Nathan Lustig

Note: I wrote this post back in May 2010 for a guest post on a large tech blog, but it never got used.  I found it today while going through my inbox and decided it was too good to not post.  This is my entrepreneurial journey from 2004 until May 2010.

As I made my way from Milwaukee, WI to Madison, WI for my freshman year of college in fall 2004, I had no idea what I wanted to do with my life.  I’d know for awhile that I liked working for myself: I’d been a soccer referee since I was 12, which allowed me to make my own hours and make more money than any 12 year old should be able to earn.  I’d been fairly bored with high school because we learned boring theories instead of practical ideas that would help me later in life.  My biggest take away from high school was “more practice, less theory.”

All of these thoughts took a backseat in my 18 year old mind when I received a letter from the University of Wisconsin notifying me that I’d lost the student football ticket lottery.  I was devastated.

After moving in, I’d been thinking about how to find tickets, but I didn’t have to look very far.  One of my friends invited me to a party my first night at college.  I was about ready to call it a night and walk home when I heard a guy screaming into his cell phone.  He hung up and was so mad that he slammed his phone on the ground, breaking it.  He got even angrier because he said he didn’t have the money to get a new cell phone.

Something in my brain just clicked and I said, “hey, do you have football tickets?”  He looked at me really strangely, but said he did.  I responded, “well I don’t have them, but I’d buy you a new phone for your tickets.”  I wasn’t really expecting anything, other than maybe some choice words, but to my surprise, he got excited.   The next day, I tracked the broken cell phone guy down via a friend in the frat, bought him the money for the phone and made the exchange.

I was pretty excited.  It only took me one night to get my football tickets.  All was right in the world.  I told my story to some of my new friends and quickly realized that there were a ton of kids who were in my same predicament.  I agreed to help them find tickets.  It pays to be in the right place at the right time.

Enter Exchangehut.  I first remember seeing flyers and spray paint stencils for the site a week into my freshman year.  I checked it out, signed up and was user number 1117.  Exchangehut was a ticket exchange that worked like the stock market.  Buyers could input a bid price and sellers could put in an ask price, creating the market.  When the prices matched up, a sale happened and both parties were contacted.  I used the site to help 4-5 friends buy tickets and quickly saw how useful the site was.

As the year went on, I became one of the more active users, I realized that the site had limitations and thought about creating a competitor.  I wrote up a simple business plan, but got discouraged because I was having trouble finding a programmer to write the new site.  I put the project on the back burner and went on with my summer.

I was in the right place at the right time again a month later.  The owner of Exchangehut was selling the site via an auction because he was graduating.  I quickly shot an email back, did my research and put in a bid.  I excitedly talked with my friends about how I was buying a business and to my surprise, one of my best friends from high school said he was too.  I said “what business” and we both said “exchangehut” at the same time.  He was a computer engineering major and we decided to merge our bids.  A month later, we were the proud owners of a 2000 person tickets and textbooks website at age 19.

We ran the site until 2008, growing the site to 150k users across 8 college campuses.  We learned a ton and needless to say, I was hooked.  I loved coming up with ideas for the site, promoting the brand and working my own hours.  I was making more money each week working on average 8 hours per week than my roommates were making bartending and waiting tables full time.  I loved the freedom that came with being able to work from anywhere.  I got to travel places and meet interesting, creative people.  I enjoyed meeting people who though “how can we fix a problem” not “why can’t we.” We sold the business to our ad network in summer 2008, but I knew I was going to start a new business.  This isn’t to say it was easy.  We put in long hours, answered angry customer emails and calls and continued to go to class.

Like many entrepreneurs I know, I keep a business idea list.  I had over 200 ideas on my list and after selling, worked on cutting them down to 10 that I thought were promising and would be fun to work on.  All that stopped when three professors I had gotten to know independently told me that I had to meet a student named Jesse Davis.  At the same time, two of my friends said that Jesse was working on something cool and needed a partner.

I met Jesse in one of the libraries on campus and he pitched me his idea.  Jesse’s pitch went something like this:

“I just read Thomas Friedman’s The World is Flat and couldn’t get through it when I got to US Marine Justin Ellsworth’s story.  He was killed in action in Iraq and his family wanted access to his Yahoo! email account.  Yahoo said no.

After a long court battle, a judge ordered Yahoo! to turn over the contents of his email accounts to his parents.   It shouldn’t take months to gain access to a deceased person’s email account.  Also, what if I don’t want my parents looking into my Facebook account or other sites I might have? Friedman ends the passage by saying “someone sort this out.”  Let’s create a system for people to store their last wishes for their digital assets, which are any online account or file on their computer, and let’s allow them to input their passwords so that their survivors have access.

I immediately thought back to ExchangeHut.  In 2005, we hired a programmer to help us make improvements with the site and at one point, I realized that our programmer has all of the usernames and passwords to the server, database, credit card processing, affiliate programs and everything else that was necessary to run the site.   Like programmers like to do, he used a random password generator, so there would be no way we’d be able to guess his passwords if he were to get hit by the proverbial bus.  We ended up having our programmer write down every password on a piece of paper and I stored it in our safe deposit box, just in case.  Jesse’s idea would have solved this problem.

I was looking for a project, Jesse was looking for a cofounder with some experience and we hit it off.  Two months later, we founded Entrustet.

I was sold on Entrustet because we had a chance to create a solution a real life problem.  The death of a loved one is an incredibly stressful time and we thought we could help give people peace of mind that their digital assets would be dealt with according to their wishes, and that survivors wouldn’t have the burden of having to guess what the deceased person wanted done with their online accounts.

We’ve been working on Entrustet since November of 2008 and launched in March 2010.  In our first year, we spent under $20k starting the business.  We were able to spend so little because we hustled and were located in Madison.  We’ve stayed in Madison, even though we’ve had opportunities to move to Silicon Valley, New York, Boston or Austin.  Being located in the Midwest has given us some advantages that are often overlooked by people on the coasts.

It’s incredibly cheap to live and work in Madison.  Our office is located across the street from the state capital and we pay $200 per month.  I pay $400 per month to live in a nice apartment four blocks from the office.  On the coasts, we’d have had to pay 5-10x more.  While the talent pool is not as deep, we’ve found talented employees who cost a fraction of what they would on the coasts.

Madison is small enough that we’re able to get in contact with anyone we want to relatively easily and Madison has groups like MERLIN Mentors that help new startups by pairing founders with successful entrepreneurs who server as in informal board of advisers. Everyone in our company walks to work and we’ve become active in the startup community by starting Capital Entrepreneurs, a founders group with over 60 tech companies in the Madison area.

I’m a huge believer is pursing your passion and starting starups has allowed me to pursue mine.