#86: Dallas Hogensen (Felux)

Dallas Hogensen (Felux) [00:00:00]:

What we figured out as a strategy there that's been really fun, actually, is we've started to brand ourselves the way we act, the way the company looks, the way the company thinks, the way we communicate around this idea of Make Steel sexy. Land so we've made this really emotional ploy and tie to the industry that has really created a lot of stir and excitement, where it's showing everybody that we're doing things differently and people take notice.

Jeffrey Stern [00:00:30]:

Let's discover the Cleveland entrepreneurial ecosystem. We are telling the stories of its entrepreneurs, land those supporting them. Welcome to the Lay of the Land podcast, where we are exploring what people are building in Cleveland. I am your host Jeffrey Stern, and today I had the genuine pleasure of speaking with Dallas Hogansen. Dallas is the CEO of Felux Making Steel Sexy since 2019, which was established by a team of steel land technology experts to create the world's largest operating platform and marketplace to help solve commerce for the steel industry. Having raised over $24 million since inception. Under Dallas's leadership, Felux has grown exponentially over the last few years in their efforts to digitize the $2 trillion traditional paperbased steel industry as they've built out their platform to manage the entire steel sourcing process, from procurement to logistics to financing, facilitating many hundreds of millions of dollars in transactions. Dallas joined Felux after a decade building and scaling companies. His previous work includes Cofounding Livelli and Signal HQ, which were acquired in 2016 and 2020 respectively, plus two top sales jobs at Lyft, where he led Lyft Business to become a billion dollar run rate business unit. Dallas has incredible perspective on marketplaces, on the challenges of company building, and on the importance of culture. This was truly one of my favorite conversations to date, and I hope you all enjoy my conversation with Dallas Hogansen as well. Dallas, you have quite an extensive entrepreneurial background. When you reflect on your career, how is it that you think about your path to startups and the multiple companies you've helped to start and to grow? Where did that interest in building things stem from?

Dallas Hogensen (Felux) [00:02:30]:

