VO: Get ready for your semi-regular dose of random ideas from the guys at Codelation. We like to talk about big ideas companies that are winning, and those that aren't along with current events in our crazy world of software startups. So come along with Erick and Josh, who challenge you to think big, start small and turn your ideas into something on this episode of, from idea to done.
Josh: Hey everyone, I'm Josh.
Erick: and I'm Erick.
Josh: And on this episode, we have our friend Jake from Bushel. Hey Jake, thanks for joining us today.
Jake Joraanstad: Hey guys. Thanks for having me.
Josh: Yeah. Could you tell everyone, uh, on the podcast here a little bit about, uh, who Jake is and then what bushel is?
Jake Joraanstad: Yeah. Uh, Jake Joraanstad, uh, grew up in here in North Dakota up near the Canadian border, about 10 miles from, uh, came to school at North Dakota state, uh, computer engineering, terrible student on average, uh, ended the four and a half years of computer engineering with a 2.7 GPA and, uh, in, uh, my own company. So I, you know, Y you know, for one way and good the other way. And so, uh, I've been building a software business since 2011. In 2017, we made a pretty strong pivot into agriculture as our main focus. We had really had no focus kind of for the first six or so years of the business. And so that was a turning point for us. And, uh, today the company's brand is bushel, and, uh, we are going to market kind of broadly across what you'd consider the, the grain industry or the row crop space in the United States here. Uh, we're also in Canada with some of our tools and, um, we started as a custom dev shop and, uh, we got to a point here now where we're, uh, have a product and a dev shop, and it's an interesting space to be in.
Josh: And how big is your team no Jake?
Jake Joraanstad: We have 180 people on the team with most of us here in Fargo and a few scattered throughout the Midwest.
Josh: Wow. So, you know, the main thing I wanted to bring you on today is talking about, uh, you know, raising funds, we're here in Fargo and, you know, Fargo gets some buzz about a, a good tech hub, but we're, you know, we're not a Silicon valley, we're not a New York. Um, you know, I'd like to just get your take on raising funds here in Fargo, what challenges are, you know, and, and what, you know, now that you wish you knew when you, when you started out.
Jake Joraanstad: Sure. So I'd say I'm a pretty passionate about this topic. I, when I set out to raise funds the very first time, which was in 2016, at the end of the year, going in 2017, I made virtually no traction outside of the, the immediate market here. I was not getting meetings with, um, Silicon valley players. I wasn't getting meetings with traditional venture. Um, and that, at that time I would blame our inability to articulate what we were trying to do next. Right. We weren't quite clear on why we were changing from a development team only to a, to a product, or we were really weren't even committed to that yet as a company. And so that, that was tough. We raised money locally here. Um, some what you might call like a super angels and family offices that made initial investments of a million and a half of 2017.
Jake Joraanstad: Um, then, uh, within the time of that point, and, and in 18, we had two potential acquisitions come, uh, both from, uh, uh, one from the Midwest and one from west coast. We, we ended up not doing either and we're smart to do that, but it was pretty compelling at the time. It was a super early in launching the bushel product. And that's what they wanted a piece of it was to get, get in early on that and turn that into something that they want to use for their business. So then as I set out, I kind of walked away from those deals and set out, okay, we got to do another funding round. This one's going to have to be 5 million, probably, maybe, maybe more. Uh, the problem we ran into there was the same, except this time I think our vision and our plan was much more articulated.
Jake Joraanstad: And we had made major progress. We had like 30 or 40 companies on our platform and had a few thousand farmers using the tool. And we could, we could not get, we got some attention from traditional venture, but we could not make any progress. And we had to start with defending Fargo. Why, why Fargo? Why do you think you're relevant? What makes a software company even good in Fargo? Are there any engineers in Fargo, these kinds of really ridiculous questions of people who clearly have never thought about this space? Um, so that would tell them about our business of selling software, to grain companies, grain, elevators, elevators, and they would wonder which kind of elevator we're talking about. And I would have to explain, we're not talking about physical elevator that humans get into, but the elevation of grain into a storage facility. And it was very, very difficult to see a path in which venture capitalists companies outside of the Midwest would understand that.
