By Lee Schafer
Star Tribune (Minneapolis)
Maybe nothing fuels entrepreneurship quite like anger.
Mark Lazarchic sure doesn’t bother masking the fact that anger is driving him. “I have the words ‘anger is a gift’ tattooed on the middle of my back.”
And he’s not kidding.
So clearly Lazarchic isn’t a typical software company CEO, not even a typical entrepreneur. His anger doesn’t come from an old grievance with a former employer, the kind of start-up story you may hear from other founders.
His company, called Otterology, makes inexpensive inventory management software for the smallest of small businesses.
What really gets him fired up, he said, is that “every big company in the world has a competitive advantage because they are the only ones that can afford stuff like this.”
Not only is software made for bigger companies too costly for smaller ones, it’s so hard to use, too, Lazarchic says. And he doesn’t show much respect for the backbone bookkeeping program of the small-business market, QuickBooks. According to him, “it’s overbuilt, it’s overcomplicated, and it’s a pain … to even figure out how to use.”
It probably comes as no surprise that Lazarchic is not a software entrepreneur by skill, experience or even interest. More than anything, he’s Otterology’s target customer, the kind of small-business owner that software companies couldn’t figure out how to serve profitably so routinely ignored.
His other businesses are about as far from the information technology sector as one can get, including owning what he thinks is the largest retailer of fireworks in the state.
To call Lazarchic’s Renaissance Fireworks seasonal is an understatement: 80 percent of the sales typically come in three business days. It doesn’t have stores but tents, as many as 46 one year. They pop up in parking lots just in time for holidays such as July 4th.
Part of the challenge of operating in a parking lot for a few days is how to run a cash register and a credit card reader. Dragging a power cable to a tent was not that costly, except the power cable had to be inspected for safety compliance. That raised the cost and the aggravation. Then he heard about Square.
Square got its start in 2009 with the idea of making it really easy to take payments over mobile phones. Its little white Square Reader for swiping credit cards fits into the 3.5-millimeter audio jack of devices like iPhones and iPads. Lazarchic signed up and rented a stack of iPads.
Still, he had his inventory management problem. The best technology he had found was notebooks, and he didn’t mean notebook computers, but those with paper. That needed pencils.
The cheapest software option offered him exceeded $60,000, he said, “so I said to him, I think I am losing $28,000 a year in theft. You want to charge me $60,000 to tell me that I am losing $28,000 a year in theft. Do you see anything intelligent about that?'”
The sales guy shrugged. It’s what such things cost.
Thoroughly aggravated, Lazarchic went about finding an IT firm to build him an inventory system that he could couple together with Square. He had one ready in time for the selling season of 2011.
July 3 is a particularly hectic day, and he was looking forward to the usual 20-hour workday. In the middle of that afternoon, he said, “we were sitting around, sort of looking at each other. Someone said ‘We don’t have anything to do.’?”
It was a revelation.
After that July 4th, Lazarchic got an unsolicited invitation to meet from Randy Reddig, part of the founding team of Square. The company was then just a start-up itself, making Renaissance a big early user. When Reddig visited, their conversation quickly got to Lazarchic’s simple, homemade inventory tracking tool.
“This is awesome,” he remembers Reddig telling him that day. “You need to drop everything you are doing to get this out into the market.”
Otterology was formed in the summer of 2012 and has offices in Spring Lake Park. With the blistering pace of mobile payments growth, this time Lazarchic knew a new company of his could one day grow into a big one. He lined up a board of advisers and prepared to raise capital from investors, tasks he had never done before.
The company has raised about $425,000. Minneapolis investor Casey Allen, an early shareholder, said there’s a gold rush underway in mobile payments, as “every bank and credit card processor will soon be clawing each other’s eyeballs out to have solutions for mobile and tablet.”
But what most investors have so far missed, he said, is the niche being pursued by Otterology. “The coffee shop owner will still need the software that will keep track of what the store is low on, text the manager at the right time, and do it all automatically in the background,” he said.
Once a potential investor harmlessly asked if Otterology would one day make a version of its small-business product robust enough to serve companies like Target or Best Buy.
Lazarchic’s response was a bit too colorful to repeat here verbatim. He couldn’t care less about Target or Best Buy, and said so.
His board of advisers has already learned not to try to talk him out of his vision for the company. They encouraged him to price the product at no less than $49.95 per month. Lazarchic flatly refused, and Otterology’s roughly 800 users will start getting billed $19.95 per month this Friday.
“I didn’t build this because I wanted to be CEO of a software company,” Lazarchic said. “I built this for the guy who thinks he can maybe do $20 a month. No big company cares about that guy.”