South Dakota Innovation Expo 2021

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Sioux Falls, South Dakota. Everyone, if I could have you guys move to a table, get sat down. I know we're here to, to network and meet, but we're going to go ahead and get started with the. So my name is Nick with the Enterprise Institute. I am one of the hosts for Innovation Expo along with our co host startup Stu Falls. This is year 18 of being the place where suits and shirts connect in our community. Really just a great opportunity for founders, investors and the different resource partners in our community to get a chance to meet up and really get a chance to know each other. Last night we were having our speaker dinner and Mike Grigsby, one of our speakers today with the city of Sioux Falls, was talking about kind of the opportunity that South Dakota and Sioux Falls has right now in front of us with population growth, the number of building permits going on, the investing community that's being really built up in this area. And just one of those things that we really want to make sure that we're capitalizing on. And so that's a big part of what Innovation Expo is. You know, our lineup of speakers this year is a really a great representation of what that means to connect where suits and shirts are. Today we have some really amazing shirts. Those founders, we have people that have received angel investments in the last year from Falls Angel Fund and other angel funds across the state. We have those investors as well that are also going to get on stage and talk to you a little bit about what they do and the decisions that they make and how they make the decisions to invest into companies. And then we also have some of the amazing resources that are going to let you know what it takes to help build a community and build an entrepreneurial ecosystem. So really just an opportunity today to learn more about kind of what's going on. And you know, one of the things I always tell people in kind of getting Ready for Innovation Expo is this is also a chance to celebrate what's going on in our communities. Sometimes as Midwesterners, we might be a little shy or we might not always want to make sure that we're talking about the successes that we have and the great things that we're doing. So this is an opportunity to get to know each other and an opportunity to connect. So please keep in mind that if you are one of those founders in the room, you know, we have lots of college kids in the room. You know, if you're a college student working on A business idea. There are investors, there are CPAs, there are bankers, there are lawyers. There are lots of different resources in this room that can help you move your business forward. You know, and one of the most amazing things to me about this is that the people that are here that do these things want to help. You know, just again to talk about kind of the success and really what's going on in this area. For anyone that reads Matt Paulson's blog, back in March he talked about a recent angel fund meeting where there were three investments made of over five for over $500,000 total in three different companies in the area. And that's one of those things that you really, you don't expect to hear about. So those types of things are going on in this community are things that we want to celebrate and we want to make sure that we're talking about today. So before I go any further, I just want to make sure that I'm thanking the people that helped make this a possibility. Our diamond little sponsor today, MarketBeat. If we can give a round of applause to Matt Paulson and Maureen Ohm and everything that they do. This is a big part of why we're able to do this. You know, we met back in April to start planning this with the startup Sioux Falls team, our co host, Matt and Maureen. And really things kind of, you know, they started as a snowball and they turn into a big old avalanche by the time we get here in October. So it's amazing that we have the ability to do these things also. For several years now, the Bush foundation has been our platinum level sponsor and they're a big part of allowing us to put this event on and make sure that we're connecting individuals. So it's pretty amazing. And we just can't say thank you enough to all the sponsors that allow us to put these things on and, and not only allow us to put on this conference, but also allow us to make sure that we can support the entrepreneurial ecosystem of our state. Couple of housekeeping items. First and foremost, refreshments and snacks will be in the back corners. So if you get hungry or thirsty throughout the day, you need a cup of coffee, you know, we'll try to keep the energy levels up, but if you need something to snack on, go ahead and check out in the back. If you need to leave at any point during the day put. Perfectly understandable, but we'd love to see you come back at about 5:00'. Clock. Your little lanyards here. Have a drink coupon if you know who Tim Weilborg is. You can go say hi to him. He'll probably give you a few more. And we're gonna have a little happy hour with some food and some refreshments out on the wing here at five o'. Clock. So we'd love to see you back. If you have friends that couldn't make it to the full conference, please invite them to the happy hour. The more the merrier in that regard. One thing as well this year I want to make sure that I impress upon everybody is that we want to hear from the audience, we want to the questions that you have for our founders, our investors and our other resource partners that will be on stage today. So Peter and Sarah from startup Sioux Falls will have a microphone available when a presenter gets done. We're going to try to leave a few minutes for Q and A. So this is your opportunity to ask questions of these individuals when they're on stage. For those of you that ask a question, we have some free swag, We've got some startups, Sioux Falls T shirts, we've got some MarketBeat T shirts. So if you've ever wanted to get a promotional job working for Matt, here's your opportunity. So just please keep in mind that this is your opportunity to ask those questions of the individuals on stage that are doing some amazing things. Lastly, I did ask Matt if he would keep down the number of Matt Paulson secret text club texts today. So you shouldn't be getting too many notifications from Matt. Matt, how many do you have planned today? Two or three? Okay, that's a great answer. All right, so with that, thank you again for coming up. I'm going to have Matt actually come up here for a second and introduce our first speaker. Our first speaker today is actually. This is one of the amazing things about this conference. So our first speaker today actually came up last year and told us about what he was working on and where he wanted to go with it. And in the last year, he's made some amazing progress and Matt's going to share a little bit more.

