Wisconsin Public Television University Place Entrepreneurship in Society  Matt Younkle The Serial Entrepreneur  September 28, 2011 UP630     cc >> Jeanan Yasiri: This course is offered through the University of Wisconsin School of Human Ecology. I'm Jeanan Yasiri. As we begin our course today I'd like to extend thanks to our partners in supporting this course, the UW Office of Corporate Relations, the UW College of Engineering for their technical support, and financial support which is provided by the Ewing Marion Kauffman Foundation which is committed to advancing higher educational entrepreneurial efforts. Additionally, we'd like to thank our media partners, Wisconsin Public Television and their University Place crew for taping today's lecture. I'm quite pleased to introduce our special guest today, Matt Younkle. He is co-founder and CEO of Murfie.com. It's just one of the many new concepts that Matt has turned into viable and very high profile businesses, as we'll learn. Before Murfie.com, Matt was founder and president of Laminar Technologies. Laminar developed and sold the TurboTap, a device invented by Matt capable of pouring draft beer faster with less waste. As president of Laminar, Matt led the growth of the organization from no revenue and no employees to that of a multimillion dollar business with a team of 20. 

He's been involved with several other start-ups including Vosaic, LLC, one of the first companies in the world to stream live video and audio over the Internet. Vosaic was acquired by a publicly traded video conferencing company in the late 1990s. And prior to Vosaic, Matt developed control and robotic systems that flew aboard the space shuttle during his employment at the Wisconsin Center for Space Automation and Robotics. He holds degrees in electrical engineering and computer science from the University of Wisconsin-Madison. He is an active supporter of the Wisconsin start-up community and co-founder and co-organizer of the Forward Technology Festival. He was appointed by the mayor of Madison to serve on the Economic Development Committee for our city. I've asked Matt to come and talk with us today about his experiences as what I call a serial entrepreneur. He has very appropriately entitled his talk today, "From Beer to Music: Why it's a Great Time to be an Entrepreneur." Please join me in welcoming Matt Younkle. [APPLAUSE] >> Matt Younkle: Thanks, Jeanan. With an intro like that, I guess I'm done. 

I don't think I need to do anything else. Thanks for all coming out to hear me speak today. I'm really excited to be here because it's a great time to be an entrepreneur. It's a great time to be starting a business. And I can say with 100% certainty that it's a terrific time to be a student who's starting a business. How many people are graduating either this fall or next spring that are here? It's a fantastic time to be a new grad that's starting a business as well. There are so many resources available and the level of risk that you have to take on is as low as it's ever been. So it's really, really cool. But I'm a little bit biased, I'm actually quite a bit biased about this, because as Jeanan mentioned I'm a serial entrepreneur. I started in business when I was 12 years old with a paper route delivering papers up and down the blocks around my house. 

I taught piano lessons. Pretty much my entire life I've never had what I would call a real job. So I've been really lucky, but I'm also a bit biased in my approach. In my time with you today I'm hoping to convince you of two things. The first that there's never been a better time to be an entrepreneur, or specifically a student entrepreneur like I mentioned. And secondly that just about anybody here is capable of going out and starting their own company, starting their own business, taking on their own projects. I'll spend most of the time talking about that second point, and what I'm going to try to do is take away sort of the mystery of what it means to take your idea and turn it into something real. And I'll do that by really going through step by step how I started two companies, my most recent two companies. The first being Laminar Technologies, which made TurboTap. The second being Murfie.com, which is a new way to buy, sell, and trade music online. 

I hope you'll come away realizing there really isn't any secret formula to all of this. It's really about finding a good idea and then just taking action, just getting out and doing stuff. And taking action sort of being the really big point that I'll emphasize. But you need to go out there and do stuff and then just keep doing it. My story about TurboTap began when I was a student here at the University of Wisconsin-Madison. And it was a warm summer night on the UW Terrace and I was at the Union and I was waiting in a very, very long, very slow moving line to buy some beer. Since the line was moving slowly I started thinking, well, why is the line moving slowly? There's probably a bunch of different reasons. There might be a slow person at the register or whatever, but the thing that I noticed was that the beer was pouring really, really slowly. It was taking a long time to fill up pitchers. It was Friday night and everybody was ordering pitchers of beer so it was taking forever to get the beer. 

So while I'm in line I'm trying to think what could I do to make that beer pour more quickly. The problem was I didn't really know a lot about fluid mechanics or fluid dynamics. I was studying electrical engineering and computer science at the time, but a friend of mine who was in engineering mechanics kind of knew a little bit about that. So I sat down with my friend Rob Meyers, and we kind of threw some ideas around and we kind of hashed something out that looked like it might work. Another friend of mine, I was talking about the project, and Mark said that's a really cool idea, you should call it the TurboTap. And I said that's a great idea, Mark. And that name clearly has stuck. So I owe a debt to Mark to this day for that name. It's a very, very valuable part of the overall business. And then a third friend of mine who was an acquaintance at the time, Rob and I were struggling kind of building a prototype so I recruited somebody I knew through Hoofers. 

I was on the UW Hoofer sailing club and I was on the sailing team and I knew another sailor who kind of knew how to build stuff so I started talking to him and he said that could be fun, I can help you guys try to build something, put something together. So Chris Dressler is the guy's name, and he helped Rob and I build our prototype. So with all that, we entered an engineering contest which was just in its second year. It was called the Schoofs Prize for Creativity. And Rob and I won. We took first place. We won $10,000 for the effort, and it was great, very exciting, a lot of money. The next day we had the picture of the TurboTap and Rob and I were on the cover of the business section of the Wisconsin State Journal so we thought maybe we were on to something here. And then the day after that we ended up with a little paragraph on the cover of the Life section of the USA Today which was wow. And this is well before the time Facebook and Twitter and the way things normally go viral today. 