Yeah, I think if you look back and it's probably like a lot of other stories, a lot of story about failure, discovery and chance. And so I look back in my career after being in Silicon Valley for a decade in New York and Denver and now ultimately Cleveland, it really started probably when I was young, grew up on a ranch out in Oregon, so very far from home at this point, was an athlete through college. And so a lot of that life was about project based, completing the task, failure solving for adversity a lot of the time. Land ultimately, I always thought I wanted to work in the financial world, and my goal was to really be a trader, work at a hedge fund, and that's really kind of where I aligned my paths, too. What changed that decision for me was after I got hurt playing football, I had to really think about what was next and prioritize my life around thinking about the future. I stumbled across the opportunity to build a fraternity in college and I built it from the ground up. And it was just really the first kind of foray for me to dive into something that I really got to build from the nuts and bolts of the house to the first 70 people that were in that class. And what was fun for me, to be honest with you, was that I had no idea how fraternities worked. I understood how teams worked and how to build to a mission. And so I got to be really free in the way thinking about building that community and that group of people together. And I wasn't withholding by any of the previous traditions that had really happened there. And for me, that was something that really opened my eyes around entrepreneurship and building businesses and building equity and value in something that has staying power. And so I really got interested there, honestly. But however, at that time, I'd still signed my offer to go work in the financial world and out of college I left to go do that. I was there for about two years. Land I was studying startups all day. I was studying early stage company, I was studying public companies and looking for ideas, really for the portfolio that were interesting. And I had a bunch of good friends that were in Silicon Valley and I found myself constantly calling them, asking them questions, learning more and just getting more excited. And I ultimately made the decision to leave that job, really get rid of all my belongings. Land take a hockey back down to San Francisco and staying with a couple of buddies that I grew up playing poker with and went to high school with and now who are all CEOs and SVPs of different technology companies. And I shared a bed with one of my best buddies for like six months and he actually was the officiant at my wedding. So it's kind of crazy how that chance and happenstance kind of brings that future forward. Ultimately, what I had done is I realized that I wasn't smart enough to be on the product or engineering side. I didn't have those technical skills. And so I was probably going to land in the BD side or I was going to land on the sales side. And I had tripped down there for work where I ultimately held, I think, 13 interviews over two days with companies. And I had a pretty strict criteria at that point. I was looking for an opportunity where I had to make 80 to 100 dials a day because I knew that if I could create these quick feedback loops, I could learn much quicker than doing like a traditional long tail, high ACV enterprise sale. And I also wanted to find a company that had good investors, but also had good founders that had previous success. So I could learn from them. And at that time, I believe Rocket Lawyer was Series A or Series B, I can't remember now, it's been about ten years, but I showed up day one and picked up the phone and started dialing. What I had learned from that process and really kind of set off my career was I would get in 536 in the morning every day. I'd take the 509 bus from the Marina to downtown San Francisco. I would turn on the lights and I would take all the inbound calls from the East Coast because nobody was in the office. And so I would hit quota. I mean, it was like $300 at the time. At this point, you were really dialing for dollars. And it was about speed. It was about how quickly could you match and mirror this person? And Rocket lawyers just like legal zoom, essentially legal services, paperwork and things like that. So there's pretty big emotional pain with the buyer, and it's usually too late. So they're looking for something that's already happened. And so we had to learn very quickly how to build empathy with those prospects and essentially close them and get credit cards on the phone. And that was really eye opening to me. Not the sale itself, it was, I think, pretty simple, but how important it was for building rapport with the human being, matching who they were, understanding where they were coming from, and actually finding a solution that fit their need that was going to help them. I'm really glad that I took that approach because I just had thousands of ed bats. And so what you asked me is how that ultimately led to the future of my career was because I'd hit quota. Every day before noon, I would get on LinkedIn land, I would message founders, CEOs, business leaders and things like that on LinkedIn every single day. And what I got really good at was understanding the business model of their company. So I would ask questions that were smart. And so, for example, we were a heavy inbound team. And what I would be asking is, hey, here is our model. I see that you guys have a transactional sale as well. Here's things I'm thinking about. I love to sit down with you at lunch, talk about what you found. Top of funnel that's interesting, that might help accelerate what we're doing here. And so I was being very pointed with my questions and doing my homework. And so I did that for several months, actually almost every single day. And what ended up happening is I got through a recruiter, actually introduced to the YC network, and ended up taking my first VP job for Icracked, which ultimately became the world's largest on demand iPhone repair, buyback and insurance company, where we had built the Uber for iPhone repair. And so in seven months, really using that strategy and being in sales was not my ultimate goal. It was just a place that would take me, really was. I had the chance now to go build a company from scratch. When I showed up day one, they were getting an inbound lead printed of on a piece of paper, and we had raised the seed round coming out of YC, and then we had just previous to our 10 million series a with Andreessen at that time, that was really eye opening to me. And I'll tell you what I really learned was that one, nobody knows what they're doing, and we're all making it up. You just get better at making it up as you progress throughout your career, and you start to recognize patterns and things like that. But like I mentioned, even when I was building the fraternity in college, that my mind was so free to think about ideas and do it differently. And I wasn't stuck in an old process or a way that I'd been taught I really got to build from scratch on my own, and they gave me the flexibility and freedom to do that. It was a really good run for us. It was poised to be one of the next billion dollar companies. We ultimately had a good exit a few years later, but that gave me the confidence and the access to silicon valley. I think that kind of propelled my career forward, and it was just an insane story. You see silicon valley on HBO. That's the startup story. Like, I was sleeping on a sailboat. I was skateboarding to work every morning. I slept under my desk two days a week. We had nerf guns. It was beer kegs were up till 130 in the morning packing like, iPhone kit repair kits and sending them all over the world. And at that time, too, we actually had a warehouse where we had a million dollars of iPhone parts, or $2 million at any given time. And what was really fun about that experience, even though it was really hard if I look back, like I would never do it again, is like how galvanizing it was for the organization. Everybody was working hard, everybody was staying late, everybody was doing the work to be had, and it's just so different than the corporate life. Land I think that energy kind of drew me down this path. That early stage, as hard as it is, like, the relationships and challenges and adversity you face with your peers is build these lifelong commitments. And all those guys today are still some of my closest friends, and even one of them was the best man in my wedding, one of the founders. So I felt very lucky to have a chance there where they took a chance on me, which they shouldn't have, obviously, right? Like seven months of inside sales, transactional sales experience come in to be their first VP of Growth and revenue. Land I think they had the trust. That just my business sense. My financial acumen was smart enough to make not huge mistakes. But there is a funny story from that, where one day so what we were doing is we were running back. So we were building a network of technicians. So it was a three sided marketplace. And one day we run background checks and everybody land so really, to enhance the process and the funnel, I'd kicked off the background process check on the website. And then we're getting thousands of inquiries a month at this point. And so about seven days later, I hear our CEO, AJ. Just being like, Dallas from the other side of the office. And I'm like, I have no idea what's going on right now, what could be happening. Land I go into his office, and he's, like, yelling at me. He's like, Hold up this piece of paper. And he's like, what is this charge for $36,000? And I'm like I was like, first off, I don't know. What does it say? Essentially what the engineer had done. And this was a great lesson, too, just on moving fast and breaking things, but also sometimes, like, double checking your work is when an individual had signed up on our website, we actually kicked off the background check process, and that was, like $30 to $50 a background check. And this was when checker had just started out. And we were one of their first customers, and Uber was one of their first customers. And now they're like a multi billion dollar company, which was so funny about this. He's like, you better do something about it. So I called the founder, Daniel, and I was like, hey, listen, man, we made a mistake. What can we do here? And he removed the entire bill. And he was like, Listen, I know how much business you guys are doing. It's no problem. We'll eat it, and we'll build for the future. And that was just, like, a really cool lesson to understand. There's so many startups out there, especially in Silicon Valley. At the time, it was a hotbed for it, but everybody was in it together, right? And, like, the YC network. Land how important you leverage that community to go build great businesses and how it taught you to do so. And so that, for me, was really like the launching pad to thinking about, okay, this is my path. This is the way that I want to spend my time and build my life around, and I'm lucky enough to go from there to do some fun things. I invested in a marketplace company called Lively, which was building really interesting technology for staffing in the restaurant space. And this was a really hard problem at the time. And so we had built that team, about five of us. Really good friend of mine who's an advisor now for the company. And has a marketplace company as well, and was the old COO of Bolt, which is, if you've read in the headlines, probably one of the most fascinating growth stories in history. We ended up actually selling the technology off for that business pretty quick. And what happened from there is I actually synced backed up with my old boss from Rocket lawyer and him and I came in to Lyft at the time when there was a couple of hundred employees and we started lyft Business ultimately grew that to the most profitable business line within the company and took that to a billion dollar revenue line within the company. And that to me has a lot of parallels, like what we're doing today, where for the first six months we didn't have a product. We were the black sheep of the company. Nobody really knew what these salespeople were doing within Lyft at the time. Everybody thought about it as a consumer platform, but we were building and selling into HR to really improve employee travel. And so we had built really the first ever platform to incorporate rideshare with our consumer network. And so not only could you save money, you could actually geofence locations and you could have predicted dollar amounts on each ride. You had a lot better safety mechanisms. And so it really changed the game around how people think about the expense stack for employees, how they think about safety for travel land, how they think about managing cost and consideration of what their employees are doing when they're on the road. So I just felt really fortunate to have that opportunity, honestly. And I think that really propelled me to where we are today with Vlux.

Jeffrey Stern [00:15:25]:

I guess summarizing what I would take away as really kind of having built out a core competency in Marketplaces. I would imagine with the experiences you've had starting companies at that point, helping to scale marketplaces on Lyft's front, the world would be your oyster in terms of what you chose to do next. And so I'd love to hear about your thought process of why choose to focus on this industry, which you have in particular, and just a little bit about the kind of founding, if you will, for Felux.

