Justin Stanford: 4Di Group’s Risk-taking, Convention-bucking Lunatic

Justin Stanford: 4Di Group’s Risk-taking, Convention-bucking Lunatic

SHARE

Vital Stats:

Picture this. It’s the early 2000s, and Justin Stanford, known for his academic record, has decided he wants to drop out of school.

 

He’s in grade 11, and he’s terrified the tech wave will pass him by. He’s been following the Silicon Valley dot com boom (unusual for a kid raised on a fruit farm an hour outside of Cape Town), and he’s read about the young entrepreneurs who have sold Hotmail to Microsoft for a small fortune.

Related: Billionaire Buffett’s 2-List Success Recipe

He’s reading his future in the stars – via Alta Vista – and he knows it doesn’t start with him stuck in a classroom.

“I wanted to be a tech entrepreneur and I wanted to do it now,” he says. “I was obsessed with the idea and lost all interest in school. I went from the top to the bottom of the class, and everyone was worried about me. But I was determined.”

So what does he do? He does what any great entrepreneur worth his salt does. He negotiates. “I started with my dad,” he says. “I needed to get him on board first.” It took a while, but Stanford managed to convert his dad to his way of thinking. This solved nothing. “I was 17, I didn’t have a car – and couldn’t drive even if I did – I had no money, and no access to the Internet, which is what I really needed.

 

Entrepreneur-Newsletters
Entrepreneur’s daily tips & insights delivered direct to your inbox.

“I couldn’t launch my dreams from the farm, but I also wasn’t ready to move to Cape Town on my own.”

Enter his second round of negotiations with the principal of the college he’d just convinced his dad to let him drop out of. “I managed to convince him to let me stay on as a boarder, with a small office and Internet access. They moved me around wherever they had a small space for me, and in return I helped out the IT department.

For the next year, Stanford was free to pursue his own curriculum, which focused largely on furthering his coding skills, researching on the net and finding out as much as he could about Internet security.

Justin-Stanford_Entrepreneur-Profiles_Success-stories

Selling the dream

But let’s take a step back. It would be simplistic to think that Stanford woke up at age 17 wanting to completely disrupt his life. Like all game changers, it was a mix of attitude and circumstance that brought him to that point.

“From an early age, my path was preset,” he explains. “Like the Stanfords before me, I was enrolled in Bishops from the day I was born. I’d go to school, then university, then I’d establish a career. My mom wanted the best for us, and she pushed us to excel in academics. I had huge support from my family, which really shaped me when I was younger. But we weren’t at all spoilt, which meant anything I wanted I had to work for.”

These early lessons taught Stanford the value of delayed gratification and long-term investing, which he believes is essential in business. “I coveted a model airplane, but it cost R2 000. It took two years of painting fences and selling apple juice at school that I’d bought from my dad to buy that plane. Anything worth having is worth working for.”

Young Stanford’s first big move away from his preordained path was refusing to go to Bishops.

“I was preparing myself for high school when I caught wind of a proposed new school in Somerset West that would be fresh and forward looking. I was convinced the Internet was the wave of the future, and I wanted to be a part of it. I managed to get my parents on board.

“We eventually helped build the school with a small group of dedicated parents. It was a big risk – I gave up my spot at Bishops without even knowing if the college would be ready in time, but by then I’d learnt that some risks are worth it.”

When Stanford started his grade 8 year at Somerset College, there were 65 students, but the school had access to the Internet, and a tech focus. The young entrepreneur-in-the-making was in heaven. He also concedes this was the start of his downward slide into becoming a mad, risk-taking, convention-bucking lunatic.

And then tragedy struck. When the world changes it happens in snapshots. “I woke up with my head between my knees. The only two people who could move were me and my dad. I needed to get out of the car and find my mom’s bag, because that had the family cellphone, and we needed to call for help.”

The whole family was travelling on a back gravel road in the family SUV when the accident happened. Stanford was in grade 9. His younger sister died instantly. His mom passed away four months later after suffering paralysis from broken vertebrae. Stanford was left with a dad and a younger brother, and things would never be the same again.

