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Kurt Theobald, right, gives Chris Olson advice on business plans. Early in the startup process, they might be frivolous, he says.
Kurt Theobald, right, gives Chris Olson advice on business plans. Early in the startup process, they might be frivolous, he says.

CEO Roundtable: Startups

Posted online

What is Springfield’s startup identity? Is taking a loan a good thing? Those and other questions are addressed by Springfield Business Journal Editor Eric Olson and entrepreneurs Drake Hughes of Sustainable by Nature LLC, Luke Kuschmeader of Kuat Innovations LLC, Chris Olson (no relation to Eric Olson) of Locke and Stache Media LLC and Kurt Theobald of Classy Llama Studios LLC.

Eric Olson: Could you all briefly describe what it is your businesses do?
Kurt Theobald: I’ll break the ice. I own Classy Llama, an e-commerce agency. It started about nine years ago, kind of fell into it by accident. I wanted to do something cool and awesome and edgy and instead, I started an agency by accident. We grew with a platform called Magento, which is an open source e-commerce platform that launched about eight years ago. Magento now commands 25 percent market share globally.
Chris Olson: I’m part of a partnership, so I guess there’s three CEOs, but it’s a media production company. It’s called Locke and Stache Media. We just started legitimately three or four months ago. We try and concentrate a lot on really high-end production and traveling and doing a lot of international stuff for nonprofits.
Luke Kuschmeader: I’m the founder of Kuat Racks. We’re a hard goods manufacturer. We make automotive accessory racks, so our specialty is in hitch racks for vehicles to haul bicycles. We’re branching into cargo, ski and kayak [racks]. Founded in 2007, that’s when we officially got funded. The concept was maybe as early as 2004, but it took us a number of years to dial in the prototype of the initial product. In 2009, we worked aggressively on a new product – the Envy – which became our flagship product. Without that product, I probably wouldn’t be sitting here.
Drake Hughes: I’m the co-founder of Sustainable by Nature. We’re 2 years old as of September. We do sustainable landscaping focused on permaculture design, which is a concept that is pretty new. We design 80 acre homesteads down to backyards, but everything has multiple purposes, so we won’t add anything to a design that doesn’t do at least do two things. Aesthetics can be one, but it has to do something else other than just be attractive.

E. Olson: If you could describe the startup community in one word, what would it be?
Kuschmeader: It’s been a few years for me, but it was supportive.
Hughes: Same word for me.
C. Olson: I feel like we’ve beaten this word into the ground, but it’s kind of what we make our business on, and I would say collaborative.
Theobald: It’s fledgling. So, I know you want us to do one word, but fledgling is an adjective I would use and immature is an adjective I would use. I’m less confident about this and I’m putting it on the table: coreless. Like, what’s the core of our entrepreneurial community? I don’t know if I could name one. I know other entrepreneurial communities always have a core, a center point they’re pivoting from that drives the innovation. There’s lots of things happening around that, but they all spiral from that center point. I feel like we’re just trying to gain traction.

E. Olson: What do we want to be known for – do you guys see any sort of common core?
Kuschmeader: I think there was a core, but it was probably 30 years ago with the tank manufacturing. Stainless steel tank manufacturing in Springfield is super vibrant. There’s Tank Components, there’s Mueller, there’s probably 50 manufacturers and that’s probably the renaissance. But since then, the support that we had when we started manufacturing here was almost nonexistent.
C. Olson: Of course, you have SRC that’s still rocking and rolling, but it seems like something is happening to where I don’t see the new edge of manufacturing happening here.
E. Olson: If it’s important to have this startup identity, what do you see that we can rally around?
Hughes: I don’t see it as being cool and edgy right now. I don’t know what it would be. There’s a lot with The eFactory stuff, so there’s a lot of effort in that direction, but I haven’t seen anything big come from that.
C. Olson: It feels like the momentum is going to revitalize Springfield – the Heer’s building, all that stuff downtown, it all feels like it’s ramping up for this big, huge breakthrough.
Kuschmeader: We talk about Boulder, we talk about Austin, we talk about Salt Lake City, these are cities that have invested a ton in community activity. Whether you’re a coder or you’re in the outdoor industry, do you want to move to Boulder and work for some outdoor brand or you want to move to Springfield to work for Kuat? Having a draw in Springfield, something to have you want to work in Springfield, I think it’s important for the community to do that.
Theobald: My concern is that the lifestyle gets ahead of the heartbeat. Where people are attracted to come to Springfield because of the cool lifestyle, because of the bike paths, because of the community events and that sort of stuff, but they miss the core. I think you’re right. I think there’s so much energy developing right now, just as a whole community, that will have an inflection moment where we hit critical mass, but if we do that before we have really identified a pivot point, then I think that will be like some of the other communities. There’s this excitement, but I would call it a superficial feeling. I don’t want that for Springfield. I think there’s something cool about focusing on the uncool. I feel like Springfield could actually do that: applying technology to the uncool thing. We’ve got logistics big time in this area, manufacturing that could be revived, and a lot of uncool industries, but those industries are demanding technology. What if Springfield became cool by focusing on the uncool and the unseemly and applying technology and applying that edge to those things?

