Betsy: Jens, Welcome to the show. I’m so excited to have you.

Jens: Nice to be here Betsy

Betsy: So, let’s talk about how you started Coinstar, since that is what you may be most well known for.

Jens: Well, I was working in New York as a financial analyst at Morgan-Stanley at the ripe age of 23, and working crazy, insane hours and I was learning lots about companies, and what it took to grow them and finance them, at least from the financial perspective, but something didn’t feel quite right, we were working ninety, I don’t know, a hundred hour weeks, and my life felt a little out of whack and I’d been raised in a family, where we not only thought about the work that you did, but also the benefit you could have for the community, and in the public sector. And I was really thinking about how I could make a contribution, not only in the private sector but also in the public sector and the non-profit sector, and as I looked around, my life felt out of whack, I was working all the time in the private sector, and my public sector contribution was essentially sending my absentee ballot late on the day of election and then making a donation to some non-profits at the end of the year, and it just didn’t feel quite right and I started to think that it would be interesting if I could actually spend the lion share of my effort in an entity or an organization that combined public, private and non-profit sector efforts in one entity and that would be exciting to be able to spend that exact same time working in something that essentially could do well and do good at the same time. And as I was playing with the idea, what I realized, a couple of things, one of them it was motivating for me and two, I realized that there were lots of other people who felt the same way and would be both easy and interesting to recruit a group of people together who wanted to do both well and good. So that was interesting and the other thing I realized was that sort of a global sense, or an economical sense that the boundaries between the public, private and non-profit sector were blurring, and tradition would have been only the realm of the public sector was becoming privatized and non-profits were starting to take on profit sector management techniques and I was kind of interested that the global economic trends and my own personal interests were starting to align in terms of this overlap. So, that was really the seed for Coinstar, believe it or not. And when I finally got to business school three or four years later, one of the reasons I decided to pursue Coinstar was, it was an opportunity to make good on that initial desire. And what I realized in Coinstar was, first of all, it was a great chance to create a really interesting private sector company that could grow fast, employ lots of people and do lots of good things in the private sector, but by virtue of its success, we would also create a defacto national coin recycling system that would save money for the Fed and the Mint and be a plus for the public sector, and we could also create a non-profit benefit which is the Coins That Count Program, whereby people could actually donate money to charities, and I thought, this is kind of interesting…this is a coin counting idea where, this is actually a chance for me to prove that public, private and non-profit benefits can exist in one organization. So, those were the seeds of the idea, it went back a long way and it was born out of frustration.

Betsy: Talk a little bit about the Coins That Count because I don’t think a lot of people know about that program

Jens: It’s a program that was put into the original idea for Coinstar’s very first business plan and we really didn’t start implementing it until probably the mid nineties and the bulk of what happens at Coinstar is people have jars of coins at home, they come down, dump it into a machine, it counts it and sorts it, and then we produce a voucher, it’s good for cash or credit at the checkout, and the business model is we would charge a fee for that to the consumer, and the benefit to the consumer is that it saves some time and in general, people have much more money than they realize in their jars and the fee becomes less of an issue. So there’s sort of a powerful economic engine, and on the Coins That Count side, if you think about charities and the history of coins, there’s been a long history of coins being donated to charities, things like March of Dimes, Salvation Army, UNICEF collecting the orange boxes at Halloween, so we thought, gee let’s make a modern version, a modern way for people to donate their coins to the organizations. So in the mid-nineties, we added software to the machine, where we could actually go up to the machine and decide whether or not you wanted to get cash back and do the regular program, or if you wanted to, in fact, donate to an organization. So if you wanted to donate, you hit the donate button, a variety of organizations would come up, either local, or regional or national, and you dump your money in, and instead of getting a voucher back for cash, you get a tax receipt for 100 percent of what you put into the machine. And then what Coinstar does, is it turns around, and it sends that money to the organization and it passes through, I’m not sure, either 93 or 94 percent of the funds that it collects, so it covers some of the cost, but it’s less than the fee, and actually giving through Coinstar is the most efficient form of fundraising out there. I think United Way passes through 89 percent to 90 percent of the funds it raises and with Coinstar you can actually pass through much more. So we became quite excited by it, I don’t know what the numbers are today, I think we’ve raised probably about 10 million dollars for local and national charities that people have donated, which on one hand is exciting, a lot of money, but on the other hand, and Coinstar’s process probably $4 or $5 billion dollars in total for people across the country, $10 million is a relatively small percentage of $5 billion so it, ….the program is still in its early stages but it’s out there.