Dallas Hogensen (Felux) [00:16:01]:

Yeah, absolutely. So after the lifting, I was pretty burnt out and I wanted to build a lifestyle business, actually. And so a couple of buddies and I, we actually bootstrapped a company called Signal HQ, which was really one of the first companies thinking about Intent Data for sales individuals. And so we had leveraged some really interesting data sets from a partner of ours, Bumpora, which is one of the leaders in Intent Data. And we had built a technology platform for account executives and SDRs. And we had this incredible soup, like, incredible tool we called a God mode for the Internet, where we could really see what every individual business was searching for. We ended up bootstrapping the business and had a Fortune 500 company, 20 other customers, like, right out the gate. So we're like, oh, there's something definitely here. The intent was never to raise capital for the business, but I think ultimately what ended up happening is that I think just the the founder relationship wasn't great. Land we decided to kind of wind down and sell the business to Bombora. And so that brought me to, okay, I do want to do a venture backed business. I want to do something that is big. Land is worth 20 years of my time. And so my framework out the gate was pretty defined coming into early 2020. And so I'd written down on a piece of paper, where is venture capital poor and where is private equity rich? And then my thesis really was around where are really long tail, fragmented markets that have poor buying experiences or low NPS scores for the buyer? And where can we verticalize technology in that space? And it's got to be a multibillion or hundreds of billion dollar market. And so I started out in cold calling, really, all these unsexy spaces, just trying to learn and understand what these businesses were doing, where opportunity was. And funny enough, I have a huge poker background and a lot of my friends are still professionals today. But I had ended up speaking to a guy I played poker with who ran a steel service center in the Northwest. And my aunt had worked in the industry for 40 years. Land I called them. I just said, how does this work? Walk me through how a dollar flows through this business. How do you manage your customers? How do you manage supply? What does the industry look like? And to be honest, it was kind of like, oh, shit, this is how it works. And it was eye opening to me that this was still taking place. Now, I probably shouldn't have been surprised, but I was like, okay, there's something here. And I think this is where opportunity meets. Like, preparation really was. I actually had gotten received a phone call and an email from an executive recruiter that I spent a lot of time working with at Lyft. And he would call me a bunch around marketplace companies and want me to talk to founders and things like that. Land so like you said earlier, I've always been kind of known as a marketplace or community guy because I built a couple of community based companies as well. I'll never forget this. He's like, Listen, hear me out. Don't hang up the phone, but I want you to talk to the CEO of a steel company. And honestly, I was like, okay. I was like, why? And then I originally thought he was going to be like a 70 year old guy that had like a young kid that was like, I got a technology idea. That's what I thought I was going to walk into. And to be honest, I didn't really do any prep. I just was like, I'll take the call, see what they're doing, I'll see if I can make introductions or be helpful. But I didn't really think too much of it. Hindsight it just is funny how the timing aligned and worked out with what I was searching and building around that's when I got introduced to Todd Libo and Christay. So Todd Libo is the CEO of Majestic Steel, which is one of the predominant flat rolled carbon service centers in the United States. And I think Todd is one of the leaders in entrepreneurship in the country and in the city of Cleveland himself. And what I really fell in love with Todd was that his ambition and vision was so clear, he was so passionate about what could become of this industry because he's been in it for the last twelve years as the CEO of Majestic and has really transformed that business to be an innovator in the space. And what I found my skill set to be really excellent at is not exactly like the zero to one or the zero to a half, but like the half to 100. And I was like, oh, you understand the supply side of this industry. You have relationships. You're the person that's on Bloomberg, you're the person that's on CNBC, you're the person in Washington thinking about policy. So your fundamental understanding and knowledge of the space is something that could take me ten to 15 years to get any credibility in. But we have that day one. And in industries like this that are so opaque, that are so old, like old school boys clubs, that's important. That is an important part of the scorecard. Land the rubrics that you have to check that box to get in, if not, they don't let you in. And what ended up happening was they had started the company in 2019, had about 80 or so customers, had done about 10 million in GMV, but it was two Seal guys building a really complex and solving a really complex technology and data problem. And so my thesis and what I came back to them with is like, hey, I believe in your vision, it aligns with what I want to go do. But how we execute on is a little bit different. Really, I thought, in order to kind of own this world and bring this offline industry online, and I think it's the largest offline industry that might still exist today, it's up there is that we have to build the largest data graph in the world and normalize taxonomy. So we have to be the system of record, of language, so we can build the matching algorithms and we can build the technology to facilitate the movement of goods. I'll tell you very plainly, we're not ever going to be a brokerage house. Our goal is to have a piece of every single piece of metal that's ever moved in the world. So whether that's insurance, whether that's finance, whether that's shipping, whether that's warehousing, whether that's our own asset based carriers, we want to move every piece of material in the world probably outside of China, just given what that market is like land, that's still a $2 trillion market that exists today. And we're the first technology platform thinking about that in the space.

Jeffrey Stern [00:22:15]:

So at that point, you found something at the intersection of this Venn diagram of your thesis, right? A highly fragmented industry with low NPS, with someone who has that industry expertise already working on kind of a vertically integrated Keith Raboyesque solution to this kind of problem. The thing that I want to maybe start with here is I love this idea of entering what is obviously such an enormous market, right, where, obviously steel is incredibly significant. And in the face of a market that big, I'm wondering how you came to this idea of a vocabulary, right? Creating that taxonomy, a language as the first product. How do you go about figuring out where to focus? Because obviously there's endless problems you could try and potentially solve in a space that big.

