‘Shut up and build it!’ - Jim McKelvey, Square co-founder, on bringing ideas to life
Image credit: Jonathan Wilson
The origins of credit-card payment system Square and the pleasure to be derived from taking easy money from venture capitalists.
For a man who has helped democratise credit card payments for the less financially advantaged with Square - set up a decade ago with friend and Twitter co-founder Jack Dorsey - Jim McKelvey becomes most animated when discussing the fine art of glass-blowing.
It was glass-blowing that enabled McKelvey to make a living in the late 1980s and early 1990s - despite having no formal artistic qualifications - and it is a passion he still pursues today. Curving, swirling objets d’art in glass adorn his maker space in St Louis, including highly elaborate avant-garde ‘helter-skelter’ shapes that serve as the taps in the building washrooms.
It being the SolidWorks World 2019 conference at which he is speaking, McKelvey is cognisant of the fact that he is expected to stay vaguely on message vis-a-vis the importance of prototyping software and the egalitarian design freedom offered by a 3D system such as SolidWorks, so he likens the emerging individual glass-blowing scene that bloomed from the 1970s onwards to the mainframe computer scene of the 1960s and 1970s. How creative access in glass-blowing was walled-off until the 1960s and 1970s, much like mainframe computing involved huge machines behind glass partitions that only a select few people had access to.
Then, gradually, the scene began to change and certain previously prohibitively expensive pieces of equipment slowly became more accessible, until the likes of the first Apple computers heralded a new era of personal computing in the mid-1970s. A similar sea change occurred in the world of glass-blowing, such that - fortuitously for McKelvey - the best period for creatively blowing glass as an individual, and making a living from it, turned out to be the late 1980s. So it was that McKelvey “started blowing glass to make money, to make a living”.
This was 1986, but glass-blowing wasn’t McKelvey’s only gig. In fact, he had turned more to glass-blowing from 1986 onwards in light of the fact that other, more routine ventures were not panning out quite as expansively as he’d hoped.
One of those endeavours was a business that published trade-show literature on CDs, so that attendees could have everything on one disc instead of hefting around a back-breaking sack of leaflets and brochures. This business pre-dated the internet’s big breakout.
“There was masses of conference literature, so we used to put this on a CD,” McKelvey remembers. “Then I saw the internet coming and I knew that this was going to just wipe out this company. It was clear that the internet and web pages were just going to wipe out disc literature.”
However, despite intuiting this devastating future (devastating at least in terms of his company’s business model) McKelvey wasn’t able to successfully convey this message of impending doom to the other members of staff.
“I must have been a terrible leader, as I couldn’t get anyone to follow me except for my 15-year old intern, who didn’t know any better. We ended up going off and starting our own company.
“I guess it was a lesson in how walk away from a company that is going to die but which you know still works”.
As it turned out, that loyal summer intern was Jack Dorsey, who subsequently went off and co-founded Twitter. When the two men reconnected in 2009, the result was Square, for which McKelvey designed the physical hardware for the payments system.
“Ten years ago today, we started Square,” McKelvey nods. “At the time, [Jack] wasn’t working anywhere and I was blowing glass.”
Back to the glass and how an engineering, creative spirit was imbued in him practically from birth. “I grew up breathing in all these VOCs [volatile organic compounds],” he recalls. “My Dad was responsible for the first plastic Coke bottle.”
[Side note of note: McKelvey has donated $15m of his own money to the Washington University School of Engineering and Applied Science to build a new computer science and engineering building named after his father]
“It is so difficult to make anything out of glass,” he says. “On a molecular level, glass is really tough. You don’t make anything thicker than 18 inches. The thickest thing ever made out of glass was 18 inches.
“Glass is an amorphous solid - it doesn’t have a crystalline structure. It is both an elastic and a plastic. There is a transition period when it is plasto-elastic.”
In terms of handling and forming glass, McKelvey says that “you cool it very, very slowly”. The lens for an astronomical large telescope, he says by way of extreme example, could take 18 months to cool down. In some cases, the first lens has been known to break even after a year and a half of cooling, so the second one is given up to three years to cool successfully.
As a glass-blower, McKelvey admits his artistic accomplishment is “limited by my rudimentary skills... If we could design in SolidWorks and then print it, that would be phenomenal. But then I’d probably be out of work!”
Talking of work, what about Square? McKelvey is quick to point out that as a publicly traded company, “you will get no new information about Square!” This is less a reflection of McKelvey’s circumspection – far from it, as he is refreshingly garrulous and open about almost every other topic – and more about FCC regulations.
Square is a simple – relatively speaking – hardware/software solution that enables virtually anyone, anywhere, to accept credit card payments for their goods or services. A tiny hardware interface connected to the phone handles the physical card interaction, whilst the cloud-based smartphone app and back-end software facilitate the cash extraction process. Coincidentally, your correspondent’s Nigerian taxi driver happened to use a Square device on his smartphone when presented with this traveller’s credit card to pay the cab fare from Dallas Fort Worth airport to the Omni Hotel in downtown Dallas.
If a Nigerian immigrant, who followed his brother to Dallas just seven years ago, is able to handle credit card payments from an overseas card account, while sitting in the front seat of his Chevrolet, as seamlessly and efficiently as the front desk staff of the Omni Hotel, Square is obviously doing something right.
