No one can ever argue that Canadian Entrepreneur and Hamilton Ticat owner, Bob Young, is a conformist. From co-founding Red Hat, a company that gives away its software, to changing the publishing industry or wearing red socks, Young just thinks differently. Young recently spoke to future entrepreneurs at the University of North Carolina’s MBA program.
Young initially felt that Red Hat, a Linux based company based out of Raleigh, NC, could compete against Microsoft and give the open source software away for free. “Certainly many people thought we were crazy,” the Hamilton native states. What we heard from our customers was that they wanted control to adapt the operating systems to their environment. It’s like a car manufacturer locking the hood of the car and monopolizing the opportunity to fix it or make changes. We let customers make those changes. That “crazy thinking” helped Red Hat become a multibillion dollar company.
As Red Hat grew to 500 employees, Young passed the leadership reins over, but stayed on the Red Hat Board. “I had never been in a 500 employee company let alone lead one. You have to know where your strengths lie, so I stepped down,” Young humbly stated.
At a later date, Young recalls being in a meeting with the VP of Human Resources, who discussed their hiring practices and the types of people who would become Red Hat employees. At that time, based on my previous experiences, I’m not sure they would have hired me, he said jokingly.
“One of the keys to being an entrepreneur is the ability to handle failure,” he stated.” I was a C student so I was used to some failure. I prefer to compete against A students, because they’re not used to failing and taking that level of risk. It’s important to be able to seek criticism and understand your strengths and weaknesses.”
While on the Red Hat Board, there came a time when he didn’t feel he was adding value, so it was time to begin a new venture, Lulu, presently one of the leaders in the self publishing market. “I tend to get bored after I understand about 60% of a topic, so that’s when I moved on to Lulu. That’s why it’s important to align yourself with people who fill those weaknesses, in my case, detail,” Young joked.
Young’s vision for Lulu came from his own personal experience of writing a book about founding Red Hat and receiving very little profit from the proceeds of the book. His company essentially turned the industry model upside down with the author getting between 80-90% of the profits and the publisher, the remainder.
This model also exposed the beauty of latent markets. Young talked about the early stages of eBay and that the estimated market size of the auctioning market was $2 billion dollars. Currently eBay does in the neighborhood of $60 billion revenue per year, which spoke to a much larger market who would auction items, given the chance.
That same latent market existed for Lulu as well. The estimated publishing market was $80 billion per year. But what if there was a way that made it easy for the common person to publish a book, poem or whatever they desired. That market would be a lot greater. Lulu’s success is leading to a public offering being filed in Canada looking to raise a reported $50 million.
Young comments about his earlier success with Red Hat. “That’s not bad for a company born out of an office in his wife’s sewing closet.” That may be a little different!