs and convert them to something smaller, it's still the same metal, but they act completely different. These things are antimicrobial, they're magnetic, they are conductive. They are catalytic, meaning they'll facilitate a catalytic catalytic reaction. So you can imagine the myriad of things you could use these materials in, if you could truly take the periodic table and convert the center right of the periodic table to something smaller and more active, magnetic conductive, you know, can catalytic or antimicrobial, you could focus on large billion dollar applications, and accelerate efficiencies and cut costs. And so I was of course enamored with the potential of this process. And I was engaged with the scientist, I ended up getting a large percentage of the company, I raised the first $100,000 I didn't think we'd ever need another dime $100,000 was a lot of money and still is. And I said, Look, if we can build this reactor, this vacuum chamber that's under high vacuum, and just a few millimeters of vacuum, you know, suction, and we can get the right temperature, we can melt these materials. Every metal has a melting point and vapor point. And if you can liquefy these metals, and cool them and collect them at the nanoscale, you can do incredible things. And that's all very real, very patented and very public information. And that all actually worked. We were successful in getting patents issued. We did build the first reactor, the materials, large materials, micron size, grains of sand or salt went into the reactor and very small, fine black velvety powder came out incredible. And I needed to see this with my own eyes before I would put my name really on it in a big way. And we were making fingernail foles a day, probably the most in the world at the time. This is back in 2000 to 2003 timeframe. And I was really excited we actually had money left over. We had spent $85,000 on the reactor material came out it was truly nanoscale. I invited people to come in to see the reactor in the back of my brother's garage. And we were really hitting some great milestones, we, you know, we then went out and ended up raising a lot of a lot more capital. My biggest investment loss doesn't equal $100,000. It ended up being about a $35 million total investment in this company and it transpired over the next 15 years. Early on, there was a very hot window of everything nanotechnology that was, you know 2003 to about 2007 timeframe. And I ended up running into these guys, these scientists in 2002. We sort of formally launched in 2000 And three timeframe. We raised the first amount of capital we built the reactor. We proved the concept we filed patents. We engaged with a few large potential partners and potential early customers like this

Andrew Stotz 15:12
is going to the moon.

Kevin Maloney 15:14
Yeah, like like Northrop Grumman. I mean, it was it was incredible and, and,

