Alan Hahn is the cofounder of MycoTechnology which utilizes fungi based food-processing platforms to transform the flavor and value of agricultural products. The company has raised $120 million from investors such as Wavemaker Partners, Seventure Partners, Middleland Capital, GreatPoint Ventures, S2G Ventures, Tao Capital Partners, Emerson Collective, Continental Grain Company, Cibus Fund, Eighteen94 Capital, Closed Loop Capital, Tyson Ventures, Health for Life Capital fund, Bunge, Evolution Capital Partners, Ajinomoto, and Greenleaf Foods to name a few. Prior to this he cofounded Shared Technologies Fairchild, Corvigo, and SolarX.
In this episode you will learn:
- Picking the right investors
- Structuring different types of investors to get from funding to scale and exit
- The new sustainable food revolution
- His two top pieces of advice before starting a company
- The two things you must do before deciding to work with someone
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Alan Hahn:
Alan Hahn is a serial entrepreneur with three successful exits. Alan Hahn has been a key executive in six startups and four public companies. Alan Hahn is a respected leader with strong team-building skills. Alan Hahn has successfully co-founded several companies including Scale Computing which he grew from inception to $100M in valuation in eighteen months. Alan Hahn also successfully grew a start-up from zero revenue to $200M per year, delivering a $1.1B return. Alan Hahn has guided MycoTechnology since founding in 2013 leading successful Angel, Series A, and Series B initiatives, spearheading innovating new products, and generating significant value through key partnerships.
Alan Hahn has a BS degree from the University of Tennessee.
Connect with Alan Hahn:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a guest that has done it not once, but six times. Imagine the wealth of knowledge and the insights that we’re going to be getting from the conversation today. He’s built them; he’s scaled them; he’s exited them; you name it. So, without further ado, let’s welcome our guest today, Alan Hahn, welcome to the show.
Alan Hahn: Thank you, Alejandro. I really appreciate having the opportunity to talk to you today. I’m very excited about filling people in on what I’ve done and the six startups I’ve been a part of.
Alejandro: To do a walk through memory lane, so that the people listening get to know you, you were born in New Jersey, and then you moved quite a bit. So, tell us about that.
Alan Hahn: Yeah. Born in New Jersey, and my dad was in the textile industry, a chemist. He went to Brown University. It’s funny; we always had a lab in our house with lots of fun things for me to play with. We ended up moving to the south for cheaper labor for the textile industry. Then, we ended up moving to China, but we ended up being in Georgia and Tennessee. I spent my teenage years in Nashville and my college years in Knoxville, and my first 15 years in business in Atlanta.
Alejandro: How did you land in Atlanta?
Alan Hahn: It’s a short drive from Knoxville. It was really interesting. The company I worked for shut down the location in Knoxville, where I lived. I went home to tell my wife that I had been laid-off, and she said, “Well, how about that. I’ve been laid-off on the same day.” So, we picked a city that we wanted to move to. I went down to Atlanta, which was the city of choice, and did some interviews and got a job offer, and we moved there two weeks later.
Alejandro: Wow. Obviously, you ended up there, and this is your first exposure to startups. I believe you were a co-founder, and the Employee #1 of a company called Shared Technologies Fairchild. Tell us about this.
Alan Hahn: It was an interesting time. When I first got to Atlanta, I found telecommunications and really fell in love with it. It was the time of deregulation. Most people don’t know about that unless you were around at that time that it was illegal to sell a phone or a phone system. You had to rent it from the phone company. So, the laws changed. You could start selling it. I got into selling telecommunications equipment back then. Then, there was an opportunity to join a startup, which I didn’t think about it as a startup, just a small company that was developing a whole different approach to telecommunications, and then was traditionally being done at the time.
Alejandro: What was the business model of Shared Technologies Fairchild?