“We were all changed, but in different ways. My mom had always been a driving force in my life. She pushed us to achieve great things. But naturally, this was through a more conventional lense. I was 14 and I started questioning everything. When you’re young and you have a strong, supportive family, the world is a safe and certain place. Sure, there are constraints, rules and regulations, but you don’t really question them.”

Justin-Stanford-on-Venture-funding_Entrepreneur-Profiles_Success-stories

 A life extraordinary

“The accident changed my perception of the world. It ripped up the rule book for me. Everything around me suddenly felt like a man-made construct. I started questioning what was real and what wasn’t.

“I looked at my life and knew I had to make a decision: Would I be a victim, or a survivor? I wanted to make something of my life. It marked a turning point where I started bucking convention. I wasn’t going to follow the path my mom had planned, but I would make her proud. I wanted to do awesome stuff and lead an extraordinary life.”

Fast forward a few years and Stanford’s a high-school dropout moving to Cape Town. His dad has bought him a Tazz, and he has R1 000 to his name. His dad has also arranged for him to live with family friends, supported by Erik van Vlaanderen, while he found his feet.

“I’m sure that all he asked of Erik was to help me fall softly,” says Stanford. “I think everyone thought I’d get my entrepreneurial dreams out of my system and return to the path.

“But I had plans. I was convinced that everything would eventually happen through the Internet. I aspired to be an Internet millionaire, I didn’t want to work for someone else, and I had patience. I also had my ‘big idea’: If the Internet was going to be huge, as I believed it would, then it would need to be secured. So I focused on Internet security.”

Things quickly came together. Van Vlaanderen didn’t just help Stanford with somewhere to stay, he also arranged for him to work out of his brother’s garage, and he gave him R20 000 in seed funding.

“It was a huge amount of money to me and I knew I had to make it last, so I used it to cover my meagre living expenses while I tried to build my business. But it was basically a disaster!”

Lessons learnt from mistakes

Like countless entrepreneurs before him, Stanford quickly learnt the difference between a great idea and a viable business model. “I did everything wrong. Everything failed, I battled for three years!”

Stanford’s first idea was to sell network hacking to companies. “It was an incredibly hard sell. First, it was very early. Yes, companies were starting to rely on the Internet, but security wasn’t yet a top priority in South Africa. Plus, I was 18. No one cared what I had to say. Second, I was selling time. It was a service-based model, and that’s incredibly hard to scale.”

Just scraping by, Stanford refused to accept failure. “All of my pride was staked on this. My mates were all studying and partying, supported by their parents. I was barely making ends meet, but I wasn’t going to let that stop me. What I was doing wasn’t working, and I had to find something that would.”

So, he evaluated his business model critically. His three biggest detractors were his age, the product fit and state of the market, and his unscalable, hard to monetise service-based model.

“Once I realised what my problems were, I could start fixing them. First, I needed a product that was easily scalable, something based on IP. Software was the obvious answer. I then needed to craft a façade that elevated me from just a kid in a garage.”

Fake it ‘til you make it

It was the start of what Stanford calls ‘faking it until you make it’. He’d developed code for tools that helped his service model. Now he wanted to develop an entirely Internet based company. “I needed to create a website that clients could interact with, without seeing me.”

During this time he came across a small Slovak Internet security software developer, ESET. “I was doing research for my only client, testing security tools for them, and I came across this product. The user interface was bad, but the tech was phenomenal. It outperformed all established norms.

“I knew there was huge potential, and so I contacted them. Without mentioning that I was alone in a garage, I told them I was an Internet security firm in South Africa, and that I was really impressed with their tech. With some tweaks, I thought it could be a great fit for our market.

“They were a small company as well, and had someone living out of a car trying to get a foothold in the US. We weren’t a priority market for them, but they listened to my ideas. I wrote a business plan for them centred on the idea of an Internet-based business model and proposed that the product only be downloadable.

“Many in South Africa thought this was mad. We didn’t have the infrastructure to support downloadable software here. But we planned to use resellers to reach the market, who would have access to better-than-average Internet connections, and ESET was already thinking along similar lines.

“They gave me sole rights for sub-Saharan Africa, and I started coding an online platform that made it simple for resellers to login, download and instal the product for clients.”