15:19
you know, and I had

Kevin Maloney 15:20
and I had surrounded myself with incredible mentors, a bill Collins, the former president of tech coast angels, the largest angel investment network group in the US. George Ola, the Nobel Prize winner from USC chemistry 96, I believe 9496 Nobel laureate, joined our advisory team, fez cayambe, Caltech microbiologist has taken two companies public both billion dollar market caps genmark and inhibits both public and out there a founder or advisor, Dr. Mark off Caltech, high energy physicist who studied with Gell Mann as his as his advisor on his Ph. D program, that my bosses at PIMCO, one of the largest investment firms now in the country where I started off in finance these guys back to me with capital and became advisors. They were MBAs and CFA is from the top schools like Wharton and Berkeley. So I didn't have to be the smartest guy in the room. And I knew that, and I was very open and transparent about it. Yes, I was probably the youngest and most connected and ambitious in the room. But I didn't have to be the smartest because I had so many brilliant people around me. And I figured if I was just open and coachable, and ask a lot of questions, we'd measure five times cut once and I had plenty of experts to guide me. And so we would hit milestones along the way in 2000, gosh, 2007 timeframe, we put out an article, I managed to a marketing company, and they said, we're gonna promote you and I said, Well, you don't need to promote me. I don't need to be on the cover of anything. I facetiously joked, I want to be Forbes number 41 you know, the guy you don't read about right? So not everyone out there is asking for money, I could just donate anonymously. Um, and so um, you know, I said, but I don't need to be on the front cover of anything. What we need is our technology noticed in trade publications and technical journals where engineers would be reading saying, Wow, if I can get my hands on this material, catalytic conductive antimicrobial or, or magnetic, imagine the things I can do. And he was successful at getting us a group called k calm here in California, a guy named Sina canassist say an ambitious Turkish immigrant, his family from Turkey. He did a great job and and Energizer and then a group and consultant from Energizer called and said, if you can do half of what you guys say you can, I want to test and evaluate this material, send it to me and all evaluated my laboratory and if it works, if it shows promise, if it's really catalytic and more active, we can build a battery electrode, one of the sort of the flat active layer of the battery, the engine inside for zinc air metal air batteries, we can get that in front of Energizer and I said, Oh, that would be incredible. So I hired this individual did a great job for us took him almost two years and developed an award winning cathode, an active layer inside the battery. These are metal air batteries, the little button cells for hearing aids, you pull the seal back, air flows in, it starts to oxidize. And these batteries generate stable power running from air, right. So you're just slowly oxidizing zinc, which then turns into zinc oxide. And if you neutralize that you literally can use zinc oxide for sunscreen. So we were all about clean tech, green and clean energy. 2006 2007 timeframe. Man was going through the moon on stories, a lot of overfunded, overhyped companies, companies that were raising no joke hundreds of millions of dollars. And I thought, What's wrong with us? Why was I only able to raise a few million dollars we actually have real scientist, real advisors, real patents, and people and products and a little bit of r&d revenue. We were engaged with customers that wanted this stuff on there. I got a couple things long, a very wrong along the way. I misjudged The, the level of, of how conservative how conservative the chemical industry is very conservative. Anything in the chemical industry typically takes eight to 15 years to bring to market, even if it's real and repeatable and third party validated it takes eight to 15 years to bring a new product to market in the chemical industry. I got that very wrong. I thought if we build it, of course, they will come and if the performance is good enough and repeatable and validated by third party experts, how can you dispute it who's not going to commercialize this technology if it's truly better, faster, cheaper, or more efficient, or gives you more power, more energy. And even if you check all those