Daniel holds a bachelor of arts, economics and a master’s degree in accounting. He is often found calling himself a recovering accountant. He started his career early in 2005 working as an intern for a variety of companies fulfilling financial roles. After starting his career at Ernst & Young and AOL Daniel took a leap of faith and started Growth Computer. He has worked as a virtual CFO for numerous startups and is currently the founder for the Start-up Economics 101 and Grow computers inc. Daniel is dedicated to building the first digital operating system for indoor agriculture.
In this episode, Daniel also discussed his opinion on what kind of changes COVID-19 has brought to the finance and start-ups community, and shared his inspiration of teaching and coaching for students and young entrepreneurs.
Angela– On episode 17, I’m introducing Daniel Nelson, how are you?
Daniel– Good, how are you?
Angela– Welcome! Daniel holds a Bachelor of Arts, in Economics and Master’s degree in Accounting. He’s often found himself calling “A Recovering Accountant.” He started his career in early 2005, working as an intern for a variety of companies fulfilling financial roles after starting his career at Ernest & Young and AOL. Daniel took a leap and started Grow Computer. He has worked as a virtual CFO for numerous startups and is currently the founder of the startup “Economic 101”, and Grow Computers. Daniel is now dedicated to building the first digital operating system for indoor agriculture. Wow!
Daniel– Nailed it. Basically, that’s just says that I have a lot of different types of experience and jobs in my career.
Angela– So, let’s start with Economics 101, can you explain that?
Daniel– Yeah, so startup Economics 101 is curriculum that I recently designed and its designed because I have a background in undergraduate degree in economics and master’s degree in accounting. I was a CPA, hence the recovering account in part and recently over the last five or six years, I’ve been working with startup founders and other entrepreneurs on their quantitative side of their businesses, and oftentimes that means the economics, the accounting finance and I found that there’s a real lack of accessible information written in 2020, for these people and so I designed the class originally for a group of entrepreneurs that I was a part of and they asked me to come in and talk about accounting and quickly that it expanded to be everything that I wished that all of my consultant clients knew before I started working with them. And I think that the goal is just to use these basic concepts that I’ve learned so in depth, and communicate them in an accessible way to people. In 2020, is really a special time to start a business because a lot of those core things that you needed to have in your company are products that you can download. So, anything you would think of from corporation to communication to bookkeeping, is actually a lot more accessible and so the goal of startup economics 101 is to reintroduce these concepts and much more modern and not so much about how many widgets your factory make way.
Angela– What did you envision when you launched your first startup, and what was the biggest lesson you’ve learned when it didn’t work out?
Daniel– So, going back to 2013, when I launched a company called K-Pass, so the story there is that I was working at AOL and I was a young mid-20’s guy, single, and I was in charge of AOL Kids, and parental controls. Which was interesting because when I got my first computer in the early 90’s, I was on AOL Kids as a kid. After building a lot of the backend of the business model and business plan, there was a really interesting piece in technology around identity infrastructure. Basically, how do you know that I’m Dan on the internet and serve an experience for kids in a safe way. Coppa laws are federally protected privacy laws. That platform, I said “Oh! There’s this real interesting piece of technology, here’s how we can basically package it up, and sell it to anybody else.” Looking back on it, I made so many mistakes. Part hubris, part ego; but it’s really misunderstanding how markets work, how multisided markets do work, so for example in that you know, in order to make it really successful we needed parents to buy in to the safety of it, kids to want to use it and brands to install it. I had thought that there was this vicious cycle but really was one customer and that was the sites themselves. So, missing that was a really big mistake on my side but also the team. I had a great collection of people, some of the smartest people that I’ve ever worked with but we weren’t a team. I think that was the real challenge that looking back on it, you really need people to go down the foxhole with you when things get real; and it wasn’t that way and its kind of led to me realizing that it wasn’t going to survive.
Angela– And that’s okay!
Daniel– Exactly, I learned a lot!
Angela– And, also because you started working with multiple startups, and I’m sure it was so overwhelming at first.
Daniel– It’s hard because it’s not just working with other people which was the easy part, but it’s the emotional part of starting a business and really committing myself to it- and then seeing it kind of fizzle and just be wrong in so many ways. Going back on it, learning from that was a very eye-opening experience. There were some specific moments where I realized instantly that I was moderating a panel, where we’re talking to someone who is really successful and he was explaining what he was doing, and my entire business model just evaporated in my brain, as I’m on stage moderating a panel. So, learning from that and trying to pick up the pieces and realize what worked and what I thought versus what the reality was; I think was a really important learning. Whereas, what we’re doing with Growth Computer now, we may have made mistakes along the way but I don’t think I’ve made the same mistakes.
