Show Notes

Blockchain technology continues to change the world in new ways. Tech startup Data Gumbo is one of the latest examples of that. Data Gumbo uses blockchain technology to create a network of smart contracts for industrial companies to automate their vendor management. By doing so, Data Gumbo vastly reduces supply chain friction while also bringing trust into an area severely lacking it. Date Gumbo CEO Andrew Bruce sat down for a conversation with startup ally Roland Siebelink this week on the Silicon Valley Momentum Podcast. Andrew explained why blockchain technology provides the perfect solution for this particular use case. He also shared the steps Data Gumbo has taken on its road to success:

• How the idea for Data Gumbo came from companies that didn’t trust each other.
• Why business sponsorship was a better fit for Data Gumbo than venture capital investing.
• The importance of looking at what investors can bring to the table outside of money.
• Andrew’s strong opinion on the evil of pilot projects.
• How a structured operating system played a key role in Data Gumbo’s growth.
• Why establishing the company value of “comfortable with chaos” has been critical for Data Gumbo.

Transcript

Roland Siebelink:Hello and welcome to the Silicon Valley Momentum Podcast. My name is Roland Siebelink and I'm a scaleup ally for tech founders. And what a special day it is today because I have with me, Andrew, Bruce, the Founder and CEO of Data Gumbo. Hello, Andrew. Thanks for joining.

Andrew Bruce:Hello, how are you?

Roland Siebelink:I'm very good today. Let's get started. Let's talk about Data Gumbo. What do you do? And what difference do you make in the world for what kind of customers?

Andrew Bruce:We provide a smart contract network for enabling industrial companies to automate the execution of their contracts, using the integration of IOT data and blockchain technology. We drive down the cost of execution.

Roland Siebelink:That's awesome. Okay. A lot of very cool technology is involved in there, blockchain and IOT, but then for industrial companies. Those are not necessarily always, I'm guessing, the most eager buyers of what's newest in the market, right? Can you give us a concrete example of where Data Gumbo makes a real difference to one of your industrial clients?

Andrew Bruce:If you take supply chain, delivery of commodities, whether it be diesel or chemicals or people or water or anything like that. The traditional way that has been bought and paid for is somebody goes in, delivers a product, they sign a field ticket, they generate an invoice, they send the invoice to the customer, the customer disputes it, they argue for 120 days. Hopefully, there's no partners involved. But if there's partners involved, then it gets really messy. And it's long, complicated, expensive, and very inefficient. We change it to be much more like when you go to a gas station. You go to a gas station, you swipe the credit card, you pump the gas, and you leave. Our question is why don't industrial transactions function similarly? We've got all the data. We've got all the contracts. Let's just automate them and turn it into an automated transaction, just like going to a gas station: swipe your credit card, pump the gas, and leave.

Roland Siebelink:That's a great analogy, Andrew. I really love that. And everyone can just feel right away what a difference that makes, right? How did you get into this business? What's the history of Data Gumbo? And how did you hone in on this particular use case?

Andrew Bruce:It's a very interesting story. I started out trying to build an autonomous drilling rig for a company I used to work for using algorithms from the space program. And we needed lots of data from lots of different places, different companies that didn't like each other very much. And so we started Data Gumbo to solve that problem. How do we get access to data, standardize it, clean it up, and make it available to do interesting stuff? We were talking to a large company about how they could improve the contract performance. And they said, if we can save money, if we could improve this metric by one minute, which I knew they could do because it was all about autonomous drilling, then we could save $250 million a year. I said, "Well, why the heck aren't you doing that?" And they said, "Well, we can't get suppliers to work with us." And I said, "Well, why not?" And they said, "Why don't you go ask them?" I went and asked them. I said, "Why aren't you doing this?" Because you know that I know that you can do it. And they said, "Well, we would love to, but we don't trust that we will ever get paid a bonus if we improve our performance. So why the heck would we improve our performance? We're getting paid fine today. Thank you very much. So no." This is a $250 (million) opportunity sitting on the table. And I just became fascinated with how you can solve that. I had a friend working for Microsoft at the time, and he'd asked me about Bitcoin and blockchain, cryptocurrencies, and all that. But I started thinking about it. And if you've got a blockchain, you can have a smart contract, which is just for them. What we could use - we could capture the commercial intent of the contract in the algorithm of the smart contract. We could use the data platform to measure exactly what's happening in the physical world. And you could use the physical delivery of the service to trigger the terms of the smart contract. And then you can store all the results in a blockchain. All the parties to the transaction get an exact same copy of the results. And you can also use that to automate the payment, so you just created trust in an untrusted environment.