Dallas Hogensen (Felux) [00:23:12]:

Yeah, trust me, we've made mistakes. I call our business a compound business, just like a compound lift, right. We have to do several things at once to make everything work where it's not like a spot solution or an isolation. And so we knew the core root of everything actually stems on normalizing, the taxonomy. And so why that's important and why this problem has never been solved is that on both sides of the market, on the supply all the way down to the end manufacturer is everything exists in what you call like, a spec sheet. Inventory is like paper based. Inventory is in a spreadsheet. And that's because if you go city to city, state to state, country to country, region to region, the way that materials described land, ie. Changed throughout the supply chain, could be named differently. Now, there are standards and there are global standards, but they're not really withholding to. And so what we figured out is that we have to build, really, the repository of information that people attach to in order to build clear matching downstream. And so it took us about seven months thinking through the problem, and we had built the first ever steel configurator is what we call it. A configurator is a simple mechanism of deconstructing something so it has pieces. So if you're putting a T shirt online, it's a medium. You configure it to be a medium. So you sell the medium online. Same thing we do with flat rolled carbon or whatever type of steel that we ingest onto the platform. Land because of that, we now know and track and build every single supplier is in the country, their capabilities. And now we're starting to digitize their inventory. And so we can give them digital storefronts and help them get broader digital distribution because like I said, it's important for us at this point. We want to be a part of every transaction. And the only way to do that is kind of build the tool set and the on and off ramps to the distribution highway. What we ended up learning, and I'll talk about a lot of the mistakes here, is if you think about a marketplace, it's a cold start problem always. Like you need two sides to make a market work and it's typically the hardest part to figure out. Now, we started in 2000, land 19 and 2020, really thinking about and isolating around the supply of the steel industry. Now some of the facts about the steel industry that still remain true today. But COVID did help accelerate this is most of the industry is older white men. The last technology they had brought in maybe 15 to 20 years ago, very legacy generated ERP systems. And the didn't have a clear way to use data or a clear initiative to buy technology. It was a very foreign concept to spend hundreds of thousands of dollars on technology. And also too, we went into the frothiest steel market in history over the last two years where most of the steel guys didn't have an incentive to change. And so I think we spent a lot of time thinking about like, how do we change the mindset and outcome of that industry? But what we realize actually is the demand side of the large manufacturers pricing is so opaque, inventory levels are opaque, the way finding and sourcing new suppliers is almost impossible. It takes months to years, some time establishing credit, getting visibility into your shipments, automatically matching with the right supplier. All of that stuff didn't exist. And so the real pain actually existed on the buy side, which we talked about earlier, like the Keith or boys asked the business model, which is long tail, low NPS. And once we figured that out, everything just clicked. Land Tesla was our first enterprise customer and we work with some of the largest Fortune 500. And now we're talking to the innovation officers of Toyota. What we're finding that is that the pain on the manufacturer procurement side is so great that they're going to spend hundreds of thousands of dollars a year to use our procurement platform to get access to our supply side, to also get access to distribution and RFQs in the spot market. So we really struggle with this for a year and a half trying to figure out what's that growth loop or hook or hack that we can do that accelerates the nodes of this marketplace so we get to economies of scale much quicker. I think we feel really fortunate that we're the first ever people building verticalized, essentially procurement software for the industry. And that creates stickiness. Land it also creates a large competitive mode because you don't rip out ERP systems, you don't rip out core supply. Chain software very quickly and it removes us from ever being a brokerage too. So we're always fighting for every transaction they do land that we're not stuck just doing their next one.

Jeffrey Stern [00:28:12]:

How much did you find that your taboola rasa clean slate beginner's mind carried with you into this new space? How encumbered is the industry by the traditional proven, perhaps anachronistic ways of the way that they have done things? And have you kind of thought about that this time around?

Dallas Hogensen (Felux) [00:28:35]:

Yeah, it's a question that makes me laugh because everything you said is so true. They're really stuck in their ways. And so what I figured out was, okay, we have a saying internally, we're going to meet the customer where they are today. So they may be six months away, they lay be ten years away, but we're going to meet them where they are. And what we figured out as a strategy there that's been really fun actually, is we started to brand ourselves the way we act, the way the company looks, the way the company thinks, the way we communicate around this idea of make steel sexy. And so we've made this really emotional ploy and tie to the industry that has really created a lot of stir and excitement where it's showing everybody that we're doing things differently and people take notice. Right? Because what we have found out is, well, most of these guys are going to retire in four or five years and they're like, you know what, I'm good, I don't need anything else, we're fine. But they respect their tradition and everybody is looking for new ways to actually carry on what the steel industry is. It's going to be hurting from a talent perspective, the diversity, the age gap here is a real problem. And so what we have found is that we've become like a trusted advisor, a partner, and really the energy like the youth movement of the industry. And that has brought that's opened like every door for us, actually. And that's not even starting with the product. We always wanted to be a product like growth company, but we realized that we need to meet them where they are. We need to sometimes help reset their passwords. We need to sometimes help them do the transaction and get on the computer with them. Sometimes we have to buy them a computer that's a real thing. And so we took that approach and here was the outcome, which has really been a great outcome for us is people don't talk about Felux. The talk about the people's names at Felux. How's, Grant. How's Lydia? How's Carolyn? How's Dalton? Right? And so our customers talk about the people internally because we're doing everything we can to show, listen, we're not here for a transactional moment. We're here to build the future with this industry we think can be. And so we've treated our relationships like that. And once we figured out that, hey, listen, we can let go of the past, we can let go of the industry norms, and we can bring an energy to here that's different, that has changed everything for us as a company.

Jeffrey Stern [00:31:10]:

Yeah, the Making Stern Sexy, which I'd love to chat a little bit more about it as well, but I think the whole idea that meeting your customer where they are and helping them along that journey just a few weeks ago, I met a fellow at the airport who was wearing one of your shirts, make Steel Sexy. And I wasn't actually the first one to come talk to him about it. It invites like, oh, what is that all about? And I happened to connect with him, and he's a rave supporter of the work you're doing. And I cannot imagine having worked myself with secretaries of state in the voting industry and large health systems on the healthcare side, similar industries that are highly verticalized. You don't often see customers celebrating vendors in that way, I think in those markets where they face those kinds of pull to the way that they have done things historically. So I think it's a really fascinating approach.

