Olio and Pebble founder and now startup or venture advisor Steven Jacobs walks us through the hardware space and how he founded two companies and is now focused on mentoring founders and helping startups achieve a positive social and environmental impact.
Taking up mechanical engineering and materials science and Stanford and Berkeley, Steve then went on to work for companies like Apple (as part of their product design team) and HP (in their Premium Products Group), after which he founded Olio Devices and also Pebble, which are both around wearables. Then, Steve went on to do product management for the big tech companies like Google and Facebook before moving onto being a venture advisor.
Steve’s goal was to make products that made people smile and create meaningful change. He talks about the stark contrast in his mindset from when he first started out versus today and how the definition of ‘impact’ changed for him. He even uses lettuce as an example of a business model and likens it to soda and later on, algorithms and software.
In order for startups to have a more positive impact, Steve talks about two ways for them to go about it, and he also offers advice based from his own experience on common mistakes founders usually make and how to avoid them. One important point he mentions is integrating the social impact into the incentive structure so that it becomes the core of the company culture and values. Lastly, he emphasizes the importance of focusing on creating the greatest impact for your target audience to ensure you stand out, and only then, he suggests that you broaden your horizons.
Maiko Schaffrath 00:02
You are listening to Impact Hustlers, and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems. And for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems such as food waste, climate change, poverty, and homelessness. My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one, or by taking a small step, whatever that may be, towards being part of the solution to the world's biggest problems. It's really exciting to have you on Impact Hustlers, Steve. I've been waiting for this for a while, or we've been both waiting for this for a while to make it happen. You've been across product for many, many years, have been developing many different hardware products, some of which people probably know or have used, and I'm really excited to have you on the show.
Steven Jacobs 01:14
Yeah, super excited to be here. Thanks for having me.
Maiko Schaffrath 01:16
Thank you. So, you started your career actually by studying mechanical engineering in Berkeley and Stanford, and then starting your first couple of roles after that, and I'd love, as an introduction, just to understand your journey from studying mechanical engineering to being an engineer and then evolving your career into different roles and to what you're actually doing now, advising and working with different startups. So, I'd love you to give a quick introduction to your career and where you are now.
Steven Jacobs 01:54
Absolutely. So yeah, I started at Stanford and Berkeley for mechanical engineering and materials science. I was very interested in how things worked and how to create new things. I cut my teeth, from there, originally at Apple on the first generation iPod, iPhone product design team. I was very young, so I can't take credit for anything, but it was absolutely a fascinating learning experience and I got to work on some really interesting products and problems. I became very interested in how different companies made different types of products, so I ended up going into product design consulting for a few different firms and working on a variety of different products, but ended up specializing in first generation consumer electronics. So, some of those were the original Beats by Dre studio headphones, the first gen Kindle Fire tablet for Amazon, Chromebook Pixel laptop for Google, the early Fitbit, Nest, GoPro products, stuff for Apple, stuff for HP. There was a lot of new developments in the consumer electronics space in the late 2000s, early 2010s. I got very lucky, right place, right time at a variety of firms that were working on interesting products, ended up joining HP, the Premium Products Group, so high-end notebook computers to compete with the Mac, and worked on early Spectre laptop products, which has become a very successful business for them, so it was very cool to see how, even within a large company, the genesis of a new product group got started. And at that point, I ended up making a transition from focusing on engineering to focusing on, "Well, maybe I can start a business," so building a company, not just building a product. And so, that led me to Olio Devices, which was my first startup. It was focused early in the smartwatch space, looking at, "How do we help fashion brands make smartwatches?," at a time when it was a set of technologies, hardware, software, machine learning that was very foreign to that industry. So, that was really exciting, ended up selling that to Flextronics, where continued to work on wearables. And then, from there, [I] went into a very different phase in my career, where I transitioned into product management at big tech companies. Variety of reasons, but [I] was very interested in how software products were incepted and developed at these world-class companies and helping them also start to think about hardware and how those two worlds start to meet. So, I joined the Pixelbook group at Google and then the Portal group at Facebook, and very different cultures, very different incentive structures, very different ways of thinking about product, especially from HP and Apple, which were hardware companies at their core, two companies where hardware was this new adjacency that they were bringing into view as a creative opportunity, so it's interesting. But anyway, it landed me back in a place where my partner and I wanted to live somewhere new, so we moved to Berlin before we started a family and made a decision that, early in my career, was really focused on making products that make people smile. That's what got me out of bed in the morning and brought me a lot of joy, the impact I wanted to have in the world. And then, that second phase was really having impact at scale. So, when you're Google and Facebook, impact really means affecting large groups of people, which was different than as an engineer focused on building a singular experience for a singular person, so to speak. Coming to Berlin, I decided I wanted to get back into the startup space, which is where my passion lied and figure out, "How do I play a small role in impacting our species for the better? How do I find companies and founders and investors that are making meaningful change that will have long-lasting effects?" Far longer than any of the products I made early in my career which, many of them ended up in the trash two years after they shipped. And that led me to Berlin, where I met you and started having this conversation.