Jake Joraanstad: And so we ended up taking money from a, another family office here in Fargo. Uh, they would lead the whole round, all 7 million basically, and, uh, with some follow on from our existing partners. So once again, no progress in that arena and a year and a half later in 2019, about, about beginning of the year, we started out looking at raising a big round of funding. So we call it a series B, uh, ended up, we originally set out to raise probably 12 or 15 million. We ended up raising 19 and a half. It was a little bit over subscribed in a little bit. We realized we needed to raise more than we planned. And so in that process, we did get some time with these venture players, but in the end, the only players we chose were Midwest, um, venture groups, uh, coming out of more traditional family office model than, uh, than, uh, some sort of, um, created, uh, venture model.
Jake Joraanstad: So there's very few limited partners in these funds. They were mostly single low, you know, like a family office, this company owns the funds, or this family is the only investor behind the funds was very simple in terms of who are the decision makers and they're all eggs. Again, this is the pattern all the way through. They all had some egg background or connection. And, and what we learned to articulate in the last two rounds was Fargo is special in a lot of ways. And one of those is there are a ton of engineering talent here. There is a ton of engineering talent here, and they are, um, fully capable. And I would argue that the best talent here is as good as anywhere else in the country. The argument I think you could make, um, in the negative though, is that maybe the average talent in engineering is maybe less than the average talent on the coast, but that doesn't mean those people can't level up and get to this sort of capability.
Jake Joraanstad: But if you can find some of the better top tier talent, it's, you're just as competitive as anywhere in the world. And, uh, that's our core belief today still, uh, you know, we got Microsoft attracting people here to the university systems. We've got, you know, major university Metro and that all those things help bring young talent. And then we've got plenty of companies here that have built great software, uh, over the years that have kind of grew up a bunch of senior engineers that we can go and find. And that's what we've been doing for the last few years. Awesome.
Josh: So the takeaway I've got from that is really that you need to find people that understand what you're doing, and don't think that a word means something else when you're pitching them is probably the takeaway there
Jake Joraanstad: Based on the track record, and probably wasn't clear at the time, but it's clear now that the people who believe the most in our mission are people who have some fundamental connection to the industry. You're serving period. They grew up on the farm. They knew their family grew up on the farm, whatever that connection was made, these kinds of investors get serious about in this case, we're in the agriculture supply chain. So this is what they cared about.
Josh: And I, uh, I imagine this has been a good deal of your time is, is being able to take, uh, VC meetings and investment meetings kind of paint the picture of you're going through around, and you're going through your first time. Like, what's, what should I expect to invest in time? And, and you know, who else's time should I be relying on whether that's a CFO or like, what, what are the moving parts that I should pay attention to? If I've never done this before
Jake Joraanstad: You never done it before, it feels like you could go out and do it in a few months and in the very early rounds, there's no, like if you're raising less than $2 million, I don't think there's any reason you shouldn't spend less than six months getting that money raised. If you're spending more than that, you're, you're, something's off, something's not working or you're talking to the wrong people or your, your model's not really connecting, but when you get into the larger rounds, everything takes longer than you think. Um, in the case of our 19 half a million dollar round, we started raising, at least I started spending time with these players that we thought would be interesting as early as February 20, 20, 19, seriously, when we closed the round on December 12th, 2019. So it took like almost the entire year to close a 19 half million dollar round.
