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A Q&A With Dug Song


Dug Song doesn't wear a suit to work. Partly because the t-shirt-and-jeans-wearing Song doesn't want to wear a suit to work. Mostly because the 30-something skateboarder doesn't have to wear a suit to work either. Even if he is one of Ann Arbor's more successful entrepreneurs.

"I will never wear a suit to work," Song says. "I am just culturally uncouth. I'm not really about the professional workplace. I am good at starting things."

One of those things is Arbor Networks, which Song helped get off the ground not long after he graduated from the University of Michigan nearly a decade ago. He landed his first successful exit when Arbor Networks was acquired as one of the leading IT security firms in the world. He has since landed other impressive tricks with start-ups like Zattoo, small business incubators such as Tech Brewery and local entrepreneurial support groups like Ann Arbor New Tech Meetup. He's catching some significant air today ollying his latest start-up Scio Security, which just landed $1 million in venture capital funding.

"For me creating things is one of the joys of my life," Song says. "I would be really bored if I weren't making something."

And Song's creations are all "Made in Ann Arbor." Even though his job takes him all over the world, he still thinks Tree Town is the best place for him to raise his young family. Song is a fierce advocate for the proposed Ann Arbor Skatepark, increasing Ann Arbor downtown's vibrancy with more dense development and maintaining the Peoples Republic's quirky reputation for independent thought and envelope pushing practices. He is probably one of the most outspoken mild mannered people you'll meet, with a demeanor that is as reserved as his appearance is casual.

He and Jon Oberheide, Song's co-founder of Scio Security and a computer science PhD student at U-M, recently sat down with Concentrate's Jon Zemke to talk about entrepreneurship, the best way to find seed capital for start-ups, skateparks, and what Ann Arbor can learn from Ypsilanti.

You can work anywhere in the world. Give an example of something that keeps you in Ann Arbor and how we can use it to retain and attract more high-level talent?

Song: I am still in Ann Arbor is my wife and family. I have a 5-year-old who just started kindergarten this fall. I have a brand new baby girl that I am hoping to raise here. It took me some time to figure out that Ann Arbor is a good place to settle down. I don't think we play that up enough.

The Michigan legislature is debating angel investor legislation that promises an income-tax credit equal to 25 percent of an investment, which proponents say could really energize the local entrepreneurial community. Do you believe the hype?

Song: It's helpful. There are a lot of individuals who could be angels in Ann Arbor, a lot. The bigger problem we have is there is no culture around it. The first thing that happens after you successfully exit a company in Silicon Valley is you find ways to make more money that keep you involved in the community. I can't tell you how many successful entrepreneurs I have met here who don't roll back in. You have to pay it forward because that is the only way we can build a real entrepreneurial community.

You have said that we teach the wrong way to raise seed funding by focusing too much on an in-depth business plan and not enough on making connections. Does that mean the personality of an elevator pitch is more important than the nuts and bolts of a business plan?

Song: I can't tell you how many companies I have seen start off spending months writing a 30-page business plan before they build anything or talk to their first customer. Reality doesn't exist within the walls of the office. You need to go out there and meet folks and figure out what you should be doing. In an early stage start-up the only things you should be doing are either building or selling.

Oberheide: We wasted some cycles trying to write a 30-page business plan.

Song: Companies that do that end up spinning their wheels.

Doesn't writing out all of that detail help an entrepreneur master his vision for the company and enable him to give a better elevator pitch?

Song: It's probably useful to somebody somewhere, but it's a lot more useful to just go and do it. Talk to some customers. Figure out the business model and pricing. See how customers react. See what kind of value they place on whatever you are proposing to build, and just build it and sell it.

Oberheide: An application we filled out asked for a five-year business plan. There is no way you can make accurate estimates five years down the road when we just started building and selling our product a month ago.

Song: It's a waste of time. By our second month we had our first paying customer.

You have raised a lot of venture capital for your start-ups. Which is more important, the amount of seed capital or the quality of the resources that come with it, such as an angel investor's Rolodex?

Song: Very few investors are value added. Money is money. There are very few that do much for you after they have wired the money to your account.