Maiko Schaffrath 06:31
There we go. Amazing. That's a great journey, and you have been a founder. But still, as a guest on this podcast, you may be slightly unconventional for anybody listening to this. I'd love to dive deep into that and why you're actually on the show. I think you already highlighted your passion for impact and how you're trying to make a difference right now. And obviously, mostly on the show, we have founders that are currently running social impact-focused companies and sharing their journeys. And with you, we have somebody on the show that combines quite a lot of experience, product experience across many years, experience from different companies, different approaches, maybe also different angles on what impact means and how it is defined, so I'd love to learn a bit more about that. We spoke briefly about it beforehand. How would you see your personal relationship with social impact or your personal definition has evolved? But then also, how do you view it at the different companies that you worked at? If you compare companies like Apple, Facebook, and Google, and your own company, was that an evolving role? Was that an important role for you throughout the career? Or did that change?
Steven Jacobs 08:01
It definitely changed. I will be the first to admit that, when I was younger and starting my career, I was very focused and zoned in. What I worried about was, "How do I give the user of whatever product I'm working on the absolute best experience possible?" So, I'm a very detail oriented person, very much, I think, focused on making high quality experiences. Whether it's developing a product for Apple, or Amazon, or Google, or whatever the company is, early in my career, when I was an engineer, my principal focus was, "How do I make people smile?" And if I could design a product and then hand it to my mom, or my dad, or my sister, or a friend, and they go, "This is cool. You did something on this? I love using this product," I felt fulfilled. That was all I was thinking about at that point in time. And then, fast forward a decade, I find myself at, and I'm actually going to skip over my startup because I was very much in that first mindset even at my startup. I was still early in my journey. Fast forward to the Google, Facebook product management phase of my career, and impact started to change. It started to shift its meaning. I touched on it a bit earlier, when I was introducing myself, but it starts to take the form of, "Impact isn't the degree of happiness that you bring someone. Impact is the amount of people that you affect," and that shift in definition of the word within the culture of the organization, I think, comes about based on the business model of the organization and the types of products that they deal in. Obviously, Google and Facebook, their entire business model is predicated on, "The more people that we have attached to the product, the more revenue we can generate from them." Lifetime value, or ARPU, or any of these metrics that have become popularized are predicated on the number of active users and the amount of time spent on device, and that creates a definition of impact based on, "How many users can you get to spend more time on our product?," versus, "How much did you make that user smile?" And now, there's some correlation, because [when] people smile, they tend to like coming back. So, it's not to say that they're completely independent, but the focus does shift. And so, when you're making decisions, you start to focus on, "Okay, which of these features, or which of these products, or which side of this trade-off, A or B, is going to get the most people to interact with our product?" And that was, for me, interesting, stimulating, and it definitely gives you the opportunity to have a very large positive impact, because you have a lot of people engaging with you, but you have less control over what that engaged audience gets to do, and you start to realize that you're feeding an audience into a very large machine, but you're not actually controlling what that machine steers them towards. And so, that got me thinking a lot, let's say. And then, fast forward again, where I'm at now and what I've decided to focus my time on is to combine those first two things and do that by working with, like you said, startups and investors and figure out, "Okay, how do we figure out the technologies, the trends, the businesses, the people that are going to have a massive impact at scale, but make sure that it's a positive one? And then, how do we work with them to be successful, but at the same time, think about things down the road in advance, so that they can start steering their ship well before they attract this massive audience?" And it's fulfilling on both of the first directions, make people smile, affect a lot of people, and brings them together. So, I've really enjoyed that, but it's been a gradual broadening of my visibility, from being super focused on what's right in front of me to thinking in a much bigger way.
Maiko Schaffrath 12:51
Got it. Really interesting. There's this really popular book called Hooked, which I'm sure- I've never lived in Silicon Valley, but it's probably very popular over there and is popular in the tech scene, and I think what you just talked about probably relates to that a little bit where you're trying to optimize your products for engagement, because in many cases, the business models rely on that. If nobody's putting their eyes on Facebook and Google's products, there's no money to be made. Maybe let's exclude the hardware products that they've launched, but if you look at advertising-based business models, there's very little money to be made. Do you think that needs to shift fundamentally? Not just putting engagement on top of everything, but also looking at what's actually good for the user and for society as at large? Or is that too much to ask from companies like those?