Jake Joraanstad: Now it got really serious. And may we thought we were going to close in June and June? We came July, August, September, October, November, and December before we were really finalized on the whole thing. So there's two re points to that. One is raise, start raising a little earlier than you think, especially if you're looking at a bigger round, but also you got to think about, do you have the cash capacity to carry the business until that point, that could be a year away because if you don't, you need to start raising now or earlier because, um, you know, it would have been really bad from a negotiation standpoint. If we were hard up on cash during that time, you can't negotiate from a point of weakness. And so that's really important too, is to think about timing of if you're going to have strength or not. When you're negotiating to be able to walk away from a deal that's not good.
Josh: Yeah. That's always, always difficult when you're, whether you're selling something or negotiating a fee. If you're in a bad spot, you can almost smell it on you.
Jake Joraanstad: And I think in North Dakota, something that's really interesting is there's a people have, seem to have a hell of a time raising earliest the earlier funds. And the biggest thing I see as the reason is because nobody can get on the same page around how to do evaluations and equity in the early stages. And emerging Prairie is a good example, but there's people are working on, what's a good model, major metros have models that basically everybody's aware of. If you raise a hundred grand, the valuation's a million. If you raise 200 grand, the valuation's 1,000,005, like there's this, there's this assumption around how much money you raised correlated to this fake business. That's obviously not worth a million dollars right now, but the reason there's a correlation is because the entrepreneur in the early stages, can't give up so much equity that the longterm isn't even possible or motivating.
Jake Joraanstad: And that's something that North Dakota traditionally angels don't get here that they think, you know, why should own 50% of the business, or I should, I'm going to give you a hundred grand. That's like your business, isn't worth a hundred grand. So I'll take 90%. And you'll take in the PR that kills both sides because it gives the entrepreneur no real motivation and long-term vision to build value for themselves. And it doesn't allow for the investor to bring in other capital partners down the road. So that's something that in the early stages kind of free million dollar rounds that people just have a hard time understanding here. And it's, it's actually not that complicated. And you just kind of have to be willing to agree that basically if you're starting a business, let's agree to, if you raise 10 or 50 grand, maybe you're worth half a million. And if you raise a hundred grand, you're worth a million, and that's just how we're going to start, because there's no true factual basis in terms of valuation that early. Sure.
Erick: No, that's good. I wanted to kind of shift from that a little bit, cause like I creeped on your company forever and I like the culture that you kind of bring to your team. And it's, it's interesting for me kind of, as in that role for our company, how do you create good culture or do you have any tips for people for creating culture in like a software engineering field or something for like really introverted traditionally introverted people?
Jake Joraanstad: That's a good question. Uh, the honest answer is, some of my team would be, uh, a better answer to this question in terms of how we do it today, early days. Um, you're right. I mean, on average engineering culture is more introverted and on average engineering culture is not excitable in the way that maybe entrepreneurs might get excited for just crazy ideas because they see a lot of, uh, they have more realistic view of the world and we have a much more, not realistic view of the world and as entrepreneurs sometimes. And so what we found though, is that in our case for, for a very long time, and even today engineering leadership is that one of the driving components of the business. So the culture is heavily influenced by engineering culture. We, we don't try to, I think a mistake along the way, it would have been to ignore engineering feedback and culture for the sake of the business or the marketing people who don't agree with this view, that that was something we did well where we didn't run over engineering culture and sometimes engineering isn't as loud or sort of a squeaky wheel as other areas.
Jake Joraanstad: But you can't forget that, especially if you intend to build a software driven organization, right? And so just in a basic level, I think the culture has to somehow be heard a good way that we started a few years in to hearing the culture questions and maybe some issues we were having was a tool called office vibe. I would say between between the time when we were probably a few years into, when we really built a true culture of engineering here, office vibe, or a tool that automates basically questionnaires to your team throughout the week to help understand what areas of the organization are doing well. And as it leadership that might be an issue or maybe their manager, or maybe, maybe a choices of the businesses making whatever, what, where are the issues coming from? And they do it anonymously with the ability to opt in and say, here's who I am giving this feedback.
