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Featured Guests:
- Jesse Wolfe – Founder / President, O’Dang Hummus
- Cameron Ford – Director, UCF Center for Entrepreneurial Leadership
- Michael Pape – Dr. Phillips Entrepreneur in Residence; Lecturer, Management
- Donna Mackenzie – Executive Director, StarterStudio
- Carol Ann Dykes Logue – Site Manager, UCF Business Incubator
Episode Transcription:
Voice: “If you build it, he will come.”
Terence Mann: “He will come, Ray. He will most definitely come.”
Paul Jarley: That’s my favorite line from Field of Dreams. But, what if you can’t build it?
Jesse Wolfe: It came out to a $700,000, almost a million dollar, order. And they needed them to be about $10 a cart and I could not figure out how to get them below $25 a cart.
Paul Jarley: Or, what if they don’t come?
Cameron Ford: The Google Glass, people started using it out in public and stuff like that, and quickly were scorned as being what were described as Glass-holes. My understanding is they pulled from the market.
Paul Jarley: Lean start up offers a different approach, but is it really a thing? Or, is it just academics hyping the scientific method?
Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show.
Paul Jarley: This is how significant businesses started back in the day.
Michael Pape: What we were, I’ll just say, required to do as an entrepreneur with VCs with trying to get, maybe, economic development funds.
Paul Jarley: Yup.
Michael Pape: And this was in the biotech space.
Paul Jarley: That’s Dr. Michael Pape, Professor of Practice here in the College of Business, and Director of our UpStarts program.
Michael Pape: So it was a tech-oriented business that I’ve been involved in, was write the business plan, and I have sat down, myself and with my teams, of writing the 40 to 60 page business plan. The fat startup, if I may define it that way, had you do that. Venture capitalists would request it, and they would want to make sure that you saw the plan from beginning to end.
Paul Jarley: Then a funny thing happened starting in the early 1990s. Universities started to develop entrepreneurship programs. They did this partly to serve their economic development missions, partly because donors loved to give money to this cause and partly because more and more students became interested in entrepreneurship as a career path.
Paul Jarley: In the early 1990s, ideals spun out of Stanford, with an emphasis on design thinking. Another decade passed and Berkeley started developing what has come to be known as lean start up. It had a coming out party in 2011, with the publication of Eric Riles book by the same name. But, are universities and business schools really the place to start businesses?
Paul Jarley: I had my doubts. We excel at getting rule followers great jobs in companies who are looking for functional talent. We really aren’t geared up to help people who want to color outside the lines, pursue their crazy dreams, even when people say they’re wrong. That said, a quarter of my students say they want to start a business, and students seem to love the lean startup methodology. Cameron Ford, Director of our Center for Entrepreneurial Leadership, has a pretty obvious reason why.
Cameron Ford: Our students love the lean approach because, of course, they don’t have any resources. So-
Paul Jarley: Simply put, they’re broke. But what exactly is lean startup, and what are its challenges?
Jesse Wolfe: That’s how I started my business.
Paul Jarley: We’re going to take you on a journey with this guy.
Jesse Wolfe: Lean startup, bootstrapping 101. That’s where great businesses, in my opinion, come from because people that start off with too much funding usually have an issue staying on course. When your back’s against the wall is when I feel you think the fastest, the brightest, the quickest and you become the most resourceful. When you have too much money you tend to get lackadaisical in my opinion.
Paul Jarley: That, my friends, is Jesse Wolfe, CEO and founder of O’Dang Hummus, and quite frankly a soundbite machine.
Jesse Wolfe: We run a very successful, thriving business and people are like, “Oh where’s the Lamborghini?”. I’m like, “Someone else’s hands because I’m dumping all my money back into the business”.
Paul Jarley: Now let’s follow Jesse’s startup story. A startup isn’t the same as a company. Back to Cameron Ford.
Cameron Ford: It’s not a miniature version of a company, it’s actually a vehicle, for remaining humble, viewing all of your ideas as hypotheses and going out and collecting data to validate or invalidate these things and move forward-
Paul Jarley: It’s a product development process more than a-
Cameron Ford: I would say it’s more of an uncertainty reduction process. Because it’s not just about the product, it’s also about relationships. So it’s kinda three elements to building a company. You gotta have conceptual kinda stuff put together, you’ve gotta have social stuff put together, people right and you actually have to invest material resources.