I did not pay Nick to say anything about the awesome text club that you can join by texting 605-636-8097. Definitely don't text hello to 605-636-8-097 because if you were, if you were to be on that list, you would have heard two political announcements that beat the Argus leader within the last week. So I've been having a lot of fun with that. I'm actually up here to Introduce Michael Zuercher from Prismatic. Prismatic is a portfolio company of me personally, but also Falls Angel Fund and some other local investors. Michael spoke last year. Who was here last year. Yeah, I'm sorry that if you were here, it didn't go very well. We had AV problems. We had remote speakers. It just. It threw us off. But we hired Critical Productions this year. They've done a fantastic job. So thank you to Pinnacle for making this awesome stage and getting the AV right and the streaming right, and I think we're going to have a great day today. So Prismatic is an enterprise software company that works with other big enterprises to create basically what it is. It's a managed instance of another platform called Zapier or something like it, where you've got data and you want to expose it to your customers. And how do you do that? Turns out to be a challenge. So Michael was another company called Zircher Technologies, which merged with another company called Tritech and is now known as Central Square Technologies. Michael's exited that company and he decided to get back on the wagon and do a new startup. Michael spoke last year about what they're doing, and since then they've raised a few million dollars and have had some good progress. So we're going to hear about that progress now from Michael.

All right, thank you, Matt, and thanks, everyone for being here. Good afternoon. So, as Matt said, I was here last year. I'm hoping for a clicker that clicks this year. So this is my big hope. But, you know, I'm here just to give an update, I guess, on Prismatic. And I'm going to do this pretty briefly. Leave a bunch of time for questions in the end. But as Matt said, when I spoke last year, we were in the really early days and have made some progress since. So to kind of start things off, what is Prismatic? And to be clear, this is a pretty nichy thing. But the gist of this is that software companies for years now have been pushed more and more to provide integrations between their software and the software their customers use. So you all have examples of this in your business or in your work, probably. If you have a CRM, you expect that it just integrates with your financial system. If you have an erp, you expect it integrates with just about everything. And historically, that burden was put on the customer. And the customer would, either through internal means or by hiring a contractor, they would build integrations between the tools they were using. What's happened for a lot of reasons is that expectation has been put onto the software vendors. And so if you're a software vendor selling software to business, it's just expected at this point that you connect to just about everything else they use. And I have the scars of this. As Matt said, I had a previous startup, spent about 15 years in a company that sold software to law enforcement and dispatch centers. And we had about, by the time I exited that company, we had about 600 integrations spread across a couple thousand customers where the average customer used eight integrations. And so it was just this impossible to manage environments a bunch of ways. So that's the problem. And Prismatic is meant to be the solution, and we're working quickly in that direction. So the gist of it is that we provide an integration platform that is specifically built with that in mind. So our only customers are B2B software companies. There are a whole bunch of other parts of the integration space served by lots of other companies. That's not us. What we do is we serve B2B software companies with this really specific problem. Okay, so we're a couple years in now. We have this solution that does a lot of things, including kind of common workflow type things. So as a software company, you can say, hey, every time something happens in my software for my customer, I want you to talk to another system that they have. If I sell a CRM, every time they add a new name, I want you to automatically email that name or whatever the example is. And so without going into a ton more detail to just kind of talk about the progress we've made, when I was here last year, we'd been building for about a year by that point, almost, I guess we'd been building since late 2019. We had a team of eight at that time, I believe we had raised a pre seed round from the three founders of the business and were pre revenue, but in private beta. So we had customers that were using the product. We hoped they would convert to customers, but we were pre revenue. And the reality is we were just hoping that what we were building was something that somebody somewhere would want, you know, and that's. That's a really uncomfortable time for me, or at least it was. You know, I. I had kind of come off the little bit later stage company and suddenly was right back to the beginning where some of you probably are as well, where, you know, we don't have a lot of customers to talk to. We don't have a lot of signals from the market. We're just hoping that we're right and that this is actually going to be a market, and our market is a carve out of kind of a bigger market. And so it was entirely possible that we were just wrong and it wasn't actually going to kind of turn into a proper niche. So I didn't say a lot last year is the reality about Prismatic, because there wasn't a lot to say. But in the last year we've made a lot of progress. We've done a whole bunch of research and development work. You know, one nice thing about not having a bunch of customers in the early stages, you can move the product a lot faster. You know, as some of you know, there's, you know, as you kind of accumulate the debt that comes with more customers and a bigger product, it slows you down in a lot of ways. And we were right back to the beginning and able to move really quickly. So we really fleshed out the kind of vision of how we could serve B2B software companies and how that would look different than traditional integration platforms like Zapier. You know, as Matt mentioned, we took our first paying customer live in December. It's actually Raven in town here was our first customer. They used it for one of their software products that they sell into the ag space. And we've taken more live since we officially launched our product in March to general availability. Grew the team. You know, as we've, as we've gone, I think we're 11, soon to be 12 at this point. And we started turning on top of the funnel, which is where things start getting interesting. That's where you. That's where you meet the market for real and find out whether what you built actually resonates for real. We started doing demand gen, we started doing paid ads, we started just driving the top of the funnel. About that time, it was clear to us that we were at least not completely off track. We had iterated a lot along the way. We had customers who were clearly interested. And so we raised a seed round. We were able to do it completely locally in Sioux Falls, which was great for a whole bunch of reasons, if for no other reason than it was just a lot less work than raising it institutionally. And when, you know, when time is the premium, in the early stage especially, that was just a really, really slick way to do it. So super happy with the ecosystem in Sioux Falls and that that was possible. You know, in my previous business, we hadn't done any, you know, anything locally from a financing perspective. And it was cool to be able to do it this time. So. So a lot of progress. But the most important progress. And I think I said last year, you know, the only thing that we cared about, the only thing that mattered, was finding a path to product market fit. Like, until we, until we got to the point that it was really clear that what we had resonated and that we were in the right place, nothing else really mattered. And so you just keep talking to customers, iterating, talking to customers, iterating, etc. And we now have some early signs that we're on the way to product market fit. The vision that we kind of set out with