Jake Joraanstad: And we started doing that in 2013 or 14, our first round of it, we had, if you know, net promoter score zero or negative 100 to a hundred is the score of a net promoter score. You know, Xero's not good twenties, not really that good thirties, pretty decent 40 50, 60 is pretty high. We started at like a negative score of net promoter of our own employees of what they like, what they would, they refer their friends to come work here and it was negative. And over the course of that year, we went from negative 13 or something like that to 20 or 30, 40 50, you know, today. Um, our office five average score for the employee wellness is over an eight on average. And what happened was during that time, people were maybe unwilling to share certain things in that at least the engineering culture felt much more comfortable sharing raw feedback in a, in a, in a initially at least in a anonymous form. And that, that helped us see some major holes in our organization. We have people that weren't a good fit that we had to let go and we had to move on that were driving poor culture. And, um, that I would say that was one of the key pivotal tools to, to where we are today. We still use office space five and 180 people.
Erick: I had no idea that was a thing. And so now I have some research to do after this,
Jake Joraanstad: Check it out, especially if you have more than 10 employees, those tools get to be really impactful
Erick: Around that. We're getting to like 12 ish and stuff. So yeah, it's time to start really kind of changing things for us. Yeah.
Jake Joraanstad: When you can't walk around the office and ask everybody a real questions throughout the day. Right. That's when you need something like that.
Erick: Right. And so the other kind of, part of my job is a marketing aspect. And I just wanted to ask just kind of a high level too. It's tricky. What I want to do whenever we're working on anything is scream about it from the mountain tops. Like if we're working on some cool new app or there's something I want to talk about, that's not always the possibility though with like non-disclosure agreements and things are still, you know, in very early stages of stuff. How would you kind of in your earlier days promote, or even do marketing for launching an app or working with some of your, um, business plans
Jake Joraanstad: On the launching side of things in the early days. So most cases, you're not going to be limited by NDAs, um, with customers when you're launching a product, unless it's specifically a feature product for that customer only then you might have some limitations, but in that case, uh, you know, we, we try not to be in a position where we can't do that. Um, and it's a good, it's a good question there. I've seen so many, not well done ways to do it in the last few years from, from some, some young entrepreneurs that it's kind of hard to think about what really does work. It's not easy. The world we live in today's super noisy and, um, yelling doesn't necessarily work anymore. Um, even spending doesn't necessarily work anymore. In our case, when we launched bushel, the only way we really made traction and even in 2023 years later on our platform, there is no amount of marketing we've done on social networking or Twitter engagements or Facebook or anything of the, like even physical advertising that has moved the needle more than the first 10 customers.
Jake Joraanstad: And then the next a hundred customers being excited about it and telling people and it, and what you can, what, what does get heard today is when somebody who's not, um, in your pocket telling somebody else about a recommendation they have because of the, you know, their experience with it, that is so important. And in the first 10 customers, you learn two things. One is the first 10 customers. You will understand how wrong you were about every assumption you made so far. Every assumption you made for the first customer is different amongst the first 10. At the end of 10, you'll have a really good grasp on what your product actually should have done. And hopefully you've pivoted along the way to make it work broadly across the first 10, then in go to a hundred customers. And then it gets hard again for different reasons. But in that path, those first 10 and first 50, probably the first a hundred customers, if you can't, over-service them to the point where they just love what you're doing, even if your products breaking all the time and, but they still love your team and the, you know, what you're doing to help them in some way, that is the more impactful than any spending you can do online. That's our opinion still today. Awesome.