This was just kind of organically getting out there. And so we thought, okay, this is kind of neat, but later that night we had another surprise, and hopefully I can get this thing started.  It's thinking. Oh, come on. It worked before.  Well, what I was about to show you is a video of Jay Leno, which I can try to still pop out of this and take care of it here. Is it going to do it? There we go. >> Listen to this folks, a University of Wisconsin engineering student has won first prize in a creativity contest for inventing a faster beer tap. It makes beer flow out of the keg three times faster. [APPLAUSE] His parents must be so proud. 

[LAUGHTER] What's next? A giant funnel to make it easier to target the toilet when you're throwing up? [LAUGHTER] A thing that sits over your head that maybe you could wear? [LAUGHTER] >> So that was a lot of fun. And the next day what I hadn't realized, or the next morning, at 6:00am I get a call, and it turned out that the College of Engineering was kind enough to have released my home phone number to a radio station and their morning show. Some Boston morning show called me I think at 5:30 or 6:00 in the morning. I'm not a morning guy. And so they go, hey, it's WKOW you're on the air in Boston, tell us about this beer tap. And I'm just groggy and waking up, and that went on for about a week because even though the Internet wasn't really around or whatever, these radio stations had some sort of fax network that was sending my phone number everywhere. So I getting ready to change my phone number. So we had all sorts of buzz and all sorts of stuff going on and all sorts of talk about the TurboTap happening nationally. And it was Rob and Chris and I, we're just three college kids with this prototype that barely worked. So really, what should we do next? The first thing we decided to do was that we really needed to protect our idea, our concept. 

So we took some of that $10,000 that we won and invested it into getting a patent filed. And the next thing we decided to do is we should probably get some counsel about forming a company and starting a business. So we started asking around. We were trying to find an attorney in town that was willing to work with three college kids with little or no money who was developing a better beer tap. So that's not usually the kind of work that most attorneys are really jumping to take on. But fortunately, I get really lucky in finding a gentleman by the name of Joe Boucher of Neider & Boucher. And Joe, to this day, is the attorney that I use when I start all of my companies. He's been a terrific resource and a terrific mentor to me. So Joe suggested that we start a company, which we did, and we called it, this is the only, it's a fax, but DYM Technologies, Dressler, Younkle, Meyers Technologies. Spent a lot of time thinking of that name. 

And some really good advice that Joe gave us was kind of how to structure things because there were three of us, we were all students, but we were all kind of going off in little bit different directions. We had a couple of considerations. The first consideration was that Rob, Chris, and I all kind of worked on the prototype, the version of the TurboTap that we were going to go get a patent on, but then we wanted to start this company to grow, to possibly improve the product, to take it to market, and that was going to be a ton of work. And Rob was getting ready to graduate, and he was getting married and kind of had another job lined up. So he wasn't so interested in participating in kind of the further growth. He just kind of wanted to say I'm kind of happy with how far I took it already. Whereas Chris and I were a little bit more motivated to start the company. So what we ended up kind of working out was an ownership structure where we kind of said, well, Chris, Rob, and I all own the intellectual property part of it, the kind of original invention of the TurboTap, and we kind of came to an agreement in terms of how to structure that. 45% Matt, 40% Rob, 15% Chris. And then for the business side, so we licensed then the technology to the business which was DYM Technologies, and the ownership was structured a little bit differently. 

I was talking the lead on DYM so I got the bulk of that, but Chris got a much bigger chunk of that company because he was active and Rob was not going to be active much beyond when he moved off to start his new job so he got a much smaller chunk. So we kind of decided that was fair. And for those of you that are starting companies as students, if you're doing stuff on your own, you don't have to worry about any of this so that's an advantage, but usually you're forming a team and it's really important if you have a good idea, if you have something that you think is it a good idea, to kind of get this stuff hashed out initially because I've seen it happen a lot of times everyone comes in with great intentions but you're at kind of an influxion point in your lives when you graduate and some people move on and you don't want to be stuck in a situation where Rob, in that case, would have 40% of a company and now isn't really interested in working on it. Because then you just sort of have, what do you do? Does Rob get all the benefits for not having done anything? So that's something you should really think about when you get started. And just take care of that really early in the process. Joe was also, Joe Boucher, was also great in that he introduced us to some folks that had some angel investor money. So we brought on some investors to help us kind of iterate with the business. And the investors took 10% of the company. There were two investors. They each put in $10,000 for a total of 10% of the company. 

So between the money, the $10,000 that we won and this other $20,000, we had what we thought was a ton of money which is a lot of money but when you start to get into product development you realize it's really not that much money, to continue to go forth with the business. Using that additional capital, we were able to build some progressively better prototypes. Here's one version of the prototype. The best version, unfortunately I don't have a picture of it, is this really great, it was on a fake piece of bar countertop and it had a draft tower, and it used these nice little CO2 cylinders to pressurize the keg. So we thought it was a really, really cool thing. And that prototype got dusted off in 1997 when we were able to score an interview with, or not an interview but a meeting with Anheuser-Busch in St. Louis. And some top executives called us up. They had heard about TurboTap. We hadn't really had a lot of success marketing it prior to that. We had met with Miller, met with a few other companies, but we were really lacking, I don't know what we were lacking exactly. 

