Conquering uncertainty or at least getting comfortable with it: Shift talks with James Keirstead

Welcome to part two of our Edmonton Startup Week podcast series.

On today's episode I had the great pleasure of sitting down with James Keirstead from Levven Electronics to talk about a host of topics that should resonate with every entrepreneur as well as inspire those who may be considering entrepreneurialism.

James is a tireless advocate for entrepreneurs in Edmonton and Alberta, and this candid interview really sheds light on his approach to business and life.

Bio
James is responsible for managing the vision and growth of Levven Electronics, developing and executing long-term corporate strategies, and building relationships with partners, stakeholders and investors.

Levven has a vision of making intelligent buildings available to everyone. Focused on delivering technology and products to advantage new construction, Levven’s promise is mobile device access and control of building infrastructure that lowers building costs, speeds construction and conserves building materials.

He is a life-long entrepreneur with a commitment to innovation, excellence and enhancing people’s lives. Prior to founding Levven, James and his partners founded Blue Falls Manufacturing, makers of Arctic Spas and expanded its footprint to over 30 countries.

James is an active member and contributor to several entrepreneur organizations including Entrepreneurs’ Organization, the A100, Edmonton Regional Innovation Network, and Rainforest Alberta.

When he isn’t focused on the business, you can find him on Edmonton mountain bike trails or hanging out with his family.

Shift by Alberta Innovates focuses on the people, businesses and organizations that are contributing to Alberta's strong tech ecosystem.

Transcript

Jon:

Well, if I didn't wake up this morning inspired, let me tell you, I am now. Our next guest is a serial entrepreneur, an athlete, a tireless advocate for Edmonton and Alberta Entrepreneurs. This guy's done a lot and his story's fantastic, and he's a great conversationalist, humble and inspiring. Sit back, pour yourself something cold, and get ready to get blown away.(Silence).

Good morning. Welcome to Shift. This is Jon Hagen, and today we've got James Keirstead from Levin Electronics and part of the steering committee for the Edmonton Regional Innovation Network. James, how are you?

James:

Yeah. I'm doing fabulous. It's been a wonderful October for us here in Edmonton. I've been out on my mountain bike and I always love when I can get out in our river valley.

Jon:

Oh, it's a good one, isn't it?

James:

Especially this late in the year.

Jon:

Yeah, no kidding. And I'm glad you said mountain biking, because I want to talk to you about that afterwards. Because Rick Davidson was like, "Oh, yeah, I got to talk to James about mountain biking. He's hardcore."

James:

I'm a little hardcore. Yeah.

Jon:

I do a little riding and I'm not hardcore, but we'll talk about that a little bit later. But the real reason, or one of the prime reasons I wanted to have you, James, is a couple of weeks back, we all met at the Albert Innovation Network gathering of the eight [inaudible 00:01:41] in the province. And you got up and spoke about your experience as an entrepreneur. And when you were talking, I just thought it was really cool because you described your role, which you've done, and then how important it is for you to continue supporting innovators and entrepreneurs in the Province, Edmonton area. So, why don't you just refresh my memory, and for the benefit of our listeners, describe that.

James:

Sure. Well, I'll start by saying, I've always had this belief that all boats rise with the rising tide, and many people who know me in the Edmonton ecosystem have heard me say that many, many times. And what we mean by that, or what I mean by that in particular, is that, hey, if we build everybody up, it means more accessibility for our own businesses, which can help us scale and grow quicker. Now, my history is rather checkered. I've been an entrepreneur my entire life. I've had some businesses that have succeeded, and I've had some that have failed.

Probably the most notable that I mentioned at the AIN is back in 1997, I got together with a group of guys that I knew from the hot tub business, and we bought a small failing manufacturer here in Edmonton called Blue Falls Manufacturing. And over the first seven years of that business, we grew it from 900 spas a year, just a regional manufacturer, into Canada's largest hot tub manufacturer building about 10,000, 10,500 spas a year.

Jon:

Holy.

James:

And by 2007, I think we were probably in 30 countries around the world. And we certainly cowboyed most of it. A lot of people would say, "Oh, my gosh. You flew over to the United Kingdom with four containers of spas on the water and 15 grand in your pocket to go set up a warehousing operation in the UK, and you knew nothing about the market or anything?" "Yeah. That's what I did."

Jon:

Holy, man.

James:

And it worked because we took action.

Jon:

Yeah.

James:

Not always did our actions turn out to be the right thing to do for our business, but more often than not, they did turn out to be good things for us. That warehouse is still in the United Kingdom. They are still the biggest imported brand into the United Kingdom, and the largest imported brand into Scandinavia. So, taking a chance sometimes is really important. And what I learned from that was, one, you have to go chase the bigger world.

We can't just stay in our little arena here in Alberta and think our businesses are good enough or big enough. If we really want to make a difference in the world, we just got to step out and go do it. The second thing that I learned is that as Canadians, we can compete. We can compete globally. We might have to think differently. We might have to do things differently than lower labor cost markets, but we can do that here. And if we do do that here, we will continue to add jobs. We'll continue to grow our economy. We will continue to grow startups, scale ups, and large businesses that will continue to improve the quality of life of everyone in our community.

