A northeast Kansas start-up venture is having substantial success applying modern technology to an ancient proverb. From a business perspective, “A bird in the hand is worth two in the bush” speaks to the value of retaining your customer base. That’s precisely what Bellwethr wants to help its clients do.
“As much as growth takes the majority of the emphasis, retention is arguably more important,” said Matt Moody, founder and CEO of Bellwethr, which has offices in Wamego and Kansas City. Happy customers lead to strong word-of-mouth, Moody said, which is the best way to attract new business.
Bellwethr has developed a form of machine learning – often called “artificial intelligence” – designed to help companies increase customer retention as well as reduce the cost of acquiring new customers. While the technology can be applied to almost any industry, Bellwethr is focusing on companies with monthly recurring revenue, such as subscription services. Various companies have developed machine learning to identify customers at risk of taking their business elsewhere, Moody said, but Bellwethr takes it a step further by implementing actions automatically. “Most of the time, when businesses got involved” in machine learning, “all they got was another chart” identifying at-risk customers “and somebody else has to figure out what to do with it.” Employees still had to figure out how to respond to that data. With Bellwethr’s program, “it’s more of an automation and less of an insight,” he said. “Not only is it going to outperform much of the manual work, it’ll do it in a more efficient way.”
Technology that can improve retention by 20 to 30 percent and doesn’t create extra work for employees is going to get attention, Moody said. “They can instantly get an increase to the bottom line,” he said. They can also free up more employees to focus on the creative process.
Moody was building platforms to help clients identify which of their customers were most at risk of leaving when the idea for this venture came to him. “I saw the value of what we were delivering for them,” he said. He realized it was time to go out on his own again and start what would be his fourth company. He took the concept to tech conferences in Germany, where he was introduced to venture capitalists, and ultimately was introduced to the managing director of Tech Stars in Kansas City. Bellwethr was accepted into the Tech Stars incubator, which allowed Moody to find the holes in his concept. “That really fixed some things” and also connected Moody to more investors and capital.
Bellwethr was named one of Startland’s 2019 Kansas City Startups to Watch, and investors were noticing. Last May, the company announced $2.5 million in seed funding to help finance growth. The effort was challenging, Moody said, because his company is something of a ‘tweener. Seed funding typically goes to companies just starting out, and Bellwethr had already generated $400,000 in revenue in its first year. To access Series A investors such as angel investors or venture capital funds, a company has to reach $1 million in annual revenues – and Bellwethr isn’t there yet. “We were kind of in no-man’s land” between the firms who seek to raise large sums of investment right out of the chute – “the Silicon Valley way,” as Moody put it – and the companies that are generating revenue levels that catch the eye of venture capital firms. The seed funding goal was $2 million, Moody said, so to exceed it by such a substantial amount was gratifying. “It told us we were doing things right,” he said.
‘In the hands of anyone and everyone’
The funding comes at a key time for Bellwethr, which rolled out its latest technology seven months ago and is looking to build out its product and sell more aggressively. But Bellwethr’s vision extends beyond growth. Tools powered by machine learning are currently restricted to large organizations with significant resources. Moody would like to make it accessible to smaller companies as well. “We believe that for this technology to reach its full potential,” he said when the seed funding was announced, “it needs to be in the hands of anyone and everyone.”
As an extension of that philosophy, Bellwethr just released a free e-book called “The Dreaded Exit: How Customer Retention is Broken and How Machine Learning is Fixing It.” Moody said the e-book is a way to share information about what’s coming. “I’m of the inclination that the blog-wave is going to die soon and you have to put out some actual metrics and research,” he said in an electronic response to questions about the e-book.
As Bellwethr was developing its latest technology, “people kept telling us we were going to have to leave” the Midwest, “to go to the coast to find more talent,” Moody said. “That was proven completely wrong. We’ve attracted quite a bit of top-notch talent.” Many of Bellwethr’s employees have come from nearby Kansas State University. The company has been growing 10 percent a month since the seed funding was announced. The company had four employees at the end of May and is now up to 14, with more hires to come.
“We’re moving in the right direction,” Moody said. “We’re not there yet. We have a way to go.” Moody heard about Flagship Kansas through a couple of the company’s investors. “They’re smart, so I figured it must be a good idea” to become a member, he said.
Advice for entrepreneurs
Bellwethr’s trajectory tells Moody that the landscape for entrepreneurs has changed. “You should basically go test the market when you have ideas,” he said. “Throw twenty dollars in some ads and see ‘Is anybody interested in this?’ “There are tools out there to see if there is a market. ‘Does anybody else think this is cool other than me? How much are you willing to pay for it?’” If there’s nothing there, he said, you can either tweak the idea to improve it or move on.
“It doesn’t have to be as elaborate as it used to be, where you make one big decision and throw all your cash at it.” Modern tools allow creators to test the waters and perfect an idea before taking the plunge, he said.
Author Credits | Stan Finger | @StanFinger | Stan is an award-winning journalist who twice earned nominations for the Pulitzer Prize over the course of a distinguished career at the Wichita Eagle. A native Kansan who grew up on a farm in central Kansas, Finger has also written two books: Into the Deep, a look at the deadly flash flood in the Flint Hills in 2003, and the novel Fallen Trees.