The prototype kind of worked great. It was a little bit messy. We, as students, I think didn't really have a full understanding of what it was going to take to create a product that was truly commercializable. But Anheuser-Busch, anyway, was interested and they thought the technology could be cool so they called us in for a meeting. And it kind of became a comedy of errors getting from Madison to St. Louis with this TurboTap prototype, because we didn't want to check it on the plane. We were worried that it would get lost or get damaged. So we decided that we had to carry this thing on. And as we're hurrying to the airport to get down to St. Louis, the first thing we encountered was the metal detector. And the first thing that the folks at, it wasn't TSA back then, I don't remember what it was called, but the first thing, let's call them the TSA, they noticed were these CO2 cylinders which kind of look a little bit suspicious. And fortunately, and we never would have been able to get this done today, we were able to talk our way through security with this contraption and these CO2 cylinders to bring on the plane. 

So wouldn't you have been happy knowing that we were on your plane that day. The next thing, we got the plane, we realized we've got this big thing on the plane but now it doesn't fit underneath the seat and it doesn't fit in the overhead compartment. So where we were going to go with it? Well, Chris and I, being the clever engineers, decided there was an extra seat in our row so we kind of put it on the seat and we just kind of threw our coats kind of over it so it would make it look like there was just a pile of coats there, and that worked right up until the time when the plane was about to take off when the flight attendants were doing their last sweep through and they kind of said, well, what's underneath there? And they saw that and they freaked out and they almost stopped the plane because this thing wasn't supposed to be there. Again, it was sort of like salesmanship and we talked them through and we said we're these students, we're going to St. Louis, this is a TurboTap, it pours beer fast, and they kind of, I guess, ended up taking our side and after a stern talking, let the plane take off. That was quite the experience. But arriving at Anheuser-Busch in St. Louis was like a dream come true for us. We got treated to a tour by executives and lunch in the executive dining room. I brought along a carefully worded PowerPoint presentation. This is one of the actual slides from that presentation that was set to talk about, well, if only Anheuser-Busch would pay us millions of dollars, then they would have this exclusive technology which would allow them to sell a ton more draft beer. And so after all this build up and seeing this prototype, they said let's see it work. 

And so they went into the keg room. They rolled out, grabbed a fresh keg of Budweiser. Rolled it out. We hooked it up and we poured nothing but foam. It was just a complete disaster. We had a complete flop. We had no idea what was going on but it just did not work. The prototype did not work properly for us. So that was a major face plant which pretty much spelled the end at that point to DYM technologies. Now, the folks at Anheuser-Busch were really sympathetic. 

They said it's a neat product. If you can get it working, we'd like to talk to you again. But from that point, Chris and I and Rob kind of all went in our separate directions. And we were a bit dejected and we had spent a lot of work and when it was our moment to shine it really hadn't worked. Never mind that it had worked perfectly a couple days earlier when we were testing it prior to going to St. Louis but it didn't work when it counted. So that was a problem. So around that time I was getting involved, I had graduated, and I was getting involved with another start up which Jeanan mentioned called Vosaic which was a streaming media company. This was right when the Internet was growing like crazy and there were start-up companies happening all over the place. And Vosaic was bought by a publicly traded video conferencing company. And after that I went and worked on another start-up that was mediumly successful. 

But when the Internet kind of bubble burst in 2001 I was kind of left looking for something to do. And the TurboTap project was always there, and it always bothered me that I hadn't really seen the whole thing through in its entirety. So in 2002, I formed a company called Laminar Technologies to bring the TurboTap to market. And before starting this company, though, I checked with Chris and Rob just to make sure that they didn't want to get involved because I now had time and the energy and I thought I was, having done the Vosaic project, I was a bit of a more dangerous entrepreneur. I thought I knew more about business and everything else. You learn ever time you go through one of these iterations. So I asked Chris and Rob if they wanted to get involved and they said no they didn't. When I started the company, just because it was the fair thing to do given the effort that had been put in previously, I set aside 8% of the company for Rob and Chris and the other investors so they got to participate in the new business which I had no idea whether it was going to be successful or not. All I knew is I was going to see it through all the way to the end this time around. So when I finally got started, the first thing I wanted to figure out is why TurboTap really didn't work the first time around. 

And we were able to do that. And I was able to raise, as a result of that, I was able to raise a couple hundred thousand dollars, $200,000, in angel money for the project to really push it forward. And in exchange for that, this is what a lot of entrepreneurs won't tell you is they raise money but they don't tell you what they gave up. So in this case I raised $200,000 and I gave up one-third of the company for that. So that basically puts the value of the business at $600,000. So that's kind of a prototype and some ideas and some experience in the space. That's what that company was valued at in 2003. But with that capital I was able to build and test and do a lot of prototyping, stuff I wasn't able to do the first time around, and build some successively better prototypes, testing dozens of designs, really iterating, really getting the product honed until it was what it is today. And so it was a lot of design work. It was a lot of testing. 

It was a lot of R&D, like I always like to say, research and drinking. Because the neat thing about the TurboTap is when you're testing a product that pours beer, you only know if it works if you're actually using real beer. So we went through a lot of beer in this process of testing all these different designs, which is kind of cool having a keg on tap at your office. Not a lot of people have that. By 2004 it seemed that TurboTap was really ready for prime time. Through some of my connections at Vosaic, I had recruited and teamed up with someone who could help me on the sales and marketing end of the business, which was an area that, although I enjoy, I was never terribly, it was never really one of my stronger suits. So I hired, kind of brought on as a partner, a guy that is kind of like the consummate bubbly sales guy. Todd Keeling was his name. And so my partner Todd and I had been running tests at bars and restaurants throughout Chicago. We went back for another round of meetings with Anheuser-Busch, Miller, Coors, all the big breweries who liked the product a lot more this time around but still really weren't terribly motivated just to go buy it or license it for whatever reason, which is still just a little bit of a mystery but they're just not in the beer equipment business so it wasn't something they wanted to get in to. 

