10 Questions with John Machacek: Verdethos

Written by: John Machacek

john Machacek, Chief Innovation Officer for the Greater Fargo Moorhead Economic Development Corporation, has worked with countless startups throughout our community over the years. He knows their ups, and their downs, but most of all, he knows the questions to ask them. Here are John Machacek’s 10 questions for Lisa Esberger, CRO and Founder of Verdethos.

Contents
1. Will you please tell me your Verdethos elevator pitch? 2. Can you give me an example of the work you may do for a client? 3. What is driving this demand for this type of service and technology? Is it from corporate policy, is it consumer-driven, or is it regulations? 4. As you’ve been working with countries around the world, what have you learned to help with that process? 5. Your cultural experiences, and your appreciation and curiosity of that, remind me of how you told me last year about an interesting work or live abroad type program. What is that program and how was your experience? 6. Going off of the word “remote,” you and your business partners have built your company remotely and if I recall correctly, it was something like a good year or so until you’d even met them in person. I’m starting to work with more startups where their partners are geographically scattered elsewhere. How has the process been to build a company remotely with your business partners?7. When I first met you in 2022 after a visit to Fargo, I knew an early connection you were looking for was to AgTech software startup Bushel, and that has developed into a nice relationship/partnership. What can you tell me about that and the value of partnerships like this?8. Were partnerships like this one of the reasons you recently chose to move to Fargo and North Dakota?9. If you could go back in time to Lisa from several years ago, what hindsight advice would you give yourself? 10. What can we do as a community to help you and Verdethos succeed? About John

1. Will you please tell me your Verdethos elevator pitch?

Verdethos is a scalable supply chain management platform that addresses the challenges of sustainability, automation, and compliance by providing source-to-shelf traceability of raw materials. We serve as the critical infrastructure for global businesses to manage their internal and external workflows by providing a full chain of custody for sourced materials. Our platform connects trading, operations, sustainability, and procurement internally, while also linking supply chain partners externally. We basically get agribusiness and energy companies to stop emailing Excel spreadsheets back and forth.

2. Can you give me an example of the work you may do for a client?

A customer is a large global company that refines palm oil and sells oils and other palm-based ingredients to companies like Unilever, Proctor & Gamble, Mondelez, Ferraro, etc. Many of the refineries we talk with download data from inventory systems like SAP and manage most of their business on Excel spreadsheets and software that each serve a single purpose. We looked at how departments within agribusiness companies track information, interact with one another, make decisions, and record events. We built a platform that takes their internal processes and workflows and puts the management of these business-critical processes all on one platform.

With Verdethos software, people performing functions for sustainability teams, operations, trading, sourcing, procurement, and others all interact with each other on one platform in real-time. Their supply chain partners, like their suppliers (palm oil mills and kernel crushing plants), buyers (trading companies and consumer package goods companies), and auditors/ graders also have logins to participate in real-time. We’ve also developed a mobile app where farmers and truckers in Southeast Asia and Latin America can track and timestamp their deliveries. Each company decides which employees have access to perform which job duties, what data is shared with outside companies, and what business rules to apply to their workflows.

We provide static traceability which means that for every processor, we have mapped out the relationship of each party that provides materials to the processor. For palm oil mills, we provide a map of dealers, cooperatives, and estates that supply palm to the mill. Each individual entity has a profile on our system which lists their business information, certifications, and relationships. We also help the refineries monitor the land for deforestation and other issues.

We also provide a transactional chain of custody, meaning that for each material, we provide ledgers of what is available at each location that can be filtered by quality metrics and certifications. As the material is processed/split/mixed with other ingredients, a record of the material is included on the ledger for each step it had been involved with. For palm oil, if I’m Unilever buying refined palm oil to use in producing soap, I’d be able to access the shipping record to see all materials that contributed to my batch along with every document, certification, and piece of data associated with each processing step— to whatever degree each seller in the chain permissioned the information.

Here in the United States, we plan to focus on (1) biofuel sourcing, chain-of-custody, and compliance, (2) row crops used for food and other purposes, and (3) identity-preserved materials like specialty and organic ingredients.

3. What is driving this demand for this type of service and technology? Is it from corporate policy, is it consumer-driven, or is it regulations?