Alan Hahn: As with most startups, you pivot once you learn more about where the market really is. Because, when I went in there, I had come from selling phone systems. What we were doing, as the name says, Shared Technologies Fairchild, it was sharing one giant phone system in high-rise buildings and renting phones off of that system to the tenants. That included local service, long-distance, and inhouse support. At first, I went in there, and it was about competing with the people that were selling the system versus we were going to rent this. It became a technology battle between feature function. Then I realized quickly that my advantage wasn’t technology; my advantage was financial. So I turned it into a financial sell and showing the CEO or CFO or COO that I was working with that we could save them money over a three or five year period of time depending on how they wanted to look at it. Once I figured out how to do that, it became a rinse and repeat process that drove us from zero revenue to 200 million dollars a year in revenue and very profitable.
Alejandro: Here, we’re talking about a company that raised $40 million, and that had quite a substantial exit. What was the exit?
Alan Hahn: Yeah. The exit was a 1.1-billion-dollar exit. So, everybody was very happy upon the exit, as you can imagine. That was my first startup. I think everybody would love to have an experience like that. It was a 12-year run that was just – it had challenging points, but it was just amazing to experience that kind of growth and to be part of a company that – what happens as you start growing that rapidly, the processes that you have in place break. Then you realized you want your processes to break because it’s a really good sign that you’re growing rapidly and that what you designed and designed for growth needed to be readdressed and looked at and re-evaluated to take you to that next level of growth.
Alejandro: When we’re talking about growth, I’m sure that you grew personally and professionally, too, yourself. What is that one lesson that you took away with you from this journey?
Alan Hahn: My mentor at the time, Mel Borer, who was our CEO, was really about learning to run the business by the numbers. We ended up having locations in 33 cities. We called them the NFL cities across the U.S. He taught me to analyze PNLs and look at the numbers hard and cold and make adjustments and changes based on the financials. That was a really good lesson to learn at a young age.
Alejandro: Got it. Then after this exit, you moved to Southern California, and there you got exposed to the world of hypergrowth tech-enabled startups, and this led you to your next company, Corvigo. What were you guys doing at Corvigo?
Alan Hahn: Corvigo became the gold standard of anti-spam, anti-virus appliance. It used artificial intelligence, one of the very first products out there that was using AI. It would read an email and understand the intent of the email and decide whether it was spam or not. It was funded by Sequoia Capital, and that got my first exposure to Silicon Valley and Sand Hill Road, and I started to get to understanding the venture capitalists there. That ended up being the fastest flip in Sequoia history. It was $5 million in and $42 million out in six months.
Alejandro: Wow! And what do you think was the driver, or why do you think that actually happened?
Alan Hahn: The reason it happened is, we had superior technology, but understanding the real difference between our technology and others that were out there because there were other products out there that was much less expensive that did a pretty good job. You would get evaluated two or three solutions against every company you were talking to. But in order to get evaluated, you really had to stand out. So, you had to figure out what is different about your technology? And the AI was different. We got to be compared to everybody that was out there that was looking at it, and so we could sell them on the benefits of AI and to be able to interpret the intent of the email. That made all the difference in the world. I think that moment really solidified something I’ve learned in my first startup, which was changing a technical sale to a financial sale. That got us an amazing close ratio of opportunities. When I saw it again happen at Corvigo, where the AI was the key selling point that got us into so many opportunities that you have to think about every startup that you have, the value that you bring, what is the key tool that you can develop from that knowledge that you have or that advantage that you have in the marketplace to turn that into your selling tool? Because every startup needs that selling tool.
Alejandro: Wow. Almost a 10x return for Sequoia in six months. Not bad at all. You were pointing to the fact that this was your first exposure to VCs, so going back to recapping in one lesson, what did you learn from working closely with VCs and especially with a VC like Sequoia, which, in my mind, if not the best, one of the best VCs in the world.
Alan Hahn: Oh, they’re great. It comes down to what a VC wants, which is, they want to get to know people. They invest in people before they invest in products or companies. It’s all about integrity and delivering on what you promise. That was the key because when we sold Corvigo, they invited me in to look at the portfolio companies they thought I would be a fit for. I looked at eight companies and chose LogLogic as my next company to participate in.
Alejandro: So, let’s talk about LogLogic – another nice exit there. What were you guys doing at LogLogic?
