Banking on KC – Jason Tatge of Farmobile
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Kelly Scanlon:
Welcome to Banking on KC. I'm your host, Kelly Scanlon. Thank you for joining us. With us on this episode is serial entrepreneur Jason Tatge, the co-founder of two companies that he's bought and sold. The first is Farms Technology, an online commodity trading business that helped farmers market crops. And the second, most recent is Farmobile, a company that helps farmers use real-time data from the field to power their operations. Welcome, Jason.
Jason Tatge:
Thank you very much.
Kelly Scanlon:
You have a saying that, you can't manage what you can't measure. How did the technology at Farmobile help farmers use data to manage their operations, Jason?
Jason Tatge:
So there are a lot of different things that go into making a crop. From the fertility program that you choose to use, the seed selection that you choose to use, from the in season fertilizer applications that you might apply in crop protection and then that all results in a harvest. And so the problem that we really set out to solve is there's a lot of different machines going across the field and they're moving at different rates and different travel paths and they have a different width. And so how do you layer all that data on top of each other so that you can actually try to measure at least the effectiveness of the the investments you made in that crop. And so farmers are experimenting all the time, but when you have thousands of acres out there, you don't always remember what you did on this field or that field.
And so having that digital documentation is something that allows them to see generally fields, if they could do part of a field with one application and then maybe change something up on another part and then compare them side by side, that's really when you start to gain knowledge of what decisions are working and which ones aren't. And farming is so localized. The farmers that farm the ground that they have absolutely are experts at maximizing the output on that land. Because when you buy a new piece of dirt, sometimes it takes you a few years to get it up to the levels of performance that the previous owners had. And so there's just some local knowledge that goes into this, that was a gap that we wanted to help bring more visibility to and help farmers feel more confident in the decisions and investments they were making.
Kelly Scanlon:
And I would imagine that although there's probably lots of algorithm and coding behind it, that when that farmer is in the cab that there has to be some sort of a simple, seamless interface. Do they just have a tablet, a dashboard? How does that work in simple terms?
Jason Tatge:
Yeah, you would think so. If you look at the cab of any modern piece of farming equipment today, it looks like the cockpit of an airplane. So there are a bunch of systems happening all at the same time. Really what we try to do is we try to work in the background. So how can we just record all the decisions that are happening? Because when you're monitoring all the things that you're monitoring while you're trying to get the crop in the ground, sometimes you're so focused on what you're doing there that looking at what's actually happening is in the rear-view, if you will.
So it's one of those things where we want to work on almost like the black box of an airplane where we're just recording stuff constantly and then after you get done, you can go back and look. Now we do have some alerts that pop up. For example, if you're planting in one of the rows and your planter is clogged up, which happens, you don't want to know that when you're all done. You want to be able to know that immediately so you can stop and go fix it so that you don't lose that opportunity for production on those fields.
Kelly Scanlon:
What inspired you to get into this segment of agriculture, Jason?
Jason Tatge:
A non-compete from my previous business, basically that-
Kelly Scanlon:
You're going to have to explain that.
Jason Tatge:
... was commodity trading. And my previous company Farms Technology was a business where I was a trader for the Pillsbury Company and the Scoular company prior to starting those companies. And I basically just wanted to use technology to help automate the transaction process. Farmers sell grain to end users and the futures markets are moving all day long. And so prior to Farms Technology, I would basically take 100 calls a day from people who are checking prices and maybe transact on a dozen of them. And so my idea was how can I communicate what the markets are doing using technology instead of me looking at a screen and quoting a price to them? They could call 10 different times in the day and have 10 different prices. And so how could I figure out a way to automate that a little bit?
And so that was what Farms Technology was about. And so when that company was acquired by DuPont Pioneer in 2012, I had a year non-compete after that. And so I basically went back to a lot of the farms that I'd been working with for the last 10 years and asked what problems they had. And this was 2013. So the world has come a long way in technology since then, but at that time, and this problem still exists, they had multiple brands of equipment on their farm that would pass over their fields, but the data was not in a way that it could easily be merged together.
