Episode 2 of the Big Time Small Business podcast is here! Below are some excerpts from our conversation with John Rooks, co-founder and CEO of Rapport, a software-as-a-service company helping small and medium-sized businesses capture and quantify their environmental footprint while saving them money along the way. Since winning an investment from Steve Case during his Rise of the Rest tour, Rapport is on a mission to democratize sustainability.
We talk with John about one of our favorite topics, authenticity, through the lens of a data-centric software company, how blockchain has made its way into the sustainability space (you read that right), and the outlook for sustainable business models in a post-consumerism world.
You can listen to the full episode by clicking the audio image below, on our website, or on iTunes (more podcast players coming soon!). Know someone who would be great on the Big Time Small Business podcast? E-mail in at firstname.lastname@example.org.
The stepping stones here are large companies understand that most of their [environmental] footprint is in their supply chain. The next stepping stone is for them to start surveying those suppliers to see if they know what their carbon footprint is, and the answer is “No”. The next will be [to] get some data from them. And that’s where we are now. The next step is going to be: how accurate is this data? That’s what we’re preparing for and trying to push the market towards, is the [accuracy of] the data. Because right now, it’s questionable.
We think the Holy Grail for us is to integrate with some procurement software so that our data travels with a financial invoice. So, here’s your invoice; here’s the financial cost of the things you bought; here’s the environmental cost of the things you bought. Those two pieces of data originate in the same place [and] get separated. One gets lost. The other one never gets lost–unless you purposely lose it. [The Holy Grail is] figuring out the right way to connect those packets of data.
I wish we had spent as much time and energy on product market fit as we did tech. We should have split our time budget on doing a lot more product market fit work and interviews with the companies that we now need to talk to.
The trick is, if I cut myself a little bit of slack, we were having wins. We were selling software–onesies and twosies. It felt great. And we’re like, “See, all those potential investors who turned us down are wrong…we can sell this thing all day.” So, we were having success and we had a little bit of money in the bank. That was a dangerous moment for us. We had a small team and a decent runway. And we never sat down and did the math and say, “if this growth continues, [we’re] driving towards a cliff.” You’re driving at 40 miles an hour, [but] if you slowed it 20 miles an hour, is that okay? No. You’re still headed to the cliff, right? We were really caught up in getting a ton of press, winning a bunch of awards, high-fiving Steve Case, and selling a little bit of software. And we were blinded by that. And now we’re paying the price of a sales shift.
It’s interesting, because, actually, Rapport came out as a way to open up the opportunity to not use authenticity as a filter. The SOAP Group stands for Sustainable Organization Advocacy Partners. We advocate for those clients and what they’re doing from a sustainability perspective. And we’ve got a tight filter on it. So, SOAP has a protocol that’s an authenticity audit. It’s called Authenticating Real. What we’re looking for is the gap between what you say and what you do. So [the] SOAP Group was known for that. We had that reputation. People only came to us if they were serious. And we had built a bunch of our own brand around that.
When we spun off the software company, I was looking for something that anybody could buy, that I didn’t have to use a filter, that I could sell to a Walmart with the understanding that at least it’s real. It’s data. So one of the things that Rapport does is it creates a very authentic auditable data stream back to, let’s say, the electricity provider. But I’ll sell the thing to anybody.
I was out at a conference in Vancouver called Sustainable Brands last week and there was a lot of blockchain talk going on in the sustainability space. I’ll give you one example that I’ll probably butcher a little bit. If you want to add more value to commodities–let’s take electricity–and you are able to get data from the natural gas pad. On average, on a natural gas pad, let’s say there are 50 sensors. They’re all collecting different types of data: carbon impacts, other hazardous gas impacts. But that data’s not going anywhere–it just sits there. So, there’s a blockchain company that is capturing that data. And as that block of kilowatt hours travels into the commodity markets, they’re saying, “this one has a lower carbon impact. Would you like to pay a penny more for this”? And they can do the same thing with pork. They can do the same thing with lumber. So, any commodity market, they can trace back to its origins, and then share that data all the way up through the [supply chain].
If you have an answer to how this was made, that’s more sustainable than another way, or doesn’t use child labor, or pays their workers a fair wage, or employs more women than men, or whatever the metric you care about is. If you can demonstrate that, that [good] becomes more valuable to a person who cares.
I gave a talk called “Making Sense of Sustainability”. I had a woman on the panel, Carrie Snyder. She is a circular economy specialist, and she brought in this very scientific perspective and she talks about: from elephants to mice, all mammals get roughly the same number of heartbeats in a life. Mice are tiny, they get a bunch, but they don’t live very long. Elephants are huge. They have a very slow heartbeat. They live a long time. But if you average all these things out, all mammals get about the same heartbeats.
That’s a biomimicry lesson we can learn about growth, right? You only get a certain amount of stuff. And there are companies that are already doing this. I think Patagonia’s a good example. They’re saying, “look, if we just make good products, people are going to buy enough of them, and we’ll be the right size.”
That’s the thing. You have to be willing to be the right sized company and not the size company that the analysts say you should be. There’s a limit to it, when [you’re] not financially successful anymore, and [you’re] certainly not environmentally successful anymore. It goes from that too-big-to-fail to too-big-to-exist.
What [big businesses] are talking about now is thinking about growth in a very, very different way. Can you be growth agnostic? As naturalist writer Edward Abbey says, “growth for the sake of growth is the ideology of the cancer cell.” And I think that’s also the ideology of unbridled capitalism as well. Can you be a growth agnostic company? The answer is no, not if you’re publicly traded, [but] yes, if you’re privately held and you’re thinking about longer-term investments. If you’re thinking about growth as a forever company, you make very, very different decisions. You’re not beholden to the stakeholder meeting next quarter. A lot of these big companies as a sustainability strategy are saying, “How do we go private”? That’s cool. That’s very cool.
Have a great week,
Your Chenmark Capital Team