Jon:

Yeah. That's cool. Now, I can't remember where I heard this. It was about maybe a year and a half ago on one of our podcasts. And the gentleman we were talking to said, "Canadians are really good at building startups. We're not so good at keeping them and scaling up." You get to the point where people just sell their companies off. They're valued well and then sell the company.

James:

Yeah.

Jon:

So, what would you recommend for an entrepreneur to resist that urge to sell?

James:

Yeah. That is an interesting question. I have thoughts on the differences between the Canadian dream and the American dream. And I think what you're talking about is a little bit of that. The American dream is, always been, go conquer the world. Make as much money as you can and be the leader. The Canadian dream is, I want a house. I want a boat, and I want a cottage on a lake. And once I have that, I'm pretty comfortable. I don't think either is right or wrong necessarily, but they do drive our actions. And I think that's why we see Canadian companies grow their businesses, get a great opportunity to sell their business, and take advantage of that maybe quicker than our American counterparts might. I don't know if that's a bad thing either, because what typically happens is, much like myself, I sold my interest to my business partners at Arctic Spas so I could focus on Levin.

Well, I'm now growing another business in this ecosystem that is adding jobs while Arctic Spas continues to grow their business. And that moves our economy, it continues to grow our ecosystem. And I think the same thing happens. Typically entrepreneurs, when they sell a business, they don't quit doing anything. They do different things. And they take that money and they invest it in different things.

Jon:

Right. Yeah.

James:

And grow and scale other things. So, I'm not against entrepreneurs selling their businesses, because I think it all comes back in investment anyway. I will say, if we were to have that mindset of how could we hold onto our businesses, we would have to think differently. And by that I mean we would have to think, "Okay, how do I have to structure this business so that it serves me more, and I get the freedom and the time that I want to pursue these other things that I haven't been able to because I've been so hyper focused on the business that I've been doing for so long?" If we were to think of it that way, how might we change how we operate our businesses?

Jon:

Right.

James:

How might we change how we look for talent to fill out our leadership teams? How might we change how we personally interact with those businesses? Those are questions that I'm having right now because at Levin, I think we could scale this business and keep it operating with a great leadership team, and I could move up into the board and have a more advisory role in the business, which would serve my desire to be as invested in the community as I am today.

Jon:

Wow, okay. It's very insightful. And I want to step back a little bit, and then we're going to dive right into Levin a little bit more, because you said a few things there that I find really intriguing, and maybe from my perspective, I'm not clear on. And that's becoming part of the board and all that, but we'll investigate that in a moment. But let's go back to Blue Falls briefly. So, Blue Falls then became Arctic Spas.

James:

Yes.

Jon:

There's a big factory in Thorsby, right?

James:

Yeah. So, Blue Falls is still the company name.

Jon:

Oh, okay.

James:

Arctic Spas is the brand that we built.

Jon:

I see. Okay.

James:

And they have a factory in Thorsby. They also have a factory in Breton. They just built a new factory in the in West Edmonton out by Winterburn, to make swim spas. And they also own a factory in Spokane, Washington, that builds one of their lines of spas, which is more of an introductory line. So, yeah, they've grown a lot.

Jon:

Holy cow. So, when you got into Blue Falls, you said you met with some of your friends, your partners that were hot tub guys. What does that mean?

James:

Yeah. So-

Jon:

They liked sitting in hot tubs?

James:

This goes on to my sordid past as an entrepreneur.

Jon:

Here we go.

James:

I had stopped going to university because I ran out of money, and it turned out that this hot tub company, Koko Beach Hot Tub Company, the national sales manager for that company really wanted to hire my twin brother, who is absolutely a remarkable salesman. And I was doing nothing. I was waitering and bartending at Earl's.

Jon:

Okay.

James:

And I thought, I'm not going anywhere doing this in the long run, so I really need to shake things up. They were opening a store in Richmond, British Columbia, and they wanted to hire a team of guys to go out there and get it going. So, I crashed my brother's interview and I convinced them to hire us both. It turned out that while my brother is a remarkable salesman, I am absolutely crap at selling on the retail side. I just didn't have the killer instinct necessary.

Jon:

Oh, yes. I've heard that one before in my field.

James:

But my first boss there was Darcy Amendt, who ended up being the CEO of Blue Falls, and the fellow that called me and said, "Hey, we're thinking about buying this company. We want you to come in and do it with us," which I'm honored and so grateful for those guys. Even to this day, I have a fantastic relationship with them. They are very honorable gentlemen. They met our agreement. They continue to buy controls from me, which is very supportive for Levin. I, hand on heart, would not be here today without their business.

Jon:

Wow, that's cool.

