by Kyle Wiggers
Tech Talk is a weekly series that explores the people behind startup companies in the Cleveland area.
The Jumpstart Our Business Startups Act (JOBS) Act, signed into law in 2012, was intended to alleviate some of the financial pressure points facing entrepreneurs and investors, most notably a restriction on fundraising limiting the ability of startups to pubicly request capital. But with the legislation came new requirements for compliance: to avoid running afoul of Title II alone, the part of the law which makes general solicitation legal, all companies are required to ensure their investors meet the definition of “accredited” as outlined by the JOBS Act. That kind of verification can become prohibitively expensive for cash-strapped startups, giving larger corporations an unfair advantage.
Rich Rodman, the 22-year-old founder and CEO of Crowdentials, hopes to level the playing field. His company helps startups and financiers stay abreast of regulations by automating the process as much as possible, charging startups a one-time fee between $20 and $40 to verify individual investors. Charles Stack, CEO of FlashStarts and a lead investor in Crowdentials, says that’s hundreds of thousands of dollars less than other firms charge.
The company seems to have filled a need. Crowdentials closed a $300,000 round of funding in early January, and nabbed the #1 spot on Cleveland.com’s 2014 list of top startups.
The company alone is impressive, but this isn’t Rodman’s first successful foray into the technology startup space. As a college student at Ohio University, he pursued FlashCrop, a mobile app for making flash cards by taking pictures. The app went to compete a ten-week accelerator program and win every entrepreneurial award the college had to offer.
Needless to say, Rodman seems to have the golden touch.
I spoke with Rodman over the phone about his days as a young entrepreneur, the importance of companies like Crowdentials, the state of tech talent in Cleveland, and tips for budding startups.
Tell me a bit about yourself.
I started off doing odd jobs when I was in high school — growing up in Cleveland, I always had a working mentality. I went to Tri-C [Cuyahoga Community College] for two years and paid for it out of pocket with profits from a snow removal company. I then transferred to Ohio University and decided that I really wanted to dig into the tech scene. I’d been starting companies that were more traditional and not so much in the startup tech area, so I joined the Entrepreneurs Club, ended up becoming the president, and started FlashCrop. We won every competition that the school had to offer, participated in an accelerator program, and brought on a couple of employees there. We ended up starting another company out of the experience - Crowdentials.
I saw the opportunity in the crowdfunding space, and I knew the internet combined with this idea of crowdfunding and private financing for companies was going to take off, and realized that this compliance area might be pretty interesting
Who are your company’s products for? How would you describe the market of potential customers?
Compliance is something that has been done since the beginning of private finance — you need to stay compliant with the laws. It sounds straightforward, but there’s a lot of nuance, and it’s not that easy to stay in compliance.
Everything the internet touches absolutely changes. Instead of having billboards, you can have per click ads, and instead of trading stocks on your phone, you can go on E-Trade and transfer them in a second, but the internet hasn’t really touched the world of private finance. What we’re doing is meant for entrepreneurs, investors, and crowdfunding portals — all of these individuals who are raising and investing capital who find the archaic, traditional compliance methods aren’t keeping up with this online transition. These solutions that we sell allow entrepreneurs, investors, and crowdfunding portals to scale their compliance as much as they’re scaling their business.
Why base Crowdentials in Cleveland? It’s obviously home to you, but is there a reason the city is an especially good fit for a startup like yours as opposed to, say, San Francisco?
We started Crowdentials at Ohio University, and one of my mentors there actually referred me up to the business accelerator FlashStarts in Cleveland. We were the first class to run through their program, and that’s how we really go started. Before, we were very well-known in the industry, but we weren’t capitalized — we didn’t have the capital that we needed to start hiring people and scale our operations. FlashStarts really allowed us to not only focus full-time on what we were doing, but they really empowered us to scale Crowdentials and push it out to the mass market. Without FlashStarts, we wouldn’t be #1 in industry like we are right now.
That, coupled with the extreme low cost of living — the salaries we pay here, the rent we pay here — make Cleveland extremely attractive. If we were located on either coast, our costs would be so high just to employ ourselves that we wouldn’t be able to efficiently scale.
Another thing about Cleveland is that we were just named the #1 startup by the Plan Dealer and Cleveland.com, and before that a publication out of Chicago named us the #3 startup in Cleveland. It’s having this type of notoriety and high-profile business in Cleveland that allows us to extract talent. If we’re on either coast, that talent is already taken.
It's pretty much those three factors — the low cost, the great investors, and the great ability to extract talent that keeps us in Cleveland.
Speaking of skilled workers, what is your evaluation of the tech talent in Cleveland?
There is a lot of talent here. It’s a common misconception that Cleveland doesn’t have a lot of talent, and the reason for that misconception is that a lot of these people are hiding. A lot of these people are either doing stuff on their own, or have the “Cleveland mentality” and they don’t want to step out of their comfort zone. It’s these people that have various secure jobs who are extremely bright, but they’re afraid to take that jump into startup land. It just takes companies with a really good business model to say, “Step out of your $150,000 job because the potential is amazing.” There’s definitely talent here, and it’s a little difficult to get it — it’s not like the Valley where you walk into a Starbucks and chances are you’re going to meet four or five programmers that are equivalent to Mark Zuckerberg. Although they’re not hanging out in coffee shops, they’re here. It just takes someone determined enough and willing enough to find those people, and to have a good enough company to incentivized them to come forward.
You wouldn’t say that talent is often tempted by brighter shores?
No, they’re not. Moving to the coasts for these types of work opportunities is a give and get situation. You get a lot more pay, but at the same time all of your costs are escalated so much. I feel like a lot of professionals in Cleveland want to be on the top — they like to be in that finite pool of elite, if you will. You move to either coast, and you’re automatically demoted.
The thing about Cleveland is that we have a lot of talent that’s born and raised here. That’s the reason that you can have this extremely talented group of people that might have migrated to the coasts once or twice in their lifetime, but eventually come back and are now really filling the Cleveland pool with talented individuals.
What advice would you give to someone who has an idea for a business but doesn’t know where to start?
If you have an idea - if you have a kernel of a business, anything - where you start is hard work. Nothing replaces going out there, talking to potential customers, talking to potential investors, talking to anybody. If you read an article about Crowdentials, give us a call, even if it’s not to use our product or anything. Give us a call and say, “Hey, I have an idea, how can I get started?” That’s really where successful entrepreneurs are born, because they’re willing to step out of their comfort zone, approach someone, and say, “This is my idea, even if you can’t do anything to help me, do you know anybody who can?” The most powerful thing you can do to start a company is ask for advice. Even if it feels uncomfortable — which it will — ask for advice, ask for someone to tell you their experiences. I love it when people call me and say, “I have an idea, but I don’t know how to get a team together, or how to get money together.” I’ll talk to them for as long as they want about how I found people, and refer them to places for money.
It really starts with the right mentality - good old-fashioned hard work. Get out there, talk to as many people as you can, and I guarantee you a couple of those people will be able to help you take your idea and make it into a reality.