Paul Jarley: Interestingly, Jesse got started in exactly the way Mike Pape described except he didn’t have investors.
Jesse Wolfe: I had a business planning writing class with professor Michael O’Donnell. He told us we had to come up with a business plan idea and I didn’t want to be a part of a team that wrote for another bar concept. So, I had this idea after I had my wisdom teeth pulled out for a Ben and Jerry’s style Hummus company. And when I started writing the business plan for it, I realized there was this massive gap in that market. It was almost billion dollar category and there was one big contender really monopolizing it. And it was really primed for competition to come in.
Paul Jarley: Jesse had a plan but no product. So he got busy with the help of his grandmother.
Jesse Wolfe: I actually started O’Dang Hummus with about a hundred and fifty bucks. My grandmother gave me a food processor, so that was the freebie. And the rest of it was honestly just ingredients and some labels from like a little local printer that hooked me up.
Paul Jarley: Jesse had created what we call a minimum viable product or MVP. Cameron Ford says, it’s really important to have a prototype.
Cameron Ford: Because you give them something tangible, I always like to tell people a picture’s worth a thousand words. A prototype is worth a thousand pictures. You get something that people can literally see and put their hands on that’s very tactile. That often will enhance the conversation and imagining process for a lot.
Paul Jarley: You could do more than just touch Jesse’s prototype. You could taste it. And it was yummy.
Jesse Wolfe: And that was the basis you know, it got me in front of people getting a taste testing and samples. And then when it came time to really launch the product and start selling it, I entered the UCF Business competition called ‘The Joust’.
Paul Jarley: Rather than seek out a network of advisors that could help Jess grow his business, he went straight for the financial kill. In retrospect Jesse realizes this may have been the biggest he made.
Jesse Wolfe: Not getting more people around me quicker in that space was a bit of a hindrance.
Donna Mackenzie: I think starting a new business is sort of like waiting into the ocean with waves crashing around you and birds pulling you this way and that.
Paul Jarley: Donna Mackenzie is executive director of Starter Studio. She thinks Jesse waited way too long.
Paul Jarley: How early does that need to start? That mentorship and guidance.
Donna Mackenzie: Day one.
Paul Jarley: Jesse didn’t win ‘The Joust’ and the big money that came with it. In fact, he finished third.
Jesse Wolfe: I took third place in that. And I’m proud of that.
Paul Jarley: That’s always the path to success in ‘The Joust’. Always finishing third!
Jesse Wolfe: Third place is the winning spot. It’s not first, it’s not second, it’s third.
Paul Jarley: The money is in third.
Jesse Wolfe: The money’s in the third. Yup.
Paul Jarley: You lost to women who wanted to pee in a cup.
Jesse Wolfe: Yeah, that’s [crosstalk 00:06:57] I lost to a female urination cup so that’s one of my greatest prides thus far at UCF. But yeah, I took that prize money it was about four thousand dollars. And again, I launched now our multi-million dollar business with $4,150.
Paul Jarley: But in fairness of that day, because I remember that day really well.
Jesse Wolfe: So do I.
Paul Jarley: I can imagine you do. I don’t think anybody there believed you didn’t have a killer product. I think they thought you couldn’t make any money at it.
Jesse Wolfe: Yeah, agreed.
Paul Jarley: Understand that Jesse isn’t the kind of guy who takes no for an answer. He decided to double down instead. Next stop, the real shark tank.
Jesse Wolfe: Hello Sharks! My name is Jesse Wolfe. I’m a UCF student from Orlando, Florida and my company is O’Dang Hummus. Today we’re seeking $50,000 for 10% equity stake in my hummus empire.
Paul Jarley: Jesse got his offer from the sharks but they took way too long with their due diligence. In the meantime, Publix came knocking. What’s surprising here, is they didn’t want Jesse’s traditional hummus, they wanted his hummus based salad dressing. So he signed a deal, found a packager and had to scale up production without sacrificing quality.
Jesse Wolfe: We’re doing truckloads of chickpeas at a time right now but it’s the same exact quality and consistency. As a matter of fact, we’re still using-
Paul Jarley: As what came out of your blender right? That’s the tough part right?
Jesse Wolfe: Same blender. The toughest thing I’ve had to bridge.