James:

Because that's how tough it has been trying to launch a new product into the construction industry like we're doing. So, I worked for Darcy and I was terrible at sales, but it turns out I was really good at managing customer support and dealing with all the admin and back end side of running a business like that. And so, that's why Darcy reached back to me years later and said, "Hey, we're buying this and we'd like you to come and do it with us."

Jon:

Wow. That's an unreal story. When I think about a lot of people, especially in the context of entrepreneurialism, they find it daunting. Well, I speak personally about this. I find what you guys do, and women as well, it's an incredible mental head space you have to occupy to be able to do this stuff. Because my background is waiting in bartending as well. And to see that you've gone from that, to where you are now as a huge support for Alberta businesses, is pretty cool. James.

James:

Well, I have a little secret for you that I'll share with everyone here. I am not a normal entrepreneur. It scares the shit out of me.

Jon:

Okay.

James:

Apologize for the word.

Jon:

That's all right.

James:

But it scares me. I don't care for the uncertainty that I have to live with every day as an entrepreneur.

Jon:

Okay.

James:

I struggle with it. On the other side of the coin though, I've seen how I can use that natural organizational behavior that I have, that natural fear of uncertainty, to build out systems and structures inside my organization that help me get more certainty than I would normally have, or maybe other entrepreneurs might have because they're more comfortable with that uncertainty. And that has definitely allowed me to build a business that can scale without me being there all the time. And that's pretty exciting because in the end, that's what we really want out of our businesses.

Jon:

Sure. But so, you're freaked out about the uncertainty. How did you know or develop the skills to start building those backend organizational structures to help you mitigate that uncertainty so you could essentially sleep at night?

James:

Well, I wouldn't say that I learned anything new about it. It is who I am. I'm just one of those people that really likes to have things organized and-

James:

... really likes to have things organized. And because of that, it just felt like the natural thing I could do to gain some control of my environment, which I felt I didn't have control of. And so building tools and going to learn about tools that I could do to help drive that actually was just sort of natural for me. Call it a defense mechanism to that uncertainty. I had that even back with Arctic Spas. I would go into our various departments and I would put in systems and processes that would allow us to scale. It was just what I was comfortable doing. And it turned out, despite my fear of it, it's kind of like when you're mountain biking-

Jon:

Hey.

James:

... and you're at the top of a hill and you're looking down and you're like, "That is so steep. I don't know if I can do it." Well, let's just leap off of that and see what happens. You either crash or you find your way. I kind of taken the same sort of mindset with my entrepreneurial career. As fearful as those things are, I've always felt if I just go ahead and tackle that head on, maybe I'll get more comfortable with it.It turns out that hasn't been the case. I'm still nervous all the time. I still really dislike uncertainty, but I'm not paralyzed by it. I'm able to work my way through it and go take action. That's probably the biggest thing I learned. I don't get stuck if I'm feeling stuck and afraid, I take a step, I go do something, I take action. And that has really worked for me. I don't know if it'll work for everybody else.

Jon:

Right. But that first step doesn't need to be something crazy. You feel fearful about something, just take a small step and move towards your objective.

James:

Yeah. Others in the ecosystem know that I'm a avid mountain biker and I've done a lot of other crazy sports in my past. And I see the analogy of them to business. I'll give you an example. I did Ironman in 2009. When I first did my first triathlon, I couldn't swim 250 lengths, 250 meters in a pool.

Jon:

Oh, really?

James:

I couldn't even swim that. What I learned from that experience was, look, go start, pick goals as you go along and continue to work on that skills and preparation, and over time you have done all this preparation that the actual race itself is completely doable. And then what I found out after Ironman, because I came down, like a lot of Ironman participants do, they come down off of that high and they're like, "Oh, what's next?" It can be a little bit on the depressing side because you've made this amazing accomplishment, not too dissimilar from entrepreneurs who've had great success and want to go and try and repeat it. You come down off that, yeah, you've sold your company. Now what do I do?

What I learned, now that I'm older, is that I love the journey way more than the event itself. And the same thing has been for my entrepreneurial journey. I've loved the journey and the success, whether I make money at it or anything like that, that is completely secondary to what I'm learning and what I'm experiencing along the road.

Jon:

That's really cool. It's a very interesting perspective because as we've talked, that journey is fraught with uncertainty. You say you're freaked out about all that, but there's part of you that digs that uncertainty, I think.

James:

I guess it depends on what gives us our dopamine hits.

Jon:

There you go. Yeah.

James:

Maybe that does give me that adrenaline rush. I certainly have felt it many times. It's certainly made me uncomfortable a lot. I have learned that, as an entrepreneur, we have to live with being uncomfortable. Sometimes the more uncomfortable we are, the bigger thing we're on to.

Jon:

So from what I'm getting up to our conversation at this point, if someone is listening to this podcast and they're maybe doing a nine to five job or working as a waiter, a bartender, and they've got an idea, they've got something they're passionate about, your advice would be just take that first step.

James:

Absolutely. Take the first step. One thing I've learned though now, after all these years, is not to leap without experimenting first.

