What does the startup community look like in Springfield? To find out, Springfield Business Journal Editorial Director Eric Olson sat down with Josh Holstein, CEO of mobile car information service CellARide LLC, Robb Woolsey, founder of GPS service Sprocket LLC, Brian Kincaid, director of business incubator The eFactory, and local investor and entrepreneur Dan Cobb, who co-created health care software used by McKesson Corp. and HealthMedX.
Eric Olson: In a word, how would you describe the startup industry in Springfield?
Dan Cobb: Emerging.
Josh Holstein: Up-and-coming.
Robb Woolsey: Infant.
Brian Kincaid: Gaining momentum.
Olson: What is the difference between a startup entrepreneur and a small-business owner?
Cobb: Typically, an entrepreneur is doing something a little riskier that hasn’t been done before. A small-business owner may be doing something there is already a blueprint for. Say you are opening a yogurt place, there is a blueprint for that. The things these guys [points to Holstein and Woolsey] are doing, they are making it up. There is a lot more risk, a lot more work. It’s all-consuming.
Holstein: I haven’t found a startup franchise yet. Plus, we are looking at national and international scaling, so it really is just shooting from the hip, especially if it’s a new technology or a new way to implement that.
Woolsey: I’ve owned small businesses and now doing the startup thing and there is a difference in the mindset. I tend to think of them both as entrepreneurial and they take the same type of personality, but when starting a small business, you are looking at how you are going to provide a living for your family. A startup starts with the idea of creating that industry and how scalable is it. You are looking at a minimum of a national level. Your key performance indicators and measurements are different in that.
Olson: KPI? What falls under that?
Cobb: Depends on the business. It could be financial, it could be productivity, customer satisfaction. Really, there is no blueprint for that other than what is important to your business.
Olson: So, each business sets their own?
Woosley: Each business sets their own and startups are going to have different types of KPIs.
Cobb: And the different types of startups are going to have different KPIs.
Kincaid: We go through those with clients at the incubator. What are your monthly performance indicators? What are your 30-, 60-, 90-day horizon goals? Then we want to make sure we are listening to them enough to know where they are headed so if there is an opportunity to identify an introduction to be made we can step in and try to assist.
Olson: Let’s say you’re a guy with an idea you want to put into business action. How would you advise them to take that first step?
Cobb: You should develop a business plan. There are blueprints for that. There is a template when you think about what your product is, how you differentiate yourself, who your competition is, what your revenue projects are. The exercise of going through that is as important as the end products because it forces you to think through all the facets.
Olson: I have heard a lot of talk of problem solving. Should the product solve a problem in the market?
Cobb: Yes, and that’s what your business plan should spell out. If you really can’t, it’s a good place to stop.
Kincaid: We always suggest people go though the business plan. It will look different three months into the process, but it’s good to think through those steps. I would be curious to know from you guys how often you get to that end and have a go or no-go decision.
Holstein: I call that pivoting. There is a lot of pivoting going on in a business like this. I’ve never worked in the automotive space until I came up with an idea that’s based in the automotive space. I have my ideas on how I think the product should be set up. Then I get into the market. The product phase is when you need to go through the proof of concept and find out where you need to pivot, what ideas you need to add or subtract. Figuring out that market fit happens during the proof-of-concept phase. I went the bottom-up approach and knocked on doors, gained dealers, lost dealers, gained dealers. I realized that’s insanity. I had to make a change, a pivot, and took the top-down approach. But I couldn’t put that in the original business plan. I didn’t know that then.
Woolsey: I did it slightly different. I went out to potential investors and started discussing it until I thought I had an idea someone would buy. Then I went and sold that idea to a customer. They paid me, then we started developing an idea. I figured if I could develop it with a potential customer and I could get someone to pay me before I had it, then I had a product people would buy.
Cobb: You try to get verification as early as possible. We did that back in the day as well.
Olson: Startups are kind of a buzzword right now with national TV attention on shows like “The Profit” and “Shark Tank.” Do you guys watch those shows?
Cobb: The pro is that it encourages people to get out there and take an idea and run with it. The con is that it encourages people to get out there and take an idea and run with it. Startups are highly risky, more work than you could ever imagine, more stress than you could ever imagine and it’s not for everybody. A lot of the media exposure implies it’s easier than it actually is.
Holstein: I watch both, but I do like “The Profit” better than “Shark Tank.” I’m very religious about watching them because I do see a lot of similarities. Sometimes, I don’t want to watch it because I’m living it.
Woolsey: It’s painful.
