Episode 256: Exploring the Startup and Venture Studio Model with Josh Stanley and Fahad Siddiqui

December 13 , 2023  |  By Brent Williams

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In this week's episode of the Be Epic Podcast, Brent converses with Josh Stanley, CEO of Cartwheel Studios, and Fahad Siddiqui, Principal and Senior Vice President at SSI. They delve into their unique career transitions from corporate roles to entrepreneurship, their individual contributions in the thriving ecosystem of Northwest Arkansas, and the dynamics of the startup studio and venture studio models. This episode offers valuable insights into the world of startups, making it a must-listen for aspiring entrepreneurs and business enthusiasts.

Podcast Episode

Episode Transcript

Josh Stanley  0:00  
When you're a startup and you need capital, right capital is just an ingredient to your success story. It's the fuel to your ship that you've built. Like your as a startup, you're always kind of seeking you're hopeful for smart money.

Brent Williams  0:10  
Welcome to the Be Epic Podcast, brought to you by the Sam M. Walton College of Business at the University of Arkansas. I'm your host, Brent Williams. Together, we'll explore the dynamic landscape of business and uncover the strategies, insights and stories that drive business today. Well, today, I'm fortunate to have with me two guests. I have Josh Stanley, who is CEO of Cartwheel Studios. And also have Fahad Siddiqui, who is Principal and Senior Vice President at SSI. We'll tell you a little bit more about both of them about SSI and Cartwheel what they do. And the unique partnership they're forming in Northwest Arkansas. But maybe before I do that, let me ask each of you to tell us just a little bit about you and your background. Josh, I'll start with you. Fahad come to you next. And then Josh will kind of come back and talk about Cartwheel.

Josh Stanley  1:14  
Okay, sure. Yeah. Yeah, my background. And I would say professionally, I came up in product management and project management, have kind of run teams on both sides of that kind of technology facilitation role and got into entrepreneurship after spending years at 1-800 Contacts, which is the contact lens business. And then Backcountry.com, and then ultimately, Zappos. So I spent a long, basically 12 years in E commerce doing those roles, and then took the leap of faith that a lot, or I shouldn't say a lot, but some, some corporate people take into entrepreneurship. Did that after kind of fighting through this, like, how am I going to become an entrepreneur, I went through a period of feeling like I needed the perfect idea. And then I ultimately ultimately landed on this concept of like, no, I should just do what I'm good at. Like, I could do that as a consultant, as a contractor. And that's how I started and then kind of eventually ended up working with some friends to build an agency out of Las Vegas that served product development. So we were a product development agency that did software development, but kind of holistically covered the spectrum of product management, design, and software development so that we could, you know, in isolation, kind of go off and build build a product for a client, for the Fortune 500 clients that we worked with. And then I mean I'll include how I got to Northwest Arkansas, because that's it's at the heart of I think a lot of what we want to talk about today. And that's, yeah, in that, running that agency for about two years and growing that to a couple million bucks in revenue. We got acquired by a larger agency out of Northwest Arkansas called RevUnit, which I think many in the region know. But yeah, just a larger software development firm or product development firm. And ended up running that for about two years and then exited, exited that or helped to help RevUnit go through a private equity transaction in 2019. But yeah, so I've co founded I think six companies. Now I'm kind of skipping over some of the details of how those happened. But it had been through a few exits as well. So it's been a it's been a fun journey and now based in basically Bentonville, I live in Little Flock just outside of Bentonville, but our office is in Bentonville.

Brent Williams  3:31  
All right, wonderful. Well, Fahad, how about a little bit about your background?

Fahad Siddiqui  3:35  
It's hard to follow Josh on this one,

Brent Williams  3:38  
It is.

Fahad Siddiqui  3:38  
Certainly less exciting career. But I spent I started in the telecom sector in New York, basically big corporate, spent 10 years in telecom in different positions, very corporate positions, corporate development, strategy planning, little bit finance and strategy oriented and then wanted to get closer to sales and marketing. Became head of marketing for a b2b division, business services division. So that was sort of the 10 years were planned out and then decided, okay, let's do something more entrepreneurial than try to set up own my E commerce startup. Now, I'm in Chicago at this point, spent exactly a year and three months doing that and burning all my cash, great experience, you know, loved it, but didn't work out for me. And that's when I ran into the founder of SSI in Chicago and decided to join these guys to help grow this business. And I've been here now nine years. It's been a fantastic journey. We've grown this company from 50 to 550 in this period of time, so great experience.