And Anheuser-Busch, though, ironically was the most supportive and the most interested of all the breweries the second time around. The bars and the breweries were both great but we knew that the place that TurboTap would really shine would be in a stadium or in an arena setting where just a ton of beer is poured over a short period of time. We thought that would really be the place to get TurboTap installed. So with a ton of networking among connections in Chicago we were able to land a meeting with the folks at Wrigley Field. At that time the concessions at Wrigley Field were all managed by a company called Aramark, and the general manager of concessions at Wrigley Field was a guy by the name of Curt Radle. And Curt gave us a call and said, hey, I'd like to see a demonstration of this TurboTap that you're talking about. I've been hearing good things, and I'd like so see a demo. And we said no problem, come down to our lab. I had a lab on Michigan Avenue in Chicago. It was in this really old building, though. 

So I had a Michigan Avenue address but I was paying $300 a month for rent. But you really needed to, you couldn't find my office if you wanted to. It was in this back dusty corner. Some cockroaches, it was kind of a nasty place, but I got a lot of good work done there, and it was a good spot for a while. I'm just realizing now, I think every picture I've shown you I've been wearing the same shirt. [LAUGHTER] I don't know if anyone else noticed that. So it's kind of funny. I've got to look into that. I don't own that shirt anymore though, fortunately. So anyway, so Curt said, well, no, I don't want it come into downtown Chicago. 

I don't want to go down to Michigan Avenue. Isn't there a place closer by where I can go and see TurboTap? Now, fortunately, Todd Keeling, my partner, had a house in Lincoln Park, and in his garage he had a fully functioning version of the TurboTap. Todd would like to go and pour beer at all hours of the day and night just to make sure everything was working fine. And this is a picture actually in Todd's garage. This is of a really early prototype that is exploding. So that's me, that's Todd, that's Todd's kid, Todd's dog, and the funny thing is, if you look at this, everyone except Todd is kind of looking at the beer going oh, my God, and Todd is never breaking form whatsoever. So that kind of gives you a sense of Todd's personality right there. So anyway, in this garage in Lincoln Park is where Curt Radle came over and we gave him the demo and he loved it. But he said, you know, the only way that we'll know if it works at Wrigley Field is if you come and install it at Wrigley Field and we test it out. And we were just thrilled. 

This is like the big break that we were looking for. So through field research we knew that the number one selling beer at Wrigley Field was Bud Light. So we went about getting a bunch of Bud Light to test just to make sure everything was okay. And the next week we had a date. We went out and we installed TurboTap at Wrigley Field. We installed it in the bleacher section which is out here which is, I believe to this day, still the highest grossing concession stand in major league baseball. So they sell more beer, more hot dogs, more everything out of that one concession stand in the bleacher section of Wrigley Field than anywhere else. How many of you have ever been out in the bleacher section at Wrigley Field? So if you've been there, you probably know. So we got the TurboTap installed. There's one of the prototypes. 

We had to gather up all the prototypes because we weren't in production yet. So we had to gather all of the dozen or so prototypes. And even then we could only outfit half of the bleacher section. But we got it installed and tested. And I spent a good chunk then of that summer of 2004 behind, I was standing right there watching, observing, taking measurements, taking notes. How is the staff using the TurboTap? How fast was the beer pouring? Were they selling more? Were they selling less? And the big thing that we noticed, though, up until that point it was all about speed. TurboTap, we can use the device to pour beer faster which means you should sell more. But one of the things we noticed as part of getting that device installed at Wrigley Field was that not only was the beer poured faster but because we were pouring it the same way every time, the staff was wasting a lot less beer due to over-foaming and spillage. And when we actually ran the numbers it turned out they were wasting 10% to 15% less beer per keg on average than with the conventional ways of pouring beer. So that was a huge discovery for us just by getting out and testing the product. 

And as a result, we had the confidence to go out and go into production and raise additional capital and really turn TurboTap from a project or just kind of a project state where we're testing and prototyping, into a real business.  So in early 2005 we landed our first real customer which was Quicken Loans Arena, at the time it was called Gund Arena, but The Q in Cleveland. It was early '05 and this is when Lebron, his star was really rising in Cleveland, and all of the sudden instead of having 5,000 people go to every basketball game at The Q, they were selling out. And their beer system was really stressed because they hadn't really done much with it for a long time. So they heard about us through Aramark because it was another Aramark facility and called us up and said, hey, can you come out and install it. We want to essentially buy TurboTaps and put them in throughout our stadium. So we thought that would be a great thing. So in early '05 we load up a car full of TurboTaps, full of equipment, full of tools, Todd and I did. We also recruited Todd's brother because we knew we'd need some extra help, and we drove from Chicago out to Cleveland and got started installing it, installing TurboTap. We dramatically underestimated kind of what we were going to encounter in terms of the beer system. 