Roland Siebelink:What you're solving here, it sounds like a pretty dysfunctional legacy environment that you're turning into a very functional, highly optimized, and trusting environment where everyone can just trust the data rather than distrusting each other. How did you then turn that from what I guess was your first customer into more of a scalable go-to market proposition? How did you find your additional customers and how has that been going?

Andrew Bruce:We were fortunate. We were working very closely with something called the Offshore Operators Committee (OOC) Oil and Gas Blockchain Consortium, which is now called Blockchain for Energy. And that's 10 of the world's largest oil and gas companies. And so they had some use cases that they wanted to explore and they picked us for one of them. And the lessons we learned from that and the interactions with those companies gave us the knowledge and the confidence and the credibility to move forward. And then we were invested in by Equinor and Saudi Aramco. Then all of a sudden, we had the backing and the credibility. Those two events really gave us a jumpstart. We needed it to be able to get into the space and really understand it and get the credibility and the staying power.

Roland Siebelink:Yeah. And it sounds like part of being part of Blockchain for Energy not only got you in contact with the right companies but even with the right buyers within those companies. Was that right?

Andrew Bruce:That's correct. Yes.

Roland Siebelink:Who would you say your typical buyer is in one of those energy companies?

Andrew Bruce:Supply chain manager or an operational manager. Somebody who's tasked with reducing the expenses within a company.

Roland Siebelink:Okay. That's really the benefit to your customers, right? It's cost reduction, that's it?

Andrew Bruce:Cost reduction. But it's also transactional certainty. How do we ensure that you're only paying for what is actually delivered? And how do you ensure that you actually get paid for what you do to deliver? And how do you reduce the payment time? Rather than having 120-day payments, you can bring it down to contractual value; 30 days or we can even bring it down to daily if you want financial incentives to be built in for each of the counterparties.

Roland Siebelink:Very good. You did mention you got investment from Equinor and Saudi Aramco. Congratulations. That's really great to pull that off. Was that a difficult decision process to either seek money, seek funding from corporate investors, such as Equinor and Saudi Aramco, or did you also consider alternatives, such as more traditional venture capital?

Andrew Bruce:Yeah, we considered more traditional venture capital. But when they're trying to introduce a new technology, you really need the business sponsor as well. By taking the strategic money, as opposed to the institutional money, it gave us not only the capital but it also gave us the customer base as well. Cause what we're building is a network, right? We're building a network of interconnected nodes from different companies. And if you're trying to get a network platform business off the ground, you need anchor tenants. You need people who are going to provide you the initial anchor tenant, the initial pool for that work. That was as important to us as cash. By being able to get the anchor tenants on board, that was the start of the flywheel moving. As well, our recent Series B was led by new investor L37, a Bay Area and Houston-based venture capital company

Roland Siebelink:Absolutely. I get a lot of questions from founders like we have an interesting offer from more corporate investors, but VCs tell us we shouldn't take that money. It sounds like your advice would be look at the bigger picture and see what else can they bring to the table rather than the money. And is that crucial for your business model?

Andrew Bruce:Yeah. It may be different for different business types, right? We are very explicitly a network with a platform mentality. If you're selling a solution that doesn't have that network requirement, then maybe you don't need the anchor tenant nature that we needed. Because you don't need the pool. You don't have to get the flywheel going.

Roland Siebelink:Very, very good. What can you share, Andrew, in terms of the traction that GumboNet and Data Gumbo has seen so far? Can you share anything about the number of nodes or the growth metrics? Whatever you're comfortable to share.

Andrew Bruce:Well, I can tell you that since we were invested in by Aramco and Equinor, we've doubled in size. We got an office in Norway. We have an office in London. We're looking at opening an office in the Middle East. We're In the process of doing that. Then offices in Latin America and basically wherever the business takes us. I think you can tell from those metrics how we've grown has been pretty, pretty, pretty astounding actually. We started in the energy business, even though we're focused on industry, we started on energy. As a multinational business, you have to go to where the customers are.

Roland Siebelink:Absolutely. In the energy business, of course, it was famously, I would say, quite affected by the whole fluctuations in the markets due to the pandemic this year, right? We even had negative oil prices at some point in time, I seem to remember. Was that a big fluctuation for Data Gumbo as well? How did you manage yourself through all these fluctuations in the market?