Brent Williams  4:54  
Well, incredible experience for both of you. Josh, you're now you're in Northwest Arkansas and have created and leading Cartwheel, cartwheel studios. And I would tell us a little bit about Cartwheel I think maybe many people aren't all that familiar with the venture studio model.

Josh Stanley  5:15  
Yeah, I definitely find that that's the case. I mean, it is kind of an emerging asset class of sorts. And so yeah, I can speak to Cartwheel, and this, this startup studio slash venture studio model. So we yeah Cartwheel started as a startup studio. And I'll talk about that transit, the transition, we're in the middle of right now kind of expanding that scope. But yeah, essentially, anybody who's founded a company before, knows how hard it is to get a company off the ground, to start from scratch, to build from zero to get even to a million dollars in revenue was a big accomplishment and requires blood, sweat, and tears. And I think another another thing that I think most people know about startups is 90% of them fail, like that's a fairly well known stat that gets thrown around. So I think the startup studio model and the venture studio model, and I'll talk about the differences in a minute, or they're very nuanced differences between the two, they're relatively the same. But the model itself is like how do we improve that 90% failure rate? How do we pull forward the failure rate? How do we do it early on before significant investments of people's time, talent and resources. And so that's really what the startup studio model is striving to do. It is not an incubator, which a lot of people start translating, you know, startup studio into incubator or it's not an accelerator, either. Both of those models go out and seek either a founder or co founding team, or an established startup to help accelerate their growth, right? Like those models are great models, and nothing wrong with them. But they are built to kind of take an established person or team and startup, pull it in, and help accelerate it in some capacity, where the startup studio venture studio model is more about, let's go identify the white space that exists the blue ocean opportunities in different markets. So you tend to focus on a certain thesis. If you're running a studio, like for us, it's the retail value chain, which I know is near and dear to you, Brent. And that that idea of focusing on retail value chain for us, it's like, okay, let's go identify where where are there opportunities in the retail value chain for us, where we can come up with new business concepts. And we tend to try to have affinity mapping around those business concepts. And by that, I mean, hey, this next cohort of concepts is all gonna be focused on supply chain. So we're gonna go identify 20 concepts, potentially viable business concepts in the in the supply chain space, and we'll vet that will validate, we'll do business, subject matter expert, or operator or corporate interviews, where we're helping to identify assumptions that we've made about those concepts, like what are the most critical assumptions we have about that concept that we have the least amount of confidence in. And so we'll go out into the market, we'll do market analysis, competitive analysis, and interviews, that allow us to kind of validate and vet what assumptions might be true and what assumptions are, are clearly false. So with that in mind, we actually start with a large number of concepts, and then whittle down to say, two to three concepts by the end, that we can feel the viable businesses that have been vetted and validated, that allow us to then hopefully, find a co-founder. So we go out into the market, and seek to identify an individual has a unique advantage in that business concept. And we attach them to that concept to go over the last kind of stage gate to forming and funding a company. So that's the startup studio. That's how it's different from an incubator and accelerator. And it's, hopefully, a higher probability of success than just starting from scratch what we see when we look at and help and try to help startup founders that might exist out in the community, because we see a lot of confirmation bias, we see people that seek out data that that validates the assumptions they've made up front, we see emotional attachment. Maybe like you're you're really attached to this thing, and it just doesn't have the legs. And so what we believe is that the startup concept really allows for the separation or startup studio concept really around allows for that separation, because if we don't, if an idea isn't working, like we're not emotionally attached, like we will take it out behind the barn and shoot it like we will, we will put that idea down if it doesn't have legs, and in a way that allows us to really get to the heart of what has the highest probability of success. So that's, in a nutshell, that's the model of venture and just to say at startup studio, venture studio, venture studio looks exactly the same as what I just described. The only addition I would add is it typically has a sidecar fund. So it has what looks like a traditional venture fund attached to it, where it can do follow on investments into those startups as they kind of continue up the lifecycle into later stages. And later fundraising. Fundraising rounds.

Brent Williams  10:21  
Totally makes sense. And Fahad, you have you and SSI have gotten engaged, I think maybe was the initial partnership around the Pocket Factory product?