The beer system they had there was really old, decrepit, hadn't been cleaned in a while so there was a lot of additional work we needed to do. And rather than just throw in the towel at that point and say you guys, your system is beyond repair, we decided to really take this project on. So we rented a corporate apartment a couple blocks away from The Q, and that's Todd and his brother Steve and that's just kind of taking apart and fixing and one by one we got every single beer tap at The Q up and running and working perfectly. So that was a great win for us getting that first customer out there. Getting up and running at The Q was certainly a big deal, but shortly after that we got a call from Wrigley on the basis of having tried out the product Wrigley said, hey, we want you to come in and install TurboTaps at Wrigley Field which we thought was awesome. So there's Todd with one of the Aramark guys. It's still winter. We were going around and checking out their beer system there, and we got TurboTap installed in time for opening day which happened after the White Sox opening day, and in this classic north side Chicago versus south side Chicago fashion, the White Sox heard that the Cubs were getting TurboTap and called us up and said, hey, can you get these TurboTaps installed in here too. We said sure, no problem. So we got TurboTaps installed at Sox Park. 

By summer, word really started spreading about TurboTap in '05, and the Wall Street Journal ended up running a cover article about the technology and the product. And that story prompted interest from a lot of other customers. And today you can find TurboTap at all sorts of stadiums. The majority of sports stadiums and arenas in the country use the product to pour draft beer, and the product has been used to pour tens of millions, if not into the hundreds of millions of beers to this day. So I guess I can probably give you a quick little video. This is what the product does if you've never seen it. They have them at both Unions. I don't think they're calibrated to pour quite this quickly at those locations. But this is for a Fox News piece that aired live. I was really nervous because I had one chance to pour a beer. 

This isn't me pouring multiple beers. This is the same clip going over and over. And I'd like to say that I'd planned a little drip of foam down the side but that was not me. That was just kind of luck. But that worked out. In '07, I was able to exit the company in order for my wife and I to make good on a life-long dream we had to go live somewhere warm for a little bit. So the two of us moved to the Caribbean and took some time off, took a sabbatical. Some of which we bought a boat. Actually sailed around, went to a bunch of different islands. It was a great time. 

And this is another one of those reasons, I shouldn't have to try terribly hard, I think, to sell you on entrepreneurship, but taking on a start-up or taking an entrepreneurial path gives you the flexibility to do things like take sabbaticals or follow other dreams that you might have. So that's really a big perk of this sort of career path, if you'd like to call it that. In fall of 2009 we moved back to Madison, and as part of this move, and I moved a bunch of times before that, I found myself sort of moving and unboxing and unpacking these boxes of music CDs that I had been accumulating over the years. I probably had 300 or so of these things. And as I'm unboxing them after having moved them, I realize that I don't even have a CD player anymore. So what am I doing with all these things? So these CDs represented the ownership to me of that music. So they were important but the plastic just sort of represented clutter. I knew that the music that was on many of them was valuable, maybe more valuable to me or to other people depending on your music taste. And some of the albums or the CDs I listened to. But some of them, my tastes have changed over the years so I would have been kind of content maybe trading for other music and that sort of thing. 

So what I really wanted to do was come up with a way then to be able to retain ownership of some of the music that I want, trade away some of the CDs that I didn't want, and I was trying to figure out a way to do that. So I took my collection to one of the local CD stores here, Strictly Discs, and the CDs that I wasn't interested in anymore I said, hey, can I trade any of these CDs for music at your store? And they said no, you can't trade any of the CDs for music at our store but we'll take a look at your collection and we'll let you know what we think it's worth and we can give you store credit and if you want to use the store credit to buy more music, you can do that. And I said okay, that sounds good. So a few days later I get a call from Strictly Discs, and they said we'll give you $20 for your collection. I had like 150 CDs. And I'm thinking $20 of store credit maybe buys me another two or three or four CDs, but that's not a really good exchange rate for me. So I said no, I think I'm going to try to figure out something else, some other way to do it. And in researching the problem and researching sort of what was out there I really couldn't find any other service that really did what I was interested in doing. It seemed to me like there should be a way to trade all the music that I didn't want or wasn't listening to for some music that I did. And as I researched the problem further and started looking at the market, it turns out that since the inception of the format of the music CD, over 15 billion CDs, music CDs alone, and this is of the major record labels, have been sold in the United States. 

So it's not just me that has hundreds and hundreds of CDs. I realize most of you probably maybe have never even bought a CD, so this is a generational thing, but a lot of us have to the tune of 15 billion of these things. And as digital music has become more popular, the CDs, in a lot of ways, have become less valuable, however, the music that's on the CDs is still as valuable as it's ever been in many cases. So it seemed like there is some value to be created here, particularly since most of these CDs at some point are just going to end up in landfills or getting thrown away. Certainly, 50 years or 100 years from now you won't expect to see optical plastic discs around anywhere. So a few months after I moved back to Madison another friend of mine introduced me to another Madison entrepreneur named Preston Austin. And Preston had just sold his company and was sort of looking for another project to get involved with, and we brainstormed a couple different ideas that we had, and the CD idea was one that we sort of latched on to as something that could be kind of interesting. So we formed a company that we called Byte Recycle, B-Y-T-E, Byte Recycle LLC, in June of 2010, so June of last year, and spent a few months hashing out the basic design of a service that would solve this problem until we had something that we thought was ready to build. An important thing for kind of consumer-oriented businesses in my opinion is a good name. So we worked with a local graphic design company called Swink. 