which, to be fair, we got to cheat because we were solving a problem that we ourselves had for 15 years. But it turns out that other people have that problem as well, and it resonates, and that's really, really good. Second, we've started to figure out how to talk about this to the market. And that sounds so dumb when you say it, but it's so hard to come up with the right words to say, especially when you're defining a new market segment where there isn't just an established vocabulary for what this is. You can't just say, I'm an X because there is no category for this thing. And that was really challenging. Honestly, that's been one of the hardest parts of the last two years, is kind of figuring out how to message this to where it, it clicks with people quickly enough that you don't spend the first 30 minutes of a call trying to get them to understand what you're doing. And, man, did we have some just painful, painful calls for a while as we were, you know, as we were trying to learn how to talk about this. So we kind of got that figured out. And I think the last thing that I would say on the way to product market fit is a lot of the differentiators that we bet on. It turns out at least some of those seem like they're going to be real lasting differentiators that matter. And, you know, another interesting thing about carving out a new market segment is we didn't have established competitors. We couldn't just say, here's the list of, you know, five big competitors and we're gonna go, we're gonna go be better than them in this way and peel it off. It was a very moving target. There are a couple other startups, mostly on the west coast, that are doing the same type of things that we're doing. There are a couple established companies that are kind of pivoting into our space, but it's been just this really, really moving target. And so we had to just make a bet. Here are the things that we think we can kind of stand alone on and invest a lot in that will be lasting differentiators and that that has paid off. So, you know, I guess as far as the last year goes, I mean, I'm extremely happy with how things have gone. I always wish things would go faster and get bigger and whatever. But, you know, we've had a really, really good year. We, you know, we've gone from pre revenue to post revenue, which is pretty great. We, you know, we raised around, which gives us enough Runway now to hopefully kind of march down the next 18 months or so, you know, which, which is where we need to get. So. So as we look at that next year and a half, there's a ton to do. We have really clear signals from the market now because we're talking to so many more customers and prospects than we were. We have really clear signals not only about the stuff we've done, right, but, but also the things we've missed on. And there's always going to be plenty of that, right? And so we're basically running around now saying, okay, turns out we missed the market on this, it went a different direction or we just misunderstood or whatever. Now we need to redo this thing in this way. And it's all, it's all just rounding errors kind of to some extent in the scheme of the whole thing. But it sure takes a lot of time to clear up. And so, you know, we're going around redoing some pieces. We're going around, you know, improving the product, continuing to invest in differentiators where we can second. It's time to start, you know, refining our top of funnel activity. I mean, we, we have an actual pipeline built now. We have top of funnel that's, that's working, but we need to add more sources to that. We need to start doing real outbound sales development with the cold emails that we all love getting. You know, whether we all love them or not, they work. So, you know, it's time to start doing that. We need to identify how to, how to get the ear of the buyers of this. Unfortunately, the buyers of this are CTOs, VPs of engineering, product managers and software companies. Those people are pretty good at not answering emails and not answering the phone. So it's actually kind of a challenging outbound marketing, marketing challenge. So we've got to get going on that. We also need to continue to process size. We've just started this, what I call kind of the mid funnel activity. It's great. You get leads in, you qualify the leads. Well then in an enterprise cell like this, you've got a long process of, you know, probably running a pilot or a proof of concept, touching the, you know, on average, probably five different influencers in the deal. And we're doing this with a sales team of essentially, you know, me and one other person. So, you know, we need to start processizing that and learning how to do it as efficiently as possible. Because one of the things that's going to matter in this business long term is whether we can get the cost of acquisition low enough by being efficient enough in kind of the entire funnel. But from this perspective, at that mid funnel activity, if people aren't a legitimate buyer, get them out of the process as fast as possible. If they are, figure out how to best invest to make sure that you outrun your competitors, which are probably in the deal as well. So a lot of work to do there. We now have enough of a thesis that we really have a strong belief in that it's time to take a strong thought leadership perspective in the market. And there's a lot of room for somebody to take that. It's a new market segment. There aren't a lot of people talking about it. We have some competitors that nobody's ever heard of that are talking about it as well. But I mean there's, there's room for somebody to take that, take that crown. And we have enough of a, of a message at this point and enough of a strong belief that we need to do that. So, you know, we're starting to invest more in that. The thing that people don't talk about at all is, you know, at least a lot is this next one. You know, a lot of times you think of company culture as you get to a later stage and there's no question that when it's three founders, there isn't a lot to worry about from a company culture perspective because you're just trying to figure out if this is even a real idea. But where we're at right now is where processes are starting to get put in place. Even as small as we are, we're only 11 people or whatever, but you're still starting to set groundwork for the way this company communicates and behaves and all of those things. And some of that is changing. We're starting to spend way more energy on marketing and sales than we did before. And that's good because that's how companies grow and survive. But it's also a change from the early Days that feel kind of like a science project to some extent. And so we need to make sure that our culture grows in the right way as we make those transitions. They're good transitions to make. You just need to make sure they don't get you off track from a culture perspective. So it's time to start spending time on that, on cadences, on kind of the heartbeat of a company. And then lastly, all of this is kind of the next milestone for us from a kind of company trajectory perspective is a Series A round. You know, I think I try not to get very caught up in the fundraising thing because fundraising, I believe, should be thought of as a thing you have to do to get where you need to go, or at least you may, depending on your business. It is not an outcome, it is not a finish line. But in our case, a Series A will coincide with our belief that we have a repeatable sales model with metrics that make sense to scale, so a cost of acquisition that makes sense given the lifetime value of our customer. Enough of a repeatable model that we know that if we triple our sales team, we expect to have at least a tripling of top line ARR or of revenue. And we're not there yet. We don't have enough data, we haven't run enough experiments to know that. And so when I say we're driving to a Series A, what I really mean is we need to drive to a repeatable model where, you know, kind of all of the moving parts of selling our solution, implementing our solution, supporting our solution works from a unit economics perspective. So, I mean, that's where we're at. Like I said, kind of brief overview, Happy to answer any questions or if anybody is super interested in productized integrations for B2B software companies, I would love to talk. But any questions on any of that or where we're at?