Jon:

So maybe don't chuck all your hot tubs into a container and ship them off to-

James:

Yeah, you might want to take a trip to the market first and go and do some market research and understand the market. And the same thing goes with developing a new product, a new idea. There's nothing wrong, that first step could be, "Hey, I want to go test this idea. Let's go find out if it really has the value that I think it does for the customers that I think would most benefit from it." And if those customers are telling me, "Yes, this has good value. Yes, I'd be willing to pay for it." Perhaps even how much they'd be willing to pay for it. Okay, then we're off to a start that we may have an economic business model here. Now let's go test out, how could we actually build that business model to create a sustainable business before leaping headfirst and putting millions of dollars of investment.

Because we see it all the time in startups. People come with these ideas. They intrinsically think they have a great idea, but they haven't validated it with the market whatsoever. And they're looking for investment and they're wondering why people don't want to invest. The reason is that investors are looking for quantifiable data to show that you will have traction, that they're not going to just throw their money out the window. And we should think the same way as entrepreneurs. How can we do this to reduce our risk, to reduce that uncertainty up front so that when we do take the leap, it just progressively moves along.

Jon:

I've heard the story of certain entrepreneurs will get an idea and they become so married to that idea or that technology that they'll go out and try to validate, but when they hear feedback from people, it's like, "That's got to be wrong." They're so married to something. How do you get that out of your head that you're passionate about your widget, your baby if it's not what people want, you got to move?

James:

Yeah. Lots of people in the technology space have heard me say, "No one cares about your technology." And I would say the same thing about the builders we service in our industry. No one cares about the technology that Levven delivers. What they care about is the problem that it solves for them.

Jon:

I love that.

James:

If we can always remember that, that will help us get over the fact that, "Hey, I know what's best." Because the reality is it doesn't matter what you think is best. It matters what that customer thinks is best. Because they're the ones that spend money. They're the ones, they vote with their dollars. And if you want a successful business, it has to be driven by the value that it creates for the customer, not by what you think. Because I've found over my career that what I've thought, yeah, sometimes I've gotten the bets right, but more often than not, I've had to pivot multiple times trying to find where the real value to that customer is just so I could get traction. And Levven is no different. We came up with the idea, we worked with Resin Nasry from Landmark Homes to come up with the idea of a wireless switch and thought, "Oh, we'll just remove all the wires from the walls and everybody will love it." Well, turns out nobody liked it.

Jon:

Okay.

James:

Scared the bejesus out of everyone because we've been wiring homes the same way for a hundred years and you're coming along and telling me you can take all the wire out and it's going to be just as reliable, just as valuable, and all these other things it's going to add to the home. I don't know if I believe that. That's what the customers were telling us. And then we had to go digging deeper and deeper into finding out what was the real problem that this product could solve for those customers. But you see, that's backwards. If I'd have done that work ahead of time... We built our first product in 2014.

Jon:

Okay.

James:

We are not an overnight success.

Jon:

Yeah. Eight years.

James:

We're still pushing hard to really get that incoming traction that we need to become a real scalable opportunity. And that's mostly because we didn't do a lot of our due diligence up front. We didn't know that we would run headlong into electrical code issues in both Canada and the United States. Those took us six years of lobby to get.

Jon:

Oh wow.

James:

Even in the US right now, the 2020 electrical code, which now accepts wire free wall-mounted controls because of lobbying we've done, only 14 states in the entire US have adopted the 2020 code. So we still have a long way to go before all of the US will accept wire free switches in their homes.

Jon:

So what accounts for that do you think? Is it that old, like you had said earlier, we've been doing this for a hundred plus years, wiring and-

James:

Yeah. And think who becomes the electrical inspections side of things? Old electricians, people that have been in the industry for a long, long time.

Jon:

Right. Where's the copper?

James:

They're like, we're looking at it going, we're pulling out 1000 to 1700 feet of high voltage wiring out of every single home. And we think that's amazing because it's going to make your home safer. And they're thinking, "Wow, that's not safe. What happens if the battery in that switch fails?" Completely different mindset.

Jon:

Yeah, totally.

James:

What happens if Levven Electronics goes out of business and no one else has those switches? Actually, a fair question. Imagine what the first guy who came up with wifi, a wifi router for your home, imagine the challenge that he had, he or she had, getting it out to market initially and now hundreds, perhaps thousands of companies make wireless routers. Being first is tough. It is scary and it is challenging beyond belief and that's what makes it so amazing.

Jon:

Yeah. And what also keeps you up at night.

James:

A lot of nights. Yeah.

Jon:

Let's pause for a moment for a little station identification.

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Okay, so I got this great idea for my industry and after doing some market research, I discovered I'm really onto something. So I put together a prototype, but now I'm struggling with the next stages of development in getting the IP protection in place.

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Wow, I didn't know that. Thanks.

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Alberta Innovates. Come talk to us

Jon:

Back to our interview with James Kierstead. As you were talking, I was thinking a long time ago when AC and DC were first, George Westinghouse with AC and Thomas Edison with DC and Nikola Tesla was always talking about wireless power. And here we are a century later, and this is essentially what you guys are doing in a way, right?