Dallas Hogensen (Felux) [00:32:16]:

Yeah, I appreciate it. I mean, it's funny that you say that. I've probably received, like, six or seven texts from people saying, hey, listen, I see your Make Steel Sexy T shirts out there, which obviously, we didn't know what it was going to do or how it's going to take of, but we give hundreds of those shirts away. Our competitors want them, our customers want them, and we get requests all the time. We actually built in a hackathon of Makesealsexy.com store where people can buy them too, and we get orders. The joke in the beginning is we were kind of like a pro consumer based model in the beginning. We were giving away and doing the transactions for free. Some of our first revenue was from selling T shirts. And so are we a T shirt company now at this point? But, I mean, to that point, we have a very curated approach to this, and it's important to us, and we put a lot of time thinking about it at our conferences. Like, we have a huge conference coming up. We're not doing a booth like, we're doing a lounge. We're having a cigar roller that has branded Make Steel Sexy cigars. We're having matchbooks. We have playing cards with Steel facts. Right? We're not giving out pins. We don't have a simple backlit booth. We try to create and invest in experiences for our customers, land our vendors and the people that they work with, because we believe inherently here at Felux, that if you can build, like, an emotional tie and bond with that individual, that goes much farther than business. And that's what we want to build the foundation of our customer relationships off of. And we did the same thing at Lyft, to be honest with you. We had a very simple strategy the first year where we want to get to text and hugs with travel managers. That was our strategy. Uber was making thousands of phone calls a day, and they were kind of the bad guys in the space. But because we cared, we showed up. We knew them. We knew what they cared about. Land. As People, we Took Away 11% Market Share in Our First year building that Business with that Simple Strategy. And I think that something that's missed a lot of time today.

Jeffrey Stern [00:34:17]:

How has the business kind of changed? You mentioned some of the learnings along the way so far. I guess. A few things on that thread. When you look back, what would you describe as kind of the first big break that you got in your favor or something that happened that created, like, a step changed function in the business? Is that figuring out that you need to perhaps start on the demand side instead of the supply side. How has it evolved from there?

Dallas Hogensen (Felux) [00:34:48]:

It's Interesting. So when it took over the business in 2020, I think it was yeah, about 10 million in GMV on the platform. And now we're about 600,000,002 years later. And that makes us one of the largest marketplaces in North America and in the world. And yet we had just feel like we weren't succeeding up to our full potential. And we're like, how do we unlock this market? What do we have to do? Like banging our heads against the wall? Land. The real break actually came with working from Schneider Electric when a Fortune 500 company, one of the largest companies in the world and what we started to figure out was that there is a very complex procurement process that happens to establish contracts with some of the largest suppliers in space. They're spending millions of dollars with consultants to try to solve this. Land. We figured out that most of the people in the procurement side were pretty new to managing the steel supply chain and really didn't have any historical data or context. Didn't know the market, didn't know how to buy against the market, how to hedge against it, how to forecast against it. And a lot of times they're building or buying thousands of SKUs for all their products. And so the stakes were incredibly high. And so we spent a lot of time with Schneider, helping them analyze, build models, look at cost savings. Source new suppliers. Land built technology and product around it. And so the real big break land hook for us was realizing that, hey, the actual unlock for the marketplace starts on supply. That's one of our main key on ramps to distribution. And for example, like with Tesla, we pulled in a supplier that's been trying to get in there for ten years. And we walked the in the door. Day one. And so it automatically created this pull mechanism to the supply side. So We Are really focused on the enterprise procurement side of it first. Land we were focused on top line growth of the marketplace first. And I think the big unlock and learning there was land. Now listen, the venture market for the past 13 years really allowed us to do that, where you could raise a lot of capital and you're expected to grow top line fast because you'll figure out revenue later. That was the model. That's why valuations were so crazy that everybody was raising eight to twelve months at Part. And we were in the same boat, we were in the fat. We grew 4500% year over year from 20 to 21 and 22 land. So we were on those metrics. But what we really cared about is how do we establish quality revenue and how do we build these moats? So we have long term relationships, long term contracts create pull mechanisms in the marketplace where they're doing that organically, and we don't have a bunch of acquisition cost around it. And so that was that moment where we were like, oh wow, we stumbled on something here that's pretty special, that really no one else is looking at. And so we really committed the entire company. We've shifted 90% of the company resources to focus on that. From a product perspective, land really spending all of our time there right now. So we act as a marketplace second model. Now where in the beginning, we act as a marketplace first model.

Jeffrey Stern [00:37:56]:

With that shift, maybe just give us a little background history of what the company looks like today, how has it evolved, and then I'd love to get your perspective on with that first unlock. How much do you think is left to, to be unlocked and on, on what timeline? It feels like, you know, it's in the early days here, but what are those things that are, are going to drive the business going forward?

Dallas Hogensen (Felux) [00:38:22]:

I talk about this a lot internally, and I really think we're in the first batter or the first inning. As far as the timeline of the company, I think we still have a six or seven year track to IPO, and that's ultimately the goal of the company. But if you look at the company today, we raised about 24 million in the last, I got to call it 16 months. We raised our seed in May of 21 from ABC, Expa Light Bank and some other angels in the space. So we brought in some strategic capital, too, from the scrap market, from the steel market. And then, like I said, we had tremendous growth over that eight month period. And then we raised another 19 million at the start of this year. That was all based on the marketplace first model. So the team today was about 36 people, and original headcount model was to about 50. And we actually slowed that down, just given kind of what happened in the venture market, what happened on a macro perspective. Today, we're being really conservative with cash and have about three years run rate currently in the bank because what we wanted to do is make sure we could establish a clear line to quality revenue in this procurement side before we double down and start to accelerate again. And so I think that when we look at how much this company has changed, really, from when I took it over, there was six or seven people. We rebuilt the culture from the ground up. We rebuilt we rebuilt the brand. We've gone through three or four iterations of like, where do we think we start? What do we think we focus on? But ultimately the goal, like I talked about earlier, we want to touch every piece of metal. And so the phasing of this business is really in the infancy. We're a seed stage company again, where this is, we think, the most important work to unlock the next level, which is actually supply side distribution. And so the way you can think about that is like, shopify. We're building the operating systems for these steel suppliers to manage all of their digital orders because 99%, like it or not, still happen offline in this industry. It's all email, it's all fax, it's all text, and there's really no historical records of what's happened. And so all of those things need to be solved before I think you can reach massive global scale.