So if you have a question, go ahead and raise your hand. Peter or Sarah will come over and hand you a microphone.

I think.

Anthony, over here.

Oh, hey.

Michael, over here in the back.

To your right, to your.

Okay, gotcha. Thank you.

How, when you make the integrations on the back end for your customers, how manual is that or are you able to automate that?

Yeah, so that's a super good question. You know, the thesis of our product is that we are not building the integrations. We are a platform on which a software company can more easily build their integrations for themselves. And so the right way to think about that from our perspective is that, you know, when you build an integration or 20 integrations between your product and something else. 80% of what you did has nothing to do with the specific industry you're in. It's no different between healthcare or AG or CRM or whatever else. It's things like logging and security and reliability and stuff that's just the same horizontally. That's the stuff that we're trying to provide from a product and a platform perspective, which, which then should let our customers build integrations where they're only focusing on the things that are actually specific to their domain. There's no reason for a software company to be the 50,000th company that has figured out how to deploy scalable integrations in a, you know, in the cloud. But there's a really good reason for an AG company to figure out what their customer needs from a workflow perspective and actually innovate inside their market. And so, you know, we're not a services play in any way. We're not the ones building the integrations. You know, we're trying to provide the platform on which our customers can do that. And we get away with that because they're software companies. Right. So like kind of by, by their nature, you know, they, they have the skills and the workforce to do a lot of those things.

Yeah. Time for one more question.

So let's tug on that thread just a little bit more. Real world example of a customer, your ideal customer.

What do they look like? How do you help them? You talked about Raven, but more to the point, what does it actually look like and what are they getting from.

You at the end of that project?

Yeah, so I mean, if, let's talk kind of a classic customer is a mid sized software company, you know, that probably has their product in the cloud and is probably in a vertical market that has a whole bunch of other players in the ecosystem. So if you talk about, I mean, AG is actually a pretty good example. You have software, let's say, that manages the spraying of fields, right? Well then as it turns out, every time you spray a field, you need to deduct the chemical that got used from the erp. Oh, and you need to file a thing with the EPA saying that you sprayed it on this acre. Oh, and you need to know which field to spray which comes from some mapping system. If you're the one selling the spray management software, you don't own any of those systems. That's other stuff. And so what a customer doing, or what a customer of ours would be doing for their customer is providing a marketplace so that the customer of ours, the Customer of our customer, sorry, can. Can go into their product and say, hey, I use Acme ERP to track my spray chemical, whatever. So they can click connect or whatever. Just like a lot of us are used to in Salesforce or Slack or anywhere else. But now in a vertical market where it doesn't probably make sense due to various economics, to build some giant marketplace, you can build that marketplace on top of us and with much, much less effort have an embedded marketplace in your product to make those connections and whatever else. Does that make sense? Cool. Awesome.

