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CEO Roundtable: Startups

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Springfield Business Journal Editorial Vice President Eric Olson discusses the startup world with company founders Kevin Johansen of AgButler Inc., Nic Lamphear of MiddleCoast Solutions LLC and Henning Schwinum of Vendux LLC, all of which are participating in the Efactory’s business accelerator.

Eric Olson: I want to start with your 30-second elevator speech. Tell us, in just a few sentences, about your startup.
Henning Schwinum: We are a matchmaker, a matchmaker that helps business, small and medium-size businesses, fill a skill gap and develop a reliable sales process that works like a machine. And on the other side of the matchmaking, there are executives that are available to take those roles and provide that skill set to the company. The specialty of what we do is that it’s not a recruiting business. It’s a matchmaking business, whereby the executive comes in. He’s only there for the time that that particular skill set is needed. In most cases, that means it’s a fractional assignment.
Kevin Johansen: AgButler’s a digital marketplace, where we’re bringing the gig economy to agriculture. Our goal is to alleviate bottlenecks that farmers and ranchers face when they’re trying to find high-quality, on-demand labor, in and around their communities. We always like to say people know who’s available in that 5- to 10-mile radius, but if we expand that out to 30-50 miles, there’s a whole new pool of people that are qualified and have the experience to help operations be more efficient and productive.
Nic Lamphear: Myself and my two business partners, Alison Lamphear and Dusty Klinger, we started a company called MiddleCoast Solutions. Our goal is to develop large-scale web applications for use within private, federal, state correctional institutions. We’ve also encompassed, after going for the cohort program … any institution that works with public safety, as well. Our first application that we’re bringing to market, hopefully by Demo Day, will be a product called HeroHub.Its goal will be to make safer working environments by identifying risks and guiding business owners through making contingency plans to counter those risks.

Startup story
Olson: What’s the origin of your businesses?
Lamphear: I was in architecture school at Kansas State, and we were going through a pretty intensive 3D modeling class. One of the best ways was to take a 360-degree shot of a room, in HDR, and you could program the computer to reverse-engineer and pump lights into the modeling. … I brought that to working at the (U.S. Medical Center for Federal Prisoners) with me. One of the things I have to do in my job is I’m supposed to keep blueprints up to date for the entire campus so that if someone gets taken hostage, or there’s a fight or something silly like that, the responding teams have up-to-date blueprints of that area. And it’s almost impossible to do because we’re constantly renovating. We came up with this idea that it can take me months to stay on top of a set of blueprints, where we can take a picture inside a room of 360-degree view, and we can give someone a relatively accurate snapshot of what’s inside that room. We can pinpoint utilities and tell people what they need to shut off in order to take back command of that situation. I pitched this idea to [former “Fed Med” Warden] Linda Sanders. She loved it, and she funded it. She told us to run with it, and we actually wrote a piece of software. We were there for three weeks, and we took about 300,000 photos of the entire institution. There are businesses and these contingency plans and this preparation should be taking place on the street. There’s active shooters, and earthquakes, and fires, and tornadoes, and businesses need to be prepared. So, we started researching the market and found out that there really wasn’t anything like that out there, helping small businesses be prepared for the risks they can face. We started developing a piece of software to do that, and that’s grown into what HeroHub is now.
Schwinum: I’ve spent the better part of my career in sales, leading sales teams around the world, different companies, different products. And I took the skill set two years ago and said, “I want to go to work and help companies, small- to medium-sized business to develop better processes, have real sales leadership in place.” I wanted to hire myself out as a fractional or interim sales leader. And I realized that I wasn’t well connected enough to people who would make a decision. I looked for somebody who could match me into those opportunities. I could not find a matchmaker. I decided that’s a gap. The need that I saw that wasn’t met, others would be experiencing, as well. So, I pivoted my future and said, “I’m going to build the matchmaker. I’m going to be the matchmaker for the 3,000-5,000 executives that are out there in the U.S. today ready to take on a fractional, or interim, sales leadership role.”
Johansen: Agriculture is, basically, the cornerstone of every rural community. It’s really the lifeblood of a society because you have to produce fuel, food and fiber from there, for society to live comfortably. Whenever we were coming back to the farm four years ago and had a more managerial role in our family’s operations, I started listening more to podcasts – lot of it was based off of startups and entrepreneurial type of podcasts. Listening to all these different podcasts and thinking back when I was in college, early adulthood, I was in the gig economy before it was a thing. I spent a lot of my time traveling the country, working for cattle operations, on a part-time basis for an extended period of time. When we do that, the only way to get more jobs was, essentially, by word of mouth, or people seeing your work and talking to you. And then, hopefully, they kept your number whenever they needed work done down the road. We have a family that runs the basic skeleton crew, and then, certain times of the year, we need one or two more people. It’s a lot easier to bring somebody to your place that already has the knowledge and experience of what you’re trying to do, so you can be efficient, productive and not cost any more dollars than you need to. As we looked at that on the managerial side, it’s like if we could find, or figure out a way to build, a platform to where everybody comes to one location, because, mind you, four years ago, the social media was filling up, in my realm, of people looking and asking for part-time help. … We decided, “Hey, it’d be a great idea to … make a platform.” So that’s where AgButler came from. But on the flip side, I can also go over and be a laborer and be that experienced, on-demand help for somebody else that doesn’t have a big enough operation to be able to pay for a full-time employee that has my type of experience. I’m not only the founder, but I’m also the user.
Olson: Where’s the family farm?
Johansen: Well, there’s three locations between two families. Lebanon, Missouri, is where our base is. My wife’s family’s place is in Aurora, Missouri, and then my family is up by Tipton.
Olson: Henning, you’re from Kansas City; what drew you to Missouri State’s Efactory and this program?
Schwinum: I’ve been looking to join a program for a while now. A lot of the programs in Kansas City are friendly focused toward tech companies. I’m not a tech company. I’m tech-enabled, but tech isn’t the core of what I’m doing. Frankly, I was rejected by a number of programs. I saw this one come up, and before I even applied, I called and I asked that question, very frankly. I said, “I’m not a tech company. Does it make sense for me to even apply?” And they said, “Yes.”