Fahad Siddiqui  10:38  
Yeah, so I can give you some backdrop of that. So over a period of time, we've actually built some products with some entrepreneurs and launched them as separate entities. And Pocket Factory is one of those products, which is a Industrial Internet of Things, industrial IoT platform, focused on the bottling sector. So take, you know, bottling like Coca Cola, Pepsi, Heineken, whoever it may be. So, to the platform is, you know, it's applied to the manufacturing facilities, cleanse data and give them predictive maintenance and give them a health check on their manufacturing facilities. So we decided we needed a platform to scale this startup. And that's when we ran into Josh and team and found that Cartwheel to be an impressive platform. And we thought this startup could, you know, learn in and scale, basically. So that's how we started this partnership. And now that partnership is much broader than larger than maybe started off.

Brent Williams  11:52  
Well, these are, these are sort of Josh's words, not yours. Exactly. But you know, when he described SSI to me, you know, he said, you guys are a little little unique in that, you know, you're high quality, you're fast, you work well with startups. And then you also have a fund where you do invest in maybe some of those startups. Tell us a little bit about just SSI and kind of was Josh right? Is that? Is that the right description?

Fahad Siddiqui  12:22  
I hope he is. Well, all I can say is that we've got a good track record. You know, we we're currently engaged with, like 40 plus tech companies, out of which most of them are startups, happen to be startup or are co-funded startups, few are idea stage companies. The rest of our clients are more enterprise or let's say publicly traded companies where we're doing multi year sort of projects. But in terms of the number of customers, most of our work is in the tech space. And out of that portfolio, it's mostly tech startups. And I think where we have been successful is our average client relationship goes about five years. And for the top 10 clients, it's about eight years, which is not typical in the sector. And really, I think the reason for this is because we have such a great model of engagement, where we can understand the needs of an early stage firm, which are very different from when they scale to a growth stage, and then to maturity. And we work with all size and stage firms and build a very flexible model that can take them from that idea all the way to market to scale. And then beyond and in our team of you know, technical architects to developers, etc. That team kind of evolves as their majority evolves. And so I think that model has really worked for us. And it's been successful. We've been lucky. Also, we work with some really amazing startup founders and startups that started with you know really two guys and two dogs that came to us with an idea and exited for $400,000,000 2 years later and built, and all those platforms have been built by us. And, you know, since that happened, you know, we set up our own fund because we were like, okay, we didn't have any skin in that game. You know, they had a great exit and we've been their partners, and even today with the startups. They're not a startup anymore. They've been acquired by a publicly listed company. So so we set up our own fund. Take, you know, basically, we invested in this fund. And the idea is, again, on a case by case basis, where there's a good match in terms of domain or industry knowledge and expertise, and we can bring something to the table, other than just pure development capabilities. And we see a good match with the founders will typically participate in their capital raise and invest and you know, and it's a win win for everyone because you know, our personal money our company's money is tied into their success. And so everybody wins and we make sure that they're successful. So try to make sure as much as possible.

Josh Stanley  15:14  
Yes. Just to jump in here, like, it's not possible that every vendor on the planet can do what what SSI can do. But like when you're when you're a startup, and you need capital, right capital is just an ingredient to your success story. It's the fuel to your ship that you've built, that you're hoping to take, you know, Exit, Exit, Exit, the gravitational force of kind of just creating a company with and like to have a partner that also has the ability to invest in your startup, like your, as a startup, you're always kind of seeking, you're hopeful for smart money, right? You're hopeful that along with that capital, that ingredient that fuel to your ship, you can also get someone in partnership with you, that has aligned incentives that can bring more value to the table and man to have your technology team have that capability to also be kind of a contributor to that fuel. I don't know there's a lot of power, I'd love to see more. I would love to see more companies that provide services to startups that are always asking for payments, right? Like they're selling, selling into startups or selling into series A Series B companies wanting they're wanting their cash that they've raised in exchange for services, but also to be able to contribute back, not in all instances, but when it when you know, interests are aligned. Like when you can create a line incentive relationships with vendor partner vendors. I think that's where some of the best outcomes come from when everybody's invested. He's like, no, we need this to work. Let's make sure we're coming up with the best concepts, delivering the best possible solution. I think that's interesting for me.