Well, Michael, thank you very much for coming again. Maybe we'll have you come again next year. So, ladies and gentlemen, Michael Zuercher. Thank you. So before we bring Paul up, one thing, by the way, Paul, if you're in the room, could you raise your hand? Hey, there you are. Hi, Paul. Before Paul comes up, if it's your first year at Innovation Expo, could you please stand up quick? It's always just a good idea. Lots of people. That's awesome. Okay, now real quick, if you're not standing up, if you've been to Expo before, go give one of those people a high five or shake their hand or just say hi to them really quick. All right, so our next speaker today at Innovation Expo, our next speaker last visited South Dakota while driving across the country in an Airstream with his wife. Paul Singh is co founder of Bump Health, which he has bootstrapped to $40 million in revenue. And he's made over 3,000 direct investments into tech startups and Main street businesses. Many of you maybe have had the chance to interact with Paul. He's been in here since Tuesday. He's encouraging us to give us his time and hang out with lots of different people. Yesterday he spoke at Dakota State. He hung out with us and had dinner last night. So really great to have the opportunity to connect with Paul and talk about what he's been doing. So with that, ladies and gentlemen, please welcome Paul Singh to the stage.

All right, well, thank you for the intro, by the way. Time wise, how long do I. 30 minutes. All right, so that's about 40. It'll be great. All right. Tough crowd already. Okay.

All right.

My name's Paul Singh. I'm really thankful, actually for the opportunity to be here to be very candid with you. Half the reason I'm here is completely selfish, and that is because, you know, I want to figure out where the investments are happening, whose deal to sneak into and that sort of thing. But the other half of the reason I'm here and maybe Whatever the opposite of selfish is that I sort of want to kind of give you guys maybe a view from the outside. I think a lot of times when you get stuck in your own business or your own community, it's sometimes hard to keep tabs on what's happening everywhere else. So what follows here is really sort of. I'm going to give you a quick overview on my background, just for context. I'm going to actually then start with two main ideas I want to leave you with. And if you just walk out at that point, I won't hate you. But at least I got my piece in there. And then I brought data to back it all up, actually. So if you do stick around, I'll show you kind of the data and stuff like that. And all throughout this. By the way, that did not sound interesting. I will make it interesting, I promise.

For you.

