MEMBER
SPOTLIGHT: INTERVIEW WITH VIGILISTICS, VENTURENET BEST OF SHOW
WINNER
Interview by Jennifer Beever
This issue's
Member Spotlight features Craig Nelson, Founder and CTO of Vigilistics,
Best of Show winner for VentureNet 2005.
Tell us
what Vigilistics does.
In most manufacturing environments, when operators in the plant
do their job, they write down what they did, and then later it
gets entered into an Enterprise Resource Planning (ERP) system.
There is lag time between the operation and the recording, and
with manual data entry, you sometimes have inaccuracies. Vigilistics
eliminates the lag time and possible inaccuracies by connecting
the plant floor computers that control processing to the ERP system
on a real time basis.
What is
this marketplace like? Is there a lot of competition?
The competition is still building tools that engineers can use
to go into and customize for their plant. Vigilistics has the
first completely configurable product that doesn't have to be
customized.
Recently
you won Best of Show at the Software Council's VentureNet. What
was that experience like?
That was a great experience. It brought attention of VC firms
as well as interest from angel firms that we had already started.
We are 2-3 weeks from closing. 2 partners and I (I own another
company that's been around for 9 years) funded most of what we
needed already, so now we're just ready to launch into the full
market. We're pretty far ahead with this. We don't really need
a lot of money to launch, so it looks like an angel round is going
to do it.
What is
your other company?
The other company is a systems integrator that does plant floor
automation. That's really how we discovered this opportunity -
a group of customers were searching for a solution and couldn't
find anything.
How did
those customers come together?
Most of the big companies talk - in fact, when they have excess
capacity they often share production and charge each other back
and forth. So, they already work in groups. And I've been working
for the Food and Drug Administration (FDA) for years. One [company]
came to us to start with, and then we pulled together a small
group of manufacturers to really validate that we were going down
the right path. We also kept the government in the loop as we
developed our product.
What do
you do for the FDA?
For about 12 years, I've interpreted the regulations, and I've
been teaching both their staff as well as manufacturers about
what the federal government intended when they wrote the regulations
and how that applies to their automated process. I teach all over
the U.S., really all over the Americas - I've been to Puerto Rico,
and I've done some cooperative stuff with Canada. Typically it's
the FDA in Washington that calls me in and asks me to speak at
different locations. Last year the FDA came to me and asked me
to rewrite about 9 pages of the regulation. I've been ghost authoring
for about 5 years, but now I'm actually authoring and going and
testifying on the regulations.
What was
the government's role?
They see their role as twofold - primarily to protect the public
safety, but also to train the manufacturers so that they can be
successful. They really would like to see good solutions coming
out for the manufacturers.
When did
you start Vigilistics?
We started the software development 4 years ago. We launched it
formally as a company in July of this year.
That seems
like a long time. What have you been doing in these 4 years?
First we had to plan, develop, and conceive the software, and
find a host plant to do the alpha testing. That took a year or
year and a half. When we had the prototype running, then it back
to design the full product, hire programmers, and start to build
it. That was another year and a half, and we did some beta testing.
We launched the Early Adopter's program just over a year ago.
What is
the Early Adopter's program?
With the beta companies we were watching the bugs, doing fixes,
and listening to what they wanted and rolling that into the product.
Our Early Adopter stage was finished production, installable software.
Early Adopters did not pay the full license, but paid a substantial
price and paid an installation fee to put it in. We told them
there would only be ten Early Adopters, and that there would be
a gap before we go to what they call the Early Majority in the
book Crossing the Chasm. We would pause, and ask Early Adopters
to give us feedback before taking on more customers. We've promised
that we're not going to install the first full production product
until after 2005.
Most companies
just have alpha and beta testing. Has the Early Adopters program
made a difference?
If we had just gone to market, we would have been overwhelmed
with installs, without clear goals of what we wanted to accomplish,
and ended up without the good references we are beginning to get.