Alan Hahn: We created the whole field of log management: computers, VPNs, routers, and so forth, which all give out data packets of information. It creates this log management, and it’s a bunch of unreadable zeros and ones, that to take any action of that information required a tremendous amount of analysis that would take your best person months to figure out what happened. Did somebody hack into this computer or into this server, or what was the incident that happened to get down to the root cause? It was virtually impossible to take action on it. So, we developed an appliance that would capture all this data, parse it very rapidly, set off alerts and alarms in order for you to take action. Back to what I said before about what was the key tool to give us that advantage in the marketplace to sell this because, yeah, that’s good, and people don’t want to spend the money on things that they don’t have to until they have a problem. Then, they wish they had spent it so they could have solved it. But there became SOX compliance, so we built SOX compliance tools into the appliance. Now, everybody wanted it. Sales exploded, and that led to our success. Again, it’s all about finding that critical tool.
Alejandro: In this case, also quite a short run. One year and six months – it’s not a long run when you keep into consideration that this was a 33-million-dollar investment and a $290 million exit. So, unbelievable! Alan, here, you do it again. What happened here? Why, again, another short run?
Alan Hahn: Yeah. It’s interesting because you get really excited about the going in and going out, having success, and exiting. That’s what Silicon Valley is all about. What’s cool is what you learn about Silicon Valley, it’s kind of a virtual company – the entire greater Silicon Valley from San Francisco down to Campbell. Everybody wants to be part of a startup. You go anywhere else in the country, and people want to work for bigger companies. But what’s cool about the valley is, everybody is looking for that next Google or Apple or whatever to get in as early as possible and be part of that success. It’s intoxicating.
Alejandro: For this one, for LogLogic, what was your lesson learned?
Alan Hahn: My lesson learned with LogLogic was really about how quickly you can find that tool that delivers the success. I knew to look for it. It took a while to figure out, like six months. The quicker you can find that key advantage selling tool, the quicker you’ll blow out your numbers. I consider that all happened quickly, but later on, you start looking for that, and you’re trying to figure it out in weeks, not months.
Alejandro: Got it. Then, here you are, close to $1.5 billion in exits, and you arrive to your next startup, SolarX, which ended up being not the desired outcome. Tell us about this experience.
Alan Hahn: For SolarX, I was leveraging my experience from Shared Technologies Fairchild, which was the shared tenant services. I was going to create a company that sold power as a service. So, solar panels in Class A type buildings and low-rise buildings and sell the power. I put together a really great team and funded it myself. I got a letter of credit from a bank at the time to fund the largest solar project in North America as a 240-million-dollar line of credit for this project. Two weeks after I got the letter, Lehman Brothers went bankrupt in October of ’08. That was pretty much the end of SolarX. The lessons learned in SolarX beside the financial part of it is about avoiding going into businesses that have too much control by the government. It was really a lot on the government subsidies on Solar to bring the cost down, and without those subsidies early on, it did make financial sense, but you really don’t want to get in a position where the government, every year, is making a decision to have a rebate of not have a rebate or incentives. That was going to dictate how your business was going to go. So, you lose control in that respect.
Alejandro: Then, after this experience, you started Scale Computing. What was Scale Computing about?
Alan Hahn: The great part about this is – I shut down the SolarX company around 2:00 in the afternoon, one day; 2:00 in the afternoon the next day, I get a call from my guys that I did Corvigo with and said, “We’re putting the band back together. What are you doing?” I said, “Perfect timing.” We started Scale Computing that day.
Alejandro: Wow. What was the business model there?
Alan Hahn: The business model was about leveraging Cloud computing, where you could have the Cloud in your facility. You would have servers for small and medium-sized businesses that would replicate the ease of the Cloud, but have the security benefit of having facility-based equipment and taking the work out of it – kind of a plug-n-play approach.
Alejandro: Got it. Here, you exited after having some sort of technology issues, and the company is still running, but this was the segue for you to start your Mosley and Company, MycoTechnology. Tell us about MycoTechnology, how you bump into the idea because I believe that this story of the founding is quite interesting, but here’s your sixth startup. Alan, you don’t get tired. What’s happening?
