Passionate mentor and supporter of Alberta’s business community, lifelong entrepreneur James Keirstead looks back on a career of lessons learned and what tech’s exponential growth means for the future.
I’m keen to know about your experience as an entrepreneur. Where did it all begin?
Well, I’ve been an entrepreneur most of my life. My twin brother and I grew up in a single parent family, and we spent most of our childhood figuring out ways to make money because my mom could really only get enough for basic survival. We couldn’t have anything extra for ourselves unless we figured out a way to pay for it. I started off delivering papers when I was nine years old, washing dishes when I was 13, cutting grass, shovelling snow — whatever we could do.
I started my first business in college at a College Pro painting franchise, and from there I had a number of failed business attempts. Then my brother and I ended up getting a job with a hot tub company, and finally opened up a hot tub store in Richmond, BC. That was a really interesting experience — which ultimately ended up in failure — but I learned a ton.
For example, I got exposed to international business because, through a Chinese businessman, I ended up going to China and doing a feasibility study to set up a Whirlpool spas factory over there, which we didn’t end up doing in the end. But my brother set up an office in China and started selling North American products into China. This was in 1995, before Hong Kong was handed back to China. We’ve always had these bold ideas that sometimes worked, and sometimes didn’t.
In 1997, my old business partners contacted me and asked if I wanted to go in with them to buy Blue Falls Manufacturing. So we bought that company, rebranded under Arctic Spas and started on a path to growth. We grew that business from 900 spas here in Alberta — which were mostly sold by my partner stores — to more than 10,000 spas a year in 30 countries. We did that in seven years. And then, of course, we kept going. That business today is still the largest manufacturer of portable spas in Canada.
That is phenomenal growth. Tell me a bit about the strategy.
We grew through a number of ways. One was that we were a real marketing and sales machine. But we were also an innovative leader. We had a great way of looking at the industry and solving problems that customers had with products. Something a lot of people didn’t know about Arctic is that we had vertically integrated quite a bit of our supply chain. Because of our background in China, we set up our first cut and sew operation in 2001. In 2003, we had our first injection molding factory. A year later, we set up a factory making games from furniture — pool tables, bar furniture, etc. — all to be sold through our dealer network. And in 2004, we also got into LED lighting for the pool and spa industry and, through a joint venture, that business became one of the industry leaders for the pool and spa industry. We eventually sold to our Chinese partner in 2011.
What a story! That’s a huge accomplishment.
It was, and that’s also how I ended up starting Levven. I bought a small contract manufacturer in Edmonton to make our own control systems so that we could develop new technology in the spa industry. We were the first guys to connect hot tubs to the internet through an app — with a whole back end portal and everything. We bought the manufacturer to make controls, and then I saw the opportunity in the home automation space, which is growing massively.
And that’s how Levven began. It was originally going to be just a vertical integration vendor to my main business. But when I saw the opportunity in home automation and really understood that we were on to something, I reached out to my partners at Arctic and asked to be bought out of the business so I could focus my investment and energy in going after this.
You mentioned that you started working at an early age out of necessity. At what point did it shift from a necessity to a passion for being an entrepreneur and creating a business?
I’d say it actually permeated throughout my working career, because I always took on jobs where I could impact my income by being better or more efficient at what I was doing. So while I was in college, I also worked as a waiter/bartender, because if you’re really good at it, you can make a lot of money. I think I always sort of thought that way, because I did notice that most people go through their lives doing just enough. And that wasn’t me.
“I think that’s the other common denominator among entrepreneurs, is that despite early failures, you don’t give up. You’ve learned that there’s a way to do it better.”
I think if you look for a common thread among entrepreneurs, you’d probably find that that’s not not how they operate, either. They’re always looking for new ways of trying to change things, to make it better and quicker and faster and easier and make more money at it. It’s always been in my make-up. In my first few forays — possibly due to my youth or, lack of capital — there’s a number of reasons that the early forays didn’t work out exactly as planned. But, as you know, that’s how entrepreneurs get their MBAs. MBAs of life.
But it wasn’t a deterrent. I think that’s the other common denominator among entrepreneurs, is that despite early failures, you don’t give up. You’ve learned that there’s a way to do it better. You know, I had been in judo since the age of nine, and I’ve been competitive my whole life. It was natural for me to want to compete and win.
The focus and the discipline of judo — I imagine that would’ve helped your mindset?
Yeah, and the tenacity. You hit the nail on the head. My brother, who teaches judo to this day, said to me, “You try to teach these kids that it’s about repetition, so that it becomes muscle memory. So when your opponent tweaks off balance, your body reacts immediately — you don’t even have to think about it.” And I think the same thing happens with entrepreneurs. We have to exercise and fail and try again. And from that develops an intuition, because of a mental muscle memory, for lack of a better term.