E. Olson: Are there too many startups right now?
Kuschmeader: The market has a way of kind of dealing those out. I think that’s why you get high attrition rate with startups when people kind of have an idea they want to set their own hours, but in the beginning, that’s not a reality.
Hughes: You’re looking at a 90 percent loss rate. That’s a lot of people to go through.

E. Olson: Nine out of 10 startups don’t make it. How do we address that?
C. Olson: I don’t think it needs to. If you’re not doing what you need to do, the marketplace won’t accept what you’re doing. I don’t know if you can make 90 percent better.
Theobald: You can break things into three components: capital, people and ideas. The smarter the capital is, the lower the failure rate is going to be, because capital won’t go to dumb places and won’t get lost. You can always still start something with no capital and have a higher likelihood of failure, but smart capital not only gives you the money needed to make something work and is only going to invest in quality endeavors, but it also brings wisdom. That’s an actionable item in Springfield. We can provide opportunities for entrepreneurs to engage in wise counsel interactions. I feel like a lot of the smartest money in Springfield is relatively quiet, and I’d like to draw that out.

E. Olson: What are some practical ways to increase the success rate?
C. Olson: One of the things we were thinking of was, “How are we going to be different? How are we going to compete with these people who are doing what we’re doing?” We wanted to narrow down where we shine and figure out why people should hire us. I think adding that to  our business model and our two-year and five-year plans are kind of important internally because we haven’t really executed yet.
Theobald: It also depends on the phase of the business you’re in. If you’re in startup mode, I think a business plan is usually pretty silly. I think you need to understand your business and have the right mode of operation. It’s more about a rhythm and an approach than it is about a plan. When you’re in startup mode, things are so wide open that it’s just insane to think you’re actually going to plan your way into this. You think you’re going to do this product, but you find the market is in the other direction, so you end up deviating from that.
Kuschmeader: Our business plan looks nothing like what our business looks like. We drafted like a 30-page business plan. Now, when I do small projects, I do one page, just to inform whoever the financial institution we’re working with is, “Here’s how the product is going to work, here’s why it’s going to sell, and here’s our exit strategy.” It’s good to show that you’ve thought through it, but I’m with you. Startups change rapidly and you’re not like, “Oh, wait. We’re going to go this direction. Let’s get the business plan out and amend it.” It’s in a filebox and we’re never opening it again.

E. Olson: Where have you guys found the most success in financing your ideas?
Kuschmeader: I’ve used both private angel investing and traditional lending from Guaranty Bank. We started with an SBA loan, which is a great program, and then we went to angel investing as we needed more rounds of funding. Then, we went to traditional loans as it became more viable and successful.
Hughes: First year, we all worked two jobs. Everybody did, even employees. Not because we weren’t paying them, but because we just were doing it as a 20-hour-a-week thing. We made it like seven months, but we’re trying to add another crew. The owners aren’t paying themselves again for a few months and we’re all working jobs again through the winter.
Theobald: There’s definitely a mentality in the entrepreneurial community that, “Where’s my financing?” And I’m like, “Whoa! Let’s back that truck up. Let’s start with the right questions.” Questions like, “Do you need capital to start this thing? Is there another way?” Start asking questions that create creativity. What I’ve seen happen is that someone will say, “I need $500,000 to do this,” and when you start asking questions you don’t end up where they say, “I don’t need any capital.” But they say, “Oh. Maybe I just need $80,000.”
Kuschmeader: I think it just depends on the industry.
C. Olson: It’s funny, because despite all this, that was the conversation we had yesterday about whether or not we should get a loan. I’ve spent, I don’t even want to know how much money, buying camera equipment. We all believe in the same thing, and what we could do with video, and we’ve just invested all of our own money into it. We’ve made a couple purchases off of the business account now, which was a big deal for us because it’s the first thing we’d bought with it. It was a good feeling to know that we’re not in debt because of that previous investment.

E. Olson: Where does good fortune play into it?
Theobald: I think fortune, from my experience, has nothing to do with it. Bacteria grows in a quality petri dish. What I mean by that is your business grows in a quality culture. I think it actually has a lot to do with faith. You had the faith to invest in it and you had the faith to believe there was opportunity. Maybe another way to say it is that fortune is everywhere; pick it up people.
Hughes: It’s all about executing the opportunity.

E. Olson: What startups do you admire and try to emulate?
Kuschmeader: Yeti coolers is a really good example of, kind of a common product, that was overlooked by huge manufacturers. The guy who founded it actually worked for a company in Australia that made pretty much the same thing, but they weren’t executing it correctly. He came here, launched it, marketed it to people who needed to keep stuff cold and needed to be super burly, and now, it’s like this huge cultural brand. I mean, it’s going to go public for millions and millions of dollars. I remember when they first launched walking by their booth at a retail conference in 2008, and it was a little 10x10 and I thought, “This is insane. This product is $400. You can buy a cooler for $25.” I didn’t see it, but fast forward a couple years and now it’s this huge thing. They had the vision, and they knew how to execute it.

E. Olson: What’s next for you guys?
C. Olson: I’m just trying to start the first thing.
group laughter

Interview excerpts by Features Editor Emily Letterman, eletterman@sbj.net, and editorial assistant Barrett Young, sbj@sbj.net.

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