Alan Hahn: I never get tired. No – I’m highly motivated. I’m a serial entrepreneur. I love what I do. I love starting companies, and what was interesting how this happened was about three years – let me back up a second. I started MycoTechnology seven years ago. So, three years before that, I was diagnosed as a type 2 diabetic. It really surprised me. I didn’t expect that when I was diagnosed that way. The doctor, on my way out the door, said, “Hey, Alan. Here’s how you live your life. If it tastes good, don’t eat it. If it tastes bad, eat it.” He slapped me on the back with a little laugh and sent me on my way. That just sounded horrible to me that you have to trade off something you enjoy, like eating and tasting good, for health, it had to taste bad. So, I started taking classes on nutrition. I lost 30 pounds. I got off all the diabetic medicine. I got my A1C down to 5.2. My doctor told me I’m his first patient to ever follow his directions and reverse diabetes from diet and exercise. So, it really has worked for me and understanding that what you consume has an impact on your health. So, when I got a call from a buddy of mine, Pete Lubar – we had done two startups together, the last one, he was at Scale Computing, as well. He said that his nephew is a scientist who met another scientist, and he’s thinking about investing in their company and wanted to know if I would come to Denver and evaluate this company. I said, “Sure. What kind of high-tech company is it?” He said, “It’s a mushroom technology company.” I said, “No, no, really. What kind of company is it?” He was like, “No, it’s mushroom technology company.” I go, “Well, I’ve got to come to Denver to see that!” So, I get to Denver, and I meet the two scientists. This is the great part of a startup. Silicon Valley is all about starting in the garage. Well, this started in a basement, so close enough. They had built a clean room out of the house that they had rented. It had fermentation hoods. They had rerouted the HVAC system in the house to run all through the basement. They stacked up filters from Home Depot to create a HEPA filter environment. It was all put together with wood and duct tape and plastic. They were fermenting these mushrooms into all kinds of different substrates. They said, “Would you like to try it?” So, I said, “Sure.” They went upstairs, cooked some up, and it was the best-tasting vegetarian meal I’ve ever eaten, and I’m not vegetarian. At the time, I had a negative view on vegetarian. I like a lot of meat in a serving, so I looked at it through a different lens. My lens was, “Wait a minute. Here, you can take food that has taste challenges and ferment it with mushrooms and get rid of these taste defects and these aroma defects without adding a bunch of sugar, salt, and fat. Right then and there, I knew I had to be a part of this. My wife thought I was absolutely nuts. I’m going to create a company that is mushroom technology versus high-tech, but now, she thinks it was brilliant and glad I did it.
Alejandro: What happened next?
Alan Hahn: We did a test. When I looked at what they had made, they had served me a version of tempeh if you’re familiar with that.
Alan Hahn: Their version was excellent. I said, “The tempeh market’s pretty small. What else can we do with this technology?” The scientist had written a draft of a patent. I read the patent, and it talked about coffee. I said, “What can you do with coffee?” He goes, “I believe we can take low-grade coffee and ferment it and make it taste like a higher-grade coffee by removing bitterness.” I go, “Well, that’s a huge market.” We got three coffee companies to give us coffee beans. We fermented it. We came back to them to do blind taste testing, and they all said the same thing that this was the first technology they had ever seen that removed the taste defect in coffee without introducing a secondary defect. With that, I said, “I’m in.” Pete and I funded the company for the first six months and then started raising money. Now, seven years later, I’ve raised over 120 million dollars. I have some of the biggest names in the food industry, our investors, our customers, and partners.
Alejandro: How did you think about onboarding these investors because now, your sixth startup, I’m sure that you were very careful as to who you were bringing to the cap table.
Alan Hahn: Yeah, and this was a long-term strategic plan I put together on investors because I felt comfortable raising money, so I knew I could get money, but not all money is the same. It’s what do you get beyond the money? It’s the relationships and contacts and an eventual exit. I was very careful to choose venture capitalists, family offices, strategic corporate investors in the right mix for various reasons, for potential customers of our products, the venture capitalists – you know, that’s the strategic guys. The venture capitalists understand that you need continual rounds of funding over time as you hit different milestones, and not necessarily strategic investors understand that, so you want to have the ventures guys and gals in there to help make sure you’ve got investors in for the A, B, C rounds, and so forth. We’ve just completed our D round of funding. Then, you want potential strategic partners in there to be customers. Then, on a potential exit, you want to have people in that could possibly acquire you to create that natural friction that you want to get or that IPO exit that companies have gotten to know you over time and they understand the value and understand what a proper exit would look like.