Betsy: Wow, that’s fantastic. I read that when you were doing the research for Coinstar, you did 1500 interviews at supermarkets.

Jens: I’m a research junkie. I was in business school at the time, and both first and second year, and my wife and I spent a lot of our time hanging outside supermarkets saying, ‘Hi, we’re grad students, what do you do with your coins?’ And we did end up interviewing a bunch of people, both in person and also through survey forms. It was about 1500 and it was an invaluable experience for me, it really gave me a very good sense of what the customers wanted, and I wouldn’t trade that for anything, in fact, with any organization I get involved with now, or any new products I look at, I always start with the research side, because you just learn so much in terms of really hearing what people are thinking about. And that’s how you develop a good gut sense of the business.

Betsy: And do you have any, memories that stick in your mind about what people told you?

Jens: Oh, what they told me? I mainly remember getting chased away by supermarket managers, because I’d be camped outside. You know, we’re there and we’re kind of talking to people, and I found out later you were supposed to ask permission and actually do it that way, which we started doing. What struck me though, was that 3 out 4 people said ‘Yeah, I’ve got a jar’ and they didn’t know how much, so I kind of asked how big was it, so I went home and filled up some jars and tried to figure out how much people had, and what we discovered, the first ‘ah hah,’ was at that time, this was early…late, this was 1989, 1990, but there was about $7 or $8 billion dollars sitting out there on peoples dresser tops, which is a lot of money. And then we realized secondarily after that that this isn’t a static event, people touch coins everyday, and while there may be $7 or $8 million dollars out there on dresser tops at any one time, if you think about how often people engage in cash transactions, and buy stuff and make change, there’s actually between $140 and $150 billion dollars that flows through the consumers hands. So, those were really big numbers, and we thought, gee, if we could build this network and put it out there and have 10,000 machines, or 20,000 machines across the country, we could be, processing a fair amount of change through the system and really helping people get that money back to work.

Betsy: Right, it is amazing. And I’ve also read, that as a result of Coinstar, that the velocity of money, has increased in the U.S.

Jens: Yeah, this was, this was a fun piece. Part of our purpose was to have a benefit on the public sector, and, I remember, we got a call in 1995 or 1996, and it was a call from the Fed, and the call was basically ‘Who are you and what are you doing?’ And we’re like, ‘Oh my God, the Fed is calling us, you know, what do we do?’ And it turns out, what had happened is that we launched a new supermarket chain down in Los Angeles, and put our first major rollout out there, and that’s a huge area for the Fed, and the Fed, in addition to having, high level responsibility for monetary policy, it’s also responsible for making sure there’s enough coin and currency out there in the system to feed the banking piece. Anyway, so the regional Fed of Los Angeles called up the guys in Washington, D.C., and said, hey, you know what, don’t send us any more pennies, we’re never gonna need them again because there’s this Coinstar thing and it was kind of stunning, because obviously pennies have been shipped to the L.A. Fed for a long, long time so anyway, we went back to Washington, D.C., and kind of explained to the Fed who we were, what we were doing, in fact, we diminished the amount of coins that were needed, we didn’t actually take it down to zero, but what happened was all those coins that weren’t in circulation came back in, and then, from a velocity standpoint, people actually started using their coins, just a little bit more frequently, so it lowered the overall demand for coins.

Betsy: Did you anticipate that at all?

Jens: Yes, we did. We were pretty quantitative guys and, and early on, this was one of the things we were hoping for so in the original idea for the national coin recycling system, we figured this would happen, we had no idea how big the impact would be, or how fast the velocity would change, in fact, it really depends on consumer behavior, but this was absolutely something we were hoping for, that was part of the public benefit, we were hoping to deliver on.

Betsy: And is it true that Coinstar processes more coins than the U.S. Mint?

Jens: Yes, I don’t have the latest numbers, but I’m virtually sure that Coinstar on an annual basis, processes more dollar volume than what the U.S. Mint produces.

Betsy: So let’s go back, when you had this idea at Stanford, how did you go about making it a reality?

