Aaron Klein: Interview XII – Real Leader Interviews

Regulars here have heard of Aaron Klein before. He has been an inspiration of late for a few things (the most visible of which has been a change on font on this blog).

Aaron and I met via Disqus at AVC.com a few months back and we’ve been in touch thanks to commenting on each other’s blogs since. Aaron is one of those full of energy and inspiration. He is the CEO of a start up, a Trustee at a college, leading charity projects to help educate kids in Ethiopia and most importantly, a husband and father of 2 wonderful kids Casey and himself brought home from South Korea and Ethiopia – 2 kids who have changed their lives. Oh, and he also has a wonderful daily blog.

In short, a great guy and someone I’ve been looking forward to meet for a long while. I am sure you will enjoy this interview..

About Aaron:

Aaron Klein is the co-founder and CEO of Riskalyze, a technology startup that is revolutionizing how we make risk/reward decisions with our investments.

He’s also been elected twice as a Sierra College Trustee, and advocates for adoption and ending the global orphan crisis as a co-founder of Hope Takes Root.

Most importantly, he’s a husband and a father who believes in Isaiah 1:17’s radical mandate for changing the world.

One of our goals with Real Leader interviews it to keep it to short 15 minute interview. With Aaron, that was simply impossible. It was a laughter fest from the first minute as he rolled out one funny comment after another.

Please note that the internet connection in the Sierra foothills (the beautiful area where Aaron lives) is not the most predictable – so the video is not the clearest at all times. Our champion editor has worked hard to make it seamless. Our apologies for any part that may not be all that clear!

Rohan: Hi Aaron! Would be great to hear your story. How did it all begin?

Aaron: I have a rather interesting background! I started working for my dad when I was 12. He had a wholesale distribution business for security equipment like automatic gates. I literally started with packing boxes. I wanted to work with my dad and he thought ‘what else can this 12 year old kid do anyway’! I was gradually learning though. I started doing inventory and then operations. Later, I got into marketing for his products. At one point, I had to do slow down on college work because his industry had taken a dive. Suddenly they needed all hands on deck and there was no time for anyone to leave. Especially an 18-year-old low paid college kid like me! That was some experience.

In 2000, one of my good friends, my dad and I decided we should start something new with the internet. I was very excited about it! I have been on the computer from 1994 and I got network in 1995 in my dad’s office. My dad would often ask me to shut it down because he had to send a fax! Coming back to 2000, we started off with a web-consulting group. Towards the end of 2001, dad’s industry was getting tougher to stick to. I was trying to sell the company to a bigger competitor at that time. And in December 2001 we did sell it!

It was a bunch of different and varied experiences for me! And so, by the time I was in my 20s, I had moved from packing boxes to selling a company. My dad started working for the company we’d sold his business to, while my friend and I worked with the web-consulting firm. We later figured out that real value was in building a product. So we sold the web consulting company in 2005 and launched a business operation software for wholesale distribution companies. Our first client was the one we sold my dad’s company to! We got funding from that contract because we built it to suit their needs.

We made a boatload of mistakes with that company! It was good to learn from the mistakes though. Our biggest mistake was that we did a sort of exclusive-for-that-industry product. So we made the best business operation software for them, but we could not sell it to anyone else! Nevertheless, we were doing quite well. We had established contacts.

It was starting to get tougher though. In 2005, I could not make any venture capitalist believe that small businesses were going to buy their software over the Internet. No one bought that idea! They said small businesses buy their software off the shelves and this is never going to work. We started wondering what we were going to do. We needed about 25 million dollars of capital in this project.

We raised the first million and I sunk way more of my money than fit my risk tolerance into that company. (This is going to be funny in just a moment!) We were doing okay but about 2 weeks before the deal was going to close, the lead investor expired. And we hit the wall at 90 miles/hour. It was a huge life lesson. I don’t want to go through that ever again.

I learned a lot about risk tolerance, that’s for sure! I am not involved in the old company now, but that software is still running today with a couple of clients.

Then, a financial services company came calling as they needed to build a product developing team. They had a great marketing team but needed the ability to build technology products. So I went to work with them for about 4 years. That was the first time I was working in financial services. I explored a lot of areas there. I think it is a very interesting industry. It’s both dynamic and static in its own way.

One of the things I saw there was the huge holes that exist for individual investors. There are probably 14000 stocks in the ETFC that you can invest in and 269 million web pages where you can get ideas for investing. On the flipside there are all kinds of places you can go to execute these investments. There is no shortage of ideas and no shortage of execution. An investing decision involves figuring out the execution.

There is this great technology that quantifies risk tolerance. An old friend of mine invented it. He has a PhD in complex computer systems. He started to invest his money and he saw the way financial services assess risk in portfolios and he felt it was total baloney! He decided to come up with his own way of doing it and patented it. We started off with that.

And that’s our company – it’s called Riskalyze and it’s going very well. It looks at the investments and finds the one that fits the user. It’s helping people understand investments better and take decisions better.

Rohan: It’s been very interesting so far. It would be great to hear about some of the defining moments in the journey so far?