While we’re on the topic of this evolution — from hot tubs into home automation — was there another technology that you saw sprouting up, or a trend, that inspired you to go down the tech path?
Here’s the funny thing: I didn’t really see myself as a tech company. And what centers down that path wasn’t really technology, it was solving a problem. Now, technology became the mechanism, the conduit that allowed us to solve the problem. But it was really a builder who came to us and said, “Hey, I’ve got this problem. I’m building walls in a factory and I want to be able to not have to run wire in those walls so that I can seal the drywall off in the factory.” They were already insulating the walls, but they had to have the walls left open because of inspection requirements. They wanted to eliminate the wire from the switch leg to the light.
We literally saw it almost immediately — that a light switch really is just a device that is doing two jobs in one. We have the user interface to toggle (the switch) that we operate every day. And then you have the actual power break, the leg that brings power in the back. We separated those, which we could do without needing it to be wired. That’s where it all started.
A light bulb moment.
[laughs] Yeah. And then we started investigating and thought, wow, all this IP we’d been developing in my previous business would actually solve a lot of these issues that home automation was having. And we saw that, here’s a market where everybody wants it, but people can’t afford it. The technology that was out there was very centralized, very expensive. A new and different way of looking at a decentralized automation system that connected together, like building blocks, could drive the cost down to the point where it could be available in every home.
That must have been an exciting moment, or I suppose, collection of moments when you made that discovery and saw a new opportunity.
Yeah, and it’s kind of interesting, how you say moment — or a series of moments — because it has been a series of knowing we were onto something. But it took a long time for us to validate the value proposition by taking a look at all the cost structure that was truly embedded in wiring switches into walls. That took years to to validate. We had to literally work with builders and electrical contractors to understand all the cost implications of a wire of running those switch boxes into the house. There are materials and labour, which are arguably the two biggest things, but there’s all these downstream labour savings.
Over the last two years, we’ve been able to validate that we can match a regular one-wired switch price and deliver an Internet of Things product in the entire home, which is revolutionary in that space.
It sounds like you had an extensive network of people involved in the R&D and experiment process. Did you encounter much skepticism or resistance along the way, needing to convince people that the technology could work and solve so many problems?
It’s been massively challenging experience. We have literally had obstacles all the way along. “No, I don’t want to change what I’m doing because we’ve been wiring switches this way for 100 years.”
Most electrical contractors are operators, and a lot of them think they’re in the pipe and wire business because they’re technicians and they grew up on the tools. And if they think they’re in the pipe and wire business and you come along and tell them you’re going to take wire out of the walls, they’re thinking you’re there to take money from their family. But the guys that understand that they’re in the business of managed skilled labour actually realize that, hey, we can increase their capacity. And we’ve proven that we can actually increase capacity by 25-30%.
“Our situation, globally, is that we can only adapt linearly, and technology is growing exponentially.”
But one of the biggest challenges is that our sandbox is limited because of code authority. They can’t extend regulations where they have never considered a wireless alternative to what is done today. Therefore, they don’t have anything in the code body to account for that.
Our situation, globally, is that we can only adapt linearly, and technology is growing exponentially. We’ve now hit this inflection point where the exponential growth of technology is actually outstripping the capacity of our infrastructure. It’s one of the biggest problems that technology will face in the coming decade. We’re not the only ones, it’s going to happen everywhere. You’re going to see AI go through it, because they’re going to want to figure out how to protect it, protect people; you’re going to see it in robotics — you’re going to see it right across the board. It’s going to hit technology all over the place, because the codes that run our countries and society by are old and archaic, and the mechanisms to change them are not quick enough.
There’s no question, it’s an interesting time. And A100 members like yourself have a unique vantage point. Based on your experience with the group so far, how do you see the A100 impacting Alberta’s tech startups?
The main reason for joining the A100 was that I wanted to connect with the technology community, because I felt like an outsider in a new space. And the A100 was easily the best place for me to go do that. But what I’ve learned since being a member is that we have a great opportunity to really impact the up and coming entrepreneurs through mentorship and through sharing our stories of our businesses.
“To me, that’s what the A100 stands for. It’s about innovative concepts and design in industries that sometimes aren’t directly technology focused.”
I’ve been saying this since day one, that companies need to be innovative to be competitive in their market space. And that, to me, is also what the A100 stands for. It’s about innovative concepts and design in industries that sometimes aren’t directly technology focused. I think that’s where we have a great opportunity, because people like me and many of the other A100 members have used technology to solve real problems and created businesses out of it. Those stories need to be shared with startups, and mentorship needs to happen for startups to get the knowledge that they need, and the experience and confidence. And I think the A100 can help do that.