Jeffrey Stern [00:40:34]:

What is the competitive frontier for the business? Do you consider it the old guard, the analog way of doing it, or are there other companies who are starting to think in the way that you are thinking about the space?

Dallas Hogensen (Felux) [00:40:49]:

Yeah, so we have one pseudo competitor and we don't really think they're like, exactly analogous today, which is Reebus, and they're really a market participant and brokerage in the space. And they've done very well. They've raised 75 million at a $750,000,000 valuation from SoftBank last November, I believe. So I think what's exciting for us is that we have two companies doing interesting things in the space for the first time ever. That's thinking about technology, that's bringing a new light, a younger face, a new energy. But other than that, you really think it about it's the old guard, it's the old way of doing business. And that's sometimes even harder to rip and replace. We talk about YC a lot. It's got to be 100 times better. It's got to be 100 times easier for them to make that change, especially when you don't have a large fluency in technology use. In our demo, it makes it even harder because these are the guys that have operated off their cell phone now for ten years and they don't even look at a computer. They have their buddies, they make an order, they call them, they make it happen. Now, the result of that has actually created pretty poor business operations, land, business transfers. So we're seeing a lot of consolidation space and we're seeing a lot of sunsetting but a lot of the historicals are not there. So everybody's kind of recombing in starting from scratch and we see this everywhere. We also see this on the manufacturing side from the largest companies in the world like GE. You name any company, their actual historical data of what they've spent on the steel supply chain is like nothing. They don't have it. It's not easy for them to find or put together. So we're really finding that this is a big inflection point in the industry where we, by focusing on the manufacturing side, I think really have a clear strategy.

Jeffrey Stern [00:42:46]:

So I want to maybe segue a little bit to culture, which I think we've touched on a bit throughout this conversation so far. But I know it's something that is not window dressing in your mind. It is something that is very intentional and something that you've spent a lot of time thinking about. I'd love for you just to kind of outline here how it is that you've thought about culture and what that actually means. How does it manifest in Felux and the company at large?

Dallas Hogensen (Felux) [00:43:21]:

Yeah, I think it's something I care passionately about just in general is I think if you compare two teams to each other that are equal, like, the team with good cultures can always win. Right?

Jeffrey Stern [00:43:35]:

It's usually facts, poultry, strategy for breakfast.

Dallas Hogensen (Felux) [00:43:39]:

Something like that, 100%. I'm a big believer of that too. I think a large part of my job and I think everybody on our leadership team and everybody we challenge everybody in the company to always be thoughtful. Thinking about culture and being an owner of culture is what we talk about. I think that is really important where a lot of companies just frankly, they just don't do it because they think it's not as important, but you have to prioritize it. But to me, culture isn't the mission, vision, value type of things. It's actually to me, culture is really created by creating trust within your employees and you do that with vulnerability. We really try to manufacture experiences that allow our employees to be vulnerable, fail in front of each other because that creates trust and understanding and camaraderie and really helps us establish buy in. And some of the feedback that we've gotten within our company is I've never seen a company that has so much like, clear buy in from everybody. And to me, like, that's something I'm really proud of because we're very transparent in everything we do from the financials to our priorities, to who our investors are, to what we're thinking about as leadership. And so we want to make sure that we really inform our team to have the best information, to make decisions and move fast. And we put a lot of effort into that. Now, we fail, I think, quite frequently at doing so. But I think the intent of making that a habitual process or habit is really important, but I've always had really like a ten step, more or less framework for building culture from the ground up. Land so far it's worked really well for me. Lyft we were named one of the best sales cultures, the best sales team and stuff like that. Land so it's something I take a lot of pride in, to be honest. I've never been the smartest guy in the room. So what I want to do is foster the ability for our team to execute at the highest level and make sure the smart people have the ability to do their jobs a lot better than I could ever do that.

Jeffrey Stern [00:45:44]:

And so just like the tactics of it, is this something that is galvanized crystallize somewhere within the company? How is it that the culture and how is it relayed? How is it communicated? How do you kind of facilitate the process of culture?

Dallas Hogensen (Felux) [00:46:04]:

Yeah, so I'll kind of tell you, I'll walk you through kind of the ten things that I think about and kind of how we do some of that internally. But really at every stage I'm thinking about belongings. I'm always forcing functions. Land putting individuals in situations that creates connection. And so we do a lot of that right now. It's a lot harder remotely. I think that's an inherent challenge that I'm always thinking about. And so always lay one. We want to put people together land experiences that may not be work, but allow people to get to know each other and remove that kind of professional bridge that usually or facade that is put up from there. We want them to fail together quite quickly. So we're always trying to think about the trust and empathy part. So that's like, step two in the process for us. And then we create safety. Like, hey, we encourage failure. We give feedback. We do a lot of things on video. We record them. We have people give like, self assessment and feedback, and we do a lot of just direct feedback in the company say, hey, listen, this is what I think you could improve. This is what I think you did. Well, how did you think you did? And so we were always doing that as a team together. So communication for us has always been a clear land direct priority. And that's really established just a professionalism and trust within every level from the SDRs to management. It doesn't matter. And then we're always thinking about ways to build, like, togetherness. That's the next phase is if you create safety, how do we think about togetherness as a company? And so it's harder today, but right now we do kind of a yearly summer camp where we bring everybody in. Land it's like four days of fun. It's like Dave Matthews conference. We're going to baseball games. We're doing all of these kind of business challenge exercises together. I think we can make up like three professional bands in our company at this point. We have so many good musicians, so we have in the office there's guitars and there's like mics and stuff like that. So people are like singing and playing games and stuff like that. And once we have created this group of friendly people that really like each other and have trust in each other, we start setting standards. I think Bill Walsh is one of my favorites at this. And The Score takes care of itself, which is obviously one of my favorite books, but we really set, hey, this is the Felux way, this is the standard at which we operate and this is the standard that we expect you to operate at. And that really creates the accountability for the team. And so everybody feels really accountability for the jobs to be done that they have. And so I think that comes after you're able to create, for lack of better words, it's like locker room feel and that's how our company feels internally. You go into a locker room, everybody's buddies with each other, everybody's talking and joking, but everybody's very serious because they have high standards for how they execute on their job and they hold themselves accountable. Land so once we can get to that phase with culture, we're really about autonomy. Land so we think about planning and strategy where we give everybody the ownership of that output, where they know exactly what they're impacting. And so we spent a lot of time just on that piece of curating, the ability to go do that. And it took about a year for us to do that, really hire in great people, change the culture that was there before. And now what we do is frequency, so frequency of accountability, where every Monday we have weekly business reviews. Every single member of the team on Slack says, here's my three priorities this week. Here's the three things I did last week, here's what I completed, here's what I didn't complete, here's why. And then we always are trying to simplify and make sure we align. And so we do a lot of heavy communication like that as an organization because we want people only to be working on the hardest problem or the most impactful work. Land so I think that also helps establish the culture of standards that we have, is that we do good work, we have high standards, we trust each other, that is an incredible recipe for speed and also success. And so we're very intentional about how that is. Land we're always playing with it and finding the best way to execute on it. But the whole company knows every single Monday, hey, this is what's important, this is how you impact that. This is how we're doing, this is where we failed, this is how we're going to change it. Is that aligned to your three priorities this week going forward? If not, let's talk about it. Stack rank the priorities and making sure that you're free to go do your best work. I think because of that, everybody feels like they're making an impact in the business. And looking back, one of the things that I've learned that's incredibly important about maintaining that standard is that if you're finding that people don't have enough, like if they have too much time in the day to fill up their time, that's when things can go really bad. And so we set goals that are just stretch goals. They're going to be hard to reach. Land, it's going to take effort to get there. Because what I had found in the past that if you have a company which is a little bit lause fair or it's not very clear, well, people fill up their time with things that they think are important and a lot of the time that probably is not work stuff. And that gets into their mind. They start thinking, well you know what, I'm not really doing anything here. What else could I be doing? And it creates kind of a downward spiral of personal, mentality or emotions. Land so a lot of this stuff is very calculated in how we think about how can we do just enough where the goalpost is not far enough, where they see the next step, they know how they contribute and also they feel like at the end of the day, they've done good work for what they're doing.

Jeffrey Stern [00:51:54]:

One of the things I wanted to ask you about with the intentionality you've had with everything else we've talked about so far, namely culture, is the importance, the significance of building a steel company here in Cleveland with such a rich steel history.

Dallas Hogensen (Felux) [00:52:14]:

Yeah, I think it's a little bit funny. Like I never thought I would be in steel or Cleveland, and yet here we are. And I think it's probably the most important work I'm going to do in my life. So it's funny how things work out. We talked about this earlier, but preparation meets opportunity sometimes unlocks some really interesting things in life. And having the courage to go forward, I think is about what being an entrepreneur is about. But I remember sitting on the couch with my wife. We were living in Denver at the time, I think pregnant as well. Land I said, hey listen, if this thing works out, there's a chance that we might be going to Ohio. Land she looked at me, you better be fucking right. That's what she said, full stop. But I think the journey here is an important one. Land I think one that is something I take a lot of pride in, I'm excited to be a part of. A lot of people don't know this, but the first ever billion dollar company was a merger between Rockefeller and JPMorgan, which is US Steel, which is based out of Cleveland. First ever billion dollar company came from here and it was in steel. So what are the odds of that and the rich history of that story? And also too, this is really where the west was built out of Cleveland. And so this is a funny story, but I remember packing up land, selling a Clover house in Colorado in like 6 hours. Like the market was so crazy there. And so we were like, okay, I guess this is real, we got to go. And I remember packing up and we drove from Colorado to Ohio. And that was the first time I'd ever stepped foot in Ohio. I remember leaving at 230 in the morning, like, closing the garage land, just kind of being like, okay, this is really real now. And it was an important decision for us. But the reason why we made the decision too, is like, my other partners are here and we also believe that. And I believe personally that I have an opportunity, this company has an opportunity. The team we have here, our investors have an opportunity to actually build an extra great ecosystem of technology, talent, land, companies. The thing that's going to make me proud is I have companies leave here, start other companies, and they have companies that they start where poise leave there and start other companies. And that's how you build an ecosystem. And so my personal mission is like, how do we develop this hub into something powerful within industrial tech or just in technology in general, given that insurance and healthcare is such a heavy part of what this market is about. And there's not a lot, I mean, there's not a lot of funding coming to Cleveland. It's all going to Columbus, it's all going to Chicago. And I think we have to be the people that lead the charge to change that. It's something you and I talk about all the time. We think it's important work and I think we believe in what the future of this town could be. It's a really cool place. It's a great place to live. We love living here and we're going to be here for the foreseeable future. And I think what an outcome that looks great for us is that if we can create the ecosystem for entrepreneurs to be successful, to give them pipelines to venture capital on the coast, to give them pipelines to access the capital in the Midwest, to help them solve hiring challenges that exist here, I'm really committed. And I think the narrative around Cleveland gets a bad mark right now in the technology space. Not a lot's happening. And I think that it's disappointing to me, but I think that where you have that creates opportunity for people to go be in the forefront of that and make change land, show them how. And I think that's what we're really trying to do with having our headquarters here because we do have offices in Seattle, La, the Carolinas and Texas. But always Cleveland is going to be. Our home. And my approach to Cleveland in general is we want to be thought of as the leaders in the city on how you build companies from the ground up. That is my personal mission here, that I'm fighting like hell every day to do so and making sure that we're really curated and careful about how we do it.