Aaron: It sounds funny but I’ve had a 21-year-old career by the age of 33! (My dad clearly had no idea about child labor laws!) The business operations software experience was a big learning. There was a team working for me, there was money involved and it was a very painful experience. In the learning process, sometimes you cant avoid that.

However, I feel it’s my job as a CEO to make sure that we are always headed in the right direction; that we are not stuck on the wrong trajectory. That’s one of the biggest learnings. Assessing the trajectory you are on in a startup is quite important because running a start up is a bit like taking a leap off a cliff. And they don’t allow parachutes!

You have to figure it out and make sure you are aware!

Rohan: It would nice to hear about things you do apart from your work life. Your kids and the projects with Africa..

Aaron: My wife and I decided to adopt in 2006. My son Spencer was born in South Korea. We flew to Seoul and brought him home. We did that again in October 2008. Our daughter Emma was born in Ethiopia. We met her Christmas morning in 2009. We flew home with her on New Years Eve 2010!

They have changed our lives! It’s hard to explain. A lot of people meet us and go ‘Thank you for what you are doing for these kids’. I don’t really see it that way. These kids are bringing more richness into our lives than what we could ever do for them.

Adoption is really about finding families for kids and not the other way around!

Rohan: You had a two-day trip to the South of Ethiopia as well right?

Aaron: When we went to adopt, we didn’t really travel throughout the country and left with a limited view. It’s like going to Central London and thinking that’s all there is to the UK!

There are a lot of core issues behind the situation there. It has to do with poverty in the developing world and how a lot of aid has not reached where it has to go. One part of the world cannot adopt another part of the world’s kids. That is not really a solution to the issue. We have to go deeper than that.

We thought we should solve the problem by preventing kids from becoming orphans in the first place. It starts with food and education. If you can ensure this and make them self-sufficient, we can break the cycle of dependency and ultimately poverty.

I took another trip in September 2010 and travelled throughout the country. I walked into Adami Tulu, this tiny village of 3000 people and it hit me. The kids were there and at one point I played a video for them on my phone. About 80 kids just piled around and the sky closed in! It was amazing. There is a school in the nearby village of Ziway. We have invested there too.

The biggest industry that region of Ethiopia, is made up of 22 acres of greenhouses. And they supply roses for the entire country of Denmark! Remarkable right? So, outside these greenhouses there are people sitting and hoping that someone inside falls sick and leaves because, that way they get to work. There was very little hope in the area.

We have built a couple of classroom buildings there. It was amazing to see it all come together. Some more buildings are under construction now. We have launched a sponsor program for the kids at the school. $19 a month is giving a kid food and education. That feels amazing!

We want to start some self-sustaining business ventures to fund the operation of the school. The goal is that 50% of the school’s operating costs will be covered by the business ventures in 5 years. At that point we will be able to cut the cost of the sponsorship or redirect the funds to other places of need!

Rohan: What a great story! Could you sum up Riskalyze for us in a few words?

Aaron: Riskalyze is all about quantifying your investment decisions. Making your decisions should be captured into an equation. And really, half of this equation comes from the risk tolerance. So, it goes back into the Internet and finds the investments that fit you! If you go to Google to do this, you’ll find investments that were hot in the past and a bunch of ads from companies that ask you to pick them. These are not ideal.

When you go to the software and tell it that these are your ideas and this is your risk tolerance, it calculates an optimum portfolio that fits you!

Rohan: What are your words of advice for the leaders (and aspiring ones!) out there reading this?

Aaron: The most important lesson is that every moment counts! We have to be purposeful and very intentional. I don’t think people spend a lot of time thinking about the kind of life they want to have and about the things they want to do. We don’t spend nearly as much time building the structure and the systems to achieve that.

I have a good example on that. 12 hours ago, I received an email from you saying ‘Aaron, let’s chat directly on Skype. I don’t check emails for 24 hours on Saturday.’ You do that to help yourself achieve what you want to do and that’s a good example.

Build a routine that works for you! In my case, I work on my start up on the weekdays and often do a 6 hour day on Saturdays. That’s life! On Sunday morning, we go to church and on Sunday afternoon, we always do something as a family! I make sure that I do as much as I can on Saturdays so I can keep Sunday focused for family. That’s not going to work for everybody but it’s up to you to build systems that work for yourself. If you are intentional in how you plan your life, you are going to be a lot more successful!

My dad taught me a lot about business and about life. He and I are still fantastic friends and we get along great. He was always dedicated to his family. I learnt all this from him. I remember this song called ‘This moment’ which talks about living in the moment and not in the future. A lot of that thinking has led me to be more intentional about things..

It’s interviews like that make me thankful for the many who have worked hard to make this ‘Interview Real Leaders’ idea a reality. I had so much fun and have taken away an immense amount of positive energy going forward.

Thank you so much, Aaron for your time. As I’ve told you multiple times after our chat, I cannot wait to meet you – hopefully in California this year!

Over the last month, 3 of us have been working on getting these Real interviews out to you. This was the first one that was entirely a team effort. I did the interviewing, our talented iPad artist EB did the editing and talented artist and blogger Dhanya did the transcription. We hope to make steady incremental improvements to our efforts.

And we look forward to all your thoughts and feedback on what we could do better.

Happy Monday! And have a great week!