boxes, I got that very wrong. I also misjudge the time it takes the least predictable part of the entire cycle to develop a product is the time it takes for your customers to bring their products to market when they depend on you. So if you're just Intel chip inside the computer, that's incredible. But you still can't push a rope, you need that computer to be available, I think the first chips were used in them in the calculators, but you can't push a rope. So even if that chip is available, you still need the computer to be operating an out there looking for a better chip. So the chemical industry is very conservative. The cycle time it takes for customers to bring their products to market when you're the Intel Inside chip is very unpredictable. It's the least predictable part of the entire cycle. And getting that right is difficult. A lot of guesswork and even if you have excellent, close, transparent, great healthy relationships with big partners, like Energizer have been around 100 years, right? You can still be very wrong on these things. Other things can happen beyond your control, global economic meltdowns can happen. We've saw a little bit of that this year. Well, we had a little bit of that in 2007, eight. I don't know, I don't blame bad timing, bad luck. You know, global economic meltdown is beyond my control. Generally, things come down to there's only two things that can fail the people or the process, right. And so bad timing, bad luck. At the end of the day, you can blame those things. Sometimes that happens, but it's really also Let's face it, that decisions. And if you're if your title is CEO on the business card, you can save that Tommy bad luck, my partners died, people got divorce, you know, some, some places in China borrowed a little bit of our technology didn't want to pay for it. No offense, I love the Chinese culture. They're incredible at doing amazing things. But, you know, some of our technology was you know, borrowed and not paid for. And so that happens. So I don't blame any of those things. We we a series of events happen that were really positive, we developed an incredible high rate, high performance, what's called a gas diffusion era electrode, again, the very thin paper thin layer, the active layer and the metal layer, zinc air battery 322% increase in power, a really big deal for about a 10% increase in costs. So for every dollar, you're going to pay now 110. But I'm going to give you 3.2 x return on power. That's a pretty good trade off. Generally, yes, we want to increase power and cut costs. But the metal can have the battery is number one in cost. The number two is the current collector, it's usually a nickel screen, it's very expensive. And we were number three, so we weren't the most expensive component. But it is expensive to make nanomaterials. So we had great performance, excellent advisors, our consultant walked us into Energizer, they took another 18 months to validate. It didn't work at first, and I thought, is this bs? Is this not real? What did this guy? How did we miss this? And it turns out, even when you engage a partner early on, which our scientists did not want to do, our scientists and engineers in our laboratory said it's only 50 or 60% of the way done. Don't show them our blackbox. Yet, they'll laugh, they won't believe us, they won't think we can achieve it. And I said ultimately, it doesn't matter what we think we have, we might miss the window or opportunity for Energizer to truly engage and put skin in the game intellectual and financial capital and commit to this project. If it's if we don't do it. Now, if we get too far along, I later learned if we were 80 or 90% of the way done, they wouldn't have put the skin in the game to unwind it to get it perfect for their application. And 60% of the way there as long as we were super transparent about our strengths and weaknesses, what was working in what was not. And we were willing to be flexible and iterate and try new things in the lab based on their feedback. We learned that that's what the large companies wanted. And by the way, why would 100 year old American battery company even consider working with the high risk small startup, right? They've been doing this for 100 years, what possibly could I do in the first few years of our existence that would change possibly the trajectory of one type of battery chemistry that's been around since, you know, the 1800s 200 years. Alexander volta right out of Italy. Yeah, believe on. Well, that happens this,

