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CEO Roundtable: Tech Startups

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Springfield Business Journal Editor Eric Olson sits down with Jason Arend, CEO of Eagle Speak LLC; John Hamra, co-founder of SelectSitter; Paul Longman, CEO and founder of iSense Sleep LLC and Advanced Sleep Technologies LLC; and Charlie Rosenbury, founder of Tacit and Self Interactive, to discuss the tech startup industry.

Pitch pit
Eric Olson: To start, I want to ask you to do something you’re very familiar with and that’s a pitch of your business. Let’s hear it.
John Hamra: SelectSitter is a child care app that connects parents with trusted sitters through their social network.
Olson: Ten seconds. Wow, I like it.
Paul Longman: ISense Sleep is a division of Advanced Sleep Technologies. We’re in the mattress game and improving people’s lives through better sleep. We buy a mattress when we’re conscious, but we use it when we’re unconscious. It’s not until we wake up in the morning that our body tells our brain we made a good purchase. We’ve incorporated technology that puts control of comfort into the hands of the consumer through some smart bed technology. Using your app, you can adjust the firmness day or night to suit the level of comfort that you have at the time. We brought adjustability to the mattress industry.
Jason Arend: Eagle Speak is an award-winning tech company. We develop cutting edge communication, collaboration, voice recognition, data encryption and file transfer technologies.  We have users in over 80 countries now and we’ve been able to develop and test new types of real-time sentiment analysis to gauge the real-time emotional state as you’re talking to somebody through audio, video and texts. We’re leveraging the latest in machine learning and AI and applying those to new innovations in medical, health care and voice assistance. We make technology that’s enjoyable, invisible and seamless to improve your work, how you do business and your life in general.
Charlie Rosenbury: Tacit is a virtual reality training platform where employees can safely learn on-the-job skills in a simulated, virtual environment. This is through virtual demonstrations, guided, hands-on engagement and real-time assessments that businesses and employees can find efficiencies beyond real-world training. Essentially, we are replicating processes and procedures that people do in the real world and taking it inside of VR where it can be self-directed and safely executed.

Early hurdles
Olson
: What have you found to be the biggest hurdles to bringing your products to market?
Arend: Usually your two biggest hurdles are capital and talent. Capital is specifically hard in the Midwest as opposed to the coasts for tech startups. It’s slowly getting better. Talent is an ongoing problem everywhere. We have really great talent, but it’s kind of becoming incestuous at the moment. All the back and forth between companies and everyone is trying to snatch up talent as fast as they can. If you are actually doing innovative work, you have to find people with the right mindset to be self-driven.
Longman: I’m in Springfield from Sydney, Australia, because I married into the Midwest. When I looked around, I actually found sufficient talent as long as you looked in the right places. When we looked hard enough, we found a highly intelligent group of people. I’m sure we’ll find limitations, but so far as I’ve looked deep enough I’ve found the talent that was necessary. I’m 30 years in this industry, so I can tap into a network anywhere in this country and also globally. Where I set up is really not limiting me.
Olson: Have you found investors through that network?
Longman: I’ve self-capitalized the business. The interesting journey will be when I’m ready to search for external funding.
Arend: As far as outside capital looking to invest in Springfield, at least from experience we had in the past, it seems like it’s a mixed bag. There are a lot of (venture capital) firms I’m seeing now that are really understanding that the next billion-dollar companies are going to be in the Midwest. The cost of living is so much better. The talent is here.
Rosenbury: Our biggest hurdle being in VR is just getting people to understand what it is without being able to put a headset on them. Until you actually get the headset on, you don’t really understand how one-to-one it is with the real world. People who are coming by our place and seeing what we’re working on, they get jazzed, but then they have to go back and resell it to their higher ups.
Hamra: Our biggest hurdle was finding the right developer that could develop our vision. We found him, luckily. And where to start, too. We didn’t know anything about coding or app development. We were kind of at a loss of what to do. Our next hurdle is reaching out in those markets that we’re going to enter into that we don’t have a strong connection with like we do Springfield.

Proof of concept
Olson: What did you do for proof of concept on these young ideas?
Rosenbury: We just went out online and found a toy motorcycle, 3D model, and kind of broke it into pieces and built a really basic prototype where you put the wheel here, the handlebars here and the engine here. That was what we were selling with, as well as dropping them into more produced VR experiences just to convey the power of the medium.
Arend: We had showed up at [efactory’s] startup weekend three or four years ago. Charlie was one of our mentors there. We pitched the idea and nobody liked it or understood it. We weren’t supposed to build Eagle Speak at all. We started our own team, and we said we’re going to build a voice-activated communication platform in two days and demo it on Sunday. They were like, “You’re out of your mind.” By the end of the weekend, we won everybody over and won first place and the audience choice award. From there, it just kept snowballing for the next year.
Longman: There was a brand that was already providing adjustability in sleep … but it was only available in what generally is 5 percent of the market. What wasn’t available was the other 95 percent of what people sleep on, which is spring and foam mattresses. There was no technology available, so we had to design it, patent it and prepare it. Our debut was in the Vegas market. When you go into the storefront, the first thing you’re going to do is sit down and go through a seven-minute virtual tour of the mattress. It shrinks you down, drops you into the mattress and takes you on a virtual tour. It blew the industry away. We had people lining up to get in. We’re a product business, but we’re using technology to bring the concept to life.
Hamra: Our proof of concept was kind of already out there. There were already companies out there that would help you find a sitter, but they used complete strangers. When we got looking into it, we were like, “We would like to hire someone that we know; we don’t want to hire a stranger.” Through customer development interviews with our friends, they found it much nicer to be able to book a sitter that someone they know already used.