James:

Well, we are using RF, radio frequency, as our communications layer. So if you think about it in a home today, you have loads for lighting, you have loads for your plugs, and then you have your fridges and stoves, appliance loads, and that's kind of the electrical system in a house. It's not really that complicated. But you've got this entire layer in your home that gets weaved in for one purpose, to control those powers, to give us simple, easily accessible, reachable control.

And the idea, kind of like the old idea with a car, remember you used to put a key in the door and that's how you'd unlock a car. And now, your car is all using RF key fobs and you walk up to your car, you open the door because it recognizes the key. That's all done by RF. We took the same sort of concept and said, "Let's get rid of all that control layer." And if we get rid of that control layer, what's the benefit? Well, we're going to save all kinds-

James:

... that control layer, what's the benefit? Well, we're going to save all kinds of material, we're going to save labor, and we're going to give that back to the trades and the builders so that it offsets the cost of the technology. Quite frankly, the business value is quite simply economics for the builder. It's not the technology at all. They don't actually care about the technology. They do care about building homes faster and cheaper.

Jon:

Right. Okay.

James:

If you can do it and deliver a better value for the end consumer because now they've got this network of devices in their home that are run through a gateway and connected to their phone and they can program it as they will, wow! Every single person in the value chain gets a benefit.

In all my years as an entrepreneur, I have never been in a business where I can honestly say there is value for every stakeholder in that value stream. That's why I'm so excited about what we do at Levven. That's why I will not give up until we are the thing that everybody uses because I do believe, 20 years from now, nobody's going to wire switches into walls in new construction because it doesn't make economic sense.

Jon:

Right. Amazing. So, what's the outlook right now? You've said there's obviously people still looking at this old school, "Oh, no. You need wires." As you said, there's a different perspective. What if the battery dies on the switch? What's that perspective looking like? Is it going up? Have you guys hit a plateau for a while because often we see that plateau and then a little upswing and another plateau.

James:

Yeah. So the first thing I will say to answer your question of what does it look like, when's the last time you used a key to open your car?

Jon:

Good point. It seems like a while back.

James:

Right? So, I will say to you, it is definitely the way things will go because it is more convenient, because it does deliver more value, because it makes things more efficient. Absolutely no doubt in my mind. We had a challenge. Our biggest challenge at Levven was, just as we were really scaling up nicely, COVID came along and disrupted supply chains to the point that our main processor chip in all of our devices was out of market for almost a year this past year.

Jon:

Oh, man!

James:

We just came back into market this summer. So, we had to go out to all of our customers where we were growing at 40% quarter over quarter, and we had to say, "Ah, sorry. You know how you were worried about us not being able to supply you? Well, we can't, and we've got enough stock to complete all your work in progress because the last thing we'd want to do is tell builders that all these homes that they built without wires in them, they can no longer get our product."

Jon:

Oh, boy. Yeah.

James:

That would be the death knell for us. So, now we've got chips. We're starting back and having discussions with those builders, but we've got to earn their trust again, and that's going to take some time.

Jon:

Sure.

James:

The positive news is, they're moving and things are changing in the building industry because interest rates have just started to skyrocket and demand for homes, at least in the short term, is declining, and what does that mean for their businesses? They've had a heyday through COVID. Most of them are still dealing with backlogs that will finally start to get cleaned up by the end of this year, beginning of Q1.

Then they're already telling us, we're seeing 50% less traffic through our show homes and our sales centers. That's going to translate into a new competitive dynamic that they're going to be looking for options that aren't going to add costs to their homes, but deliver more value for the end consumer to help differentiate themselves.

So, it's been really interesting because when times were really busy, our message to them was, "Hey, listen. You've got labor capacity issue. Our product reduces the amount of labor, and so you can get more done with the same amount of labor." Big deal when you can't build enough product. Well, now they're going into a different cycle, and our message is still as strong, just different. "Hey, you now have a product that didn't cost you more money and it delivers more value and helps you differentiate your homes more."

Jon:

Let's go back here. I want to dive into home building a little bit more because I think about, we've got population growth, we've got immigration, the need for homes. I don't know in general how many homes Canada builds, but we'll dive into that in a second. But one thing when you're talking about the chips during COVID, you guys, your supplier had now, the well had run dry, so to speak. How do you guys mitigate that possibility if we should have another pandemic?

James:

Yeah. Well, we did a couple of things. Firstly, we had built on this specific architecture, and now we've designed a new product, our next generation of products coming out right away that's designed on a newer style, but we can now get supply from both different chips. So, we've spread that risk out.

The second thing isn't us so much as the United States, to be honest. The United States is committed to 137 billion dollars to building chip fabrication in North America in the US. That, coupled with the slowing economy, is actually creating a opposite effect, so it's kind of over-steered.

