- So I grew up in southeast Iowa, and when I left the family farm, I wanted to be a
full-time poker player. I very much from day one,
treated poker like a businessā instead of playing
by gut feelings, I decided to play by mathematical odds. I would play up to
forty tables at once. Each table had 80 hands an hour, so over 3,000 hands an hour, a few million hands
of poker a year. It helped prepare me for startups by just remaining process-oriented, and understanding you need a
proper sample size of data. You know, everyone says that 9 out of every 10 companies fail. So, my mind translates that as I just have to start 10 companies. - Today, Clayton is working on his second tech
company, Nebullam. The plan was to become
the name brand for indoor farming equipment. They never intended to
become an actual farm. - I never thought I
would be a farmer, but I think jumping
outta the plane and building the parachute
on the way down is the best approach. - You just started your
dream business, how much profit would you need to pay your basic living expenses like rent and ramen? This is a show on the
economics of entrepreneurship, and founders turning
their dreams into reality. This is "Ramen Profitable." - I think naivety carries
you a long way. When Danen and I
started Nebullam, we saw that indoor farming
was very antiquated; where you have a bunch
of growing equipment that's all stacked on
top of each other. It doesn't move, so you have to have
these big aisleways, and then there's little to no
software in the day-to-day; amounting to producing small
amounts of food per square foot while requiring a lot of labor. That combination adds up to an average indoor farm
takes seven years to reach profitability, so that's why most go under. We thought we could come along and implement better,
more-scalable technology to help indoor farms
become profitable faster. So here at Nebullam,
we focused on making our growing
equipment mobile, and that's because at
the end of the day, you are paying to heat and
cool all of your space, whether you're growing
plants in it or not. When we started Nebullam,
we thought we wanted to ultimately sell the
growing equipment to new and expanding
indoor farms, and then license the software
that runs that equipment for the reoccurring
revenue piece. - They needed to test and
develop their growing equipment, so they temporarily
sold the produce it grew to local restaurants
and grocery stores to offset the cost of
running the business. - We're growing at two to
five percent month over month really just proving this outā and then the pandemic hits. I remember going
down to the farm and just sitting there because I didn't know what to do. With the governor announcing that all restaurants
are going to close, we just lost, at minimum,
three-fourths of our revenue. And a lot of "what if" scenarios were just running
through my mind. I kind of just had to
slap myself out of it. We need to find a
home for this food. We can't put lettuce on
pause from growing, and we've got
essentially six days before the next harvest. - They decided to try
a subscription model, selling produce direct to
customers on a reoccurring basis. - So we told ourselves we had to go and get 12 subscribers and all of them had to be people we had no connections to. It started with rebuilding
the website, which I'm the last person
you want building website; I'm a little color blind as well. Apparently it was really ugly. But, all we really need to do is grow lettuce, deliver lettuce. If the first version
isn't pretty, that's okay you just need to prove
that functionality, and thankfully it worked. We ended 2020 with
50 subscribers. So here's what I'm thinking, if we take just our
current demographic and we overlaid that in all six of those locationsā - Right, so which one
matches up the best. - Exactly.
- Yeah. - So we don't have to
reinvent the wheel. With our new business model, I see us very much as,
we're a data company sitting on top of a supply
chain company, sitting on top of a vertical
farm or an indoor farm. And that means every
decision we make needs to be data-driven. So in my mind, data is
the words to the story, and I've been just
obsessed with it my entire life, which is numbers. To me, it's, you know, 'Am I making progress
on something?' - A subscription-based
business model lives and dies by its
customer acquisition cost, or how much money it takes
to get a new customer. - So before pivoting, our customer acquisition cost was an entirely different
mathematical equation. We need to know who
our subscribers are, and why they actually
buy from us. - They use their customers' data to identify trends that help identify
potential new customers. Since they are a local farm,
they take a local approach. - One of our most
successful outlets for bringing in new
subscribers is offline, which I know is crazy
in today's world, but that's door stickers. It's costing us three times more to pick up a subscriber online, and that's about 150 bucks compared to picking up a
subscriber through door stickers for about 50. We always want to
be reducing that so now we're making
more and more data-driven decisions around
customer acquisition costs. - If it costs $100 on average
to bring in a new subscriber, and they make $11 a
week per subscription, they know it takes about
nine weeks per subscriber to recoup the cost, or about two months. Lowering that acquisition cost is key to scaling. - Now that this model is working and we're reaching
a proper scale, natural next steps for us is to take what we've built here, and cookie-cutter it
into another location. We're excited because this year we're going from essentially
one location and a thousand square
feet of production, to two locations and
3,000 square feet. So we started the year
with 300 subscribers, by the end of the year, 2022, we want to be at
1,500 subscribers. Whether you like numbers or not, you have to know your numbers. At the end of the day, you need to understand
that cashflow and when you can actually
reach profitability. So I think anyone
starting a business today or anyone excited about starting a company or
scaling a company should understand
their numbers. - Before the pivot, the
plan was working, it was slow but they
were growing. Fast forward to after the pivot, Nebullam is growing
eight times faster than their old business model. - There's over 60 deliveries today among the Ames area. When we launch new locations, we'll have over 300 deliveries going out every single week. I think it's really
important to set out trying to solve a problem
you're passionate about. In our case, we think
everyone deserves access to reliable and
local food year round. And as we go after
achieving that mission, our vision comes to lifeā and our vision is to
replace the produce aisle.
Delivering in audis, sounds like they had good financing lmao