Ever want a redo?
Olson: What one thing would you do over again in launching?
Longman: I didn’t realize how important affiliates and influencers are in the world we live in today. As soon as you are in a position to be able to do that, I would have done that from day one. They are the best form of endorsement for what we do. The trick to those is that they take a long time to establish.
Hamra: Ours would be better customer development interviews. The things we thought the parents didn’t necessarily want right off the bat were some of the things they wanted right off the bat.
Rosenbury: Early on, I would have clarified the vision and sought investment to go faster. Since we are self-funded, that limits how quickly we can move. There are pros and cons to both sides. If and when we blow up now, we get to keep so much more of it and we’re our own bosses. By the same token, sometimes it feels like we’re crawling.
Arend: We had investors; we raised capital. It’s not a fun process.
Olson: Tell us about it.
Arend: You really need to have, and we did luckily, capital before you start raising capital. You will spend so much time, even if everything is going well, on just the dance that you have to do to do it. It’s really difficult to give advice to other companies and startups on how to go about getting investment, because every type of investor, VC or angel group operates very different.

Radar screens
Olson: What are the number targets you’re going after?
Hamra: Our target is 10,000 users using the app one and a half times a month in the next three to five years.
Olson: How far in are you to that?
Hamra: We still have a good three to five years left. [laughs] As of (Sept. 16) we only had 625 users. We’re a ways off, but it’s still early and we’re only in one market. We’re targeting Missouri, Arkansas, Oklahoma and Kansas. We just have to get our name out there. Get our friends that are in those markets using it.
Arend: As long as revenue is going up … I’m more interested to see how far our tech is advancing so we can get to the next level of things.
Longman: Our goal in order to get noticed and positioned in the industry where we’re a real player is the Top 20 scoreboard. That’s a minimum of $25 million in wholesale revenue just to get at the bottom. This is a $16 billion wholesale industry and a $30 billion retail industry. One of our key goals is to be with the customer after they swipe the credit card. Our goal is to actually continue a relationship through to better sleep after that sale. That opens up doors for a lot of products and a lot of services.
Rosenbury: We have a pretty meager goal of onboarding one new client a quarter. Looking 10 years in the future … we’ll all have glasses or contacts overlaying the digital world around us. We want to start building toward that future right now. Our goal is to build these proprietary training programs to spec for these companies, but we’re doing it in such a way, the way our contracts work and the way we’re creating code, is that there are components of this that we can reuse. We simulate how to clean a window, for example. CoxHealth isn’t the only one who needs that. Now, we have standalone generic models of how to do these and we can resell. There’s a business model there.
Olson: How many of you are building to sell?
Longman: Every business is built to sell, whether you choose to is entirely up to you. I’ll build it in a way that is attractive when other people look at it. And if that means one day there is an offer at the right time – I’m not getting any younger … there will come a time when I want an exit strategy.
Rosenbury: You nailed it. I would entertain it, but to your point, I quickly found as we were building up our company that I was becoming a linchpin. My focus has been trying to hire and, maybe ironically, train people to take over those duties because ideally we want to scale and it’s not sustainable for me to have a hand in all these different things.
Olson: What’s next for tech in Springfield and how would you characterize the industry locally right now?
Arend: Where Springfield is today from where it was even five years ago is just leaps and bounds ahead. Springfield is completely unique compared to anywhere else. It is very much about helping each other. We have a unique flavor here.
Rosenbury: We’re just the right size that our town supports these big companies, but still small enough that I can meet the right person easily. We’re moving in the right direction, but there is still room for people recognizing the talent of people locally.
Longman: We had plans to set up elsewhere. Just taking a look around town, I was quite surprised by the level of tech evolution that had happened here. It became the obvious question: Why not stay? It’s central to the country – I could do with a few more flights and destinations out of Springfield’s airport – but all I can say is that I have found talent. From stepping off a plane here 25 years ago, a lot has changed and it seems to be heading in the right direction.
Olson: Technology is an inherent disruptor in every industry – because it’s a change agent. What is the biggest disruption to the tech industry?
Arend: Culture and the exponential enhancement and innovation in tech kind of killing itself … companies moving fast, innovating too fast to create the ethics that go along with it. And then the culture of how that is being perceived by the rest of the world, then turning away and being like, no I don’t want this grabbing my attention nonstop or invading every part of my life.
Longman: Europe has just gone through one of the most massive privacy law changes than anywhere in the world where you need two forms of proof that the customer is in agreement with you using their data. The legal laws around the use of information is probably the biggest disrupter in the tech industry.

Excerpts by Features Editor Christine Temple, ctemple@sbj.net.

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