It's funny you say that because all of the angel investors I have spoken to say it's more about the value they add than the money they give.

Song: I am glad people think that way and try to be that way. However, that's not the typical experience for folks.

Since you're one of Michigan's more successful entrepreneurs, do people often come up to you to pitch a business idea?

Song: All the time. I encourage it. I love hearing ideas and trying to connect entrepreneurs to people who can be helpful. I am a strong believer in this notion of business Karma.

Not to toot your horn too much, but which helps enhance Ann Arbor's entrepreneurial ecosystem more, a home-run like Arbor Networks or smaller things like A2 New Tech Meet-up and Tech Brewery?

Song: Arbor is not a home run. Arbor was a good deal. There have been a lot of good deals lately, like HandyLab and HealthMedia. A home run is like ISS in Atlanta.

Oberheide: (laughs) That's a grand slam. Come on.

Song: Yeah, but that's what we fucking need here. That one company built an entire tech ecosystem. All of the tech companies there have some sort of tie to ISS. That's what happens when a company is successful. It completely turns the tables for everybody. Exits create opportunities for entrepreneurs, especially early stage guys like me.

You grew up outside of Michigan and your profession takes you all over the world. How important is this broader perspective, especially in a place that can be as provincial as Ann Arbor?

Song: The tech playing field is completely flat worldwide. If you're not building with a global market already in mind then you have lost. I don't know who I would sell to in Michigan. We're starting out going after global customers. Our first customer is in New York City.

Oberheide: One of our competitors in South Africa just raised a bunch of money. It's not just the globalization of customers, but competitors as well.

Song: Totally.

You are a big Ann Arbor supporter and someone whose entrepreneurial endeavors often take you around the world. Would you still be willing, or even able, to set up shop here if we didn't have Metro Airport?

Song: (laughs) I am a big believer in Aerotropolis. Metro Airport is one of the crown jewels of southeast Michigan. Without that, boy would it be bad. People go through Metro and it's the one thing that makes them think, 'Whoa, Michigan might not be so bad.'

Oberheide: As much as I hate NWA and Delta, thank God for the big hub here.

Song: Cities like Paris can get away with absolute shit airports because Paris is an awesome city. For us, we have to make sure that airport is pristine. With that in mind, we desperately need public transportation that connects the region, particularly around the airport. When I see things like Detroit-Ann Arbor commuter rail line and WALLY fall flat, it makes me nervous.

Ann Arbor and U-M are so closely tied together that it seems like locals often confuse the influence and impact of each. Should Ann Arbor be planning for its future as if the university didn't exist and what should it focus on?

Song: No. Ann Arbor wouldn't exist without the university. It's unthinkable, like the earth without the sun. We should be leveraging more resources to engage U-M more in the community. U-M is great for the trickle-down effects, such as jobs, educated populace and culture. What it completely sucks at is engaging the community in a real way. I like to compare U-M to Berkeley. Berkeley offers so many extension courses it's like a phone book. Things anyone in the community can do at the university. I see nothing like that here. It's really frustrating.

Is Ann Arbor in danger of repeating Michigan's mistake of being over-reliant on the auto industry, but in this case it's the university?

Song: If we spent more time fostering the grass roots things that are already happening, we would see a lot more sustainable economic development. We get into trouble when everything looks, smells and feels like a government program or school. You're not going to train a breed of entrepreneurs. I can't even say those words, it's so non-sensical to me. What you need to do is build a community that is trying, doing, and learning together. Find ways to make it easier for them to help each other.

You said you have had companies blow up at the Tech Brewery. Do you guys think failure is more of a merit badge or a scarlet letter?

It's not a merit badge. Should you celebrate failure? Nooo... Failure sucks. That trope that all of the best entrepreneurs have failed, I don't buy it.

You once wrote that "we lack the start-up-savvy rich people to pair with nerds." It seems to me that our local entrepreneurs are often left looking at seed capital through a window because they don't know how to open the door, and the people who own the store don't know how to make a deal work. Is there a way we can we make that connection and maximize the potential of this region's old money?