So Case has their own proprietary format, John Deere has their own proprietary format, so they all try to use that as a way to lock in your equipment purchases. And the truth is that the farms aren't all conductive to generally one paint color of equipment. And so that was really the first thing, the problem that we identified was bringing this data together was going to be difficult and how could we figure out a way to create a standardized format to collect and really organize that data?
Kelly Scanlon:
Did you ever envision yourself as a young man or even as a kid becoming an entrepreneur?
Jason Tatge:
The first job I ever had was caddying at the country club when I was 13. I've always had a little bug in me, I would say. And working with the Pillsbury Company really helped me learn business because I ran a P&L for them, a trading P&L. And so I paid for rent of my desk space and portion of shared services for accounting and telephone bills and I could hire more people if I wanted to, but it comes out of my P&L. And so in that company, they paid you a very low base, but then you got a fairly large incentive. So you basically got a check once a year and everything else was a draw against that. And so that really taught me a lot of just the ins and outs of managing a business and numbers and being able to make pretty decent decisions.
Kelly Scanlon:
So now you've been through two company sales. How did you know when it was time to exit? Some just don't let go. So what told you, "Hey, it's time."
Jason Tatge:
I think going through the first process made the second one a little bit easier because you know what to expect. But I don't know that you ever really know the right time to exit. I think when it stops being fun, then it's probably time to do something different. In both of my experiences, we've started off the acquirer being an investor and I think in that timeframe you get a feel as to what the business is going to look like when you're not driving anymore. And I never knew this, but I'm realizing now that I really like to start things and I really like the excitement and not having to wait for committees to say yes to things. That kind of stuff slows me down a little bit. And so I think everybody talks about a sweet spot where, I've talked to a lot of other entrepreneurs, where they have a sweet spot of things that they really like to do.
I think mine is really building stuff and going from that zero to 30 people and maybe going from the $0 to $3 million in revenue, that to me is where the most innovation can happen and when you can get the most done with the least amount of resources. Those are things that I like. Neal Patterson was a mentor of mine and a friend, he is one of those rare folks who was able to take it from beginning to end. And I think he was one of the longest tenured CEOs of a publicly traded company. And that is just abnormal. That's really abnormal. And so I think I've learned for myself, when your schedule gets filled up with meetings and you don't really have time to think, that tends to take away some of the fun. Although the resources of a big company are great, it's like the time demands, it just changes. And so for me, that's really when we figured that it's time to move on.
Kelly Scanlon:
And it's not for the faint of heart, you said that when it doesn't become fun anymore, but there are periods even when you're having fun, cause sleepless nights that make you wonder if you're doing the right thing. So considering both of your companies, what has been your biggest hurdle as an entrepreneur?
Jason Tatge:
Oh, wow. I mean, I feel like being an entrepreneur is running a marathon of hurdles. There's just always something that's coming and you just figure out ways to navigate around or get through or get over or get through the next one. But there are always that time, and it is not for the faint of heart. I think you just get in and then it's just up to you to figure it out. Maybe this will get user made mode, but I think there's a couple of things to look at when you talk about hurdles. One of the trickiest ones is always when to take capital. That freedom that you have when you are bootstrapping suddenly goes away when you take on capital. The timing of doing that right is really tricky because you always think that if I had more money, then I could execute the vision and get everything done faster.
And then on the other side, you think, okay, if I go slow, and I've done this both ways, if I go slow and just build up the resources and then grow at a normal rate, that's more comfortable. But then you're worried about competitors coming in and getting funded. And so I think that's always a tricky one as to when to take on money. Now, I will tell you that if you've got product market fit nailed, then it's time to go raise some capital because then you can just accelerate and scale what you have. If you're not quite sure if you have that product market fit nailed yet, then you have to be careful about taking on additional capital because it suddenly becomes, instead of an accelerant, it almost becomes an anchor of things and responsibilities and people you have to answer to. So that's pretty tricky and most businesses are just up into the right graphs. If that was the case, this would be pretty easy.
The other one is employees at the beginning. It's easy to say you need to be slow to hire and quick to fire. And I think as an entrepreneur, I've always thought that it's my job if I hire someone, if I invest in hiring someone, it's my job to make sure that I can find a role for them to fit. And sometimes I've probably held onto that a little bit longer than I should have, but it's the person I am. When I hire someone, I'm committing to them and I think that they're the right person and then I've got to figure out how to do it. But when the company is so young, I'm going to say under 30 people, every person you bring on changes the culture. And so you have to be really careful that it's a culture fit as much as it's a professional fit for whatever you're hiring them to do because that can go bad really quickly too. So I think there's a balance and it's really creating a family, you're together so much of the time and there's so many demands and so many expectations.