But honestly, ground rules here. I know we've got question the mic and all that stuff, but heckling is encouraged. You can throw questions out, keep me on my toes. Half the fun of this is really testing ideas in public. So my goal at every event that I speak at is to try to find the line that I can't cross before I don't ever get invited back. Actually, I have one slide on here that I think might make Nick uncomfortable. So we'll see how it goes. The nervous laughs are good, actually. All right, so background. I won't make you, like, I won't tell you 20, 25 years of history. My daughter tells me I'm a geriatric millennial. Now, apparently, I'm 40, and the local classic rock station is playing the music I listen to in high school. Maybe some of you guys can commiserate with that. I gotta see my therapist tomorrow. But anyway, I built a lot of companies over the last 20 years. Some of them were mine, companies that I founded. Some of them were other people's companies. I spent some time at the White House as well, in the Office of Science, Tech and Policy, where we specifically wrote some of the work around the extraordinary visa that we use, the O1 visa that we use to bring funded founders into the country. Country. So an operator. But I also, you know, so. So in 98, I started a hosting business and started thinking a lot about, you know, I didn't want to be employed. I didn't like the idea of, you know, show up at 9 and, I don't know, 37 minutes for lunch and somebody gets pissed off at you. I was. I'm just inherently unemployable. And so I started by building a hosting company, grew it pretty large by 2004, started, stepped out of it. We installed the team. I'm going to say we, over and over to make it sound a lot bigger. The we is just me and my wife. You know, we got. It's just us. And then I stumbled around and I spent the last 15 years just investing in as many entrepreneurs as I could. So about 3,000 portfolio companies now across 56 countries. I live in Virginia, actually, and somebody asked me yesterday why there was a gap for Africa. It just turns out there's not a lot of direct flights from Washington Dulles into Africa. So, anyway, tough crowd. Anyway, point is, though, what I'm going to try to show you over the next few minutes is that it's the same everywhere. And one of the many ideas I hope to leave you with is if you can't build a company in Sioux Falls, moving is not going to help. So awkward. Am I going to get thrown out yet or. No? I don't know. Okay. All right. So I first started investing in everything, everywhere. Flying about a half a million miles a year. After I had my first ditto, I started thinking like, well, I can't. I don't want to put my family on an airplane. There's a long story there. Decided to buy an rv. Did not tell my wife about it until after I bought it. Best and worst idea ever. So, anyway, built that thing out, potty trained our daughter in that thing, which is great, and just started driving. There we go. Just started driving. And, you know, I'll spare you all the details, but what I will tell you, though, is, like, I learned more in those three years living in the RV than I did in the last 17, 18, 19 years of my life. What I mean by that is I learned so much more about what I call the in between. So as an example, again, I won't bore you, but I'll just give you the example. One of My biggest regrets of this whole thing was that I called it the tech tour. I called it the tech tour. And I'll never forget, like, one of the. One of the examples I'll give you about why I regret that is that I was driving from Fort Wayne, Indiana, west, probably. I don't know where. But anyway, right around the border, I'd pulled off to the interstate to get some fuel and get some food and all that stuff. And anyway, this guy comes over, and the trailer, you can kind of see in the middle there, it's got a couple logos on the side And. And anyway, this guy walks over, and he must have been in his, like, late 50s or something like that, and he asked, you know, what are the logos and all that? And anyway, I told him, and he said to me, and I never saw the guy again, by the way. Like, he was just. He said to me, you know, the problem with you tech people is you think tech is. It gives you limitless bounds. You can build anything. You think that tech is the future. What you forget is for the rest of us, tech is the thing that cost us our job. You know, this particular guy worked at a paper factory. And, you know, as we got to talk, I actually ended up walking into this cracker barrel with him and having lunch with him and that sort of thing and really got to know his story. And it was kind of heartbreaking. Something I'd never really thought about is that as the world went online, people needed less paper. And as less paper was needed, a lot of those factories shut down. Anyway, it stuck with me. Even years later, I never saw the guy again. You know, it's not like he was on Twitter or anything like that. And anyway, it stuck with me, and it was just a really interesting time in my life. And so driving around a couple hundred thousand miles in four years, my daughter thinks this is the coolest thing in the world. I guess my sons weren't around at the time, but anyway, I tell you all that to then kind of start with the picture, right? Like, I actually was born, or I actually grew up and still live in a small dairy farming town in Virginia. It's about. Depending on traffic, about an hour west of D.C. sort of up in the hills, that sort of thing. And I still live there. Now. My first business is still two miles down the road. My parents are, like, four miles down the road. You know, the kids all play, so I haven't left. Just like, I imagine a lot of people here haven't really left, and that's okay. But. All right, so I'll pause there and just say, you know, if you guys want to heckle, please, heckle. It's totally okay. If you want to be passive aggressive about it, you can tweet and, you know, I'll find it later and I'll track you down. And I'm sure somebody in here is going to try to sell me something, so I'll just make it easy. There's the LinkedIn, you know, tough man, tough jokes. I'm trying to find the boundary here somewhere. What is. All right, anyway, okay, so the main idea is I want to start. I'm going to start with what I want to end with. So we'll kind of like sandwich this. I'll start by saying that starting a business everywhere has never been easier. And I'll prove this to you with data here in a few minutes. But I'm just going to frame it. So it's never been easier to start a business everywhere else. Sorry, everywhere else. But it's also never been harder to grow it. And this will become more clear to you in the next 10 minutes or so, I hope. Now, this is the one. This is the slide that's going to make. Hopefully. I mean, I don't know. Nick might throw me off stage here. The irony of what I'm about to say is we're at a conference called the Innovation Expo, okay? So please don't kill me. Here's the thing. I think in this country we use the words entrepreneurship and innovation interchangeably, and we do it from a good place, right? Because it's like, you know, we just the same word or whatever. But I think that the case I'm going to make for you over the next few minutes is that they are different and that one is more important for you than the other. All right, I haven't even made the case. I'm done. That's great. Let's get a beer later. That's great. By the way, number one fan. Okay, so here's my point. Here's why I say that. And again, please refute me, right? Like, this is not. I'm saying this assertively, but I don't mean to say it that way, but here's the thing. Innovation to me is about pressing and pushing the boundary of human knowledge. In other words, to go to Mars, you have to create a new life support system. You have to create a new way to farm. Those are innovative things. And actually, if you look at our society, that's why we have advanced degrees and that's why we ask our PhDs to do a thesis. Because that thesis becomes sort of that push to expand some sort of human knowledge. Does that kind of make sense? I know we have a couple academics in here, but I know I'm not doing a great job, okay? But entrepreneurship to me is more about doing something with something that already exists or making something that people already do easier. Okay? So what I mean by that is like, innovation is about creating something entirely new. It's important. Don't get me wrong, it's important. But entrepreneurship, arguably is even more important and even more accessible to you. And again, I'll kind of make that point. So I'll just kind of like drive it home real quick, though. Entrepreneurship is the fundamental driver of growth in Sioux Falls. Again, I promise I'll make the point. It is also for the investors in the room. Entrepreneurship is what you should invest in. Not innovation for the angels and the funds, the venture funds. In here, you must invest in entrepreneurs, not innovators. And for the people that live here, whether you're in Sioux Falls or South Dakota or just the United States. Anyways, entrepreneurship is the fundamental driver of growth in your community. So let me pause there. Now. I'm going to prove it. But questions? Concerns? No. No. Okay. The Midwest is so hard to read, you guys. No, you're doing great. Thank you. That's also nice. Oh, you know, the thing about the east coast is, like, people just tell you when you suck in the Midwest. They're like, no, no, you're great. You're great. You know, I did a talk in Hilton Head. It's funny because it's true. By the way, I was speaking in Hilton Head, South Carolina. I don't know if you guys ever been down there, but it is in South. And my wife's from Tennessee and she loved it down there. Anyway, by the way, Indian guy in his Tennessee. I mean, we're just like a equal opportunity poster. But anyway, I got all these. Bless your hearts. You guys ever had that? I said something like some lady in the. Oh, bless your heart, honey. And I was like, oh, that's. Oh, shoot, she's totally mocking me. But okay. All right, so, okay, by the way, what is the equivalent? Is there an equivalent for South Dakota? Smiling. Oh, wave. I like that. Okay, all right, Now I know what the wave is, by the way. All right, okay, so let me start backing up what I'm saying with some data points. And I expected more smart asses. So I brought data to the gunfight here.

