Olathe entrepreneur Mark Calhoun and his business partner Jim Starcev of Leawood knew they wanted to use their gelato business to pioneer new software to help small business owners collect sales data.
The problem was figuring out how to get started.
That’s where Digital Sandbox KC is trying to help. Started with a $1 million grant from the U.S. Department of Commerce and other local support, it’s part of the UMKC Innovation Center, and its goal is to help local entrepreneurs gain a foothold when trying to launch new projects. Most of its efforts have been on the Missouri side, and recently, Gov. Jay Nixon announced a new $500,000 grant from the state to Digital Sandbox.
In this case, Digital Sandbox is partnering with the city of Olathe to help homegrown Olathe efforts succeed and ultimately create new jobs.
One problem entrepreneurs face is raising seed money before they have any data on a product’s actual performance, but it’s a Catch-22, because it’s tough to get that data without the funding to fully develop an idea.
Calhoun and Starcev’s new software venture is called PerfectCube, and they’ve used a grant from the Digital Sandbox to flesh out the software they’re using at Paciugo Gelato in Oak Park Mall.
“The reason why we opened up the gelato shop was because we wanted to aggregate retail data,” Calhoun said. “We discovered through the operation of our shop we had trouble getting the data we wanted, so we started building our own tool. We wanted to give (small business owners) the competitive edge that larger businesses have.”
When Calhoun and Starcev approached Digital Sandbox with their pitch, they weren’t completely new to the development process. Previously, they created Etelligent Consulting, which the Charles Schwab Corp. acquired about eight years ago.
Still, with Etelligent, “we totally bootstrapped it,” Calhoun said. “We started it with $6,000” of their own money.
This time they wanted to expand much more quickly and needed help to do it. The help that they found in the Digital Sandbox was more than just financial.
“The exercise of having to pitch your business to a group of investors — with Etelligent, we largely made it up as we went along,” Calhoun said. “With Digital Sandbox, we developed an investor pitch, defined who our market was and when we got the Sandbox grant, potential investors knew we were a real company. We had a better shot at it.”
Digital Sandbox asks entrepreneurs to come to them with a 15-minute pitch and plan for their projects. Members of the Sandbox board then question each entrepreneur group for 15 minutes.
It’s a bit like the TV show “Shark Tank,” except less adversarial and with more interest in growing local job potential.
Out of about 120 presentations every year, Jeff Shackelford, executive director of Digital Sandbox KC, estimated that between 22 and 25 receive grants of about $25,000 for a specific project. Currently, they’ve provided grants to 55 companies, which have created 247 new jobs in the metro area.
“We focus on those ideas that have information technology components,” Shackelford said.
The grants are far from being a series of blank checks.
Once they’ve made the cut, the entrepreneurs go through the process of getting bids from vendors to complete the project they’ve pitched. They get to select whichever vendors they want, and Digital Sandbox contracts directly with the vendors to pay for the work.
Neither Digital Sandbox nor the vendor ask for equity in the company as part of the deal. For grants that are part of their new partnership with the city of Olathe, entrepreneurs must make good faith pledges to keep their bases of operations in Olathe.
Another element of Digital Sandbox is making new connections.
“Early stage entrepreneurs can come learn. We want to become a hub in Olathe to get them connected to resources, even if we don’t fund their project,” Shackelford said. “How do you find the next Garmin? You have to plant the seeds to grow these companies yourself.”
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