Stanford quickly realised he couldn’t do it alone. “I went to Erik and asked him to join me. I needed more funds to get the business off the ground, and I knew I had a great platform with an excellent product that would sell itself if people tried it, but what I really needed was a business partner who knew what I didn’t. After three years of going it alone, I was aware of my gaps. I was into technology, I had a vision, drive and ideas, but Erik had the wisdom and experience that I lacked. He was older, had an accounting background, had been a senior partner in practice and had held CEO positions. He was now an entrepreneur running a successful fruit export business. We complemented each other. Convincing him to come on board made a huge difference, even though at the beginning he wasn’t full-time.”

Related: Loaning Start-Up Cash to Your Family Entrepreneur Makes You a Credit Provider

Despite additional seed funding from van Vlaanderen, the business still needed to operate as lean as possible. “We needed to get creative. We had great products and a simple-to-use web platform for resellers and customers, but they needed to know about our products first. We offered a month’s free product trial, and if I could get people to try it, I knew they’d buy it. But how to get them to test it?

“I had a friend who had started a marketing agency. We had no budget, but we worked out that we could use PR, which was very low cost but could gain wide exposure. I wrote compelling press releases, and he got them published. A lot of people were experiencing virus outbreaks, so we tapped into the conversation of Internet security. We offered pragmatic explanations in laymen’s terms. We made ourselves available at short notice, and soon I started getting calls. I slipped our web address into every conversation. We didn’t do a hard sell; rather we tried to add real value.

“We also made things as simple as possible for the resellers. They could sign up online, activate a licence and immediately download the product. We would only invoice them at the end of the month. It was a risk, and it meant that we spent a lot of time collecting on bills, but slowly the product started gaining traction.

“The fact that it needed to be downloaded was a problem, but, I didn’t have a warehouse, and I couldn’t produce discs and packaging. After a slow start, once we started growing, it happened in leaps and bounds.”

By this stage, Stanford was also able to hire an employee, Carey van Vlaanderen, who initially interned for free, and is now the CEO of ESET Southern Africa. They had a desk and a phone line, and a game plan to look much bigger than they actually were.

“We had a decent website, and all of our business was online. When we got a call, we would put the person on hold and put them through to the ‘department’ they wanted, which was really just me handing the phone to Carey.”

As the business scaled, they were able to afford office space, and van Vlaanderen joined the business full-time.

“Today we’re far from ESET’s biggest market, but our early successes provided some insights for them. They invited us to share our stories, tech and ideas with them, and we sit on on their advisory council. It’s a great relationship.”

The business has maintained its lean structure too. “We’re almost paperless. Everything is done online. 90% of the work is automated by systems. Our margins are high, and within a year we were profitable.

“We’ve had double-digit growth per annum ever since, which proves once you have the right product, a way of getting it to market and a service model that supports your offering, you can grow a profitable business.”

Justin-Stanford-of-4Di-Group_Entrepreneur-Profile_Success-stories

Lessons for Growth

1. Never take shortcuts

We’ve always believed in playing the long game. There are no short-cuts in business, at least not if you want to build a long-term, sustainable and successful business. We bend over backwards for our resellers and our customers. Take the time to hear what they’re saying, solve their problems, and go that extra mile to delight them. In the long run, you’ll reap the rewards.

2. Always trade on integrity

We never compromised our integrity, even if it would have meant quicker, easier growth. We kept our eye on the long-term rewards, always putting our customers and partners first.

3. Understand the value of a team

Erik and I joining forces was the single best decision this business has made. We have different skill sets, we complement each other and we believe in a philosophy of partnership. I really believe that all great businesses are built around excellent people and relationships. You’ll never have everything your business needs. Don’t let ego get in the way. Find great partners.

4. Hire for culture fit

There are a lot of great people out there who are very good at what they do. That doesn’t mean they’re the best fit for your organisation. We always hire based on the right cultural fit. Sometimes, we hire someone because we see their potential, but we don’t necessarily have a position open for them.

We’ll bring them in, give them time to get a feel for the business, and then they’ll find what they’re going to do. Skills can be taught, but attitude is engrained. We believe in company culture and culture fit, and highly capable people who get things done. We remunerate well, and leave them to get on with their jobs.