And Paul, we do have one back here who has something to say over here.

Yeah. All right, I just had a quick question.

You had mentioned that you said invest.

In entrepreneurs versus innovators. Can you explain that a little bit? Yeah. So, okay, so entrepreneurs are people that sell something. They don't make it. So, like, if you were to take our portfolio of companies and you just randomly picked any 10 of them, I feel like you would be able to pick any random set of 10 and look at them and be like, gosh, these are sales companies that happen to use technology. They are not tech companies searching for a customer. You know, like, it's a Subtle but very important difference that these people are the people that are saying, like, I don't want to put somebody on the spot, but actually there was somebody that pitched a little earlier this afternoon and great pitch, you know, he's making money and stuff like that. And he sat down and if you're in here, don't raise your hand. I don't want to make you feel weird or anything like that, but I said, like, you know, hey, if I can give you any unsolicited advice, throw away 90% of that deck. And his company was fairly technical, Fairly technical, Very technical, actually. But they do make money. And he spent maybe 10 minutes trying to convince all these investors in the room. And I'll be honest, all those investors, I like to watch the room. They just sort of glazed over, you know, obviously, politely, of course. Nobody waved, by the way. Now, I know you wave, but anyway, the point is though, is that like I said to him, you should throw away 90% of this. And he said, what do you mean? I said, well, look, your first slide. I said, look, I'm not from South Dakota, but just reading the room here, I would have taken the 10 minutes and distilled your pitch down to two minutes. What I would have said is, hey, listen, I'll bore you to death with all the magic we do, but let me click this slide. Hey, these logos right here, these companies pay us a ton of money so that they can make a lot of money again. I'll tell you as much as you want to know. I told them, then click the slide. The next slide ought to be these logos right here. These guys are all within our 30 to 60 day pipeline right now. We think we're going to get them here in the next few weeks, maybe next few months again, I'll tell you as much as you want to know. Bottom line is companies pay us a shit ton of money to make themselves a shit ton of money. What do you want to know? And I said, just stop talking when you get a 10 minute pitch. Make it two. Because the question now is, who speaks up? Because that's the one that's interested. That's the investor that's interested, that's the customer that's interested. And so that to me is what an entrepreneur is like. I'll say one other thing and then, you know, unless you guys want to keep going, that I'll move on. Let me say one other thing about entrepreneurship. English is not my first language, so I immigrated from India with my family when I was a kid, and here's the thing. So, you know, I don't know if anybody else speaks a different language or another language first, but, you know, in your head, you always speak your first language and then you sort of. Does that ring a bell? Does anybody know?

Maybe.