Andrew Bruce:Yeah, the negative oil price was actually really good for us. It was the tipping point that we needed. Companies have to save money. And the easiest thing in the world for a corporation is to do nothing. But if you have to save money, then you can't do nothing. It was a tipping point for us that really started giving us additional momentum for that flywheel I keep talking about. And then our international business travel expenses went down. And the ability to have more meetings in a day went up. In reality, it's actually been good - I hate to say it, but it's been good for us.

Roland Siebelink:Absolutely. Yes, I could totally see. Does that mean that, as you say, the easiest thing for a corporation is to do nothing. Does that mean that, in a way, doing nothing is your biggest competitor?

Andrew Bruce:Yes, absolutely. Because what we're doing is substantially different. If you take an internal payment process that takes 45 different steps and multiple different sign-offs and multiple different people's jobs are involved, and you turn that into an automated process, then you're changing some fundamental things about how the business is done. You're making it more efficient. You're changing people's jobs. There was a company we were talking to in a sales situation. They said, "Well, thank God you're here because I trained to be an engineer and really what I'm doing is pushing paper for invoices. What you're enabling me to do is get back to being an engineer, so I don't have to push paper and worry about field tickets and have people come in and bug me." We got what we call touchless transactions during the world of COVID. It's fantastic because now people don't have to chase each other around and get signatures. It's all automated.

Roland Siebelink:Just interested in how you actually attack that inertia problem a little bit more. Because this is a problem I hear from a lot of founders, right? When they come up with a new workflow or a new habit, in a way. How do you go against the inertia of what people have already? Do you position it as a little pilot project? Or do you try to attack the status quo habit? What's been your experience there?

Andrew Bruce:Pilots are lethal. I hate pilots. I think every entrepreneur should hate pilots. Because you do the pilot and then you get stuck in this Valley of Hell when the company's evaluating, do they want to go forward or not? If you spend all that time selling the pilot and now you've delivered the pilot, now you have to go and resell it again to get live. It's much easier to say, especially with us as a subscription, rather than doing a pilot, why don't we do a project? Let's do a small project that's a low-risk project and let's get you live. From Day One to going live, 45-90 days, and let's get it live. Let's do it for real. There's no point in doing a pilot. And then let's build on that. Let's build on that because we're not ripping and replacing anything. We're building an infrastructure on top of an existing infrastructure. And then you can, as people get more comfortable with it, they start saying, "Well, we don't need this and we don't need this." They start turning off pieces that they don't historically need. It's much more a matter of let's get started, let's get the thing in production, and then we can start turning things off. Pilots are hell. Don't ever do a pilot. That's my advice to anybody.

Roland Siebelink:You do seem to say, "Let's start with a relatively small scope." Would that then be limited to maybe one supplier or one use case and then expand people on that?

Andrew Bruce:Exactly right. Start with one use case with one supplier in one part of the country. Then let's roll out to the whole country. And then let's roll it out to different parts of the world. Then you just start building projects onto each project. Because once you've got the infrastructure in place, you don't have to build it - connections with the ERP is what I'm really talking about. Once you get the connections during the ERP, you don't have to do that again. Oh, and by the way, this company over here is already connected or they transport this product for you for somebody else, so we can just connect them very quickly. And so then it just becomes a matter of the testing cycle, so the power of the network drives additional adoption.

Roland Siebelink:Excellent. Very, very good. Starting from that use case, I can see why you're using the word flywheel so much. That must be in your head all the time, right? That's a very, very key concept there. Can we talk a little bit about the team that Data Gumbo has been building up? By how much have you grown and how do you typically divide the resources between the different functions that you have?

Andrew Bruce:We've grown. We're about close to 60 people now. We've recently embarked on something called EOS, the entrepreneurial operating system. In my experience, I've seen in many startups I've been involved in myself where they get to 50, 60 people and they implode under their own weight because the systems and processes that got you from startup to now impede you from going forward. We've been very deliberate and there's a book called "The Traction Gap" about how you have to systematize your business to be able to grow to the next stage. We've been going through the EOS process. Now we have a product group, we have a commercial group, we have a finance and HR group. And then we have different function managers who are responsible for different parts of the world. That's basically how we split up the company. And then we use an EOS process to set milestones and provide accountability within the company.

Roland Siebelink:That's a great practice to use, a system such as EOS to get people aligned. What would you say has been the biggest change since you started implementing EOS from Data Gumbo as it was before and as it is operating now?