Erick: Thank you for that. I guess. Did you get it, did you have anything that you guys wanted to promote? Are you doing anything exciting coming up in the next couple of months
Jake Joraanstad: Or, you know, there's a lot of, we just launched some cool products. If you know, any friends that are in agriculture that are farmers, or they run grain companies or egg retail groups, have them hit a bushel and see if we can help them in some way, we've done a lot of tools out there today on our platform that are really making a difference. We just passed 25,000 active farmers on our platform, and that's really the active, monthly count is higher than that. And so it's really exciting. Um, the impact we're making our, our goal is to get the 40% of the market in the U S in terms of grain origination. So buying from the flow of grain, from the farm to the supply chain, we want to be a part of 40% of those, um, interactions. And I think we're, we're on our way there. Um, and someday down the road, if you're in agriculture, you're going to hope to hear about something called bushel wallet, which is going to impact the way people think about how they move money in ag. Right now, agriculture is moved entirely. Money's moved entirely by, uh, paper checks and in the mail and statements that are mailed to your home. Uh, we think that needs to change and we're working hard on what that could look like.
Josh: Awesome. I smell a whole maybe cryptocurrency there.
Jake Joraanstad: Yeah, well, not so much crypto at first. So blockchain is really interesting in this space too, because it's clearly like potential solution, but the problem we have right now, it's, nobody can get on board with what the right who's going to lead it. And what is the right blockchain technology to choose and what path to go down, or if there's going to be one right now, right now, the answer is none until otherwise noted. So we'll see,
Josh: That's really a really an exciting piece we hadn't heard of from the bushel team. So thanks for sharing that, Jake, and thanks for coming.
Jake Joraanstad: Thanks for having me guys appreciate it
Erick: All right. Times are for some more reflection. And I really liked that episode. I think leadership is so critical and influential software engineering call culture. And that kind of makes sense because all the introverts that I really know are really quiet and they work good in small groups. And if your leader is that one, that's going to be good culture. And one of the things that I had no idea was that thing is that when we get a little bit bigger, we should look into office vibe. And then what, what was that? And wow, what an interesting thing. I had no idea product. I had no idea what it was.
Josh: Yeah. I've, I've known a few companies locally that have used them and, um, a tiny pulse was another one. Eric, you know, you said more, a little bit better. Do you think we should implement, you know, something like that with correlation?
Erick: I think the, like a really easy miss that most companies miss is you have to be transparent about caring for your people. And I think that that's, that's the component of great culture in a nutshell. And I think we should try this and we should just keep trying new things and keep trying to care for everyone until we find something that fits us, I think, where he talked about being at a different size and we're at that threshold right now where we can't just walk, talk to everybody each week and just get a, get a gauge of how things are going and how they're doing in the company. So have short answer. Yes, we should try that.
Josh: Fair enough. You know, I like the part where Jake talked about raising funds and, you know, when he saw cut off of a million dollars is like the entry point to raising funds. Um, just a different take on somebody who's been there and done it before. Um, you know, the messaging of targeting the right investors that understand your market. And then also kind of the separation of our market, you know, here in Fargo and how we approach, um, the valuation versus larger markets that maybe have a little bit more depth than angel and, and, uh, you know, like series a, you know, uh, earlier stage rounds,
Erick: Just listening to some of those numbers there, that was just kind of crazy coming from us where we're like, we're the first step in a lot of these big ideas. And it was just like here in some of the new, the coast, like strategies and numbers that their builds are getting in just the investments that it was crazy to me, but it's exciting too, as an employee for a development hearing some of those, uh, some of those numbers. And then one of the other thing, like I liked when he was talking about marketing new apps, and I really, really love the idea and just kind of based on the way we do our business is really listening to your first 10 customers and be dedicated to making them happy. The first 10 people that love your product, that aren't in your pocket, that's going to evolve into a hundred and you should tell their story. And so I creep on bushel quite a bit too. And the other big takeaway has I'm interested in learning about bushel wallet, like our, our development, CUNY and Fargo. That's just awesome. And so now, now I have more of a reason to love and follow bushel.
Josh: Yeah. We'll definitely see where that one goes is interesting to hear. So thank you all for listening. We're hoping, you know, a startup that could use our advice and random thoughts. If you do send them over to correlation.com to hear the next podcast.
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