Angela– Making mistakes is really part of the process as well. What motivated you to provide courses like startup ‘Economics 101’ to fellow entrepreneurs?
Daniel– Well, there’s a couple of things. One, I love teaching so when I was a Master’s student in Michigan, I taught Intro to Accounting, and I also tutored hundreds of hours.
Angela– How was that?
Daniel– I loved it, it was really interesting because coming from the subject matter background. So, knowing the accounting, knowing the financial accounting or managerial accounting so well and connecting it to people that didn’t even want to learn it but had to. How do you figure out how to connect real world examples that they could resonate with to this material that is so esoteric? Overtime working with startups, entrepreneurs, and founders, I realized that a lot of entrepreneurs still have those negative connotations and they might’ve not have learned some of these basic concepts in a really accessible way. So, as I work more and more on Grow Computer, and not be able to do as much for consulting, I try to wrap up all of that knowledge, learning, and concepts into one class and series of curriculum that could be digested by anybody. And so the idea is that if you didn’t know anything or you knew everything, how do I introduce a range of concepts that are extremely applicable to any business, and give you the tools to hopefully say “Oh, I need to learn this,” and then go off from there- teach yourself the rest of it. Just knowing what it is, is oftentimes the hardest first step.
Angela– Do you think there is a flaw in the current finance management system for nine finance startups? Share your opinions with us.
Daniel– Yes, and no. I think it’s a lot better now, because the technology is there. For example, for bookkeeping. Book keeping was (when I started my first company) was a really onerous process. When you look at bookkeeping as it was, I had to keep it internal book of records of all the transactions that I had thought I had made. So, if I go pay a bill, I’m supposed to record it on QuickBooks. Then Plaid, I don’t know if your audience has heard of it but it’s a company- it was recently sold to VISA- but what Plaid did essentially was open up those bank accounts as API’s so now in 2020 all you do is connect your QuickBooks directly to your bank account. Instead of having to do 2 separate set of books, it already has integrated every transaction and you’re just sorting it where it goes. How do you understand how to think about that and organize your information the right way, I think a lot of accounting is based on this widget model of how many things your factory makes and not a customer acquisition cost model, where how many customers are you getting, how much it costs you, and what’s the lifetime value. It’s a new way to look at these ancient topics but with the tools that are available it’s so accessible, that it’s never been easier to start a company. If you think about it the right way you can build an efficient back-end that works for you instead of something that you have to manage and put a lot of time and effort into.
Angela– I wanted to ask you if there are any flaws that we can improve on
Daniel– Yes, I think that building a financial model thing, which is my skill. I looked at what I did at Ernst & Young and they taught me and gave me the time and resources to learn how to build a financial model. The idea is “here’s our business, and if we do this, this and this-what are our projected results?” So, every startup at some point is asked, “Do you have a model?” The challenge with that is while there is some technology out there, oftentimes you need to hire somebody to build your specific financial model. I love it because I think it’s a really cool way to understand businesses, but for me to build something in Excel, where it’s essentially, I can “code” in Excel, to send it to somebody else; there is that barrier. So, not only are there conceptual barrier but there’s a platform barrier. You start to see some new innovation to give entrepreneurs better tools to actually build these models. If you do it the right way, not only do you project what your business is able to do but it’s a really good tool to understand investment and run rates. If you build it the right way on the other side after you’ve been operating you can now check and see, for example if I thought my customer acquisition cost was going to be at $3 but it’s at $8, what did that affect on my bottom line, but knowing that was the reason why is a really powerful thing. Even if you could say, “well it was much higher,” it’s much higher because. You want to be able to explain these things in video concepts not in photos. That’s where your value is and that’s how you learn a lot about your customers and your business.
Angela– For our viewers could you explain Grow Computer and how it helps indoor agriculture. I’m sure you guys have been impacted by COVID-19.
Daniel– There’s a lot there. So, Grow Computer is something very different from what we’ve been talking about, and it’s something that happened to me as much as I created this company. When I went on my honeymoon 4 years ago, I had a balcony garden here in Park Avenue, New York. I loved this garden, I had spent 3 years improving it- I had tomatoes, peppers, strawberries and basil. But it was something that I was spending a lot of my time on, and as I’m going away for 17 days, how do I monitor and control and track this system, so that I can keep it alive? That question sent me down this Odyssey, because when I came back there was no solution that was available. There was no way for me to combine components outside of really Raspberry Pi or Arduino, or investing lots of money to do it. It just sends me down this Odyssey into urban agriculture and the opportunities of growing food and plants in a controlled environment versus traditional agriculture which is outside. The rationale of Grow Computer is that as traditional agriculture gets fundamentally more expensive, and that’s one of the impacts of COVID, where maybe you don’t have as many workers, you have soil erosion, you have climate change. So, as you look at these changes that are happening and if you look at the cost of per pound of produce was cheap enough, could it move more locally into a controlled environment and be a part of a local food system. I believe yes.