Paul Jarley: Problem was, Publix didn’t know what to do with it.
Paul Jarley: They didn’t know where to put that product.
Jesse Wolfe: Exactly. Exactly.
Paul Jarley: So where I would always find it is near the deli, kind of by where the rest of the hummus was but not really.
Jesse Wolfe: Not really it was by like, the gourmet mustards and stuff. I’m like alright this is random.
Paul Jarley: And I knew right away, I thought “Oh that’s a problem.”
Jesse Wolfe: Yeah it was a huge problem. And we called it a sauce. We let people convince us to call it a sauce. It was so jacked up. Yeah, and again but it was such a good learning lesson because we re pivoted to what, I mean it’s always been a dressing. So we relabeled it a dressing, we fixed the formulation, we listened to our fans and we delivered a product that’s bar none phenomenal.
Paul Jarley: Since that time, Jesse has had more than his fair share of struggles.
Jesse Wolfe: Never giving up. There’s so many times that I look back and thought we were dead and I stepped one more step.
Paul Jarley: He’s fixed his mentoring deficiencies.
Jesse Wolfe: But where I’m at today, I have very strategic, very specific mentors that are in the food space, that know packaging, that know consumer product goods. These are people that are really helping me thrive in my space. Not all mentors are created equal.
Paul Jarley: And he doesn’t panic the way that he used to.
Jesse Wolfe: Don’t burn everything down around me, you know trying to freak out. I just step back and I go “Here it is.” Right, we have another problem. Instead of panicking and pointing fingers at whose fault it is, what’s the solution.
Paul Jarley: And he is definitely a man who knows his value proposition. Listen to his pitch to Costco.
Jesse Wolfe: So, you know what I did is I walked in and I put a plate of salad down. A really beautiful salad. And I said, “Here’s one salad.” and I put a second plate down, I said “Here’s another salad.” And I took a bottle of canola oil that you cook with and I poured it all over top of this lettuce and I took a bottle of water and I poured it all over top of this lettuce. And then I took about a cup and a half of sugar and I poured it on top that salad. And then I took mine and I put chickpeas, beautiful fresh cooked chickpeas, I put fresh squeezed lemon juice on it, put it on the side and I put beautiful extra-virgin olive oil. And I put a fork right between the two plates. And I said, “Now, I want to ask you which salad would you like to eat?”
Jesse Wolfe: Our food system in America is broken. We’re the only salad dressing in the United States to gain national distribution being 100% plant based. Priced completely competitive to the big guys. We’re not a $10 salad dressing. We’re in Wal-Mart at $3.79.
Paul Jarley: No doubt about it, Jesse is a wonderful UCF success story. But is he typical? Does lean start up work everywhere? Or do other kinds of companies face other kinds of challenges?
Carol Ann Dykes Logue: There are companies that failing fast is better for them, I say sometimes it is.
Paul Jarley: Carol Ann Dykes Logue is site manager for the UCF incubator program. She stresses the difficulty a lot of the high tech companies have in implementing the lean start up approach.
Carol Ann Dykes Logue: It’s very difficult to apply the lean start up methodology many times. I’m working with very leading edge technology and innovation companies where the first question really is, “Can we make the technology work?”
Paul Jarley: That takes money, sometimes lots of it. Then there’s the challenge of getting technologically oriented minds to focus on the value added to the customer. Here’s a recent conversation with one of her clients.
Carol Ann Dykes Logue: And I kept asking him, “Tell me what you think. What’s the benefit of this technology that you are in the process of developing?” Throw something at me that was really a technical capability, I would come back to “Why should I care about that? How’s it gonna help me?” Tell me how it’s gonna help me.
Carol Ann Dykes Logue: A lot of times I use analogies and turn the tables on them and ask them “Alright, share with me a recent buying experience that you’ve had. Tell me what went through your head.” And they can pretty clearly tell you that and then they go, “Ohhhh, I see now.” Yeah I didn’t really care how it does what it does necessarily, I care that it does what I need done.
Paul Jarley: For students, finding the right people to talk to can be challenging when they wanna validate their ideas. Back to Cameron Ford.