25:11
how did this end?

Kevin Maloney 25:12
A lot of these companies don't have inside r&d programs, right. They're really good at marketing, a little bit of r&d. And so we sign an agreement, we went out and raise capital, I got 11 point 4 million for that five year exclusive, I couldn't do anything batteries. The global economic meltdown started happening first in the subprime mortgage market, as many may recall, in July of 2007. There might be some younger callers on the phone. But it hit the markets, the stock markets and about the fall of overweight. And the energizers stock peaked at 119. Ironically, during our agreement, which I'd love to take credit for, but it wasn't all us. And it came down to I think the mid 50s. And Energizer ended up canceling the entire project. Um, and that was crushing this battery, they make about a, I believe they will make a bout cillian battery year, and 1.8 billion of them, technically could use a technology like this. And we were hoping for a 30 to 50 million revenue stream from this one partnership. And we had about five or six others going we had diversified and had been doing other things. We during that time also engaged with a large public, top 50 Global chemical company. And they led that investment round of $11 million. This massive credibility Energizer relationship battery, you know, taking due diligence calls, huge company invested, we diversified, I put out some research a call for research papers from universities saying we will fund your research if you can demonstrate performance using our catalytic conductive magnetic or antimicrobial materials. And we got all these great ideas submitted to us. And we funded those and filed patents and, and really diversified. But ultimately, we had to shift from the batteries because that the you know, we got through 910 11 and 12, I funded us with some help through 13. And during that timeframe, when we couldn't do anything batteries during that exclusive period, we started doing research on the chemical industry to improve the production yield of ammonia. In China and around the world. ammonia is used to make fertilizer which is used to grow food to feed the planet. And we literally developed a catalyst to accelerate the production of ammonia at lower temperature and pressure to cut the cost. And it worked. And we went to China and demonstrated it. And George Ola said, Well, you know, I'm George Ola, big Hungarian accent, great guy. And he said I was even screwed by the Chinese Be very careful. But it's an excellent proving ground. It's where you go to demonstrate technologies, because the Chinese will let you demonstrate the technology. And we didn't take our reactors to China to teach them how we made the material. We took the end use product and said let me demonstrate to you how this can work in your reactor. I won't blow it up. I'm using a hyperbole, but we won't blow it up. We won't harm equipment, we won't hurt performance. And the performance worked. It was very compelling. Um, so a lot of great things were happening during the time where Energizer was developing and, and putting their story together the launch the battery, the old ultimately end up canceling the program and not launching. Fortunately, we had diversified into other chemical opportunities. I had raised 10s of millions of dollars. It was the spring of 2014. We just came out of the economic meltdown of several years here. And I met a group they said we love what you're doing. You've already spent $22 million, getting it this far. How much do you need to get over the hump where this thing gets commercial? Again, and one of the other things I got wrong was, you know, we did engage customers early on. But you've got to get that lead customer engaged and buying as soon as possible. You don't have a product until you get customers to buy more than one time. And we were definitely an r&d company with great technology, looking for applications, generally not how you want to start a company. But you know, that's what we did. We had an r&d company with incredible capabilities that could change the world. And we were literally 10 years ahead of our time. Fast forward. We got and I'll get to the end here. We in 2014, we ended up raising another $10 million for the Chinese focus ammonia production application. we scaled our process, we produce the material, we delivered it to China and several different trips, we got into the laboratories. We tested it commercially in a commercial environment it worked, we were able to increase production of ammonia, lower the temperature and pressure, lower cost increase output, that's a very big deal in the chemical market. The patent was issued, we signed a commercial agreement with the Swiss company, one of the world leaders in ammonia production in and around the globe based in Lugano, Switzerland. And we were off to the races. $10 million scaled process patents issued agreement signed and going off to raise capital to do a public offering. And it's a funny thing, when you're doing research and development, people love the story and passion and the potential to change the world. But when the passing patents are issued, and the technology works, and it's time to convert that into buyers, and revenue, we couldn't get the orders quick enough to maintain credibility with the bankers to fund the gap that it would take during the quiet period to file the s one document with the SEC to get public in the US markets. And I couldn't fund it. And I just couldn't believe before my eyes with patents issued and validations in China and the best people smartest people in the world, you could have best partners commercial agreements sign that we couldn't bring in the capital and raised $35 million. And I couldn't get $2 million more to fund through this gap. I ran out of capital, I ended up losing a lot.