We focused on return on investment for each early adopter, and
we're completing that. For example, with one early adopter, we've
focused on resolving their material losses, and they're saving
over a million a year as a result. We have solid case studies,
and through this process we've also ensured that our customers
are willing to expect reference calls.
Is the
marketplace demanding a product like yours, or is it that companies
don't know what they don't know, so you have to go out and educate
and sell to manufacturers?
We haven't done anything in mass marketing - that's all slated
for January. We got the Early Adopters by going to about fifteen
customers that we had relationships with. We didn't do any advertising
or marketing. We will have to educate the mass market, and there's
also a requirement for some training on where the gaps are and
being able to do a trace and a callback under the Bioterrorism
Act. The FDA, the US Public Health Service, is really looking
to improve the time it takes to do an accurate recall.
And your
software helps with that?
Absolutely - in less than an hour if not within minutes. We have
some direct modules that run against the real time data the process
computers collect. For example, in a fluid processing plant, all
the movement and mixing of fluids is controlled by PLC's on the
floor. Vigilistics can watch those and see each time a transaction
takes place, build the parent child relationship, and provide
trace and recall. If you type in one lot number or anything about
the product that you know, our software takes into consideration
mixed lots and co-mingling and figures out exactly what consumer
product that lot went into.
Before
Vigilistics, what did a company have to do?
95% of the time, they kept manual records of when lot numbers
were received and they make some assumptions based on when they
received a lot: when it could have been pulled into the production
chain, etc. Then they recall everything from that point on. The
protection to the consumer is that they are probably going to
get it all. But, in a lot of cases, especially food and dairy
processing, there are byproducts that get shipped to other plants.
This requires the company to publish the names of all the downstream
companies that they supply and all those products will have to
be recalled as well.
Why haven't
the ERP companies pursued what Vigilistics does?
I believe they are trying to, and we are in discussions with some
of them. It takes them a while to build something. In addition,
there's been an attitude that the plant floors are custom and
the back office systems are standardized, so there really wouldn't
be a need to connect the two without custom programming.
What's
been your biggest challenge?
Probably the biggest challenge in the funding activities is learning
how to work with institutional investors: what they're looking
for and how to present. The ventures I've done in the past have
all been bootstrapped, so I've never worked with institutional
investors.
What have
you learned about presenting?
I'm an engineer primarily, and, with our customers, we're used
to presenting the technical details of what our product does.
That's not what investors are interested in! In addition, I'm
used to people wanting to spend hours with you, understanding
how things work and what you do. With the investment community,
they really want to spend less than ten minutes! What we're finding
now is that we're having a lot better results, because the people
who make the approvals for large complex systems are board members
who have the same mindset as investors. Learning how to tell others
what your product does in ten minutes or less is invaluable.
Most software
seems to get developed based on the ideas that technical people
have, and the test and validation in the market comes too late.
Engineering is my second career - emergency medicine was my first.
You really learn there to seek outside guidance. I did special
rescue, and death was the consequence of failure! So it helps
if you lower your pride a bit - it was all about having the right
team and getting the right training and outside guidance. In the
business world, I've seen that it's sometimes more about pride
and having one idea that is pushed out onto the marketplace.
What would
you share with other Founders and CEOs?
I would say that you should relish all the outside advice that
you get - certainly filter it - and when you get to the investment
stage learn from that as well. Learn from the due diligence that
the investors do - that feeds directly into the marketing and
business plan that you do for your company.
Vigilistics,
a Mission
Controls software product released after three years of development
and testing, is proving its worth daily in national-brand process
plants from coast to coast. Now, finally, those plants can see
unerringly accurate 7/24 details of machine downtime and product
loss, and trace the most complicated batch genealogy from receiving
through shipping. For more information about Vigilistics, call
(949) 477-2228 or email craig.nelson@vigilistics.com.
Interviewer and Software Council member Jennifer Beever spent
14 years in the ERP software industry prior to founding her marketing
consulting firm, New Incite, in 1997. Jennifer helps companies
create and implement systematic, planned marketing strategies.
Contact Jennifer at 818-347-4248 or jenb@newincite.com.