Okay, here's the point. Believe it or not, entrepreneur. In English, entrepreneur is a noun. It is the only place on the planet where entrepreneur is a noun. This country is the only place on the planet where it's something you put on your LinkedIn profile. I find that so strange because in every other country, every other language, whether you're talking about Arabic, Farsi, Hindi, Mandarin, Portuguese, they hate it when you lump them in with Spanish. But still, like, the closest translation is a verb. An entrepreneur is how you think. Entrepreneurship is how you think. It's not who you are. And so we invest in people that think about being sales companies, not people that think about how they can make the widget better. So I don't know if that was, like, maybe what you guys were looking for, but again, you guys obviously think about that. Disagree with me. Form your own thesis. When I started thinking about investing in companies, one of the things I thought a lot about was like, these venture capitalists. Again, in Virginia, there's no venture capital. We're not, you know, we make wine and I don't know what else. Milk, I guess. And somebody asked me, like, what is Virginia like? I said, well, it's like South Dakota. Just maybe it's the same, actually. So, but anyway, so I started thinking, like, these venture capitalists, like, 2008, I'm like, what in the world do these people do? And so I started going to these conferences and trying to, like, learn. And I ran into, like, some really notable VCs back then, and I'm like, what do you guys do? And some of these notable people would sit there and be like, oh, we manage money. And da, da, da, da. And I was like, well, how many deals do you do? Like, how many investments do you do? And they'd be like, well, you know, we do like 10 deals a year. And in my head I'm like, what in the world do you do for the other 355 days of the year? And anyway, the long and short of it is, do you guys ever see that movie in the. It was around that time, 2008. Moneyball. Did you guys ever see that movie? I don't know why that was. Applause but I'll take it. My egos. This is great. But, you know, the core premise of that movie is it's Based off of a book from the 1980s. And what it fundamentally talks about is this idea that baseball players have been selected incorrectly through human bias for a long time. That they tend to get picked by coaches that say, oh, that guy's got a good swagger to him. Oh, I like the way he follows through him that swing. That's how it was done. And I think it was Bill James, the author of the book, went in and said, hey, he looked at the statistics. Baseball, for better or for worse, is one of the sports that has the longest set of data ever recorded. I mean, you can go back to the late 1800s and get data sets on players, right? And so Bill James as a statistics guy went in and basically said, hey, all that is trash. The fundamental, the fundamental tell of whether a player is going to be good or useful to the team is his on base percentage. And his book, basically the fundamental theory of the book was who cares what he looks like or swings like or runs like? What matters is what is the on base percentage. And so he goes on to say, if you agree with me so far, he goes on to say, these players are undervalued by the market. And then he further goes on to say, what if you constructed a full team of high on base players? And so the Oakland Athletics did it. And as you know, in the movie it worked until it didn't. But in the end of the movie, they portray it as a failure. The truth is, it was not a failure. To this day, the front office of most baseball, well, the entire baseball league, but also NFL, has become a Moneyball thing. So I started thinking about Moneyball for startups. What is Moneyball for startups? It would be a statistical model where we invest in about 200 companies per year. I'll bore you to death. But it turns out at above 125 investments per year, your probability of catastrophic loss of the entire portfolio drops to under 5%. So at 200 deals, you at least kind of insulate further. And now you have the option of following the survivors in the portfolio up. Now, we'll get into the math if you want, but the point is, I started thinking about Moneyball for startups. It's a process of aggressively building a portfolio that can return significant amounts of money. And we've been able to do it, but this idea over the years has expanded into. There is a thing called Moneyball for cities, which we'll talk in a minute. And there's also Moneyball for your careers, which I'll hopefully talk about here in a Minute, too.

So far.

I know we're kind of all over the place, but you guys following me so far? Okay, man. Yeah. All right. Hey, whoever the next speakers are, I'm warming them up for you, so you're welcome. I'll be out there for a beer later. Okay, we'll kind of fast forward here. I brought data just to prove my points now. So let's just start with a cliche. Early stage startups have changed. They've changed because it's cheaper than ever to start. 50 bucks today is the equivalent of 5 million bucks 20 years ago. Let me explain. 20 years ago, if you wanted to start a company and accept a credit card, you had to have a relationship with a local bank. You had to put up collateral with that bank, and then they would give you the privilege of that black credit card swiper. You remember that thing? I know you guys don't want to date yourselves. Okay, so then here I am. I'm trying to. I got to do all this stuff and. Okay, now here's the thing. Let's say I want to sell you something with a credit card. Now, I went through all that. I had to have money. I had to know somebody. I had to put 3,000 bucks up as collateral and put my own credit on the line. And on top of that, if I sell you something, I would swipe your card. Now, you would presumably expect whatever it is right away, right? You're like, hey, I just gave you my credit card. You got to give me whatever it is, right? And so I would. But then at the end of the day, I got to run that sheet over to the bank because they want the original. And then six weeks later, as long as you didn't do a charge back, I would get the money minus a bunch of fees. Okay, now compare that to. Now, if any one of you wanted to start a company right now and you didn't want to leave your seat right here, right now, you could download the stripe app on your phone, take a card payment in the next two minutes. So it's cheaper than ever to start. Agree. Disagree. Okay.

All right.

I brought data just in case. Okay, but you agree so we can move on. All right. The second thing that's driving this change is the web's getting bigger, the world's getting smaller. It used to be that place really mattered. It really. You know, when I was younger, I made patios. I was a bricklayer growing up with my dad. And my dad used to say, like, listen, if you remember, like, back then, you would get a caller ID and everything was about area codes, remember that? And like, I don't know how it was here, but like Virginia was like anyway. He would basically say any 5, 4, 0 numbers which are to the west of us. We don't answer, like don't even take the voicemail, don't even talk to him. But anything that's a 703 or a 202, which is to the east, always pick that up on the first ring. And the reason he said that was because to the west of us was all rural. So even if they paid us the right amount of money, the truck going out there, you can only do one job a day. You make this big 200 mile loop to make it work. But if you went to the east, you could do three jobs a day because they're all close together. Place matter. The thing about the Internet is it makes it not matter anymore. So as an example, going back to entrepreneurship, the verb, by the way, let's say you're an accountant at Samford, right? Entrepreneurship doesn't necessarily mean you have to start something. It could mean maybe you do a side hustle, maybe you're a part time.