They have an office on the square. And Swink gave us a bunch of different names but the name that sort of stuck the best was a name called Murfie, M-U-R-F-I-E. It's fun, it's short, it's webby, and the derivation, everyone asks what's the story behind it, is that MRF stands for material recycling facility. So we thought that one of the services we could offer within Murfie is the ability to recycle a lot of that unused plastic. So that's how we ended up going with that particular name. From there it was just sort of a race to get the website up and running and built. So we worked with Swink on some of the design. We worked with some other developers in town to get something up and running, and we were able to launch a beta version of the site then in December of 2010. And at that point I also applied for a patent on the process, this Murfie process which I'll take you through, I'll step you through. This is how the process works. 

I guess the, I wonder if I, is there a laser pointer here? Maybe not. Is there? I'm not going to try working it. So if you look way up at the top, so at the most basic level Murfie is just a store where you can go buy music. So if you go to Murfie.com, everyone's got laptops here, you can go check it out. You'd probably bring the site down if all of you check it at once which would be kind of cool. My engineers would be paging me then. But if you go to the site, you'll see just a bunch of music that's for sale, and we've got both new and used music for sale. And just like iTunes or Amazon or some of the other places, you can download the music. You're downloading tracks off of full albums. But the cool part about Murfie is most of the music that's getting bought and sold is getting bought from other people. 

And these are people that have sent their CDs into Murfie. So starting at the, I just realized that I did something here. So starting at the bottom here, back in the '70s, well, '80s, 90s, '00s, we bought a lot of CDs. This was before the web, before digital music, and we were all pretty happy. CDs are a really good format. But now we're accessing music online so the CDs are more clutter than anything else. So they do prove that we own the music, in fact, that we listen to. So what Murfie essentially does for the folks that are sending their CDs into us is to provide a way to offload that plastic while preserving ownership of the stuff they want and selling or trading away the stuff they don't. So all these CDs then that users have and that you can see available on our website gets shipped to us, via UPS, and we have a warehouse on the square in Madison and staff that opens these boxes and catalogs all the discs that come in and these CDs then kind of end up in, I guess we call it CD heaven. It's essentially our warehouse. 

They get organized and barcoded. And then they're listed in these user accounts on our store. So when you're buying the music then, at the top, or trading, you're trading with other people which we think is really cool. And all the music then that you're buying is getting ripped from the CD that you buy. So when you buy an album on Murfie, you're not just buying a license to listen to the music, you're actually buying a physical CD that sits in our warehouse which gives you additional options down the road because unlike with iTunes or other places you buy MP3, with iTunes you're agreeing to a 54-page license agreement that tells you how and when and where everything about how you can consume that music. And usually it's limited to your consumption on a certain number of devices. But if you own a CD, if you think about it, you can do a lot of different things with it. I can give it to a friend. I can trade it. I can donate it. 

These are rights of true ownership. And so what we do is preserve that right. So everything you buy on Murfie, even though you're downloading, the content is coming from an actual CD. So this is getting into the guts of it but the simple bit is you can just buy, sell, and trade really easily on the website. I'm going to, I'll just talk over this if I can. So this is, you saw kind of the picture, the cartoon of how things work, but this is in reality what's going on. And you can see all those boxes in the background. Those are boxes that users, that hundreds and hundreds of users are sending into us of their CD collections. And our staff then opens up those boxes, goes through, scans barcodes, in some cases trays discs into drives like this. So we're traying the disks into drives. 

We're actually working on automating this process so we have some robots in our facility now since this video was taken. But at that point, we're IDing the disks and then ultimately once those disks are listed for sale, they end up in our warehouse, which at the moment I think is up to about 45,000 CDs that have come in with another backlog of probably 10,000 or 15,000 and growing exponentially. So this is since our launch in May of this year. So this is a really new company, really fresh. We're still working on developing it and developing the concept and everything else. Whereas, the TurboTap story I told you, you can kind of see what happened start to finish, this story is still unraveling as we speak. So it's a little bit different to talk about because usually I've talked about stuff I've done not stuff I'm in the process of doing. But Murfie is really cool. So this is an example of a user account. So you can go in and set prices, set CDs for sale or trade if you've sent in CDs. 

If you don't have CDs, again you can go and buy the music and download it in whatever format you want off of Murfie. So that's all about Murfie.  I guess there's another picture of the warehouse. So hopefully in talking through all this stuff I've kind of taken away some of the mystery of kind of what happens when you go and you start a business. A lot of times you see, you hear about these start-ups and they're doing great things and it's like how did you get there. There's really not a lot of magic, I don't think, that happened here. It's just a lot of hard work. It's about being diligent. It's about going out and talking to people and taking action and just deciding that this is what you want to do, that you want to commercialize a product or bring a new concept to market. Once you make that decision and once you start taking action, that's really when stuff starts happening. 

And it's really encouraging to see you all sit here in a classroom where you're hearing about entrepreneurship, but I hope it really inspires you to get out there and start doing something. And as I mentioned before, I think this is, as students, there's never been a better time to get out and really start doing something. And I think that's the case for five different reasons. First off are the resources that you have available to you. None of these things existed when I was a student working on TurboTap. So you have the UW Student Business Incubator. The Law and Entrepreneurship Clinic. So you can go and get free legal help, legal advice, it doesn't matter if you've got an idea that you want to patent, if you want to start a business, there are resources on campus that allow you to go and do that. You can actually live with a bunch of other people that want to start businesses, which is really, really cool as well, in the ERLC. There's some other local resources that you may or may not have heard about in sector 67, which is a prototyping facility. 