Brent Williams  16:52  
Absolutely. You know, and and Fahad, well, you know, I'm, I'm a big believer in the state of Arkansas and Northwest Arkansas. Clearly, I've spent much of my life and career here and get a chance to lead the Sam M. Walton College of Business, which is quite an honor, as you can imagine. But my understanding is that you are working on opening an office here in Bentonville. And so you must see, at least some degree what we're seeing, I think.

Fahad Siddiqui  17:27  
So again, I'll give a lot of credit to Josh and team. They basically, they invited us to Northwest Arkansas to take a look at the ecosystem that all of you are building actually together. We were very impressed, we're pretty active in the Chicago sort of surrounding between Chicago, Milwaukee, Detroit, sort of the broader technical system, incubators, accelerators, venture capital funds, we've invested in a bunch of funds ourselves as well. So we stay engaged in that ecosystem. And when we came, visited your region, we found the region which is developing fairly quickly, great concentration of you know, Fortune 100, great activity overall, we felt that this could be a place would be to be should invest and get engaged in the tech ecosystem, and try to be an active contributor. So we decided to partner so we signed a partnership with Cartwheel as well, broader partnership. And then as part of that, we will set up an office and we're in the process of setting up an office there and hiring a couple of key people to be engaged in activity, that ecosystem. Also, I noticed you guys were ranked on the Wall Street Journal's List of cities, that was just what two days ago, I saw that you guys were ranked number two, and that's sort of the mid size or small size regions that have gotten highest concentration of tech skilled tech workers. So congratulations. That's amazing.

Brent Williams  19:03  
Well, this, this region is rapidly developing in that respect, and certainly is exciting. And I'm excited you and your team will be here and be engaged in the ecosystem. You know, Josh, I want to go back to a point when you were describing Cartwheel you that I think is probably really important. I know it's one of the things that really excited me is that you've got to you've got a strong focus on the retail value chain. Why is that important? I mean, I'm sure there's some probably some obvious reasons, but there's probably some nuances to why that's important as well.

Josh Stanley  19:43  
Yeah, I mean, I think you know, this as well as anybody else in the region that we've got tremendous activity in the ecosystem. We got tremendous contributors in the kind of entrepreneurial support organization network here, a lot of it. And we and we have amazing philanthropic families here that contribute to a lot of activity and kind of the growth that we're all experiencing and loving, I think. But you have the investments that have been made in in health tech and health care, which I think need to continue to be made. We have investments in, I would call Air Mobility or mobility in like the up summit that's taking that has taken place here. We've had investments in outdoor rec, obviously, GORP that runs, you know, out of your programming at the university that really is meant to be an incubator, to outdoor rec companies and startups. So we have these kinds of interesting capabilities being established and built here. But when you take a step back, and you say, well, that's a lot of there's a lot of activity and a lot of different places. Not all of those activities are built around established capabilities, like true mature capabilities. And by that I mean, think advanced subject matter experts, people that have a depth of knowledge in a particular area. We don't have the concentration of that in healthcare yet, or health tech or biotech, we don't have the concentration of that yet in Air Mobility. There's a lot of great work happening with drones and all these different areas, but it's just not mature and established. But when you look at the retail value chain, when you ask yourself, where what do we have a unique advantage in, an unfair advantage in which I think from a startup perspective, it is critical to assess, and then where do we have a depth of subject matter expertise? Where do we have established anchored kind of incumbents that are industry leaders, and its retail value chain all day, we have Walmart, we have Sam's Club, yes, that's what this region I think is most known for, is being the headquarters to those those major, you know, Fortune One companies, or fortune one company, and but we have Tyson Foods, we have Simmons, we have George's, we have JB Hunt, we have Arcbest. And the list goes on. Like, we never include the other billion dollar companies that are here in this region that are all really ultimately connected through the retail value chain from getting a product created, to getting it into the hands of the consumer. So that to us. And actually, before I do, I'm gonna give credit where credit's due. And we have a university that has a top ranked supply chain school, in in in the country, if not the world. So, you know, we have this great mix of emerging talent established capabilities, deep domain knowledge, talent, like how do we take this amazing combination of resources and global reach really, with the companies we have here and leverage it into emerging companies? Like how do we take emerging technology and combine it with subject matter expertise to disrupt the industries that are aligned with the retail value chain like we can out of this region, build startups that are the next Walmart, Sam's Club, build startups, the next JB Hunt and Tyson, like, we can build those kinds of technology companies here. And it's going to be because we have an amazing university program that produces young talent focused in that in those areas, it's going to be because we have amazing anchor corporates in this region that attract that kind of talent. And it's going to be because we have an amazing ecosystem, and the right kind of support from different angles that allow us to create new businesses and help them thrive here. So there's more work to be done. It's not perfect, there are gaps in our in our ecosystem. But yeah, when we when we took a step back and just ask ourselves, where do we have a right to win? It's like this retail value chain all day. Like, if we're not building companies in that space. It's, it's, it's shame on us is this kind of how we feel like if we're not willing to partner with with you and your team and the University programming, and corporates here, and kind of all work together to help build new tech companies in that space. We're missing out on being the kind of global leaders in the future, like the leadership we have today is as fleeting as anything like the s&p 500 is the stat we always point to have like the average lifespan of a company in the s&p 500. If you go back to the 1960s, it was some 60 some odd years that the average lifespan of a company existed in the s&p 500 had been around you go to today, and the average lifespan is 15 years. So what that tells you is that more early stage companies are taking over in the s&p 500 that incumbents have been disrupted by challengers. And that is a continued pattern that the lifespan is shrinking. We're going to see more of that. So we need to be building those companies. We need to have a shot at continuing to be the leader in that space for the next 10, 20 30, 40 50 years and beyond. Like that's the kind of vision we need to we need to start taking as we as we look at what's possible in Northwest Arkansas. That's my rant for the day.