Proof of concept
Olson: Proof of concept is a really important step in taking a startup from that idea phase to traction in the marketplace. How have you proved the concept in your marketplace?
Johansen: We’re just over a year … of launching our initial (minimum viable product) out into the real world. We weren’t able to build the technology right up front. We’re almost to a four-year journey in this whole thing. Since we didn’t have the capability of building out the product right up front, we kind of reverse-engineered our business plan and built the foundation of our business, and put all the right pieces in place. We also utilized a lot of farmers and ranchers and people that are freelancers, in the ag community, to weigh in on if we were to build something, how would you like it to work? We just built the platform last year, and that was kind of a silver lining for us because we were ahead of schedule due to the pandemic, because our developers had projects. They got put on hold. So, it sped up our platform build. We weren’t planning on promoting it until 2021, but we went back to that nice inner circle of people that we were able to take it and let them beta test it in a control group. Then, we did a soft rollout last fall.
Schwinum: We’re a 2-year-old business, and in hindsight I would say that the initial market validation was pretty thin and not very thorough. I talked to a few people to get validation of my idea. I think my hardheadedness led me down this path, thinking that it would work out and there would be takers for it. Now, two years down the road, I would say market validation happened through hundreds of conversations. I mean, at this point, I probably have spoken to 500 executives in this space. I talked to probably 1,000 founders in this space. The problem on both sides of this matching equation turn out to always be the same. It’s always sales that’s a challenge for founders. It’s always finding gigs that’s a challenge for the executives. Now, the validation is turning into business and proving out that there’s actually a need for it in the market. We currently run 11 assignments, so 11 executives are placed with companies. We’re working on a pipeline of many more, looking to grow this to 20 by the end of the year.
Lamphear: Our market research is continuing. Unlike my two cohort fellows here, we haven’t actually launched anything yet. Our goal is to have a Phase I launch in early November, for the Demo Day. The Phase II launch, that’ll take at least a year to program. We have a very big coding blitz ahead of us to get to the finish line, but we’re ready for it. Our market research really ties a little bit into how we found out about the cohort and how we got into that. We actually started as just a web design company. We started a company called MiddleCoast Media, instead of MiddleCoast Solutions. We rented an office space at the Efactory because I got kicked off the dining room table. We started a website company because we were bored. I needed something to do, needed a creative outlet. We’ve always had these ideas. We see problems, and we wanted to create solutions for them, but we kept getting too many projects that got in the way. We were approached by Paige [Oxendine] and Rachel [Anderson], at the Efactory, and they said, “Hey, we have this cohort program,” and that was really the lighter fluid. … When we pitched for the cohort, we were three weeks old as a company. We said, “We are a three-week company with a goal for the next 33 years.” We just had that many ideas. So, we took the first one, and that’s what we ran with. We have been having nonstop meetings with small businesses, large businesses, people from the private prison industry, people from the federal prison industry talking about this problem. And they all agree that this problem exists, both publicly and private. We’re not focusing on the federal government because we can’t, obviously. We work for the government. That’s why we’ve decided to take it to the public realm.