Steven Jacobs 13:55
Well, there's two sides to every coin, in my opinion. Well, there could be multiple sides, I guess. But in this case, I think about food, just as a really easy to relate to example. Most companies that produce lettuce aren't trying to make their lettuce more addictive, so that everyone needs lettuce all the time. There's this understanding that lettuce is a valuable ingredient in a balanced diet, and it's best served with other ingredients. And so, they want to make high-quality lettuce. They want to make lettuce that doesn't spoil, and they want to make lettuce that they can transport, and they want to make it as efficiently and environmentally-friendly. They're constantly improving lettuce as boring as it might seem, but they're not necessarily trying to make it addictive. And I think when it comes to sodas or other confections, that's an example of a product where they are trying to make it as addictive as possible, whether it's a high fat content, or a high sugar content, or caffeine, or other chemicals that make it addictive to our physiological selves, and those are the ones that tend to cause health problems. So, the way to solve that is, one, through education, two, through exposing and transparency of what are the contents within that product, but those are often too complex for most people to really factor in, and it takes a lot of cognitive load, and three, to regulate it and say, "Hey, you can't put certain substances in certain foods. They're too bad for people, even though people like them." And that can be applied to a whole sort of different industries. It's food and drug, automotive, aerospace, these highly regulated industries, because there's a danger associated with them. And I think what we're starting to realize with algorithms and software is that what used to be a fun little experiment in a lab somewhere and had kind of a sand box around it has now been proven to be a very impactful at-scale platform that really changes everything, from the products you buy, to the people you like, to who you engage with, to what you believe, to what the facts are in your reality, to governments. And I think when you go through that transition from a small experiment, from a few nerds in a lab somewhere to affecting all aspects of human life and having a danger to you, then there starts to be an increasing need to say, "Okay, well, what are the nutrition facts associated with this particular algorithm?" And I think Apple and others are starting to mandate that those be required, but it shouldn't really be Apple making that decision. It should be the bodies that we elected to govern these things that are saying, "Hey, we have to be transparent about the ingredients in this algorithm, or in this software, or in this business model." And then, there's the question of, similar to cars, how do we actually regulate the process required in order to launch a product? So, on one extreme, the "move fast and break things" mentality, which is brought about by pure capitalism, it's one of the most efficient ways to extremely rapidly iterate and develop new features, gather feedback, analyze it, and then optimize what you do next, especially when you're operating at a big data scale. But you're not thinking about all the future knock-on effects of every feature you released, because that would go against the fundamental principle of "move fast and break things." You're embracing breaking things; you can't do that and say you're also trying to prevent things from breaking. I think when we look at food and drug or automotive or aerospace, there's an expectation that, "Hey, because there's such a big consequence to every product that you make, you really need to think through how could things go wrong in advance." It's not enough to say, "We're going to ship a car, and then we'll see what kind of accidents people get into. And then, we'll update the design of that car in the future." You have to put a seatbelt in. You have to put blinkers in. There's all these required parts that you have to then test and make sure that they work extremely reliably before you can ever bring that car to market, because the expectation is if these things don't work right, then people could die, and we have seen them die. And I think we need to start to think about how do we take elements of bringing drugs to market, bringing cars to market, bringing lettuce to market, and apply pieces of that to really powerful software and algorithmically-driven technology, so that we avoid potentially big impact but to the negative effects in the future, and we haven't done that yet.
Maiko Schaffrath 19:25
Got it. That's really interesting. And I think if I'm thinking about some of the best impact-driven companies in my mind or even thinking about previous guests on the podcast, and some of the most exciting ones are usually the ones that are managing to align incentives, and we spoke briefly about that before the episode as well. In terms of their own incentives, they're selfish company incentives that they need to return capital to shareholders, and obviously, you need to grow the company and all these things that- like the usual average company in a capitalistic system will try to do with having a positive impact on customers, but also larger than that on society and reducing any sort of negative impact that they have. I think there's probably very few companies that are really managing that to a degree that they eliminate the negative impact completely, or there's always two sides to many coins. When we talk about technology, that debate is as old as or probably older than nuclear power, nuclear bomb. Now, AI, you can use it for good and bad. So, beyond regulating for that, from a political standpoint, and basically banning or regulating the negative use cases, what would you say could be done to shift the economic system towards that a little bit more as well? If I think about companies, how they operate, big companies, if they're publicly traded, they obviously report on a quarterly basis. Many of them are quite incentivized to look at the short term, rather than just focus on the next 10 years, because their shareholders are expecting results every quarter. Even for startups, obviously, if you're choosing the traditional venture route for startups, again, you have certain expectations that you need to meet. How do you think about that in terms of outside of regulation? What could be done to shift startups, especially a bit more towards aligning incentives and generating companies that are have a net positive impact?