Jens: A couple things were important in terms of the making it happen. One is I never really viewed myself as an entrepreneur, but I was in an entrepreneurship class, and we had a series of different people come back and tell their stories, about what had gone well and what hadn’t gone well, and made the idea of being an entrepreneur feel a little more accessible. A couple of important ideas were taught, actually several important ideas were taught in the class, but a couple I remember one being, the providers of ideas do not have to be the providers of capital. So, if you have a good idea, you don’t actually have to have the money yourself to start it. And then secondarily, good ideas often come out of need, basically the good old concept of find a need and fill it. So…how do you think of an problem as an opportunity, so I had a problem, I had moved a lot, and always had a jar of coins, that went into the U-Haul at the last minute, and, but I knew had real values, so the idea was springing around but to actually get it going, it was, absolutely instrumental, was a conversation I had with one of my Professors. I remember going to talk to him about it, ‘What do you think, is it a good idea?’ I remember his words, very clearly, he said, “It merits further consideration,” and I said, “Wow!” He thinks it merits further consideration. So I better go do some more work on this. He is the one who actually encouraged me to go out and do some research and talk to people, to figure out how to get it going, go learn about it, do some research and figure it out, and then basically, in my second year of business school, I stacked all my classes on two days a week, Tuesdays and Thursdays, and spent the rest of the time thinking about a coin counting company, and all my projects in the second year were designed around some element of coin counting, so if it was a marketing assignment I did it on a coin counting company, if it was an operational assignment, it was about a coin counting company, and if there was an organizational development question, I did it about a coin counting company. So, it gave me a lot of time to think about it, and shape it and form it and play with it a little bit. And also, I wasn’t very technical but being in Palo Alto, there are lots of technical resources. I could talk to people about electrical engineering, mechanical engineering, and software. And I was really just trying to just think about all the different elements and ended up writing a business plan, which was very important, put all that stuff together and, of course, I put numbers together, and the next thing you know, I’ve got a plan and a idea and then had to make the decision to actually go off and try and get it funded.

Betsy: Talk about that because I feel like that is where a lot of people get stuck in terms of if they have an idea, maybe they’ve done some research, but then, to actually take the leap of faith and go and pursue it.

Jens: Yes, that’s the risky part of it. Its interesting for me, it was one of these crazy things we were saying, well, this idea it makes sense, we’ve kind of checked it out, it was a sense of, ‘What do we have to lose?’ Why not spend a couple of months and pursue this and see if we can raise some money to go off and do this, and my wife was working to support us, so it actually felt like a very low-risk strategy, it seemed far riskier to me to go back and get a real job immediately and then try to, leave when you’re 30, or 35 or 40, and then try to do a start up when you’re married and have kids, and a mortgage and there’s a lot more at stake. If Coinstar hadn’t worked in the early phases, I delayed taking a job by four or five months. So it didn’t actually feel very risky. And it also felt like, seeing all these people come back and share their ideas, it made me feel more comfortable that these sorts of things can actually work. And the environment and Silicon Valley supports people who try things and fail, so I guess all that made me feel like, well, why not go for it and give it a try? But it wasn’t a grand plan, it wasn’t going to be the next 12, 13 years of my life. I’d hoped it would be, but I hadn’t really thought through it in great depth, it was more, let’s take a flyer and see if we can actually make this work.

Betsy: And what was the process of raising funding like?

Jens: Difficult. At Coinstar, I think over the years I did, either 11 or 12 different financings, both private and public and equity and debt and no doubt, the first equity financing was the hardest. I spent a year and a half trying to raise $500,000 dollars, which in today’s startup money, doesn’t seem like a lot of money, but back then it was, and it was just difficult. I called on venture guys, I made my rounds around 3000 Sand Hill Road and I just wasn’t getting anywhere. It took almost 18 months to get that first $500,000 dollars raised for the pilot test. The shift that I ended up making was realizing is that people weren’t investing in the coin counting idea, they were actually investing in me. And initially, I was very uncomfortable with that. But when I finally realized that they were betting on the jockey, not the horse, then I kind of changed my approach and went back to people I knew, people I’d worked with and found a lot more success and people were interested in backing me. That really opened things up, plus the coin counting idea was weird. Silicon Valley, it was not, it was not a match, at all, this…it was an odd thing, it was kind of low tech. I remember talking to one great venture guy, who said “Listen, I’ll take technology risks, I’ll take marketing risks and I’ll take management risks, but for God’s sake, don’t make me take all three in the same deal. This is an unproven market, unproven technology and an unproven manager.” So that’s about as far as I got with the regular venture community on the first round.

Betsy: And so, what recommendation would you give to entrepreneurs that are trying to start a business today?