Andrew Stotz 31:46
And what was the day, what was the day like when you realize we're not going to be able to fund this gap. And it's over.

31:54
It was

Kevin Maloney 31:56
it started to hit me in the December 16, December 2016. And it really hit me q1 17, I started thinking, I've net you. Many times, not many, but maybe three or four times during the 15 year time frame, I thought this isn't gonna work. And I was proven wrong, that the technology was scalable, and automated and safe. And it worked. The end use applications were really compelling. I was proven wrong, that the technology was needed. And it really did valuable things. I thought, you know, the customers aren't going to buy quick enough, they'll never pay this amount. And it turns out, it was difficult to sell the technology, it was very people were afraid of nano and this wasn't nano going into the we weren't LG with it, we weren't injecting it into the body. This is technology. That of course is not cheap or easy. It was really compelling. And the Chinese said they want to invest in purchase, but I just could not get the purchase order. Um, I finally did get one. It wasn't at a level that would be sustainable if it cost me $1 to make pencils. I can't make you know, sell them at 50 cents a pop. So

Andrew Stotz 33:17
So what did you learn from this whole experience?

Kevin Maloney 33:21
Uh, it is something that is it was an incredible experience and journey to build this technology companies spend millions of dollars on patents get patents issued and sign agreements with big companies and everything was real and validated. And it was, I learned that you can't push that rope I mentioned earlier, you can't make people buy, even if the performance is excellent, I learned that we should have engaged customers early on and got them to buy early on. And not just for the big win at the end. I learned that investors are very loyal, if you're passionate and transparent, even when you're failing investor backing the doing great things but we just couldn't get the book came in for five or six rounds of investments on this and they could see the patent issued in the performance was working in China and and the agreement signed in in Switzerland and I couldn't get these partners to put in capital and and fund the gap. And that was very frustrating. I realized that you know, it was fresh. It was really disheartening to know that hundreds of invest does with the millions of dollar at the riskiest times for when we had nothing but a vision. And this is the crazy IRA was easier to raise money on a passionate vision that we might end could change the world. But when the technology worked and the patents were issued and agreements were signed, people wanted to see the orders. And that's where the rubber meets the road, you don't have a business, unless you start selling something, the purpose of a business, generally around the world is not to make money, the purpose of the business is to create a customer. And if you do that well, and you serve them well with a good product or service, then they will pay you an amount that is more than your cost. But the purpose of the business is to create a customer. And we failed massively at creating a sustainable customer base, which is the number one thing it's we all know, we need customers we need revenue to live on. But we couldn't create the customer base fast enough, quick enough. And that was frustrating. It's definitely the thing that I recommend most is do you have a customer? No, but we're close to showing them our widget, our box, it's almost done. I said, go get one right away. It doesn't matter what you think you have, it only matters what the customer thinks you can solve for them. And they willing to pay for it. And so we lost, you know, almost $35 million, I ended up selling the technology to a public company. I had an offer for about 10 million in equity. And they got on the due diligence call. And the Swiss partner said yes, it's real, it's validated, we sign an agreement, we see the patents, we think it'll be a few more years to commercialize. Because, again, the second biggest thing I got wrong is the it had been year eight or nine, since we started developing it. And it can take eight to 15 years to bring chemical technologies, new technologies to market because they measure 10 times and cut once. So that's the second thing I got wrong, even if it's working, they still won't force it into the pipeline, it still needs to be vetted over a several year period. I know I talked a lot,

Andrew Stotz 37:04
I think I mean if I summarize some of the things that I take away, I mean, I guess the biggest thing is the idea of runway, and you have what you're teaching all of us is that there's two aspects to runway. One aspect is, you know, team and product development. And the other aspect is the sales portion of the runway. And I've never really thought about runway in that way. But you can say that the ideas and the execution and getting everything set is just a small part of the runway, the the actual difficult part is to get people to pay,

Kevin Maloney 37:42
that's the most critical thing, you can raise capital all day long on a passionate story, and a vision. If you better really try to deliver on that value, right? There's a lot of people that are in deep trouble for raising, raising money on a story and not even trying to execute. Um, we were so proud to deliver, you know, amazing people and, and products. And, you know, we generated a few million dollars in, you know, in aggregate revenue over the timeframe, a couple million dollars in, in, in r&d, small product sales, but it only matters what the customer is willing to pay, and how quickly will they start paying you for it. If it's 15 years to bring it to market and you're in your eight, and your patents are done, your agreements are signed and your technology works. It's excuse me really hard to fund that gap. Because the time horizon for venture capital and or public equity markets, when you get public, you have a couple years maximum to deliver a unit you'd be better off selling your company or selling a technology at that point.

Andrew Stotz 38:53
So based upon what you learned from this story and what you continue to learn what one action I'm going to hold you to one would you recommend our listeners take to avoid suffering the same fate?

Kevin Maloney 39:07
That's such a good question. It's difficult because the one time when I wanted to walk away, I thought, you know what, there's probably someone better than me out there to take it to the next level. And as soon as I wanted to depart that one time, in a three month period, in 90 days, when I was seriously contemplating leaving, the patent was issued, the agreements were signed on the validation was achieved and those are highly misleading but incredible milestones you're thinking. We're almost there. This journey is going to deliverable war not just monetarily but for the world. And so it's difficult on. Most people wouldn't leave when those milestones are happening. If I could go back and change one thing I don't regret much but I'm, I may have, and this is risky. But a mentor of mine said, Kevin, there's a window happening in nanotechnology right now in 2003 456. And seven, there was a window. Yeah. And a friend of mine took his company public on a story. He had done this before. So he knew how to do it. He did a reverse merger took it public. And like a biotech company, many, many biotech companies in the States, United States get public through a reverse merge. And they're the anomaly. They can be public without a revenue stream and predictable revenue stream or fundamentals, because they trade on patent news, milestone news, partner payments, milestone payments, or FDA clinical trials. Because people are betting that they're going to cure cancer, and they'll bet for five or 10 years and it takes a billion dollars and many don't work out. Those are the anomaly. The other time, there's only two times when you raise money when you have to and you can. And I had a conservative board that said we can't get public we don't have we don't have revenues. We're not sustainable. It's not fundamentally sustainable yet. But a good friend of mine took his story public and I said, Bruce, you don't have people products, revenues, patents or science, not even like

Andrew Stotz 41:15
it is now.