Steven Jacobs 21:54
Yeah, so in my opinion, there's two major ways to influence how people choose to act in any given moment. The first is an immediate reaction. When I do something, something happens to me very quickly that gives me feedback on the thing that I did. Typically, that immediate reaction would come in the form of, "Did I get approval to get onto the App Store?," or, "Did the FDA approve my drug?" It's like I made something and then someone told me right away, "Is this going to work or not?" And once I realize I'm inside of a system that requires a certain level of quality or foresight, then I start to behave accordingly. I start to conform to the expectation that has been set around me and enforced around me. Today, in software and algorithms, there is no immediate feedback system. You launch software and nothing happens to you, sometimes for a very long time. Maybe decades later, a government agency will probe you and ask you to testify in front of Congress or something. But at that point, there's a new CEO, in fact, many times. So, I think we need to think about, how do we create a smaller feedback loop to companies so that we start to build a culture into companies that thinks about these things? Because it's unfair to negatively judge a company for operating the way they're operating today if they're not getting any feedback. A very human example of this, it's like joining a company and not getting your first performance review until your 10-year anniversary. It's like, "Well, at that point, no one told me I was doing anything wrong, so I didn't react to it. I could have been proactive," but most people won't be. They won't just guess at what they might change about themselves. They'll look for reinforcement learning. So, I think that's the big first piece. I think the second piece, and you hit on it, is "the follow the money" ideology which is, how do we go upstream from the companies themselves and figure out how do we influence where the money flows down from? Whether that's government research, whether that's big banks and hedge funds or VCs flowing it into these companies, their goal is to make as much money as possible. That's what capitalism incentivizes, and capitalism is great in many different ways. It causes competition. It causes diversity. It forces people to be innovative and try new things and get ahead, so to speak, to controversial topics, but I think there are a lot of aspects to capitalism that are good, but there needs to be some guardrails on it. The fallacy that, I think, all of us fall into is thinking that our oversimplified desires to have things be constant is best. And if nature shows us anything, it's that continual change tends to bring about the most robust and long-standing, positively stable systems. So, going through periods for each technology, let's just take ML for an example where, yes, it's very unregulated. You're welcome to experiment. It's there and then actually going through a gradual change where we say, "Okay, well, when you reach a certain scale, there's a certain expectation of foresight and thinking that went into the impact that this could have." It's like, okay, you're now a more mature technology. Let's really make sure that all the lessons learned across the industry are being back-propagated into new companies that are coming out, and let's ensure that people who are investing into those companies have a responsibility to include this as part of their diligence, and the way you do that is you make them exposed. You say, "If you don't, it's like taking money from an unaccredited investor." You are exposed for a lawsuit, because you need to have some skin in the game. You need to have some responsibility for the things that you're financing. I think that's the long cycle, and if you're able to take that long cycle and say, "Hey, we're going to monitor all these different technologies or advancements and at the right stage of their development, we're going to shift the rules to ensure that we are incentivizing down the financial stack, the types of checks and balances, I don't know if that's the right phrase, that we want financiers to have for companies and that we want companies to have internally before they just release products out there, I think that can start to systemically motivate behaviors that prevent potentially negative high-impact outcomes.
Maiko Schaffrath 27:21
Love it. I love that discussion. I could probably continue with that for a very long time, but I'd love to take things a little bit from the societal, political economical level into advice that we can talk about for early stage founders, for people that are looking to launch maybe hardware companies that are passionate about solving a social or environmental problem with that, but they're at a very, very early stage and they want to obviously set up the company for success. They want to set up the company in a way that incentives are aligned for them, that they maximize the social impact, that they don't have to trade-off profitability, but also navigate the difficulties of building hardware products in general, which is hard enough already. So, I'd love to walk through all these different things with you a little bit. First of all, from your experience, I think, especially when you look at more impact-driven founders, impact-driven startups in hardware, do you see common mistakes being made? Or from your own career that you see things to avoid when first starting out in hardware?