Cameron Ford: Well I think in the early part of the process we’re working on with most students. I think for them it’s very intimidating to think about going out and talking to a bunch of people about their idea. They just don’t know that many people that can connect them to the kinda folks that it would be relevant to speak to. It’s one thing if they’re talking about “Hey I’d like to open up a food truck that’ll pull up here on campus and serve sandwiches to students.” Well then you can go around campus and talk to students right, that’s who you’re trying to sell it to. But if you’re trying to do something that might help the elderly or something like that, you need to go out and talk to 50 or 60 people. Where are you gonna find those folks? How are you gonna conduct those interviews? That part of the process can be pretty daunting if you’re a student trying to go and really do the lean start up process really the way it’s supposed to be done.
Paul Jarley: Even when you find the right people to talk to, Donna Mackenzie says that the discovery process can lead to conflicting information. And it can be hard to sort out without experienced mentors.
Donna Mackenzie: Oh that’s the tricky part. You know, you get so much feedback and it’s sometimes hard to discern whether this is the right direction or that’s the right direction. Just giving them the tools but not giving them the guidance and the mentorship to kind of sort through all of that. I think that’s really where you get that analysis by paralysis and it’s hard to get unstuck from there.
Paul Jarley: And if you skip this step, things can get ugly.
Cameron Ford: Don’t start organizing your resources and your people before you get your story straight. Because if you do that, you’re going to cause a lot of harm. A lot of things aren’t gonna work out, you’re gonna burn a lot of bridges.
Paul Jarley: People lose confidence in you.
Cameron Ford: Right.
Paul Jarley: And according to Mike Pape, there’s a lot more to creating a company than the lean start up process contemplates.
Michael Pape: An investor’s going to ask you, you want $400,000 what are you gonna spend that on? Well, you have to justify the use of funds and-
Paul Jarley: Ping pong tables probably aren’t it.
Michael Pape: Yeah, aren’t gonna be it right. Exactly. And a big salary is not going to go [crosstalk 00:14:42] Yeah there’s something to that.
Paul Jarley: So, you need to have a strong, long term financial plan.
Michael Pape: So with financial modeling the first thing you need to do is you have to establish what are and what I call and try to convey, value generating milestones. Not just milestones but value generating. To accomplish each of those milestones and they’d be value generating because they can create an influction let’s say. The value for the company, they can move the needle per say.
Paul Jarley: The hockey stick.
Michael Pape: The hockey stick. But then there’s a cost associated with hitting each of those milestones. And the investor wants to know how much it will cost to hit that milestone which is the basis for your budget.
Paul Jarley: Right.
Michael Pape: Which you then transfer to a spreadsheet which is your pro form a budget which is your financial model. And if that cash balance gets below zero and is red, I ask do you have a company?
Paul Jarley: No.
Paul Jarley: It’s time to call the question. “Is lean start up really a thing?” from Donna Mackenzie.
Donna Mackenzie: Yes. It’s really a thing and I think it’s really a thing because it gives you a framework from which to build out of uncertainty because building a business is full of uncertainty.
Paul Jarley: From Michael Pape.
Michael Pape: I think lean start up is a thing where you can be nimble and adjust to the pace of change.
Paul Jarley: From Cameron Ford.
Cameron Ford: Yes, it’s a thing. It’s made people understand how to evolve their ideas into fitness.
Paul Jarley: From Carol Ann Dykes Logue.
Carol Ann Dykes Logue: Sometimes it is. There are companies that failing fast is better for them.
Paul Jarley: From that hummus king, Jesse Wolfe.
Jesse Wolfe: 100% yes I do.
Paul Jarley: It’s my podcast, so I get to go last. Reducing uncertainty by employing hypothesis testing in the scientific method is hugely appealing to academics. It’s how we think. But any good, thoughtful researcher knows the limits of such work. Especially when you’re trying to understand how people behave. It’s why having experienced mentors is so important in start ups. It can augment science with experience and increase the likelihood of success. If I were looking for a school to help me start a business, I would want to know much more about their network of experienced mentors then their grasp of frameworks like lean start up.
Paul Jarley: Management research can be kind of trendy. And something will eventually replace lean start up as the darling theory of the day. But building a strong network of advisors that can help navigate you through uncertainty is never going to go out of style. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extensive interviews with our guests and notes from the show.
Paul Jarley: Special thanks to my producer, Josh Miranda. And the whole team at the office of Outreach and Engagement here at UCF College of Business. And thank you for listening. Until next time, charge on.