Alejandro: You know, it’s interesting now because it seems that you definitely went into this early. You did it before with AI, with Corvigo, and it seems now you’re doing it again with MycoTechnology. Now, everyone is talking about the plant-based proteins and the transformation of food and things like that. And here you are, again, you’re ready to ride the wave. So, where do you think this segment, this space as a whole, is headed?
Alan Hahn: I’m super excited about where this segment is headed. Yes, I’m very early into this and very excited to have been early because we are positioned right. We’re one of the only ones out there with a full production facility. We produce in thousands of metric tons of material. But what’s really interesting is what’s happening in real-time, right now. Beyond me, their IPO happened a year ago in May?
Alan Hahn: I think it’s when they came out, and that got the attention of the food industry and very much got the attention of the consumers. The reason why is that the technology of making plants to look something like meat was very evident to consumers when you can go and look at a meat counter that has the Beyond Burger in it, and it looks like raw meat. You take it home and cook it, it looks like cooked meat. It tastes very similar to meat, so you don’t feel from a consumer you’re giving something up. Then, there’s the halo effect of better sustainability and the assumption that it’s better for you. What’s happening is that technology is continuing to evolve, and we’re taking it to the next level. Not only are we fermenting pea and rice protein to eliminate the bad taste and aroma, but it eliminates the need for as much sugar, salt, and fat as is required for non-fermented pea and rice protein. So, if you can create a product that is better for you and tastes great, now you’ve got a customer that will be with you for the long-term. Where we’re going is not only to make tempeh proteins taste better, have better aromas but be much more functional. We just completed a study with the University of Illinois on digestibility, and there’s about a 20% improvement in digestibility due to fermentation. So, it’s much easier on your body to get to the amino acids. That’s why you eat this stuff, protein, to get to amino acids, so you can build a healthy body, and then cut down on the sugar, salt, and fat that’s added to make it taste great. Where we’re going with the technology is that right now, we use a lot of pea and rice and the mycelia, the root system of the mushrooms that are used in fermentation is a small percentage. Where we want to go is, over time, we’ll get to 100% of the protein being from mycelia or the root system of mushrooms. That will be a fundamental shift in sustainability for proteins rather than having to raise animals to do this or grow crops that get converted and highly processed. We can convert sugar into protein in hours of fermentation. We’re super excited about that that we could be a big contributor to how we feed an exponentially growing planet. I can’t wait to bring that out to the marketplace, and we expect that over the next 18 to 24 months, where we’ll be introducing that to the market.
Alejandro: Very cool. I’m throwing in a question, here, that I typically ask the guests that come on the show. We’ve been talking about lessons learned. Your entrepreneurial journeys are quite extensive. If you had the opportunity to go back in time and have a chat with your younger self, with that younger Alan, and I know that maybe you would not have listened, but let’s say you would actually listen, and you had the opportunity to give that younger Alan one piece of advice before launching the first business, what would that be and why knowing what you know now, Alan?
Alan Hahn: I think there would be a couple of things that I would go back and tell myself. One, the key to success to any business is finding that sales tool that I talked about, and finding that quicker, and spending the early time figuring out that advantage you bring to the marketplace. Second, it’s really important who you work with and the integrity of these people. Are these people you want to be around? What I really learned over time is if you’re going to work with someone closely, you need to do one or two things when you first meet them: have a long dinner with them or a long drive. At the end of that, do you still want to be around that person or those people? If the answer is a question mark, run the other way.
Alejandro: Wow! That’s definitely an amazing piece of advice there, Alan. Thank you for sharing. Very profound! So, for the folks that are listening, what is the best way for them to reach out and say hi?
Alan Hahn: You can send me an email: firstname.lastname@example.org.
Alejandro: Amazing. Well, Alan, thank you so much for being on the DealMakers show today.
Alan Hahn: Thank you for having me. I really appreciate it, and I really enjoyed the conversation.
* * *
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at email@example.com.