5. Know when it’s time to fire yourself as CEO

A big thing I ultimately did was essentially firing myself as CEO. I love start-ups, that’s my passion. I love building new things. What I don’t enjoy is admin, and like it or not, admin and diligent management is what makes businesses grow and remain sustainable.

I needed to let go of ESET SA’s daily management in order for it to continue its growth trajectory, and that also freed me up to continue doing what I love, which is product development, starting up new ideas, and helping other start-ups through 4Di Capital, our VC firm.

From Garage to Global

Today, Justin Stanford’s main focus is on 4Di Capital, his seed funding VC firm. The name harks back to the first iteration of his business operating from a garage.

“I’d called it 4D Digital Security. It was just a play on 3D, like a further advancement on three-dimensional. Once we pivoted the business into selling ESET products, we changed the name to ESET Southern Africa because we thought it gave the business more credibility.

“Once ESET was running smoothly and growing into the six, seven and eight figures however, it was time for me to start looking at what I wanted to do next, and so we created the 4D Innovations Group (or 4Di Group), of which ESET was just one company.”

What was Stanford’s next move? “I wanted to create a Silicon Valley in South Africa, a tech start-up hub.” As Stanford’s success grew, he started getting more attention, particularly from young, hopeful entrepreneurs. “I was still in my mid-20s, and was proving that you could be a young, successful business owner even without a varsity education. The idea started gaining momentum, and people were coming to me wanting assistance with ideas, funding, or just general advice.”

By this stage, Stanford had enough money and stability that he could raise his head out of his own business and really look at the state of start-ups in South Africa. “I was also gaining a profile, and it didn’t take me long to realise what I wanted to do with it.”

Never one to shy away from big, audacious goals, Stanford teamed up with another young, local tech entrepreneur who had moved to Silicon Valley, Vinny Lingham. Together, they started Silicon Cape, an organisation reliant on industry involvement and geared towards creating a vibrant start-up community in South Africa that brings various investors together as well.

“By that stage I’d spent enough time in San Francisco to know that we have something special here too, but we were lacking a collaborative ecosystem. All the ingredients were right, we just needed to create a supportive community that works together, and we needed to have a Silicon Valley style seed funding engine to support local entrepreneurs.”

Silicon Cape is now an established organisation, and Stanford has turned his attention to the problem of early stage investing.

“I wanted to start a progressive venture capital fund. I needed an investor to prove that we can foster a vibrant VC industry in South Africa. We have great tech start-ups with amazing potential  — what they need is assistance.” That investor was Johann Rupert. A supporter of Somerset College, Rupert was aware of Stanford and his antics — enough to grant him a meeting at least.

“I was completely star struck. I couldn’t believe I got the meeting. He was a business idol.” As it turned out, Rupert, who is passionate about South Africa and a huge supporter of young entrepreneurs and the power of tech, was both willing and able to fund Stanford’s next big dream. This led to the eventual launch of 4Di Capital.

Laurie Olivier, a partner on the 4Di Capital team, opened the door to the fund’s next investor, the Oppenheimer family.

“Right now we all know this is still a big experiment. It will take ten years before we either prove it can work in South Africa, or if everyone who thinks we’re mad is proved right. But, we have ten businesses on board, and we’re helping them grow. They’re able to assist each other as well, and share their insights and lessons. Entrepreneurship can be incredibly lonely, and so this alone is already valuable assistance for them.”

While start-ups are an asset class that is almost impossible to raise funds for, Stanford has stuck to his belief that great partnerships go a long way to giving a business as much credibility and stability as possible.

Aside from the big names of Rupert and Oppenheimer backing his play, 4Di Capital has five partners on the team, including himself and Erik van Vlaanderen.

“We all bring something unique to the table, and we’re all determined to make this work.”

Of the partners, Olivier is an ex-pat living in the US, which is a powerful tool in 4Di’s toolbox, as it gives the VC firm a US office, and a link to the hub of VC funding and exits. Together, they’re a formidable team, and one investors are willing to talk to. At the time of going to print, Stanford had just closed a deal with the fund’s third investor, Convergence Partners.

Nadine Todd
Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.