Now, chips are becoming more and more accessible, and I think that's just going to continue to become the case. Even though demand for microprocessors is going to continue to climb, we're going to see in the next medium term, we're going to see some massive factories in the US come online and production capacity increased dramatically, so I'm encouraged by that.

Jon:

Okay. Do you see in Levven's future, in terms of chip production, something that maybe you guys get into?

James:

Oh, no, no. I don't see us. To give you an idea, to build a factory, a fabrication factory for microprocessors and chips, it's about a 10 billion dollar investment...

Jon:

Oh, okay.

James:

... so it's just a touch out of our reach.

Jon:

Right now.

James:

For a long, long time.

Jon:

Okay. I had no idea. All right. But there's that significant investment going on south of us.

James:

Yeah. Yeah. TSMCC, which is the largest fab in the world out of Taiwan. They're building, I think two fabrication facilities in the US, one in Arizona and another, actually that's Intel is building one in Ohio or Indiana, somewhere around there.

Jon:

Okay. How do we get them up here?

James:

Yeah. Well, yeah. I get asked that. Why aren't we building chips in Canada, and the reality is because we just don't have a big enough market.

Jon:

Right. Yeah, but if we have this TSCM, is that...

James:

TSMC, yeah. Taiwan Semiconductors.

Jon:

Why aren't they coming here?

James:

Well, because I think the US is paying them a lot of money, and let's be fair. I mean, you want to be as close to your market, your biggest market as you possibly can. You reduce a lot of costs, and what COVID has definitely taught us globally is that onshoring has benefit. Being able to secure your supply chain locally has benefit.

Jon:

Sure.

James:

It's a great opportunity right now in North America to re-look at bringing businesses that we sent overseas back to Canada. I'll give you one example. We, about four years ago, before COVID happened, we brought back, started bringing back injection molding. So we had set up... Back in the early two thousands, we had set up a joint venture with Blue Falls in China to injection mold jets and fittings and other products for hot tubs because we use a lot of them.

We bought a small, struggling machining and injection molding business here in Edmonton and started bringing those molds back, so most of my encasements that cover our products are made in an injection molding facility right here in Edmonton.

Jon:

Oh, that's cool. Okay.

James:

So, I felt like, "Oh, I guess I'm a smart guy after COVID and supply chain problems just got worse." I mean, most companies like ourselves are so heavily over inventoried right now, and it's because of global supply chain is so interconnected that, when it started having problems, what did we do? Well, we had to go out and buy greater safety stocks until those safety stocks became so massive that you have this global glut of inventory that people are going to be working through for the next while in Levven's case, at least the next year.

Jon:

Right. Okay.

James:

If I'd had all of my supply chain locally, I wouldn't have to have such a heavy inventory and we might not have this challenge that we're having right now, which is supply is almost dropping off a cliff because people have got so much inventory, they're calling their suppliers and saying, "Well, demand is dying. I've got all this inventory. Stop producing."

Well, that change in business cycles, when it is that dramatic, businesses fail, and when businesses fail, it has ripple effect that carries through entire communities. Whereas if we had more local supply, the dip wouldn't be so big, we wouldn't lose as many businesses, and the longterm impact would be far less.

Jon:

Right, and not to mention the square footage you need to hold all of that inventory. If you've got local supply, they build it, they supply it and inventory it all.

James:

Well, the hardest thing is cash.

Jon:

Oh, I can relate.

James:

Space is an issue for sure, but the hardest thing is managing cash flow when you've now carrying three times the inventory you were carrying two years ago.

Jon:

You make a good... The hardest thing is cash. Real quickly, it popped into mind this impending recession we've got coming down the pike. What do you think of that in terms of an approach to business? Do you guys go into cash saving mode and go, we really need to watch what we spend and how we spend it?

James:

Well, I don't know that I ever came out of that mode.

Jon:

Fair enough.

James:

As a startup and a scale-up, we have to think about cash constantly. It is equally as important as profit, in some cases even more important. I've learned that the hard way over many, many years of looking only at the bottom line and thinking I have more money because I'm making more money, and the reality is I was spending it on the other side of the business, not realizing how the balance sheet and the income statement really interacted.

Today, I'm intimate with them, and that has helped me a lot because managing cash is ultimately what keeps businesses alive. So, I'd say it hasn't changed for me and it won't change. Am I tightening more? No, not really. I'm pretty tight to begin with. At this point, I'd say we're even probably spending more than we would normally spend considering when you get that first downturn you hear about in scale-ups, that valley of death where...

Jon:

Yes, yeah.

James:

... the sales haven't quite started to climb, but the investment is still high. Well, you're going to spend more during that time, and that's when understanding cash flow and managing cash flow becomes ever so important.

Jon:

So, get a good accountant.

James:

Yes, absolutely get a good accountant, but also be mindful of it yourself. I mean, at the end of the day, as the CEO at Levven, even though I have a great CFO, I'm accountable for it. If I fail to do my job, families don't have a place to work, and that's significant.

Jon:

Yeah, Sure is.