Brent Williams  25:03  
I couldn't agree more and probably could not have said it better. And it is exciting to be here at this time. Because you know, I do believe that, that all the ingredients are here for, you know, the next wave of innovative companies to be built right here that will impact the retail value chain for many, many decades to come. And, and I think both of you are important pieces of those ingredients. So Fahad looking forward to getting to see you more, as you're in Northwest Arkansas more and excited that SSI is joining our region. And Josh, really excited about what you are doing at Cartwheel and excited about the startup studio model. I want to say both of you, thank you for partnering with the Walton College of Business. And thanks for being willing to join today.

Fahad Siddiqui  25:59  
My pleasure. 

Josh Stanley  26:01  
Yeah, appreciate you. Thank you for having us on. Thank you for being so supportive of all the programs. And I mean, I'd be I would feel maybe missed if I didn't at least bring up hey, we've got bounds accelerator, and I don't know when this podcast is gonna go live, but I'm gonna do it anyway. So we're working with with, Cartwheel's working with the University of Arkansas, and really your your team on bounds accelerator, which is launching in January. So if this happens to get out before November 3, we are still accepting applications. And these are interest. This is for traction, or startups that have traction that have some revenue post revenue in the emerging tech space applied to retail value chain. So if anything you're doing in the startup space has any application to the retail value chain, please apply to the bounds accelerator, you can reach it bounds.cartwheel.studio, and again, that's in partnership with the University of Arkansas and many corporate sponsors along with Han Ventures, Coin Base, and AI Foundation. So we're bringing a great collection of established emerging tech companies in alongside the established retail value chain companies and in partnership with the University, I think it's gonna be a great program excited about it.

Brent Williams  27:14  
Yeah, as you know, super excited about that partnership, all the different partners that have come together to make that happen. Josh, you, your team, other partners. From from our standpoint, you know, I have to mention Sarah Goforth, who leads our Office of Entrepreneurship and Innovation. That's really been the key driver from the University of Arkansas side in in this effort and many more to build this ecosystem. So excited about the partnership. Thank you both for being here today.

Josh Stanley  27:46  
Thank you.

Fahad Siddiqui  27:46  
Thank you for having me. Thank you.

Brent Williams  27:48  
On behalf of the Walton College thank you for joining us for this captivating conversation. To stay connected and never miss an episode, simply search for Be Epic on your preferred podcast service.

Brent D. Williams

Dr. Brent D. Williams serves as the Dean of the Sam M. Walton College of Business at the University of Arkansas and holder of the Sam M. Walton Leadership Chair.

With a deep commitment to fostering excellence in business education and thought leadership, Dr. Williams brings a wealth of experience to his role, shaping the future of the college and its impact on students and the business community. A native Arkansan, Dr. Williams earned his Ph.D. in Business Administration from the University of Arkansas, specializing in supply chain management.

As the Dean of the Sam M. Walton College of Business, Dr. Williams is focused on advancing the college toward its vision of being a catalyst for transforming the lives of its students and a thought leader in business.