Jens: Oh boy, there’s a lot. I had another great professor, who has this two-page sheet of sort of great ideas, sort of management style stuff, but two I remember a lot, that helped me was, was number one, if you truly believe in something, persevere, and I truly believed this thing would work. I’d done the research, I’d talked to people, I’d, turned it all over in my head and analyzed it every which way I could. I couldn’t see any reason why it shouldn’t work. So I believed and I was going to persevere. And the other line on there was, watch the cash. So if you truly believe and persevere and watch the cash, I’d say the same things for anybody that’s thinking about starting something up, if it makes sense to you, if you’ve really done the homework, and you’ve analyzed it, hang in there. And if you hang in there, and it works, people will label you as tenacious because you hung in there and it all worked out. On the unfortunate side, if you hang in there, and you do all this stuff, and it doesn’t work, people will label you as an idiot. But it’s the same thing, whether you hang in there and you’re considered tenacious, or you hang in and are considered an idiot, you’re the same person, in the heart of that, and that’s what’s difficult when you’re in that mode, you don’t really know if it’s going to work, you don’t know if you should hang in there, hanging on in there, but then again, you come back to that thing, if you truly believe, persevere. That’s one thing. The other thing, I think that is really important, is the standard advice of having a good business plan and a monthly cash flow statement. When I look at business plans today, and talk to would-be entrepreneurs, I always want to know if they have a monthly cash flow statement, or have they modeled the business out with an integrated income balance sheet and a statement of cash flows. If they haven’t, I won’t talk to them, because I think until you’ve done that, until you really understand how the cash works in a startup, you don’t know how it’s going to come together. So, perseverance and watching the cash and having a good business plan.

Betsy: Now your parents were entrepreneurs and you grew up working in the family business. So how much do you think that influenced your success? And who you are?

Jens: Probably who I am, a lot. And probably more than I realized. Going back to even the fundamental idea of, you know, public, private and non-profit sectors in one area, I mean, that’s clearly a family value. Mom and Dad didn’t talk about it that way, but that’s how they lived their life and what they did, so that was always instilled in us, so that’s a big piece. And then I guess, growing up in a family and seeing a small business operating, I guess that made me think more like an operator than I realized, and, of course, Mom likes to tell this story. When I was 10 years-old they gave me a job of washing flower pots, my family owns a garden center, and Dad had all these old clay pots that were covered with algae in the field and he said ‘Well if you’ll scrub ‘em and give them back to me clean, I’ll give you a penny a pot.’ So I washed 28,000 pots, over the, I don’t know, 9 months or something like that, and I earned a ticket to go back to Denmark and visit my grandparents. So my Mom likes to say, I learned the value of a penny because they really made me learn the value of a penny. Of course later in life, I really learned the value of a penny and started Coinstar.

Betsy: So now you’re back working at the family business.

Jens: Yeah, stranger paths, I, things I would never have guessed I’d be doing.

Betsy: So talk a little bit about how that is.

Jens: It’s, it’s interesting. I left Coinstar on my 39^th birthday, and as I like to tell myself and my family, I gave myself my life back, because as much fun as it was running Coinstar, it was also very taxing and I was very tired, and had three young kids and didn’t want to miss out on the next piece of it. And I left with the intention of taking some time off, and not doing much of anything for a while before I figured out what was going to be next. But at the same time, my parents had started this garden center business just outside of Seattle, and for a variety of reasons, it had gotten itself into trouble and I offered to help them kind of figure it out and it turns out it was in a lot of trouble and six months after I left Coinstar, my wife and I wrote a check to keep the doors open and bought the company to keep it out of bankruptcy. So I quickly found myself in a very small, retail environment, growing and selling plants and that’s been five years now, and it’s really interesting. I had no idea when I came in if I was going to have any passion for it, if I was going to like it, but it’s a completely different deal than Coinstar. It’s very small, it’s very local, we might try to grow it some, but certainly not the rate that we grew Coinstar. I’ve really come to like the product. It’s very tangible, it’s something I’m enjoying. What I really have gotten a kick out of is that it’s an organization of around 200 people and it’s almost 50 years old, in fact, it’s fiftieth anniversary is this year, and the company was in trouble and the culture had really declined significantly. So part of the challenge I had here, is how do you come into an old organization that’s dying, and kind of reinvigorate it and breathe life in to it, and get the culture back to where it once was, and even beyond that. Whereas, at Coinstar I started with one employee, myself and we took it to 400 or 500, and that was all about creating a new culture, and a new organization, which is very different from reinvigorating an old one. So I’ve enjoyed the sort of organizational challenge of both doing a turnaround and also a startup.