James:

It's important to me that we take care of those people.

Jon:

Now, I want to explore the housing market thing a little bit here. So, I had mentioned earlier you've got an influx of immigration, population is increasing, but homes are becoming more expensive. There's rental properties, sure. But tell me, talk to me a little bit about the housing market in Canada maybe compared to the states, what it's looking like, what some of these solutions could potentially be, what you're seeing.

James:

So, first thing I'll say is that we have a supply issue, both in Canada and the United States. In Canada, they're projecting that we need 3.5 million more homes by 2035, I think it is. We...

James:

... by 2035, I think it is. We only build, on our best year, about 160,000 homes a year.

Jon:

Wow.

James:

So, you can see the math isn't working. We're immigrating about a half a million people into our country every year, and we literally are not building enough homes today to house them all. So, it's no surprise that we have an affordability issue. How are we going to solve that issue? Well, I think there's a number of things we have to do. We have to, A, start educating young people that trades is actually a good career choice, that not everyone has to be a university graduate. Not everyone has to be in computers. And there is innovation that happens in spaces that we don't typically think are innovative.

Jon:

Right.

James:

So, you can still experience that. You can still have great opportunities. In fact, I would say in the trades, the opportunities are going to far exceed some of the other opportunities that are available out there. Because today, there are more people leaving the trades than there are people joining the trades. That's a problem.

Jon:

For sure.

James:

We can't build more homes if we don't have more people. So, that's one thing. Second thing is I think both Canada and the United States... And the US, by the way, has the same problem. I'm not exactly sure what the statistics, the number of homes that they're short, but it is massive. The second thing I think we need to look at is we need to look at manufacturing homes more. Reza Nasseri of Landmark, he has long been a fore-thinker in this space. He built a factory some time ago here in Edmonton. They prefab 85% of the walls that go into a Landmark home.

Jon:

Oh, okay.

James:

You end up with a better product, way less waste, and you can build more faster because they can literally erect the whole frame of a house in a day.

Jon:

Oh, wow. Okay.

James:

And then that makes a big difference because you're reducing that build cycle. If we can reduce the build cycle, reduce the amount of excess labor, the time that that home sits on the ground waiting for more tradespeople to come through, we can speed up that build cycle. If we can speed up the build cycle, we can build more homes. It's as simple as that. So, I think we need to look at legislation around and regulations around prefabricated homes. I think overall, people in general have to have a different mindset about prefabricated homes. Reza gave me an analogy one time which I still remember to this day, and it goes like this. If someone came to you and said, "I'm going to give you a car. This car, we're going to build. We're going to put all the parts onto your driveway, and we're going to build it right there. Or you can have this car that we built out of the factory." Which one would you take?

Jon:

Of course, the one in the factory.

James:

The one in the factory. The QC is way higher. The production, fit, and finish is way better. But in homes, we build the one on the driveway today. Why do we do that?

Jon:

Well, so now, you had mentioned the QC and the fit and finish and all that in the factory. How do we assuage people's concern that what's... Oh, no. I guess, no. I'm confusing myself here. We're building the homes in the factory, so the QC and the fit and finish are perfect. Out on the field in the home, it's not quite maybe up to snuff.

James:

Yeah. I think there's going to have to be a move towards more prefabrication. We can drive down costs. We can reduce waste.

Jon:

Right. That's cool.

James:

And really improve the home that the consumer gets.

Jon:

Now, how many builders out there are doing that sort of thing that you're aware of? Is it-

James:

It's not enough.

Jon:

Not enough, eh?

James:

It's not enough. I don't know what the numbers would be exactly, but it's probably below 10%.

Jon:

Oh, boy. Wow.

James:

Yeah. So, there's a massive opportunity available.

Jon:

Yeah.

James:

But again, it's one of those things. Reza and Landmark, they're early adopters of this technology. And it takes time for that regulatory system to catch up to it. It takes time for consumers to understand the additional value they get from it, because we still think of prefabricated homes as like trailers.

Jon:

Right. Yeah.

James:

Right? Not so long ago, and I don't know if it's still the case, but you couldn't actually get a mortgage on a prefabricated home.

Jon:

Oh, really?

James:

That's another thing that has to change, right?

Jon:

Yeah. Mm-hmm.

James:

So, these are definitely things that I think could speed up and move us towards getting more homes and reducing the cost of homes, but it is definitely a supply issue.

Jon:

Okay. I don't know why my computer keeps making that noise. But you mentioned something interesting, many things interesting, pardon me. But the mortgage, not being able to get a mortgage a while back on a prefabbed home, it makes me think of innovations that happen locally in Canada. And there's so much regulation, and there's so many hoops to jump through. And I don't mean to disparage regulation because it's important. But quite often, we're heavy on it. And innovators have to go outside of the country, almost, to validate their technology and then bring it back to the country and prove that, "Oh, this worked in all of these other jurisdictions." Have you had any experiences with that or any comment on that?

