Differential's David Pearce: "The the biggest challenge we help entrepreneurs with is validating their idea. Everyone thinks they have a great idea, but the real question is: Is it actually solving a problem for somebody?" (Photo courtesy: D. Pearce)
CINCINNATI - The Cincinnati company guides its clients from concept to build-out and beyond, in exchange for equity.
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CINCINNATI - Have a great tech-based idea, but not sure it's a viable business? A team of Cincinnati entrepreneurs formed Differential to help startup companies test and develop those ideas. The team of developers guides clients through the process--building out the technology--in exchange for equity.
9 Questions for Differential partner David Pearce
1. What's the idea behind Differential?
We’re a venture studio, which means we help entrepreneurs build an early version of their product in exchange for a mix of cash and equity. In this part of the country, for entrepreneurs who have a good idea but not necessarily the technical skills to build it, it can be difficult to find a technical co-founder. So we play an early version of that role. The equity part aligns us as long term partners, so we’re heavily incentivized to help with other areas of business as well, including marketing, fundraising and hiring/recruiting.
We also build ideas internally, where we own the whole product. We’re a developer heavy team, so it’s easy (and cheap) for us to quickly build and test ideas.
2. How did all of your team members come together to form the company?
We’ve known each other for awhile through the Cincinnati startup scene. Ry Walker and Tim Metzner first developed the concept with Gerard Sychay in late 2012 and in March I came on to help with design for Cladwell , our first equity client. At the time I had a web design company with Brad Kirn and Greg Neiheisel called Trippo.
What Differential was doing aligned pretty closely with our goals for Trippo at the time; we had a complementary skill set and we meshed really well culturally, so it made sense for us to merge our two companies together. Our other two partners Josh Owens and Colin Flynn had both started out doing contract work with us, and as we grew it made sense to bring them on full time.
3. How does the startup experience of your own team members inform your client work?
Every one of us has some type of entrepreneurial or startup experience. Across our team we’ve had experience building startups that have failed, some that are still a work in progress, and some that have grown to be among Cincinnati's most successful, including: SparkPeople.com (which grew to the largest weight-loss website in America), Zipscene, and Sharkbytes (one of the first Web agencies in the U.S.).
In addition to our diverse startup experience, our team has also spent time working for some of the largest and most successful companies in America, including P&G, Great American Insurance and Cincinnati Children's Hospital.
We bring all of this experience to the companies we work with, which can often times help entrepreneurs avoid many of the mistakes we've experienced along the way.
4. Why do companies come to you? Generally where are they in terms of growth?
Most companies come to us because they need technical help. A majority are at a very early stage. Sometimes they aren’t even companies yet, just entrepreneurs who have an idea, but lack the technical skill set to build it.
So we’ll not only build a version of their product, but we’ll help coach them through the process of validating their idea. I think that differentiates us from a typical agency. Rather than take a list of features you want and building those to spec, we’ll challenge your assumptions and narrow down just the minimum you need to determine if you’re solving a problem people are willing to pay for. And if you are, we can help build out more features iteratively from there.
We’ve also had some bigger corporations approach us, and we’ll take those jobs if it fits with us culturally. Often they’re just looking to have us experiment with newer technologies, to see if it’s something they could use either internally or for marketing/customer acquisition strategies.
5. Who are your typical clients? Are most of your clients in the Cincinnati area?
Our typical clients are very early stage startups or entrepreneurs who need help building the first version of their idea. Not all of our clients are local, but a majority of them are in the Cincinnati area. There’s definitely a strong advantage to working with clients locally. We invite our clients to come down and work with us in the office, so communication is much easier when I can just lean over and ask for input on a decision.
6. What types of challenges do you help startups through?
Most commonly, the biggest challenge we help entrepreneurs with is validating their idea. Everyone thinks they have a great idea, but the real question is: Is it actually solving a problem for somebody? The tendency for many entrepreneurs is to build a bunch of features and then go try to market it. This is usually pretty wasteful.
We'll help you build a Minimum Viable Product
(MVP), which is basically the minimum set of features you need to start getting users. If you can get users, you probably have a good idea. If you can’t, then hopefully you found out relatively cheaply.
We also help quite a bit with non-technical challenges. Marketing, customer acquisition, hiring, etc. We’re in the process of building a program called Connect, where we help develop and source technical talent for local companies. For portfolio clients that we have an equity stake in, we can also help quite a bit with the fundraising process.
7. Your office is at Cintrifuse, how has Cintrifuse helped support your company?
Cintrifuse has been a very big supporter of Differential, and we’re big supporters of Cintrifuse. I think the idea of what Cintrifuse is trying to do for the local community is great. The amount of resources and support they’re putting into this area is amazing.
A lot of entrepreneurs walk through the door at Cintrifuse every day looking for help on starting a company. So being located here is great for our business. In addition, Cintrifuse does a lot to help our actual portfolio companies. They actively think of ways to make introductions or partnerships happen. Giving back and supporting the local community is a big goal for Differential as well, so it’s great to have a partner like Cintrifuse to help make things happen.
8. What's the biggest challenge for Differential as it moves ahead?
I think the biggest challenge for us as a company, as we grow, is being able to maintain our culture. I think culture is one of the most important parts of any company. It affects who and how you hire, and at the end of the day the people you hire are what’s going to make you successful.
At Differential we try to hire entrepreneurs. Most entrepreneurs don’t like working for other people, and so we have a flat management culture. Which basically means there are no bosses. You manage yourself. We do significant profit sharing with everyone in the company. We’re completely transparent with everyone. Everybody knows how much money is in the bank, they know how much we did each week, they all have input on decisions. It’s completely open. So the idea is everyone is working for themselves, they’re building their own company.
That works great now, with a small team. But at 15 or 20 or 30 people, how does that scale? Can we have 30 people in a meeting all contributing to a decision? Probably not. So that’s going to be our biggest challenge, how do we maintain that culture as we grow. How do we make sure everyone feels empowered. That they feel like it’s their company. I think at the end of the day it comes back to who we hire, we just have to keep hiring the right people.
9. What's next for Differential?
Haha, that depends what day of the week you ask. We’re a very, very new company. We just started really doing this in March, so we’re still trying to figure ourselves out. The only thing I know for sure is we’ll always be building stuff. That’s what we love most and what’s cool about our company. We have a lot of really smart, technical people, and we’re always building. If we find an idea we like, we build it.
Connect with WCPO Contributor Feoshia Davis via Twitter: @feoshiawrites