All of the above. As far as regulations; the European Union passed a deforestation-free sourcing regulation, called the EU Deforestation Regulation (EUDR), in mid-2023. This requires all imports and exports in the EU of soy, palm oil, coffee, cocoa, timber, paper, beef, leather, rubber, and charcoal, and their derivatives, to be sourced from areas that have been deforestation-free since January 2020. This is a huge lift for most companies, and they need to be able to show proof for their shipments starting in December 2024.

So think… printer paper, shampoo, car tires, biofuels, Oreos, Nutella, soy milk, McDonald’s frying oil, packaging, furniture, building materials—this regulation impacts most industries and consumers globally. The US and other countries are also looking to introduce a similar but less strict set of regulations that recently gained bipartisan support.

We help companies digitize their sourcing processes and workflows, and we saw the EUDR as the lever to get many companies’ finance departments’ approval to finally digitize their supply chains while they have funding allocated to meet the regulatory requirements. We provide an ease of doing business and help them scale the complex processes required for these regulations now. And for the future, we make it easier to adapt data to meet new regulatory requirements and streamline their overall supply chain management. With the corporate policy and consumer-driven aspect; we’ve seen a significant increase in large global brands formally sharing commitments to science-based targets and requests for fully traceable ingredients. Since news events like COVID and the Evergreen blocking the Suez Canal, companies and consumers have also become quite aware of the impacts supply chain disruptions can have on shortages, empty shelves, and prices. With cleaner data management, we help companies detect disruptions earlier so they can react more expediently.

4. As you’ve been working with countries around the world, what have you learned to help with that process?

Stay curious. We’re confident that we’ve built an extraordinarily valuable solution. But the second we assume we know what our customers need, rather than taking the time to ask them about their most pressing pain points and ask good clarifying questions, we lose a pulse on the insights that shape our future. Our platform is built to serve so many people from cultures all across the world—from the field to the board room. Every conversation we have contributes to what we build, how we build it, and when we prioritize what features. I’ve also learned the hard way that having a solid way to document and categorize what we’re learning would’ve been super helpful to have done from the start.

The most honest conversations I’ve had with people often were not in offices. They involved cooking or sharing a meal together with people very different from myself in unexpected places. The features we build to prevent things like illegal deforestation could cause families to lose their land if we’re not careful. Our team is made up of humans too, and we won’t get everything right, but the best we can do is listen well and build from there. I’ve learned a lot about potential unintended consequences our platform could have—for better or for worse—over food.

5. Your cultural experiences, and your appreciation and curiosity of that, remind me of how you told me last year about an interesting work or live abroad type program. What is that program and how was your experience?

Remote Year is a co-working/co-living program where participants travel with a cohort and live in a different city each month for either a 4-month or 12-month period. Each group has a team leader hired to travel with the group and facilitate activities and operations for the cohort. In each city, they also provide a co-working space with 24-hour access and reliable Wi-Fi, so that each person can continue to do their own job remotely throughout their time abroad. They also have a 2-person city team on staff in each location to share cultural norms, safety tips, points of interest, and food suggestions, and they run local programming and side-trips for the group.

When I joined Remote Year, I was recently widowed and exploring how I wanted to spend the rest of my work life. I originally entered the financial industry because I was looking for a quick way to pay back student loans. I enjoyed working with people and had a knack for numbers, and 12 years later, I was managing operations at a large investment firm and lacked purpose. After losing Chris, I was looking for ways to spend time abroad that were affordable and that were focused on experiencing local cultures versus being a tourist. I found Remote Year online and remember sitting in bed on a Sunday watching video after video and thinking, ‘Hmm, I wonder how I can get out of my lease early.’

I was in a cohort traveling with 35 people for 12 months in 2018 and 2019. We spent three months in Europe, one month in Africa, four months in Asia, and four months in Latin America. Our group had a mix of entrepreneurs, software developers, designers, business professionals, two teachers, and even a realtor, who all found ways to work remotely. Ages ranged from 20-67, and we even had a mother and daughter traveling with our group.