Steven Jacobs 28:42
Definitely. So, I actually think hardware, in many ways, does this- the stuff that we were just talking about, planning ahead, even better than software. You have to do a lot of reliability testing. You have to do a lot of quality control. You have to build robust, sustainable supply chains. There's a lot of environmental considerations in how you manufacture your product. So, in a lot of ways, the hardware industry actually does do a lot of this stuff significantly more in my experience than software companies or companies that are algorithmically-based. To answer your question, advice for early stage hardware companies, I mean, a few things. The first is it's likely to take twice as long and can cost twice as much as you think. Hardware is really hard, and part of that is you have to plan one, two, sometimes more years in advance for the product that you want to release, and the development cycles, what's typically called the product development process is fairly mature in the hardware space. So, you start by doing user research and figuring out what features to include in the product, you prototype it, test it, you spin up a supply chain somewhere, you go through engineering validation, test, EVT, design validation, production validation, and then ramp, and you ship the product. Each of those tend to take six, eight, 10 weeks each. There's a clear set of checkboxes, "Hey, the product has to pass all these tests in order for us to go to the next phase." There's this very mature process, and a lot of that is because of the stuff that we've been talking about. It's, "Hey, to pass this phase of product development, say you're working on an iPhone, we have to make sure that if I drop it from a meter high onto wood or concrete, that it's not going to crack. We have to make sure that at altitude, that continues to function properly in different humidity environments, in saline environments, UV exposure, different chemicals it might come in contact with like sunscreen, or lotions." You actually have hundreds of these tests that you conduct very early on in the product development process before you've launched it. This is a year, two years before the product ever sees a customer and you get any feedback from customers on it. You're figuring out, is sunscreen going to be a problem for the material that this phone is made out of? And you do that, one, because it lowers your cost of warranties and repairs and customer complaints, of course, but also, you want to reduce the risk it's going to give someone a rash, or it's going to break, or it's going to cut someone if they hold it the wrong way. And so, you're planning for this well in advance, and I think it's a really good example, because it touches on our earlier conversation of, by thinking ahead, you increase the probability that your impact is going to be positive versus negative, and it gets to your most recent question that I'm answering here of, what's the best advice for founders? Well, it's prepared to do that stuff. I mean, especially a lot of startups I work with that are more software-oriented that are starting to get into hardware, it's a bit of a shift to think about, "Hey, I can't just issue an update. I need to think about all these things upfront, and plan it in, and make sure I'm testing for it, because once the product's out there, it's out there. I can't change it readily. Yeah, so the best way to do that is the natural follow-on is definitely make sure there's experienced people on the team that have launched many products before, not just one. I mean, institutional knowledge is king in terms of making sure you're baking it into your process. Of course, there's consultancies, and there's other ways that you can fill these gaps within your company, but nothing beats having that institutionalized knowledge captured. And then, the second piece is develop your process, whether it's your reliability test spec, or your product development process, or your checklist at each of these phase gates, at each of these stages of development. It's not that different than writing your QA tests for software ahead of time, a good practice there. But yeah, really making sure you plan for that ahead of time and ahead of your capital raise, quite frankly, tends to be where many founders get tripped up.
Maiko Schaffrath 33:27
Got it. You spoke earlier, obviously, at the beginning of your career, you were very focused on making people smile, and that feels still like the main philosophy for a lot of tech products out there. You gave the iPhone as an example. It's obviously providing people with a great product experience, whatever that may be, making them smile, making them productive, whatever they're trying to achieve, stuff like that. Even Apple, I mean, has shifted probably, you know better than me, from the Jobs time to the Tim Cook times where they're much more focused now on sustainable factors and actually repurposing, reusing, recycling stuff than they were in the past. As a founder, do you have any advice or framework or tips on how to not just avoid negative impact through testing but build them, maximize the positive social or environmental impact with your products early on when you're designing them?
Steven Jacobs 34:41
The most important thing to do is to build it into the incentive structure of the company, and the most common way to do that is to make it part of the culture and the values, to explicitly list what you want the culture and the values of the company to be, because every team member you hire is going to start to weave those into the decisions that they make day-to-day. And if every decision that comes up within the company goes through the lens of, "Is this environmentally friendly?," or, "Is this accessible to a wider population?," those other examples, that's going to affect many different decisions. If all you do is say, "I want the product to be recyclable," okay, I mean, that's a good thing to do, but it's only going to affect a very narrow class of decisions that are made across all the different people in all the different teams, and what you're going to end up with is likely a recyclable product that maybe had unsustainably sourced materials to begin with. So, it's back to your original point, I guess, making sure the incentive structure within the company is reflective of the values that you want each decision to factor in throughout the history of and throughout the different teams within the company.