Angela– Do you think it could happen here in New York?
Daniel– Absolutely, so in 20 miles of where we sit, here in Downtown Manhattan, there’s probably more controlled environment investment than anywhere else in the world. It’s a loaded statement but we have Arrow Farms, Bowery Farms- which has raised hundreds and thousands of dollars and it’s across the river in New Jersey, we have Gotham Greens in Brooklyn, we have companies like Small Hold, we have Farm Shelf, Farm One. There’s a really robust community of people that are committed to solving this. From that community, we birth Grow Computer, and the idea of that is the same one that I had when I was going to my honeymoon, is if you have this system where you’re delivering light, water, nutrients, air circulation to plants, how do you control that remotely? How do you do it such that any two people that inherently are going to build unique systems can share information. So, my favorite metaphor is kind of like Microsoft Windows, where you have all these different manufacturers that build their own PC’s, and Windows sits in that. So, if you’re on Windows now anybody that’s using it can download Photoshop, they can download Google Chrome. Without that, imagine Photoshop writing their software for every single configuration and every PC model- It would be impossible! And so that’s the concept that we’re taking into this IOT world, where by creating this operating system that can connect to anything we’re allowing any grower to share any information from one system to the next. You can collaborate, you can compete, we’re working on educational program where we have high school students run a competition to see who can grow better. But also, more really cool is you can now develop and share applications. So, imagine writing a machine learning algorithm that can sit on a video feed, there might be pests that get back to your farm. Start in Zone 4, and check up on the plant.
Angela– This is very futuristic.
Daniel– It’s very futuristic but what’s cool is that we’re not really re-inventing a lot of technology but we’re putting a lot of different concepts together in a new way and our goal is to make it affordable and accessible for anybody. So, it’s been a really fun project and looking at K-Pass versus Grow Computer, the difference is the team.
Angela– So you have an amazing team!
Daniel– I believe that I have an amazing team! The fact is we care, and we’ve been working on this for three years and we’re totally bootstrapped. I would rehire numerous people but that’s in a different situation to do specific components but right now everybody on the team we met through this community- the indoor agriculture, growers, people that were interested in it and just by running this thesis by people, we were able to build a team. So, the difference is that we have two amazing technologists, a great designer, a great marketing person, that believes in what we’re doing. Our owners in their own right of the company, it allows us to be a lot more effective. The fact that I have great developers, and I have a great designer, a great marketing person, those are all areas of where we’re able to build and the sum of the parts is definitely greater.
Angela– So having worked in a startup culture, what’s the best financial advice you would share with aspiring entrepreneurs?
Daniel– Two pieces of advice. Don’t build it or buy it, if you could rent it. It’s kind of a profound way of saying it but basically if you’re building something for your company, “I need to build this really robust backend, I need to build this user management system, I need to build this customer engagement platform,” You probably don’t, because there’s already a company out there that’s doing it. So, what the purpose of that is, as a startup there’s so many places to spend money, so many people that will ask you for services or whatever, but if you can leverage software as a service companies and pay $30 per month instead of spending $10,000. I think Legal is a good example where you will need legal work, but up-front being corporation doesn’t need that much. Anyone can go on Gust Launch or Stripe Atlas or Legal Zoom or Zen Business; for a couple hundred bucks you could have a company incorporated in Delaware with an EIN number in 3 days. My first company, K-Pass cost me $5,000 of legal work, right? That’s all been packaged up and if you could figure out how to avoid those capital large capital outlays to build and buy something and rent it instead. You have a lot longer burn rate than you thought and the second one is organization. Start organizing your information at the beginning, know what accounts you have, know your passwords, know where your legal documents are, know where your key information is. Such that when somebody does want to ask you, you don’t have to spend two weeks going through every document, figuring out every single person, where they save their stuff because it’s all where it needs to be. If you have this information from the beginning it’s a lot easier.
Angela– You mentioned previously that you are a recovering accountant, what’s your inside story to that?
Daniel– It’s just a fun way to say it. So, I started my career accounting and economics, I had a CPA license and I’ve since turned it off. When I started doing accounting, I didn’t really love the idea of being in accounting but I saw the value in understanding how accounting works. I understood that if I understand how to speak the language of accounting which is really the underlying language of business that it would have a tremendous amount of value throughout my career. But being an accountant is a way different world. When I say “Oh yeah, I can help as a CFO” and they ask me if I do accounting, I don’t. But I use the skills of the accounting education and accounting roles that I’ve had to communicate these concepts and build smarter, more flexible businesses.