Cobb: You kind of want to get away from it.
Woolsey: A lot of times they will come into a small business and turn it into a scalable business. With “Shark Tank,” one of them was talking about going out and selling first to see if people would buy, which is what caused me to do that. However, a lot of the businesses financed on that show are small businesses. You will see a few startups. Most of the time, they are looking to invest $50,000 and get 25 percent of the business. In a startup, there would be nothing left.
Olson: What’s the trick to making a startup scalable?
Cobb: It has to be in the business plan to begin with. The decisions you make are going to be different if you are looking to go nationwide or have a store here in Springfield. I would think it would be difficult to start with one small thing then grow.
Olson: Describe your experience in scaling a business.
Cobb: The scalability comes in several factors. You have to have a product that will be scalable, not just size, but useful. Then you have to have the infrastructure. That could mean funding, it could mean investing in people before you need them. Also, we knew we would be in all 50 states and state regulations are different, so we had to be prepared for that.
Olson: So when you were creating this software company, you had your exit in mind?
Cobb: Oh yes. That’s maybe another difference between a startup and a small business: Your business plan should have an exit strategy. It guides the decisions you make. A lot of startups are like a steer and you raise it up and take it to market. Small business is like you have a milk cow you will have for as long as it’s alive. Your decisions you make regarding those are completely different.
Woolsey: An example is coffee. Before Starbucks came in, you bought coffee at a diner. Now, you see a lot of small businesses trying to mimic Starbucks on a small-business scale. They start coffee shops and they might want a few in an area, but they just want to be a coffee shop. Starbucks, their entire concept wasn’t to make coffee, it was to change the experience of how you bought coffee.
Cobb: I would guess when Starbucks started, they invested in large facilities to manufacture and distribute the coffee. That’s not the approach if you are just starting your own shop.
Woolsey: Coffee is just the tool.
Olson: What is the identity of Springfield’s startup community? Or what do you predict it could be?
Holstein: Technology is part of that buzz. It’s quick to market. In a startup community, it’s also a, “if you build it, they will come mentality.” We just haven’t quite built it yet. If you build the culture, the community here for startups, you will get people from outside coming in who have skill sets we may not have here. You can build the focus of startups you want, depending on how you market that.
Kincaid: At The eFactory, we have four target areas: Advance or light manufacturing, medical devices or services, logistics and supply chain, and technology. Without us really seeking it, the vast majority of companies are technology related. We, as a university, take a long-term approach to what this looks like as an economical tool. We are really starting to see the impact of these young companies and that growth process. That growth process is where we are really going to see the most tangible results when it comes to jobs and revenues and investments. We are still very much in the first stages of that approach. Few communities can say they do collaboration as well as Springfield; that’s another aspect of this. If we can continue to do that correctly and lead in collaboration, that will be unique for Springfield.
Olson: What’s the funding situation like here now?
Cobb: I would give it a C or call it fair. I have seen startups with multimillion-dollar funding before they get started, but overall it’s still challenging for most. There is a matchmaker aspect to it. It’s not where it needs to be.
Holstein: We are in the Show-Me State. You need a success story or two or three or 10. St. Louis got it from Twitter and Square. That’s what needs to happen here. Now that the infrastructure is in place and the visibility is so much better, we just need some success stories to get people excited about putting their money in.
Olson: Where do you recommend an entrepreneur go for that first round of funding?
Holstein: Friends and family.
Cobb: I would amend that to say the first thing you should start with is yourself, if you can. That includes financing. Equity is your most valuable asset, and I know sometimes it has to be done. When you give away equity for money, it’s very expensive money.
Olson: What is the difference between a business incubator and an accelerator?
Kincaid: We are starting to look at “start, grow, accelerate” as a motto. For that startup company that maybe needs some co-working space who is growing off their own funding, but you might want to grow the company a bit more, move it into the incubator and tap as many resources as possible. But then, we really need to have a mechanism in place to fund those companies and really grow them. That’s where this more concentrated mentorship comes into place. Incubator is a longer-term proposition, three to five years. The accelerator is an intensive 12-week program of business coaching, mentoring and investor preparation. You don’t sleep, you move quickly and you figure out a lot of things.
Olson: Can you grow too fast?
Cobb: Yes, it’s always tempting to take the sale, but if you have not prepared to support and deliver, it could be worse.
Woolsey: There is a fine line.
Holstein: There is a fine line, but you want to go out and get it. Don’t wait for it to come to you.
Interview excerpts by Features Editor Emily Letterman, eletterman@sbj.net