Maiko Schaffrath 36:03
I don't know how much you can speak about it, but I think one interesting example from your career is also, obviously, we haven't spoken much about your own startup, Olio. I would love to talk a little bit about that in a second, but I'm thinking about Portal as well from Facebook. Obviously, Facebook, if I'm talking to an audience that's passionate about social impact, that's a widely debated company as a whole. But I think if you're looking at the Portal product, actually, from my own experience, for my own personal definition, it can be actually regarded as a product that's having a potential positive social impact. I haven't looked at the numbers or the results or if it's actually having that, but if you think about how it's positioned almost, enabling older generations communicating with their family, I sent my mum one of them, because she's really struggling through it. She has a laptop. It doesn't have a webcam. She's struggling to connect a webcam to it. It's too complicated to set it up. For her, it was like a nice device to have at home to be in touch with me, and that's a great social impact that's making her smile. But also, in these times of the pandemic, it's having a clear mental health impact where she was locked in alone at home pretty much, me living abroad, her living in Germany, and this being a product that could connect us truly. So, I don't know if you can share anything on that when designing products like that, some examples on how to think about the social impact of it, because the product could have been completely different as well. It could have been just another way of using the standard Facebook products, but it was positioned in a bit of a different way.
Steven Jacobs 37:52
Yeah. So, Portal TV, which was the product that I was working on at what is now Facebook Reality Labs, you are the exact product market fit that we were focused on. So, specifically, for example, call it grandparents and their grandchildren that are separated by distance and want to stay involved intimately in each other's lives. It's life-size, on the biggest screen in your house, from the comfort of your couch, hands-free. It's able to track the kids as they run around the room. It's hard to get them to sit in front of a phone and talk to their grandparents for an hour. This was a product that, it's video chat at the end of the day, but it delivers it with nuance that actually creates a much more engaging, much more enjoyable, much more smile-prone experience for a very specific group of users. It's not for every user, but it's for this target core user, and it was really good at that. It's encrypted. The WhatsApp calls are end-to-end encrypted. It has a variety of different communication protocols that it's now working with. I think it's a great product. It has a lot of safety, security, privacy built into it, and it allows people to stay closer, especially during COVID, but even without COVID, people separated by distance, and I think that's wonderful. So, I was excited to work on that product, and I think regardless of what people think about the company, that product itself, I think, I was aiming to solve a noble mission, and that felt good. It also was a stepping stone to a new class of technologies that we're all going to start experiencing within our home, and that was interesting. How do you start to take these intimate, shared, remote experiences and build on top of the simple video call and offer a variety of ways to engage with one another? So, I think that was really interesting. In terms of impact, I think scaling it, obviously, is challenging. There's a lot of competitors. Just the other day, I was reading rumors that Apple was looking at coming out with their version of a smart display. FaceTime is a big network. Apple has a massive captive audience of people that communicate on their products through their protocols. That's going to be a very competitive product. Google has theirs. Amazon has theirs. This is not the only product operating in this space, but Portal TV, specifically, I think, solves a very specific problem for a very specific target in a way that nobody else yet can solve, because it's the only product that really works well on the TV. So, yeah, I think it was really interesting.
Maiko Schaffrath 40:50
Yeah, absolutely. I believe that. Yeah, let's cover a little bit as the last point of this before we run out of time as well, cover your founder journey as well a little bit and maybe even some of the experiences you've made since then advising founders as well. So, you actually founded Olio in 2013, I think. That was the same year that Pebble was launched, I think. And from my point of view, Pebble was the first company that made it really a mass market or, to some degree, at least pioneering it. Obviously, there were wearable companies before that, but you were pretty early on in terms of wearables back then, and you had quite a few years of a journey with the company before selling it. Tell us a bit about that journey, but also, what were your biggest lessons learned or mistakes made during that journey that you can share with us now?
Steven Jacobs 41:57
Yeah, so it was right when Pebble was launching. It was before the Apple Watch or Android had launched their Android Wear program. I think most of the products were Fitbit, Jawbone, and Pebble at the time. Samsung had just started their product. It was actually part of the impetus for starting Olio. Everything was rubber or plastic. We didn't think that everyone would want to wear kind of a nerdy rubber or plastic technology device, that things you wear on your person are more about fashion than they are about function. Nobody wears a watch to know what time it is. You wear it to express something about yourself. You wear it to tell the world whatever it is you're trying to tell them, "I'm wealthy," or, "I have good taste," or, "I like this brand," or whatever. And for that reason, I mean, we knew Apple was working on a watch, but it's fundamentally different than an Apple product like a Mac, where it's the same-looking product in a boardroom as it is in a dorm room. There isn't the need for this differentiation. You want a product that feels like a tool, that it's a utility product, that it's understated. Fashion's the opposite. So, I think us breaking into that market was really to say, "We're going to let the world's fashion brands offer you a variety of style, and we're just going to make it smarter. We're going to let it do more for you than just tell time." In fact, the way we would think about it internally in the company was, "We wanted to make watches that save you time, not just tell you time." And so, a lot of the features we created were to that effect. But it was a very different approach than, "We want to make a computer on your wrist," and yeah.