Kelly Scanlon:
And you mentioned fit when you talked about employees. Something that I've witnessed happen within many companies is that they're the perfect fit for that startup, but as the company grows, just like it can outgrow the founder, sometimes it outgrows those initial employees who really helped you build that company. Did you have that experience? And if you did, what did you do? How'd you handle that?
Jason Tatge:
Yeah, it happens all the time. The skillset required as the demands increase changes, those are tricky conversations. In our case, we've usually been able to augment that person with someone who has another skillset that it's got to be a give and take on both sides for them to be willing to accept it. Those are tricky situations. And I will say this as well, you also outgrow your investors. So the people who are early on, and they might be some of the angel investors or some of those, there's a certain time when they want their money out and there's a lot of other money that wants to come in.
And those are some of the challenges as well is how do you keep the cap table productive and how do you cash out certain people but keep other money coming in? Those are all things that are complicated, non-running, the business stuff, non-day job stuff. But that's really what a CEO's role becomes as you get a little bit further along is really managing investor relations, managing vision of the company, and really trusting the people you have hired to help execute the vision. Those are things that you never get away from.
Kelly Scanlon:
You mentioned the cap table and we've all heard the horror stories of the young startup who comes in and gives away a quarter of the company to the guy who develops their website and another quarter to somebody who did some other one-time task for the company. And then you get this serious investors come along and you have to sort through all that. And it can be very messy if you start out that way.
Jason Tatge:
It is messy and I will say that everyone in the beginning says, "Oh, it's only 10%." Or, "Oh, it's only 5%." In my experience, the first time that I've let people onto the cap table, those are generally the most expensive that you ever have because as the value of the company increases, the value of that 10% goes up disproportionately compared to the others that are coming in. And so that gets to be tricky. But I think one of the things that I've learned is you want to hold on to as much equity early as you can.
Kelly Scanlon:
You're an active member of the Midwest Entrepreneurial Community. You're especially involved with Pipeline Entrepreneurs and also with the Entrepreneurial Exchange. How have those organizations contributed to your success, Jason?
Jason Tatge:
So yeah, I love talking about this and this is the perfect podcast to be doing it. My wife and I aren't from Kansas City, we got transferred here with the Pillsbury Company in 1996. We didn't know anybody, we're both from Minnesota, we went to college together. And so coming down here and really figuring it out, making a life around being able to start these companies and finding others that are in a similar situation, different businesses, but similar situation, going through the same challenges and not just challenges, but the same exciting times as well, it really makes Kansas City home for us. And so we talk about this a lot, but it would be really difficult for us to ever leave Kansas City based upon the relationships that we've built with peers that are doing the same thing. And those two organizations have been extraordinarily helpful to me professionally and personally when you're in some of those sleepless nights. And so to me, that's a great thing about Kansas City. I've never witnessed a place where there's people willing to help and for no other reason than wanting to see you succeed.
Kelly Scanlon:
Right. I read somewhere where you said that when you first joined Pipeline that you really weren't sure what you were going to get out of it, but in that first year, you made several changes that really helped your business rise to that next level. And I thought that was so interesting that you had that immediate effect because a lot of times when a business owner, first of all, some are hesitant to even, because they're time-consuming to spend your time, it's an investment. And if it doesn't pay off immediately, "I don't have the time." But you have to think of it like the stack of market too, it's a long game. You have to play the long game whenever you're trying to get ideas and implement those ideas. You might not see the results the next day, but the time you spend with organizations like Pipeline and EE truly are investments in yourself and in your company.
Jason Tatge:
They absolutely are. And specifically in the Farms Technology piece, we had been around for about six years at that time when I went into Pipeline. I think I considered myself an introvert at that time, I like to do my stuff at work and go home and really, I wasn't a networking person, all that stuff I thought was a joke. But what happened is the business got stuck at that million dollar revenue point. And I kept doing the same things and same things.