Jeffrey Stern [00:56:21]:

Well, I appreciate that perspective, and we're grateful to have you on our team.

Dallas Hogensen (Felux) [00:56:28]:

Yeah, I mean, I think the city is grateful to have you, too. You're doing a lot of the cool stuff within this ecosystem as well. So I think it's been fun for us to connect. Land talk about that. I think the missions that we have here, I think there's a lot of people that have that mission. And what I'm realizing is that they're just not connected together.

Jeffrey Stern [00:56:43]:

Yeah.

Dallas Hogensen (Felux) [00:56:44]:

Land so I want to change that.

Jeffrey Stern [00:56:46]:

I would like to as well. So I look forward to working with you on that. What has surprised you most about the journey so far?

Dallas Hogensen (Felux) [00:56:55]:

How hard it is? I knew it was going to be hard. No, but to be honest, anybody that gets into early stage company building, it's a bit sadistic. You know what you're walking well, if you've been through it, you know what you're walking into. I don't think I could do anything else. Like, I think I'm unhirable anywhere else, but I think that the biggest surprise. Land just in the company's journey is how hard the language of steel is. So you think about this like, there's 600, I think, pounds of steel produced for every American in the United States every year. I'm looking around where you are today. How much of that material behind you on your head with the mic in the computer is actually derived from steel. So it's actually one of the most important materials that make up most of the products that we use on a daily basis, yet no one spends any time thinking about it. So that's why I know we're on something special here. But what surprised me is that how hard it is to learn the language of steel. And everybody says it takes about ten years, and I believe them. Now, I think I read at a third grade steel level, but I think that's part of the fun is, like, the curiosity I have for the space when I'm walking up and down the streets. The things that I start to notice. Now, when I walk into office buildings, you can see the galvanized ducks for the HVAC, and you start to understand where that came from. And it becomes this incredible story that you get to start painting in your head on where things came from, how they were moved, what the purpose of they were meant to go do. Land the reality is it touches almost every minute of our lives as consumers. And it's something I'm just personally just excited about as an individual. And I feel very lucky that I found that thing that I think a bad outcome is a billion dollars for this company if we fail. I think that's how big the market is. It comes down to execution, of course, but that's why I think this is just so hard. But I'm so excited about the future.

Jeffrey Stern [00:58:58]:

Yeah, it is exciting. It's also a fascinating idea, I think, when you build the vocabulary and gain the literacy, how a lot of things you may not have noticed become very visible and obvious when you know how to talk about it.

Dallas Hogensen (Felux) [00:59:17]:

Yeah. Have you ever seen you look at air traffic control maps and things like that, where you see all the planes moving and all these nodes going everywhere? And that's essentially what the technology we're building on the back end is like. We have complete visibility of the movement of metals and ultimately downstream for us, we'll verticalize every part of that. So we'll own the warehouses, we'll own the trucks, we'll own the manufacturers, we'll own the fabricated we'll start buying service centers just because we have so much incredible data land knowledge of the most efficient path to delivery of material on time. And so that's why I think to your point is us building land, doing the hard work. Right. We're trying to solve the hard problems and that's going to take, I think, ten years for us to do well. Yeah.

Jeffrey Stern [01:00:00]:

Well, it is very exciting though, the vision for the future land, the potential for the kind of impact that you can have in retrospect.

Dallas Hogensen (Felux) [01:00:12]:

Cool. Like I said, never thought I'd be in Cleveland or I thought I'd be in Steel, but yet I think I found the most important work of my life. So it's pretty exciting. Yeah.

Jeffrey Stern [01:00:20]:

Well, we'll book End the conversation, tying it back to Cleveland. And this may be a harder question for you than for most guests as someone newer to Cleveland, but I will ask you it as it is the question we ask everyone on the show, which is not necessarily for your favorite thing in Cleveland, although if we need to do that, that would be okay.

Dallas Hogensen (Felux) [01:00:45]:

It's probably going to be that.

Jeffrey Stern [01:00:47]:

But typically what I ask is for something that other people may not know about Cleveland. Hidden gems in the city.

Dallas Hogensen (Felux) [01:00:56]:

Oregon a different state. No? Yeah, I don't think I have any insightful revelation around that, but I think things that I've really found that I enjoy is if I'm downtown or if I'm doing something, I'll sneak over to Larder and have like a chicken sandwich or whatever they have. I think it's all like their mozzarella soup, all that's really good. And also, too, like, my business partner the, actually owns the last page, which is in Pepper Pike in Pinecrest, which I think may have won the restaurant of the year here land. So I think that maybe that's a hidden gem for people downtown or on the west side as a place you should go eat on the East Side. Awesome.

Jeffrey Stern [01:01:36]:

Well, Dallas, really appreciate you coming on and taking the time. Land sharing your story again. Really stoked to have you in the city and appreciate you coming on.

Dallas Hogensen (Felux) [01:01:45]:

Yeah, incredible time. I appreciate having me. I look forward to many more.

Jeffrey Stern [01:01:49]:

If folks have anything that they would want to follow up with you about, what would be the best way for them to do so.

Dallas Hogensen (Felux) [01:01:55]:

Usually you can find me either on LinkedIn or on Twitter at Dallas Hogans.

Jeffrey Stern [01:02:00]:

Well, thanks again, Dallas.

Dallas Hogensen (Felux) [01:02:01]:

Awesome. Appreciate it.

Jeffrey Stern [01:02:03]:

That's all for this week. Thank you for listening. We'd love to hear your thoughts on today's show, so if you have any feedback, please send over an email to Jeffrey at layoftheland FM or find us on Twitter at podlayoftheland or at @sternjefe J-E-F-E. If you or someone you know would make a good guest for our show, please reach out as well and let us know. And if you enjoy the podcast, please subscribe and leave a review on itunes or on your preferred podcast player. Your support goes a long way to help us spread the word land continue to bring the Cleveland founders and builders we love having on the show. We'll be back here next week at the same time to map more of the land.