Maiko Schaffrath 43:52
That's what Pebble was, right? Pebble was pretty much this thing that gave you a list of notifications, everything popping up, and stuff like that. I think everything I've seen about Olio was the complete opposite basically, much more focus on simplicity, it seems.
Steven Jacobs 44:10
Yeah, and it's a different target user. I think what Eric did at Pebble was very cool. I visited their offices. In some ways, it was a competitor, but it was like a friendly competitor. It was a competitor that you hoped succeeded, because you were both trying to build a new space that never existed before, and you were focused on very different parts of the market. In terms of challenges that we faced, there's a million of them. I was a first-time founder. I made all sorts of mistakes. You learn a lot. I learned a lot. One of the things that really stuck with me though, and I tell companies that I advise today this story all the time, is the benefits of really being focused and saying no to good ideas, so that you can focus on great ideas. The example from Olio for me was, when we started, I didn't have the benefit of learning all these best practices and product management and a lot of the things that I learned at Google and Facebook and elsewhere afterwards. We knew who our target market was in terms of their demographics, but we didn't necessarily know everything about them. We didn't go deep enough. So, we ended up having to make a choice: are we going to build an Android app, or are we going to build an iOS app as the companion app for the watch? And it determines, is this product going to work for Android users and/or iOS users? And we said, "Hey, you know what? This product should be working for everyone. We don't want to artificially limit who this product is for." We went out and talk to people. Everyone liked this product. And so, we built an Android app and an iOS app, and we launched the product, and it turns out that 80% of all of our customers were iOS users. There's a number of reasons for that, but the big learning, regardless of what the reasons were, were had we actually researched willingness to pay and the target demographic that is the likely customer for this product before we launched it, we could have halved the amount of work that we put into the product that we launched, and we could have used that 50% of our energy to make a better product for iOS users first, and that probably would have been better for everyone. We sold out every batch of watches that we made, so we didn't have a demand problem. We had a supply problem, but part of it was we spread ourselves really thin. I look at products like Clubhouse today where they only have an iOS app, and Android users are really upset about it, understandably. Everyone should have access to it, but it was probably the right move, because what they probably realized was, "We can make a better product if we focus on building for one platform first." And if I were to guess, they probably looked at, who were the core demographics, who are the creators that we want to get on this platform, where's their willingness to pay, and which operating system has the most of those? And my guess is it turned out to be iOS. And so, they said, "We're going to build for that platform first. We're going to make sure this thing has really strong product market fit and growth metrics. And then, we're going to expand and capture a broader audience," and I think that's a very important reminder to all founders, myself included, is to make sure to really focus on the having the biggest impact for a target audience, so that you can differentiate yourselves from everything else you're competing against and really win your core market first. And then, you earn the right to expand and to spread out and to start to reach out next to you and pull in creative products or revenue streams or target users. That tends to, statistically at least, give companies the highest likelihood of a positive outcome, or else you try to boil the ocean and you end up not making enough of an improvement on what else is out there, because you're trying to please too broad of a constituency.
Maiko Schaffrath 48:28
Was there a broader problem in the wearable market? Obviously, some of these companies you mentioned, they're not around anymore. Pebble isn't around anymore. Jawbone isn't around anymore. It was a very difficult market for anybody to really succeed in the long term. What's the mistakes that all these companies made at scale or lessons learned from that market that maybe founders can still use today and consider when they're launching not just wearables, but any sort of hardware product?