And then once I got into Pipeline and we started to have others from the venture capital side of things and other professors of entrepreneurship looking, really just a quick overview of what you're doing. And there were some suggestions that they made that at the time I was like, "Well, I want to change, I don't want to keep doing this." And so then we implemented some of those changes and they were really effective. And that's really what got me bought into this, working with others who've been here before really does help you. And so I'm the Chairman now at Pipeline and so I've gone from where it started to helping drive the future vision of it now with a great group of people and it's just been a really interesting ride along the way.
Kelly Scanlon:
What's the best piece of advice you've ever been given?
Jason Tatge:
I've had so many. And I've been super fortunate just about every place that I've been, whether it was starting off the Pillsbury Company or on finding an early partner in Farms Technology in Neal, I've just been super fortunate to have people around me who've been very influential in a way that never sours, if that means something. A lot of relationships over time sour. Neal gave me a bunch of good advice. When you hop into this stuff, you just have to be all in. At least I can't... I know a lot of people do these side hustle things and I think about that and I was like, "Gosh, I wonder how they can do that." Because I was so dedicated to that one thing and trying to solve that one problem for oftentimes years at a time, I couldn't even think of anything else besides that one problem.
So to me, I think once you jump out and do it, you've got to just go and you got to really listen to your customers. And I don't remember who told me this actually and I should, I can't remember if it was Neal or not, but when you first build something and you have someone part with their dollars for your product or service, that's a really big inflection point. It's easy to give stuff away, but the second people are paying for it, that's a pretty big deal. And really figuring out how to do that. Again, it seems super easy, but it's not. This is a piece of advice that I remember, "Spending money easy, making money hard." And it's true, it's really easy to spend a lot of money and make a product, but getting people to actually part with their dollars is a really big inflection point.
And I think we're always on the search for product market fit and I don't think many companies really ever achieve it because you're always tweaking the product to try to gain that next customer. And so true product market fit is when you can pour the capital on and really just accelerate. I think of Uber and the way that they really got their product to work in San Francisco and then they were able to raise capital after they had the product market fit and they understood what they were doing to go to other markets.
That one to me is one that I looked at a lot because I did it wrong with Farmobile. I tried to go to as many different parts of the country as I could with our technology initially just to see if it was going to be the same. I just wanted to get broad out as many places as we could. One of the challenges we had initially in raising capital was we didn't have any one market where we had true product market fit. Now, I knew that we worked on 150 different machines, but they were scattered all over the place. And so I think really focusing on a density or a geography and getting real penetration there and going small, not trying to go really big is super important.
Kelly Scanlon:
Do you think we're going to be hearing about a next chapter of your entrepreneurial journey anytime soon now that you've sold your previous two companies?
Jason Tatge:
I think you will. And even though when we were in some of the difficult times of COVID with Farmobile, my wife is like, "We're not going to do this again." And I was like, "I'm totally there with you. Okay." But I can tell you that there's probably going to be something else out there. I like building things and I like building things that don't exist today. And I'm probably ignorant to risk, I've been told before. But you take these risks and there's not really bad ideas generally, the timing is usually off and the amount of capital it takes to get the market to understand what you're thinking is off sometimes. And so I've learned now when I have these next killer ideas to just sit back and wait a little bit, be a little bit patient, which isn't in my nature generally, but I guess with age I'm getting a little bit more patient.
Kelly Scanlon:
Well, Jason, we wish you the best of luck with whatever ideas you're pondering right now. And thank you very much for taking the time to come and tell your entrepreneurial story today, a lot of good advice.
Jason Tatge:
Thank you. It's a pleasure.
Joe Close:
This is Joe Close, President of Country Club Bank. Thank you to Jason Tatge for being our guest on this episode of Banking on KC. As Jason built and sold two companies in the AgTech space, like many entrepreneurs, he faced his share of challenges. One that he mentioned is when to pursue capital or financing. His emphasis on the timing is important. Capital infusion at the wrong time can be just as detrimental to a company as not having access to funding at all. If you are an entrepreneur struggling with whether now is the right time to pursue capital, we'd love to talk with you about your situation. Thanks for tuning in this week. We're banking on you Kansas City, Country Club Bank member FDIC.