Kevin Maloney 41:18
You raise money on a story, took it public, raised a ton of cash, created this nanotechnology company, a shell went out and hired people smart people. And with that story and capital, I think he went through a couple management teams went out and attempted to build a nanotechnology company, in many times ended up doing therapeutic nanotechnology bio biology related company ended up raising about $400 million to date, and ultimately took the stock from 23 cents. I think it's at $80. Today. Hmm. And I'm not saying that would have been my story. But here's the lesson I learned. Had I take the company public. And again, we have people products, patents, scientist reactors, an incredible facility with full transparency, engaged customers and partners like Northrop and Energizer, big names you've heard of, had we taken that story public then with our publicly announced zinc air battery breakthrough and Energizer and the top 50 Global Chemical Company taking due diligence calls that it was all real, I think we could achieve a several 100 million dollar market cap during that hot period, that window of getting public. And I would have been able would have been able to bring in secondary offering capital of 50 to $100 million. And I would have gone out there and bought into a biotechnology story or bought a company with revenues to augment or offset or de risk our portfolio. Alright,

Andrew Stotz 43:02
so raise either raising huge amount of capital, or get a customer paying now. But you do neither.

43:11
Right. But

Andrew Stotz 43:13
what's your goal for the next 12 months?

Kevin Maloney 43:19
I have up to one thing that's interesting on the on the final story of que si quantum sphere as the company name. I wouldn't even go back and say I wouldn't have developed these technologies. Four times in the last three years, there were breakthrough press releases announced by companies that had announced breakthroughs, leveraging the exact same technology we announced 810 and 12 years ago, no joke. So we were 10 to 12 years too early. And I write the author every time and say that's incredible. Did you see the news on this company? 810 and 12 years ago? Yeah. I'm not to say Hey, no, we did it first. But but it's out there. And I believe it and I saw it and we have patents on that. And I'm all for that. But personally and professionally. Professionally, I'm excited about my current endeavor, which is an indoor air quality, IoT sensor and monitoring platform. And I think it's really important to monitor and track and publicly share the quality of air we breathe indoors, because 90% of our time in life is spent indoors. And the indoor air quality is three to five x more polluted than outdoors. So I'm really passionate about professionally, launching our technology and platform in the next three months timeframe. I'm excited about that. And I'm also launched a small business. Personally a fun thing with my son on to motivate kids students. And athletes, young and old students, athletes and entrepreneurs around the world to just hustle with grit, which in our family means never, ever give up. And so launching hustle with grit with him. And launching this air quality center is sort of my new endeavor and taking everything we learned about being early. Now I think people more than ever want to know the quality of air. We're breathing indoors. Yep. It used to be a nice to have now I think it's more of a have to have. And I think that timing, and hard work is really important. And I feel like I have better timing on this one. I don't want to be an innovator. 10 years early.

Andrew Stotz 45:42
All right, listeners, there you have it another story of loss to keep you winning. Remember to go to my worst investment ever.com to claim your discount on the one course that excites you the most as we conclude, I want to thank you very much, Kevin for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Kevin Maloney 46:15
I would say have fun, fail quickly and often. Fail quickly and often. Engage that customer get feedback from that customer. And it doesn't matter what you or your science team think. Just innovate and iterate quickly based on customer feedback. That'll save you so much time and headache. I got that wrong. It cost us $35 million. And be passionate about your potential.

Andrew Stotz 46:44
Great. Well, that's a wrap on another great story to help us create grow and most importantly protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.