Betsy: I also read that Molbak’s enjoys such loyalty and like legendary status that it gets a million tourists visiting it a year that come in tour buses? Is that true?

Jens: It’s not…that’s not quite right. We get about a million visitors a year, but between customers and tourists, but yes, especially in the holiday season, we can have Saturdays where we can have 15 or 20 buses out front, people just coming through.

Betsy: And, they’re coming to buy things? Or they’re coming to look at it as an institution?

Jens: Both. When I got here, I was joking with the management team that we ran a non-profit tourist destination, and we needed to think about it more in terms of a for profit business and also be useful for people who are visiting. But its an interesting place, it’s a 10-acre garden center so its big and we do a lot of display work and show people things they haven’t seen before, or interesting combinations of plants. We get a lot of visitors, I was surprised we did the zip code analysis, doing the market research here, and something like 5 percent of our transactions are from out of state, which is crazy for a small retailer 20 miles outside of Seattle. It’s a very loyal base of folks.

Betsy: When you got there, you had to do some debt restructuring. Can you talk a little bit about how that process was?

Jens: Boy, it was difficult. I came in to start to help out in September, I didn’t realize how bad the situation was, within six weeks I was talking to bankruptcy attorneys, which is a whole new process and it was very clear that unless something happened, that the company was going to go away, it would be a Chapter 7 deal, and it wouldn’t exist. It was simply too hard for me to sit on the sidelines and watch my parents life work go away. So my wife and I talked a lot about it, and we kind of dove in. But to make the turnaround happen, four things had to happen. One was, the company had to make some fundamental changes. Obviously it wasn’t working, and has expanded and opened up a couple of new stores and a distribution center, so, we closed down the extra stores and the distribution center, and laid off about 40 percent of the staff, and cut the revenues by 40 percent, that got the company back in the black its first year. So, number one was the company making changes. Number two, was the bank had to restructure its debt, and number three, and probably the most difficult thing, were the vendors, the company had about 500- 600 vendors, and there was a couple of million dollars in debt outstanding, and we had to educate the vendors that with the bankruptcy impending, there was going to be nothing left over for any of them. But we wrote a letter to the vendors and said listen, if we all band together, and the company makes the changes, and my wife and I bought in, we actually put money directly into the company to keep it operating, we’ll make the equity investment. The vendors took a discount on their existing debt, and we agreed to work with them in the future, and by making the vendor debt get restructured and the bank debt and the company making changes, and the equity investment from my wife and myself, that we were able to keep the doors open and buy an option to see if the company could make it, and five years later, it’s making it, it’s back on it’s feet, and growing and thriving, so it was a difficult time. Very different from Coinstar. Coinstar was all about hiring and growth and new money, you know, a phenomenally strong business model. And you know, a 35 percent EBITDA margin. Pretty nice margins, you don’t see those in retail.

Betsy: What I think is interesting about your story is that you’ve seen two incredibly different businesses, one is obviously smaller, local, family run for years.

Jens: Don’t have to travel much, if at all.

Betsy: Right, exactly, and then, a multi-million dollar public company. When young entrepreneurs come to you for advice, what kind of nuggets do you give them?

Jens: The general answer depends on who they are and what they want to do. In general, I’m really encouraging of what I call the entrepreneurial lifestyle, and I guess I tell people that if you want to go down this path, it’s not a job, it really is a lifestyle. And it’s the freedom to work 7 days a week, 24 hours a day, there will be higher highs you have never experienced in your professional career, and potentially lower lows, but at the end of the day it’s worth it and the interesting thing to me or the exciting thing to me about running companies or being entrepreneurs, you get to think about something interesting, you get to go do it and figure out if it’s going to work, you get to adjust and come navigate the world and the market out there. So I’m encouraging of people in general, I try to give them candid feedback on their plan and make sure they’ve down their work and going back to some of the things we talked about earlier, about how good is their business plan, have they done monthly cash flows, have they been in the customer research and making sure they know what they are getting in to. And then just talk to them a lot and then try and understand where their heads at, and if I can offer some tips, that’s great, I talked to so many people who were helpful to me, in terms of getting started who gave me advice, if I can kind of pass on some of that knowledge, I’m happy to do it.

Betsy: Right, that’s great. Well, Jens, it has been so fantastic to have you on the show. I can not tell you how much I appreciate it.

Jens: I enjoyed it.