Song: You have to teach people about the opportunities that exist here. What companies are being started and what folks are interested in helping get companies off the ground. What saddens me is sometimes we have such a huge ecosystem of services providers and business consultants, and so few folks who can really help build a business. Everyone wants to be a hanger on and grab the edges of something new.

You're a fan of the malcontents, such as AnnArborisOverrated.com and punk culture, so much so that you want to see a vibrant community of them here trying to Keep Ann Arbor Weird. However, one of the more common criticisms about Michigan is that it dwells too much on the negative or doesn't focus enough on solutions. How do you balance those two, if at all?

Song: It's more in the vein of Schumpeter's Creative Destruction where there is something new that comes in and demolishes the old. Things have to change. I kind of find it refreshing. Sort of like Detroit is the new Berlin. Even though there is this industrial wasteland a thousand flowers can still bloom.

You tweeted that you met your wife while riding a skateboard with a watermelon. How did that turn of events come about and did she try to run away initially?

Song: I was working with my first start-up, living half out of the office and the house I was renting was a total nightmare. I would pick up groceries and take them back to the office because I couldn't eat at my place. It was that bad. I couldn't even shower there. I spent my lunch hour working for food at the Eastern Accents Bakery and she worked there. I picked up a watermelon for a party, skated in, and she didn't know what to make of me.

The Ann Arbor Skatepark has been slow cooking for a long time. Is it better that the city waits this long for a skate park with the potential to be one of the most dynamic in the state or would you have preferred to have had a more average skate park 10 years earlier?

Song: It has to be worthy of the community. There is a big, strong skate/punk community that has been here for a long time. There are a lot of kids here, my kids included, who deserve something real here. We're going to build a real world-class park here.

Developers in Ann Arbor say their dense downtown developments will help with talent retention. However, it seems expensive high-rise apartments would be more for the corporate-ladder-climbing crowd than young entrepreneurs.

Song: Not every entrepreneur is eating Ramen. Many are holding down day jobs as they get things going. More generally, Ann Arbor's downtown needs to be less hostile to youth and youth culture.

Example?

Song: Take the Neutral Zone. Ann Arbor has one of the best teen centers anywhere and the city has done nothing to support it. These guys went on their own $4 million capital campaign, begging and scratching for money, and they do amazing things there. They just don't find the support they need from the community.

At Concentrate's last speaker event you voiced, several times, that Ann Arbor is struggling with a generational rift over where the community is going and this has affected your ability to do business here. Can you elaborate on that?

Song: It's more cultural because there are folks on both sides who don't quite get it. There is a cultural hegemony that is dominated by folks who have been the voice of things going on in Ann Arbor for so long that younger people who have built their own communities and events don't get the visibility they need. Folks are doing great things. Sometimes I don't feel we do enough to call out and support those efforts.

A lot of people hold up Ann Arbor and tell Ypsilanti to be more like it. However, Ypsilanti has made some real strides as of late. What is something Ann Arbor could learn from Ypsilanti?

Song: I don't even know where to begin with that. I see things happening in Ypsi that are like things that happened in Ann Arbor earlier but went away. It's more like the people who did them in Ann Arbor moved to Ypsi. One of the more intriguing things that I was able to take part in was the puppet show that Mark Maynard put on. I was amazed at how broad of a cross section of the community it attracted. It was a very diverse crowd with very diverse topics. It was awesome. It was an old-timey variety show kind of thing mixed up with civics.


Jon Zemke is the News Editor for Concentrate and Metromode. He conducted this interview while eating a huge, messy and delicious burger with Song, Oberheide, and Concentrate Photographer Doug Coombe on the north side of Ann Arbor. He condensed it on a full stomach. His last feature for Concentrate is Young & Entrepreneurial: A Q&A with Switchback

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All photos by Doug Coombe

Photos:

L to R - Dug Song and Jon Oberheide on the roof of the Tech Brewery

Dug Song with his longboard at the Scio Security office in the Tech Brewery

Jon Oberheide at the Scio Security office

Dug and Jon outside the Tech Brewery, formerly the Northern Brewery

Dug and Jon playing fussball inside the Tech Brewery

Dug and Jon being interviewed at Famous Hamburgers

Dug's desk at Scio Security with a portrait by famed Detroit caricaturist Illy Mack
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