James:

Oh, my gosh. Yes. Yes. I want to say this as respectfully as possible. I really take the time to think about what creates a mindset that keeps status quo, because that's what we're talking about here. Right? We're talking about why change?

Jon:

Right.

James:

That is the biggest challenge that regulatory bodies have to overcome. And I believe... Now, I may be wrong, but this is the hypothesis I've come up with. You are not rewarded in those quasi-governmental organizations for doing something that is new and unique. In fact, if you do something that is new and unique and it fails, you are most likely looking for a new job. So, that coupled with the fact that maintaining status quo has no risk to you... And we see it all the time in government. I can make no choice. I have no risk. If I make a choice and it fails, I could lose my position. For us to eliminate that status quo mindset, we have to change how we reward that industry, those people. We have to support them so that when they do take a chance to support a great idea that may not work out, that they're not submarined for it. The same thing we say about entrepreneurs. They need to be safe to fail.

Jon:

Yeah. Fail fast. Mm-hmm.

James:

If we don't change that in our government bodies, I don't know that status quo will ever move quickly. Already, we're fighting human behavior. We don't like change. We like equilibrium. Status quo is where we like to sit. But if we're going to break through that status quo, it absolutely has to be by giving people that security that, "Hey, you can take a chance if you think something's better. And if it doesn't work, we're going to massage it. We're going to iterate on it. And we're going to make it so that it does work instead of firing you and-"

Jon:

Punishing you for trying to make something better.

James:

Yeah.

Jon:

Yeah. No, it's a great perspective and one that I think people should be mindful of right across the board. I really like that because often, we talk about that, creating a space where you're safe to fail, cultivating creativity and a different approach.

James:

And the other part that I was getting at, too, is not allowing status quo to be okay. There has to be some risk about staying still. If we're going to advance those regulations and regulatory bodies quickly enough, there has to be risk to stay still. To do nothing must be risky.

Jon:

Right. Yeah. Well, you know what? We're in competition globally. Not just Edmonton, not just Alberta, but Canada is in competition with many other countries to create an appealing innovation ecosystem where companies can thrive, survive, and encourage others to join us. And if we're not being as active, creative, and opposed to status quo as some of the other countries, then we'll just fall further and further behind.

James:

That's correct. Yeah.

Jon:

So, this has been a fantastic conversation, I have to say, James. And when I think about everything we've talked about, and going right back to that discussion we first had at the Alberta Innovation Network, you're such a huge proponent of businesses and supporting businesses and giving back. And to the people that are listening, we talked about these people in other industries that have that entrepreneurial spirit and want to dive in and try things. They need to know that there's support out there for them. And that's not just through Alberta Innovates and not just through Edmonton Unlimited or Platform Calgary in Calgary and all of these other organizations, but there's people like you, too, that have been through a lot. How do you support the industry? Describe that to me.

James:

Well, firstly, I'd like to say that we're blessed here in Alberta. We have so much support for startups, for scale-ups, and for entrepreneurs in our ecosystem. When you look at other markets... And we don't often get to look at other markets. I've been very fortunate having had businesses in multiple jurisdictions around the world. What we get here is unique. The support that we get is unbelievable. I consider it second to none. So, we've got a great base to work from.

But the reality is we still have to think about, "Okay, once I've succeeded or even during my time succeeding, how can I share that with others? How can I, again, help all boats rise with the rising tide?" Because if we can create more entrepreneurs, they're going to go out and solve more problems. We're going to see our economy grow, and everyone is going to get stronger. The businesses are going to get better.

That's why I do what I do. That's why I believe in lifting where I stand. I think I've learned quite a bit about being an entrepreneur in all my years of doing this. And more than giving money, I can give my time, and so I do. I volunteer for the Edmonton Regional Innovation Network. I've been on the board of Alberta Women Entrepreneurs' organization. I spent many years on the board of Entrepreneurs' Organization here in Edmonton. I head up the Rainforest Initiative here in Edmonton. I'm also a founder in the imYEG program, which is a great pre-accelerator that is trying to help innovators, academics out of the universities in Alberta try and commercialize their ideas. And I volunteer wherever I can for some of the other accelerators, Propel and so on and so forth.

So, I do it because I love it. I do it because I believe that I'm lifting where I stand and I can have the greatest leverage. And I would encourage entrepreneurs that have had some success or any success to go out and look for one thing they can do in the community. Mentor someone. Join one of the accelerators as a mentor. Go speak on panels. I know we're all busy people, but those things will have an impact. And that impact will come back around to your business. I see it every day. And if we're going to be globally competitive, we have to do that.

Jon:

This was great to have you on and great to chat with you.

James:

Thanks, Jon. Yeah. I appreciate it, Jon. Thanks for having me.

Jon:

Yeah. Right on. Our pleasure. And thanks to James for joining us on Shift today. And most of all, thank you to our listeners. You guys are great and the reason we do it. And we hope you're digging everything you're learning about entrepreneurs in Alberta. I'm Jon Hagan. On behalf of everyone at Shift, have a great day.