You join it like I join a gym. You get a membership. Instead of working out your body, you're working out your brain and building either software or hardware or a combination of those things. It's a facility on the near east side of town that was started by a recent UW grad. Really, really cool. Perhaps some of you know people who have heard of 94 Labs, which is a start-up business incubator that just opened up here in Madison and Milwaukee over the summer. There were 14 different companies that received $18,000 per company for up to three founders. So it pretty much paid your rent and more than kind of covered your cost for the summer to go off and pursue an idea. I think three or four of which now have gotten follow-on funding to the tune of hundreds of thousands of dollars each. So these are some students or former students that are really off to the races with that sort of thing. 

And even broader things like KickStart are places where you can raise little bits of money from lots of people to get your idea going. So the barriers there are really low and the resources are really high. The other thing you have here on campus now is a huge number of student competitions. So when I was a student there were two. It was kind of all combined into one. It was the Schoofs competition which also had a prototype prize which is now called the Tong Prototype Prize. So if you have an idea for a product, you can build a prototype, you can enter it. That was where I got started with TurboTap, literally. If contest wasn't there, I don't know that I would have ever taken that product to market. So there's also a business plan competition if that's more your bent. 

There's a wireless prize now. The 100-Hour Challenge is really cool. I think there might be some affiliation with the 100-Hour Challenge in this class. Jeanan can correct me on that. There used to be the Climate Leadership Challenge which is just called the Global Stewards Sustainability Prize. That's three prizes, $15,000 each. There's a computer science competition. There's even something for new art. So if you have more of an art project focus, if you want to run an event or a festival, there's money for you to do that. So these competitions are a great way and as a student they're generally just open to you, so take advantage of them. 

I had someone ask what should you do, how can you do well in the Schoofs Prize? I said, well, the first thing you ought to do is enter. So enter one of these. If you do nothing else, the level of experience you'll get from going through this process and having a deadline and having judges and everything else is just extraordinary, and it's a great resume builder if nothing else, but I hope if you do these that they really catch on and that your project is one that you can take with you outside of UW. Another reason to do it now is that it gets riskier the older you get. So as students you have a pretty low, most of you, I would suspect, have a pretty low financial footprint. You don't probably have a mortgage. You're probably not married. You probably don't have kids. You're probably not used to going out to dinner at a nice restaurant two or three times a week. You're not drinking a nice bottle of wine with dinner every night. 

As you can kind of get accustomed to these sorts of things, they get harder and harder to give up. So right now when, there's a phrase in the start up community called Ramen profitable meaning you get the business just to the point where it can just sustain you. So while you're eating Ramen, it's easier to keep eating it than when you go gourmet and have to go back. So now's a great time to do it, either right now or right after you graduate because it's going to cost you a lot less to do it now. The other reason to do it now is the experience you'll get, and you'll get that experience through the competitions but you'll also get it just through the trial and error process of trying to start this business. So even if you're not successful, even if you ultimately go and want to go out and decide entrepreneurship isn't for me, I'd rather help grow an existing company, the experience level that you'll bring in from having gone and done this entrepreneur process will be extraordinary. And the last reason is it's a pretty tough economy. It's a pretty tough environment out there to land a job when you graduate. We're hiring a lot of people that haven't, at Murfie, that haven't, doing inventory processing, doing things that are below their, there are plenty of folks at Murfie that are underemployed right now, I guess we should say, because they haven't been able to find other work. And so we try really hard to make these jobs interesting and to ride that upside for folks. 

But if you start your own company, you've created your own job. And if you're having trouble finding a job, creating your own one is a pretty good way to go and I would say it's a pretty good way to go even if you're not having trouble finding your own job. So I guess just in closing I always like to, this is one of my favorite quotes, a George Bernard Shaw quote about being unreasonable which is more or less saying be unreasonable because that's where all progress comes from. So thank you for your time. We do have some time for questions, and I'm happy to take them no matter how unreasonable they may be. Thank you, everybody. [APPLAUSE] >> Matt knows that I walk around with the microphone and hand it off, and it looks like Sarah has our first question.  >> My name is Sarah. My question is about, so when you're an entrepreneur you always have to constantly be thinking about the future and the way the product is changing, so my question is about Murfie. If you're getting further and further away from the popularity of CDs, how are you planning on creating a client base since most people aren't buying them anymore? How are you planning to do that in the future? >> The beauty of it is even though it's a dead format, it's like the CD is dead, there were still 250 million of them that were sold last year in the United States. 

So that's a lot of new content that's getting minted for us every week. And last year was the first year, in 2010, where sales of physical tracks of music were lower than sales of digital tracks. So we're just at that influxion point right now. So what we're looking at, though, with Murfie ultimately is like the broader concept of dematerialization of media. So this concept of ownership even though it's still digital. So you can take a look at Murfie and say, well, there's CDs, we can do the same thing with DVDs, potentially with books. I've got a huge library of textbooks, of reference materials that I look at that and go I just want access. I want to own it but I want to have access but I don't necessarily need to have that on my shelf every day. So there are a variety of other kind of areas that we can work into. But given that we have a 15 billion sort of backlog of CDs, it's going to keep us busy for the near future. 

Good question. >> I'm going to ask a question, Matt, while I'm watching for the students to put their hands up. Your wife Susie said to me once in regard to TurboTap versus Murfie, she said, you know, that TurboTap stuff wasn't what he really knew. This is what he really knows. And I thought it was an interesting comment, and it made me wonder, well, so TurboTap, was it just something that you kind of dreamt up and decided to pursue casually? I know that you went through the whole competition and certainly your story, but maybe that wasn't the right way of describing it. But I'd like you to comment on it. >> My experience with beer when I came up with TurboTap was that I would drink a lot of it. So I wasn't an expert in draft beer equipment or how to pour draft beer or anything else. But I think, fundamentally, I'm first an entrepreneur and then a technology guy. So I just saw a huge market opportunity with TurboTap and seeing something that hadn't been done before and then figuring out kind of a way to do that. 