Entrepreneurial hurdles
Olson: What are the biggest hurdles you’re facing right now? Does it always just come down to money?
Johansen: Right now, we legitimately have enough users … that if it was used daily, I mean, it would be a decent amount of revenue per day, or per week, depending on what jobs are posted. That’s going to be our big test coming up because fall harvest is getting ready to kick off. I mean, there’s trackers on there, but click to make the connection, that returns us with revenue. I’d say the biggest hurdle, for us, is more of the adoption phase. Ag is very notorious for this. They’re one of the industries that is the biggest adopters of technology, but there’s that grace period in there that people want to try it out, kick the tires, ask others if they use it and if it worked for them. We’re almost three-quarters of the way through that grace period because the last month we’ve seen a number of jobs being posted, and not just in the next day or two, but really looking ahead and planning ahead for the rest of the end of the year.
Lamphear: For us, it was all the knowledge we’re gaining from the cohort program, classes they put you through, the legal help, the business help, the marketing help, everything that they throw you, the resources they throw you are what we really were looking at when we applied for the cohort. That’s what set the Efactory apart for shared office space from most of the other shared places, was the educational foundation they bring. There’s multiple coworking places in town. They all basically cost the same. They’re all in cool locations. They all have hip little environments with unlimited coffee and bike parking and stuff like that. The Efactory’s the only one that backs it up with classes and this community aspect where they’ll bring in community leaders and let you pick their brain and just talk to them. You can’t put a value on that as a startup company. It’s like a mini college.
Schwinum: I said earlier we’re not a tech company. We’re tech-enabled. We have a piece of matching software in the center, with human interaction on both sides of the mapping equation. We are already on the second version of that matching software, and we’re in the process of building the third version because none of the products, so far, have delivered and proven out the scalability that we require in order to, eventually, be able to make thousands of matches. … I need help and support, and the Efactory is phenomenal in providing that support on the development side.
Olson: What about the funding? At the end of the day, you can’t do what you want to do until there’s money put behind it. Of course, a part of this cohort is $30,000 in seed capital through the Efactory’s equity exchange. Do you have any other funds that you’re working with? What is your outlook on gaining more capital?
Schwinum: Besides the $30,000 from the Efactory side, we’re only bootstrapped. There’s no outside funding. I am currently on the fence whether to go for outside funding or not. If you had asked me six months ago, I’d have said, “For sure,” but now, we’ve made progress, real revenue, real client progress, and the question is, do I really need that?
Olson: That’s a great perspective. You’re weighing it on how much you’re giving up?
Schwinum: Yes, and does it, then, deliver the multiple that an investor would be looking for? Does it deliver the 10X in profitability that needs to be there? Right now, the numbers don’t really tell me that that would actually be the case with it. So today, it wouldn’t make sense.
Johansen: We had some other funding. A bulk of it was from a value-added grant from Missouri (Agriculture and Small Business (Development Authority) that we were able to secure at the beginning of 2020, which really helped us build out the platform and helped us do some tests on some business plans.
Olson: How much was the grant for?
Johansen: We ended up securing like $180,000, but we didn’t use all of it because the stuff that we had planned was not really allowed because in-person, roundtable meetings, things like that, with the pandemic. We did come under budget … but most of that was to prove out that this type of technology would be adopted by people in ag. That was a big win for us, but then, also, for this to really scale and be able to cover everything that we want to cover, we are going to have to take some outside investment. We’ve been applying to and presenting to some other angel investment groups that have ag portfolio companies. … We also were able to acquire some dollars from some competitions that we were involved in, which was really great. One of those was Pure Pitch Rally that was based in Kansas City. With everything, and the line of credit, we’re at like $320,000.
Olson: Do you have a goal?
Johansen: We’re trying to finish out the $200,000 raise. That will give us enough runway to add in additional features and tools. But also, it’s the same tools and features that we didn’t put in, initially, just to make sure the proof of concept, we even want to use it. Because we didn’t want to overbuild and have to be constructive and rebuild.
Lamphear: The Efactory funding is all we have. I’m a lot like Henning. If you would have asked us at the beginning of this if we were going to seek outside investment, that was our only goal, was to get funded up, hire about 30 developers and just squash this thing and roll it out. But after really learning more about business, I’m just not sure how much we want to give up. We’ve calculated out how far we can go, and we’re comfortable running as lean as possible and just kind of chugging for the finish line. We’ve calculated out we can go to and through our Phase II launch on the $30,000 investment. We’re not actively seeking any other investment opportunities. It would have to be a very, very good deal to look at it.

Excerpts by Digital Editor Geoff Pickle, gpickle@sbj.net.

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