Angela– What do you think are the top three necessary personality traits of CFO?
Daniel– Top three, I would say organization, definitely because you’re oftentimes the one that’s going to be asked to pull this stuff. Organization is key, and you know it’s one of those things where you start from the beginning and you start to be organized and you make it a point as a leader in the company to be consistent and organized in that way. I’ll tell you a quick story about Grow Computer where when we started the company, we said there’s no internal emails, everything’s on slack. Everyone has an email address but if you need anyone internally, it’s on slack. Slack is really effective. Two is communication. You’re oftentimes the subject matter expert of economics and accounting and how the numbers work and you have to figure out how to communicate that to other stakeholders. It’s understanding what the decisions can be and how do you communicate it back. You’re talking to the marketing people, to the tech people, and the ops people, along with the sales people. You understand what those variables are and how they work with the whole and then you could help communicate what would happen if you do this and this and this. The third one has to be optimism, because it’s all so easy to see all of the risks and everything but I’ve learned that people surprise you and entrepreneurs are the most amazing group of people because when someone says they’re going to do something, believe it. So, the optimism from the finance side it’s not, “here’s our risks if we do this,” well, we want to do this let’s get creative and let’s think about different ways that we can enable everybody else to be successful.
Angela– Could involve a little risk!
Daniel– It involves a little risk but you have to be understanding of it but not dwell on it, especially right now. It’s very easy to dwell on it.
Angela– So what is your projection on this year’s economy, especially with what’s going on? You know I’ve asked this question before and I get different responses, and some people are more optimistic than others.
Daniel– Here’s an answer that I was asked recently and this is the answer that I like. Personally, I think that humanity is much better off in a post-COVID world than we were in a pre-COVID world. I think there was a lot of inertia towards consumption and excess and exploitation and extraction, that were built into the overall economy. Right now, everyone is learning that those things don’t necessarily need to happen. There’s a new way and technology is uniquely capable to power that new way and for the first time in human history, and so as we look at how behavior was fundamentally changed for 8 billion people that coming out of it, there’s going to be a whole new world of solutions. It’s not going to be easy; it’s going to be really rough for a lot of people. However, there is this ability to take all the latent assets that we have already created here in this country and make them work better, more efficiently and sufficiently. I think that was needed before COVID because, I was very caught up in climate change and some of the real macro effects of that. But now, you look at the fact that air is cleaner, there’s less international trade, there’s less flying which as its definite drawbacks but how do you flip your mentality and think about the possibilities of how it could be. There’s a lot of opportunities out there, people are still living their life and they need stuff. There are factories, there’s commercial real estate, there’s office space, there’s retail spaces, all over the country maybe not here in New York but maybe in Upstate New York that are available that people want to do something. Not only is there a factory there but there’s a group of people there that knows what to do in the factory. So, as you think about everything that was off shored over the last 30 to 40 years, thought to save a couple bucks per product bringing it back, maybe you can create a more efficient version of that. My projection on the future of the economy, but I do think that coming out of this there’s a lot of opportunity to create this futuristic society that we’ve all seen in movies and talked about but to actually live it; there’s a unique capability now that there might’ve not have been four months ago.
Angela– Where do you see the future with the A.I.’s?
Daniel– A.I. for me, is a tool to make people more efficient, I hope it doesn’t replace people. For Grow Computer for example, A.I. is used for “here’s where you start, here’s your list of tasks to be a real-world farmer in this system based on what the computer identified as risks. Leverage that power and that capability but maybe not totally rely on it. It’s definitely going to inform a lot and the power Google offers for free as their services or IBM Watson, you know these are multi-billion-dollar investments that they’re giving away for free. I think as we figure out how to utilize the key parts to it, to make our businesses operationally efficient, to make our lives more efficient there’s going to be a lot of that, which will come out of it.
Angela– Out of all the industries you’ve worked in, which industry are you most passionate about?
Daniel– I love the urban agriculture community; I’ve recently entered it. This is probably representative of tons of new industries that are out there but it’s full of second career people. It’s full of people like me that came from somewhere else that saw the opportunities of sustainable farming, green roofs, solar power, organic farming and etc., that has come into this community. They’re there because they want to be there and there’s this real positive vibe and you know people really feel like they’re helping out. We’re going to have to be the ones to do it, and I love that energy. The New York startup scene is pretty great, and there’s a lot of super super smart people, that are doing amazing things. That’s why I’m a New Yorker, born and raised, but living here there’s so many opportunities to work with great people every day.
Angela– Thank you so much!
Daniel– Thank you so much, this was great!