And so even though I was a bit of a fish out of water in that particular market and that industry wasn't necessarily a great fit for my personality over the long-term, the market potential was such that I was willing to sort of go in and try to make the most of it. One thing it did do, though, was bring me big time into patents and I'm sort of a patent geek. At the time, you couldn't search patents online, you had to go to the Wendt Library and pull up microfilm and look stuff up. So the way I really got started with TurboTap is I said I want to figure out why this hasn't been done before. So I went back and I pulled out every beer tap patent I could find going back to the turn of the century, well turn of the last century. Like 1890 or something like that. I could actually map out the evolution of the technology, which was really neat to do. So if you've never seen a patent, Google has a patent, you can go to patents.Google.com and look stuff up and search and it's really neat to see what's out there and it's a way that you can sort of get a sense of the way the technology evolved. So that was really how I got started with it. But the market opportunity there was big. 

So that was me wearing my opportunistic entrepreneur hat and chasing after that opportunity even though it was a little bit out of my comfort zone. >> My name's Andy. You discussed how you could, when you own a CD you can lend it to your friend. >> Yeah. >> But then you no longer have the CD, so with Murfie you can download the content and then also sell it. So isn't that creating more copies of the music and how do you deal with that legally? >> So what we want to do with Murfie is give you the same rights to your CD on Murfie that you would have with your CD at home. You don't have the right to make a copy and then sell it if that CD is at home. So our terms of use say that, no, you can't do that. It's possible that you still might choose to break the law, or violate copyright, and keep a copy, keep the copy that you have on your hard drive and sell the copy. Just like you can go to used CD store, buy a CD, rip it, bring it back and resell it and keep that copy. 

But you're making that decision. What we do with Murfie to make it harder, to make it less likely that folks will infringe, use our system as a way to infringe on copyright, is that we require a 30-day holding period. So if you buy something on Murfie, we require a minimum of 30 days before you can go and sell that content or trade it away. Which makes it terribly unattractive. You can commit copyright infringement many, many other ways much faster. Never mind the fact that you can, if you really don't want to pay for something, there's probably a lot of ways you can figure out how to do that without going through Murfie as well. So that's sort of the safe harbor that we're kind of reaching for there. And we haven't seen a lot of folks abusing that. We really haven't seen anybody abusing that to this point where the 30 days comes up and they're instantly selling or trading stuff away. >> Hi, I'm Carly. 

I was wondering what the pros and cons would be of selling the TurboTap to a big company like Bud. or Miller, or something like that? Why you didn't go that route? >> Well, we didn't go that route because they never really were interested at the level we thought that the business was worth. So the initial strategy, and this was one of the things we struggled with the business, our initial strategy was to license the technology because we had this patent, we had some additional patents and we thought we could just go to a brewery and say, okay, we've got this patent portfolio, license it from us, possibly exclusively either for a flat fee or for ongoing royalties, and you can kind of control the technology that way. And the breweries look at it and kind of said it's kind of interesting but they didn't really want to give us very much money for that. We thought it was worth millions of dollars, and they thought it was worth maybe tens of thousands. So we were way far apart in terms of what we thought the potential value was. And the breweries also kind of looked at us and said you're a small team, you don't have much capital, you don't really have a lot of other options. So they didn't see it as necessary to offer us more money at the time because what are we going to do? They're three big breweries and if we don't get it to one of those, where's it going to go? So we were kind of forced then into the decision to go and start a company that was able to manufacture and market the product. And once we started doing that, then the value of the business became more evident to folks. So having that alternative always there of going and actually marketing and selling it yourself is always going to get you a better value, better value for the company.  >> Hi, my name is Cora. 

I have a quick question about Murfie. A lot of your probably potential individuals or customers are probably of the older generation, like my parents for instance, and trying to teach them something like how that works is probably a little difficult, especially when you showed the product cycle, how are you planning on teaching that generation or making them comfortable with like sending in their CDs from their favorite concerts or things like that? >> That's a great question. That's something we've struggled with is how do you explain Murfie. And it's been something that's been evolving. We're getting better at it. What we're leading with now more is just say first off Murfie is a place you go and buy music. So we're the world's largest online new and used CD store with a twist. And that twist is you buy the CD, we'll rip and download it for you, and we'll store it for you. And so we kind of explain it that way. And so we're getting our initial user base as folks that are coming in and buying. 

It hasn't been as hard to convince people to send in CDs as you might think. Originally, when we launched this site we thought we'd have to work really hard to convince perfect strangers to send their entire CD collections to us. That part has turned out to be pretty easy. And this is all about, and I guess the lesson there is get your stuff to market. Put it out there because you don't know what you're going to struggle with until you have actual real users using it. So our problem now isn't a problem of how are we getting all these CDs in the door. If you come to our office right now, there are boxes everywhere. We're getting more space and more storage and everything else because they're coming in so fast. Our problem now is getting out and marketing all that content, all that music that's there for sale on the site. And we're ahead of where we want to be from a sale standpoint, but given the pace of growth of the business, we want to be even further along with it. 

>> Well, I know the students join me in thanking you so much, Matt, for joining us today and sharing your story. >> Thank you. [APPLAUSE]