“Opening up access” is how McKelvey refers to this levelling of the financial playing field. It’s a phrase he applies to a lot of activity, including his maker studio in St Louis.
“It’s not a question of disrupting the banking industry,” he says. “Disruption is a stupid thing to focus on. If you sit there saying ‘I’m going to destroy an industry’, you’re not focusing on the right things. All the people who were processing credit cards before Square are still processing those credit cards. We didn’t disrupt anything.”
“The point of having these great design tools is that you don’t need permission from anyone,” he says. “In our maker space in St Louis, we have people designing airplanes. Will they fly? I don’t know. Before, though, you’d need Lockheed Skunkworks and a couple of billion dollars of government money. Nobody needs to give you permission any more. It’s fantastic.”
McKelvey is evangelical about doing it yourself – only with the correct emphasis on actually doing it, not just talking about doing it.
“It’s too cool to be an entrepreneur these days,” he reflects. “It’s what everybody wants to be now. I think that’s a problem. It’s almost too easy to get a seed investor, then an angel investor. You can sub-contract out almost everything. That’s probably not the best. One of the things that was great about the first Square reader is that it cost 97 cents. I had physically built every single thing in that device. I could tell you the clamp pressure on the card input.
“We never got pushed around like people who don’t know how to build anything get pushed around. When you go into a room and you don’t know anything, with people who do, guess who’s going to run that meeting?"
“Get a degree in mechanical engineering” is McKelvey’s pithy advice for any would-be entrepreneurs who want to build the next smart, cool device. Not that McKelvey himself has that particular degree, but he has proved his engineering chops in designing the Square hardware.
The path from prototype to scaling was simple enough, but full-on in terms of commitment. “I went into my shop and I built it,” he says. “I took [card] readers out of old credit card terminals. I added a spring. Wow! That’s when SolidWorks came in. ‘Now I’ve got to think about spring coefficients!’
“Now we were all speaking the same language. I could send a SolidWorks file out to prototyping companies. My solution was to say: ‘Where are all the makers?’ None of them are in the US. San Francisco doesn’t know how to make anything! I mean, they’re great at ideas, but when I showed the prototypes to people they’d freak out and I knew I had to go somwhere where people didn’t freak out”.
As might be expected in this day and age, “Shenzhen, China, is where you go. I moved my family there and we basically lived there until I got it done. I’d go to the factories in Shenzhen and they’d build it. You’re talking to people who have done it 100 times.”
Once they had the idea, “Jack and I just funded it ourselves. Jack had just started Twitter, so he was OK. I’d saved some money. My VC [venture capitalist] pitch was pretty good, because I took your money! We actually varied the amount of money based on how much of a jerk the VC guy was. It was based on how much we liked you. If you were OK, we took maybe $1. We took $40 off one guy who was a real tool,” he laughs.
“We could legitimately self-fund this company, so we didn’t really need the money. Not many companies have this ‘rock star’ partner, like Jack. The offers just came flooding in.”
Being in the position of not needing VC investment money may sound like a luxury to some, but McKelvey is adamant that “if you build the product, VC is a much different experience. People are lazy! Most people are still just pitching ideas.”
He says he hears the same song all the time: “‘I’ve got this great idea and I just need money’ and my response is: ‘Oh, really?’ For $3 an hour you can come to my maker place in St Louis. I’ve got CNC mills, 3D printers, sewing machines – you don’t need permission. Shut up and build it! I don’t want to hear about your Mach 7 plane. You can go home tonight and if you had an idea, you could build it.”
McKelvey remains enthusiastic about the power of a good idea, done right, almost in spite of all the easy VC money splashing around in Silicon Valley.
“There are too many venture capitalists,” he says. “There was some really ridiculous stuff funded in the early days. The VC model allows some people to earn massive amounts of money and still be failures. If I invest millions and I take 2 per cent from your business every year, you’re not going to catch the fact that I suck for 7-8 years. You get zero back, the money is all gone, but I’ve had a pretty good life. Everyone’s got a successful track record and the VC industry has swelled, but it’s still incredibly easy to get money. I’ve never seen a good idea not get funded.”
McKelvey uses the ride-sharing model as a prime example of a business that – on paper – might have sounded crazy, but which in a short space of time has become accepted as a routine part of everyday life.
“If you’d told me 10 years ago that I would be getting into strangers’ cars in towns and cities I’ve never been to before, at odd hours of the day and night, I never would have believed you,” he says, sounding incredulous at the very idea. “Yeah, I’m not doing that. I was told not to hitchhike as a kid.
"Now, some Kia Sorento pulls up with three pine air fresheners hanging from the rearview mirror and I’m like ‘Cool!’ and I jump in!”
It’s really all about the power of a good idea and the dedication and focus to see it to proper fruition, allied to sensible investment at the right time. A company’s success is also about people working together, sharing their skills and ideas – a creative ethos nourished at McKelvey’s maker studio, where anyone with a dream and a few dollars can take advantage of the studio’s comprehensive technology suite – the kind of equipment that, like the glass-blowing/mainframe computing barriers to entry before the 1960s, would have prohibited many people from ever even exploring their ideas. For McKelvey, there’s a sense of everything coming full circle and also of giving something back, enabling people who may not have been as fortunate as he has been.
“Opening up the doors to everybody produces surprisingly good results”, he concludes.
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