Steven Jacobs 49:02
The wearable market is fascinating as a learning experience. Probably the second biggest learning, you just touched on, which was timing, and extrinsic factors, context that you're operating within. I think we were pretty early to the wearables market, so it was Pebble and others. I think it takes an incredible amount of capital and long-term thinking in order to entrench yourself sufficiently to break out in that market, in part because you have to capture a large amount of data, you have to build user loyalty and advocacy, generations of products are relatively slow. I think Apple has the appetite and the willingness to do it, and that's why they're the single largest watchmaker on the planet by a large margin now. I think other watch brands, there was an initial appetite, but Wall Street actually, and you touched on this earlier, shorter-term analyst thinking, actually penalized them for strategically pivoting their businesses to, essentially, what the future of their industry was going to be, because of how they were evaluated, so being evaluated on your profit margin as a value company versus a growth company, so to speak. So, I think a lot of the early, I mean, and I remember there was maybe 60 Kickstarter and Indiegogo projects in the wearable space. It was very frothy and popular at the time, but there just wasn't sufficient long-term thinking and commitment for any of these companies, except for maybe Apple, to really break out. Even Google has struggled in the space with Android Wear. Samsung, I rarely see in the market. I'm not in every market, so they might be very successful parts of the world that I'm not in, but it definitely feels like it's gone into a winter. I do believe, though, that there will be a spring for wearables, as supporting technologies and our ability to do at scale, flexible cloud computing, and ingest these variety of datasets, and then pipe them into applications for a variety of different usage modes, like insurance companies using Fitbit data. A lot of these companies are building out the ability to make use of what these wearables can do for you and, I think, at some point, we'll see a resurgence, and we'll see wearables, just like connected homes start to really come back to the fore, because the infrastructure and the ecosystem around them will be more developed. So, they'll be more useful, and there's more immediate value.
Maiko Schaffrath 51:42
So, I've got one last question for you. Usually, I always ask founders about the future of the company and how it impacts the world. In your case, I'd love to focus on, if you think about 10 years from now, how do you think designing products and creating products has to change to optimize for social and environmental impact beyond just making people smile, having also great social impact on the world?
Steven Jacobs 52:13
I think, to optimize for social impact, the big changes that I hope to see, I'll name a few. I think the first is the stuff we talked about earlier around making sure that there's an incentive structure for companies, especially companies developing algorithmically-driven products and software-powered products to have to think about the potential future issues and problems that could exist as a result of their technology and have to put in place safety countermeasures, in the same way that an auto manufacturer has to build and test the seatbelt system before they ship the car. I think starting to require that and penalize companies that don't put that type of thought into their products ahead of launching them is just going to be extremely important going forward, because the developer and a product designer have access to extremely powerful technologies very quickly. So, they're able to develop very powerful products extremely quickly with much less capital than it used to require, and I think now's an appropriate time to say, "Okay, let's put some of that saved time, energy, and capital into thinking about things ahead of time. It'll slow us down. That's a perceived downside, but it will result in a lower likelihood of a large negative impact." So, I think that's the first thing. The second thing I'll mention in terms of how we design products in the future for social impact is improving our diversity and the teams and the leadership and the sources of funding that are creating these products. I think, of the companies I advise, roughly half of them are female founders, and about 25% of them are focused on fintech products, and I think part of the reason for that is there's more friction to learning and getting advice and having all the advantages of people that start companies when the people who've done it before you are different than you across a variety of dimensions. So, the more people we can get crossing over those barriers and just sharing knowledge and sharing experience and sharing connections into parts of the ecosystem that, historically for whatever reason, just haven't been as represented starts a flywheel, because once some of them at least have some degree of success, they will then be able to and will be more inclined to pass that along. Historically, they'll tend to pass that along to people like them. So, it's that crossover that ends up being the highest friction communication pathway. So, I think spending a lot of time just finding as many people different than you and sharing the things that you're good at starts to bring equity that ends up propagating for a long time in ways that I'll never see directly, but I believe exists, because it's just our nature, and I think the same is true for products. If, for example, women CEOs and founders start making products for women that women love and use and prefer over products that used to be made for them by men, because there's more empathy for the user that you're serving, because you can identify and relate to them better, if that is true, then women will realize, "Oh, I love using product X versus Y, and I recognize a pattern of it was developed by a female founder," and that starts to be very motivating, especially for young women to say, "Okay, I see this pattern, and now, I believe that I can actually create products for an underserved part of my demographic that I feel a pain point with or a user need with, and I have confidence that I can do that better than the products that are there today, because I have this advantage that I've seen play out in the market in some other product that I've used." And then, that's another flywheel that starts to spin. So, my 10 years from now, to answer your question or even just thinking about the next generation in general, I think, transferring knowledge to people different than ourselves and helping people different than ourselves build products for their demographic starts two very important flywheels that I hope will carry on and bring a lot of really interesting different perspectives to the types of companies and the types of products that we all get to use and appreciate in the future.
Maiko Schaffrath 57:31
I love that. Thank you, Steve, for sharing that and being part of that change as well now, advising so many startups and working with different ventures at the moment. Thanks very much for taking the time for this. I really enjoyed our discussion.
Steven Jacobs 57:47
It was great. I really appreciate you having me on.