That’s valuable insight coming directly from your own experience as a startup. Now that you’ve had some wins, what have you learned from your successes?
Probably the biggest lesson is to think big, think global. We have a tendency in Canada to think that we can’t compete internationally. But we disproved that with Arctic Spas. Canadians often think a little too myopic. We think about our own backyard. But our backyard is tiny. It’s a postage stamp. And we need to be thinking so much bigger. Canada has an amazing brand globally, but we don’t take advantage of it. So I would say, go and do it. Don’t be afraid.
I’ll give you an example: when we decided we were going to expand to Europe, I flew over with $15,000 in my pocket. I had four containers on the water, and I went to go set up a warehouse in the UK. And I knew nothing about the market. I didn’t know anything at all about it! I didn’t even know how to lease a building in the UK, which I found out was not so easy. That was in 1999, and I literally had to convince a farmer to let me store my containers in his yard. Then they became our first spa dealer in the UK. And six months later we had a warehouse, and our warehouse is still there today. If it wasn’t for that trip, we probably we wouldn’t be the number one brand in the UK. And we wouldn’t have entered Scandinavia, Germany, France, Spain, Russia, any of those countries.
Looking back, what would you tell your yourself in 1999? Would you do it the same way all over again?
At that age, I would have done it. Too stupid to know better. You know, as you get older you think, oh, we have to think before we shoot, because we don’t have the energy to put up with as much adversity as we do when we’re young. But sometimes, we get paralyzed by the analysis of what comes next. Sometimes you just have to say, you know what, I think we know enough. Let’s give it a go and take action.
“People often give up just when they’re on the cusp of success because they feel it’s too hard.”
The third thing I’ve learned from my successes is to keep doing it until you succeed. People often give up just when they’re on the cusp of success because they feel it’s too hard.
That’s an interesting point. But what’s the metric where you say, okay, you gotta keep going, you’re almost there. Or, no, you gave it a good fight, it’s time to change course?
Well, it starts with listening to your customer. If you’re hearing from your customer, “I love what you’re doing, but it just if it could just do this, or if it was priced this, etc.” Those are great buying signals. Those are the pieces of information that help you as an entrepreneur decide, okay, is this opportunity, legitimate or not? Even if the first thing that comes out of their mouth is, “I don’t get it”, you might need to go back to the drawing board a lot quicker.
There are a lot of stats out there showing startups that can last longer than three years have a higher percentage chance of surviving. And so while I agree with fail quickly, it can mean different things. In some cases, it means to drop the idea entirely. In other cases it means, “Hey, maybe this market fit isn’t quite right. What about pivoting?” But it comes down to listening to your customer.
Since we’re talking about when to keep going when to quit, what have you learned from your failures, if any?
Well, there’s been a lot of those [laughs]. Probably the biggest lesson I’ve learned is, understand your financials and live your business for cash flow. My first business failed because I didn’t understand cash flow. So everything I do, every decision I make now, I look at the cash flow implication.
“The biggest lesson I’ve learned is, understand your financials and live your business for cash flow.”
The other thing I learned is that you need to fund yourself, and you need to have enough for as long as it’s really going to take — and it’s always going to take longer than you think. Someone said to me, “You’ve heard the rule of pi. Technology always takes 3.14 times as long and cost 3.14 times more money than you expect.” And I thought, damn, that’s right. So I would plan for that.
The other thing I’ve learned the most about my failures is that, looking back now especially, is the right people in the right seats mean just about everything. I’m a process guy, and I’d long believed that if you build the right processes, you can put lesser people in them and still achieve the outcome you’re looking for. I truly believed that. And I’ve been completely wrong. I’ve learned it with Levven. In this business, because we’re smaller, we have less money and we have fewer resources. If I don’t have a team full of A-players, it’s a problem. And we notice right away when someone isn’t the right fit.
Speaking of learning lessons, what book has had the greatest influence on you so far?
I would say, “Traction”. It’s a book written by a guy named Gino Whitman. He’s an entrepreneur who took over a struggling family business and realized he didn’t have any operational guidelines to run the business. I was really interested in the Rockefeller Habits, One Page Plan — that whole concept. Gino took elements of that and embedded some simple tools that any entrepreneur can use and created an operating system that an entrepreneur could easily take on and make their business more functional.
He’s written several books since then, all on the system — how to be a great boss, how to use simple tools to run your business more effectively, etc. It was far and away the most impactful book I’ve ever read. I buy it by the case and give it out to new entrepreneurs. I love it.