Meet the entrepreneur who wrote a letter to Warren Buffett, and got a response back
11 min read
04 June 2015
They say the advice you get in the process of starting and growing your business can sometimes be the difference between success and failure. Well, for RoadLoK co-founder and CEO Adam Xavier, his early mentor came in the form of Warren Buffett, the Sage of Omaha.
In his last year at Ithaca College, in New York state, Xavier decided the subject of a paper he was writing would be the renowned investor Buffett – looking at the impact he’d had on the US economy. Having handed that piece of work in, Xavier headed down to Wall Street to work as a financial analyst not knowing he’d sown the seed of what would ultimately become a surprising journey.
His bachelor of science degree, with a finance weighting, had seen him put together the basis of a business plan. This came in handy when Xavier and his brother took the raw idea of a bike immobilising lock sketched out on the back of a napkin (not an expression) and began to roll with it as the basis for a business.
“After accidentally inventing a new method for locking a motorcycle, my brother and I decided to bring our idea to the market and help protect rider’s motorcycles around the world. Our product is the only safe way to lock a motorcycle,” he explained. “I was not sure if I could start and grow a company, but being right out of college, I gave it a shot with my brother and I have managed to build a global brand and navigate a major recession successfully.”
However, this “global brand” in a time of major recession might not have been possible if Xavier had not made the innocuous decision to mail a version of his business plan to a man he particularly admired – Buffett.
Explaining his respect for the Berkshire Hathaway boss, Xaviera added: “I truly admire Buffett’s ability to remain humble in light of his major success. He still lives in a modest home with his wife, drives a modest vehicle and still takes the time to visit his companies to play his ukulele for them. He is truly a good man and has managed to keep his head on his shoulders while still being one of the richest men in the world.”
Finding out the address for Berkshire Hathaway in Omaha, Xavier addressed the package to the main man himself, placed a stamp on it and hoped for the best – never really expecting to hear much in return. He and his brother ploughed ahead with their new venture, sending off business plans to investors around the state of New York.
“Two months later the plan came back, but in the same envelope – so I thought it was a return to sender. Because of that I didn’t open it up until two or three weeks later when I was filing stuff away. It was only then that I realised he’d written in it.”
Marking up Xavier’s business plan in the margins with a pencil, Buffett had also included a personal letter to the budding entrepreneur – shedding light on where he believed there was room for improvement. The main point, and one which Xavier can look back on now having successfully executed, was the need to find some way of deriving recurring revenues. This subscription type system is what gets investors like Buffett interested, Xavier believes, but was not on the brother’s radar at all then.
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Having developed and patented a product for immobilising a motorcycle, Xavier was only ever thinking about the one-off cost that would come from a customer picking it up on the shelf and taking it to the checkout.
Another factor Buffett poured cold water over was Xavier’s claim that, because of its patent protection, his business didn’t need to worry about the threat of competition. Realising, after Buffett’s comments, that was a naive approach, Xavier built brand and product protection into the business plan that ultimately raised $3m from investors.
“I was not expecting him to respond to my outstanding request. I was just a kid, but he took the time to read our 35-page business plan and mark it up with his thoughts. I took everything he wrote to heart and made the appropriate changes. His ability to take time out to read our planning is proof that he has remained humble and decent,” Xavier said.
“His feedback was important, but we knew that our company was not on his radar. The point was to see if we could get someone so large and prominent to hear us. It paved the way for my ability and drive to knock on anyone’s door and expect a response.”
However, while one response from the Sage of Omaha was optimistic, Xavier really chanced his luck when he went back to him to provide an intro to a company of interest relating to a partnership.
Taking Buffet’s advice on building a revenue stream based on recurring revenues, Xavier believed there was potential in linking up with an insurance company. “It hit me that we could potentially offer a programme like LoJack [a vehicle locator system].
“The recovery rate on a motorcycle is around 30 per cent, so very low. But the mindset here was we can partner with insurance company, and develop a product and that is sold though dealerships in the US.”
With this now in place, RoadLoK now has a trifecta of revenue streams: product purchases, its patents and the subscription insurance scheme. Buffett’s input here came though an introduction to Geico, one of the biggest insurance companies in the US and one of Berkshire Hathaway’s portfolio companies.
“I reached out to Geico, but couldn’t get meeting. So, like the arrogant graduate I was, I called Berkshire Hathaway and spoke to assistant, relaying that I’d tried reaching out to them but couldn’t do it.
“Within that same day the VP of Geico Motorcycle called and set up meeting, and within three or four months we were endorsed and Geico was offering a discount to those using our product.”
For entrepreneurs looking to build out their networks, Xavier has some simple advice. You have to get yourself out there, he urged. “Networking is critically important for any business owner to grow and thrive both professionally and with their company,” he added. “You have to put yourself out there and make some noise – be a doer.”
Getting out there and leveraging the advice of business leaders who have been there, done it, and got the t-shirt is becoming easier, Xavier believes. “The industrial revolution was one thing, this is the revolution to give back and create a more sustainable world. We have to focus and remember that when we are gone the earth will still be here and our legacy will affect those that come after us.”
So, where will Xavier be taking his company in the future? Realising that his business only manages to solve one very small problem in a niche market, his goals are “lofty” and will enter on working to change the way people behave in the world of motorcycling.
“We have a vision that we will be able to help reduce waste of both material in manufacturing and money in mindless theft recovery around the world. After this company has reached the potential I wish to see it through to, I would like to tackle much larger issues that affect society as a whole. The good thing for me is that I have some time as this is an ongoing issue and we can all help.”
With the UK one of the strongest retail markets for RoadLoK, due to the British culture of using motorcycles for commuting and not just leisure, Xavier has opened up an office in Sheffield and is on the cusp of shipping product from that destination.
However, like he has been in the US, the forward-thinker in Xavier is not just content with selling his product to the European market. He’s already making headway in linking with the same kind of partners he has done in the US – diversifying the companies revenue stream and never forgetting those invaluable pencil-written tips from Buffett, the billionaire investor who took time out of his day to share some thoughts.