Andrew Bruce:Two things. Number one, they have this concept called an L-10 meeting. It forces you to discuss the hard issues. It's almost like a continuous improvement initiative because you're bringing up the issues, you're fixing them, and basically you're systematizing the solutions that were issues in the past and now they can become solutions going forward. And then there have been some - I think that's actually the biggest thing because it drives accountability. It drives behavior. It drives everything. The other thing was we reviewed the values of the company. We have values that we'd grown up with. And then the EOS process has got a very structured way of thinking about recruiting people, retaining people, motivating people. We went back and revisited what our values were and that was a very interesting process. It was not something that - we ended it with values that I didn't expect. But I think that it's going to help people understand if you're going to come and work for Data Gumbo, what does it mean to work for Data Gumbo and what kind of people are we looking for? And how do we talk about the value that we're bringing to customers? That was also pretty interesting.

Roland Siebelink:Very, very cool. I often get founders asking me, "Should I really spend time on values? Is that not something that's more for corporates?" What's your experience here?

Andrew Bruce:It's incredibly important in my opinion. For example, one of the values is comfortable with chaos. If you're in a startup, or I would argue any company, the only constant is change. If you're in the interviewing process, you need to be discussing, "Okay, you're not coming to the corporate world. You're coming into a startup world." Everything changes all the time. It's a dynamic environment. Another value is being solution oriented. As you're going through this comfortable-with-chaos situation, you have to be thinking about, "Okay, how do I bring it up as an issue in the L-10 meeting? How do I systematize it? How do I improve it?" And then we can keep on improving the company. When you're interviewing people, you need to be discussing that so that you get the right people in the company and you don't make the expensive mistake of hiring the wrong person. Not because they're not qualified. But because they're not comfortable with chaos. That's not who they are, right? If you get the values right, they are extremely valuable in how you build the company, and how you think about hiring, and reviewing people. Whether you've got the right person in the right job is also another aspect of the EOS system. And the values help you answer that.

Roland Siebelink:The one question I often get about team growth from different founders is when you do get to the tens of people, about 60, as you say, how do you divide that up between investing in products versus investing In the go-to market, the commercial side? And then how much is remaining typically for finance and infrastructure?

Andrew Bruce:We tend to look at industry-published ratios. The best of my ratios, for example, for SaaS companies and use those as a gauge of whether or not we're on track or not. We try and manage our money as tightly as we can. Obviously, any startup, money is the scarce resource. It's a real challenge because you've got this massive sales opportunity, so you need to be hiring the salesforce to land it. But then you also need to be investing in the product. Once again, you go back to industry ratios and see if you're scaling appropriately.

Roland Siebelink:Figuring out your go-to market and how to do that efficiently is typically what takes many startups quite awhile, right? Do experiments with all the different channels they could be using. Figuring out how to scale it. Is that the phase you're currently in, would you say?

Andrew Bruce:Yeah. Up until now, we've had a very direct sales model. But now we're getting into much more of a partnership model. Working with other companies, we have something called the Ambassador Program as well. People who have come from industry and have long expertise and long contacts, how can they get involved? What we're doing is pretty exciting to a lot of executives who want to believe in trying to improve the way business is done. Providing an incentive program that they can get involved in. We're transitioning from being direct sales to being partner driven, as well as embedding our products within other products as well is another channel we're exploring.

Roland Siebelink:Excellent. When people are listening to this podcast, what could our listeners potentially help Data Gumbo with? Are you hiring? Are you looking for partners? Are you looking for customers? What are you looking for and where can they go to help you?

Andrew Bruce:The Ambassador Program is the most interesting thing. It's a way that we can increase the scope of what we do. We can help pay people for their expertise and their content. Go to links.datagumbo.com/ambassador. There's a signup program that will tell you how to get involved. I think that's probably the best way that people can take advantage of what we're doing, get involved themselves and really take this to the next level.

Roland Siebelink:That's awesome. Well, I really thank you for this extended interview and it was fascinating to hear more about how blockchain is being applied to the world of industry and energy, in particular.

Roland Siebelink:Once again, Andrew Bruce, Founder and CEO of Data Gumbo, [www.datagumbo.com](http://www.datagumbo.com) I believe, is that right? DoI have that right? And looking forward to leading many more ambassadors into your program.

Andrew Bruce:Yeah. That link is not just the webpage. It's links.datagumbo.com/ambassador.

Roland Siebelink:That's really good. Thank you for specifying. Other than that, thank you everyone for listening and we'll have a new episode ready for you next week.

Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.