I’d rent a moped or find locals who spoke English to take me out to rural areas where I experienced families in developing parts of the world farming, milling, delivering things like palm fresh fruit bunches, corn, rice, pineapples to processors, etc. Many people were burning forests near their land because the clearest way to make more money for their families and communities was to burn the land close to theirs and plant crops or palm trees. They assumed that if they grew more, someone would likely be willing to buy what they were selling. I also experienced a lot of concern with people saying they were worried they’d have to sell family land to larger companies to continue supporting their families, and when I arrived back in the US, I started looking into why.

6. Going off of the word “remote,” you and your business partners have built your company remotely and if I recall correctly, it was something like a good year or so until you’d even met them in person. I’m starting to work with more startups where their partners are geographically scattered elsewhere. How has the process been to build a company remotely with your business partners?

Four years ago, I was comfortable doing business remotely, but I never thought I could start a business without meeting my partners in person. When I returned to the US to start a business, I panicked when my bank account started dwindling, and I took a job working for another financial company in January 2020. By March, we all worked remotely, and by September I had resigned to enroll in a remote FinTech bootcamp through Columbia University. The course focused on Python development, machine learning, database management, and blockchain.

I met my founding partner and CEO, Aidan, through the course. We worked closely on two projects together, and following the course, I learned that we were looking to solve similar global problems from opposite sides of the industry. He was thinking from the top down, as he had worked as the head of trading in Africa for an industry giant, and I was looking to change it from the bottom up. We spent about two years focused on industry research looking for a solid blockchain-friendly CTO.

16 months ago, we met Kevin, our CTO, through an industry friend, and learned that he had patents on the original mobile tap-to-pay technology, and had been the head of engineering for the unicorn startup that scaled early wallet technologies. We were honored to have him join our founding team, and we all met for the first time in person in New York a little over a year ago. We individually live in Fargo, New York City, and a suburb of Atlanta, and continue to operate virtually. Had it not been for the Zoom culture ushered in by COVID lockdowns, I doubt we would have met or started fathomed building a company together.

We believe our business is stronger because of the different, backgrounds and experiences, and therefore, different perspectives. Two common factors we all share is that we’ve all lived abroad at some point, and had left large enterprises to segue into the startup space mid-career.

7. When I first met you in 2022 after a visit to Fargo, I knew an early connection you were looking for was to AgTech software startup Bushel, and that has developed into a nice relationship/partnership. What can you tell me about that and the value of partnerships like this?

My first time in Fargo had been with ILT Academy for 2022’s Prairie Capital Summit. Quite a few people were mentioning Bushel, some saying they’d be a good connection to meet and others saying, “Oh, they’re a huge competitor of yours.” I first came across Bushel earlier that year when we were doing onsite research at grain elevators in Iowa and seeing them during our competitive market analysis. Some very friendly North Dakotans quickly set up meetings with their team, and we quickly learned that we’d make far better partners than competitors, as they’re working with different parts of the supply chain in the US than us, and our work abroad also doesn’t overlap.

There are areas where we could overlap if we get over our skis at Verdethos, but we firmly believe in the strength of strong partnerships as critical to our long-term success. Since relocating to Fargo, some of the folks at Bushel have been some of the best thought partners to bounce ideas off of as we both continue to evolve. Building an early-stage startup can be lonely before hiring bigger teams, so I’m really grateful to have met such amazingly collaborative people here in Fargo.

8. Were partnerships like this one of the reasons you recently chose to move to Fargo and North Dakota?

Some startups may be drawn to Silicon Valley or New York, but I think it’s more important to find the collaborative cultures, partners, and community where the current is behind you. Building a startup is hard enough no matter where you are, so finding a unique place like Fargo where there’s a tremendous amount of support both inside and outside of the entrepreneurial community has been exciting. Ag and energy are focal points for Verdethos, so strategically, being surrounded by both industries makes sense as well.

I’ve lived in and visited many cities, and there are no other startup ecosystems that compare to what is here. It is fascinating how well everyone works together here and partners and connects with little to no strings attached. That’s rare.

It’s cool how many people from various industries show up at something like StartupBREW to network and openly offer to help—you don’t see that everywhere. Through events here in Fargo, Bismarck, and rural North Dakota, I’ve met so many people from groups like the Commerce Department,

Bushel, EDC, Continuum Ag, Emerging Prairie, agribusiness and energy companies—all interested in working together to create solutions and offer introductions to others willing to help. I’ve made friends too, which is a huge accomplishment of its own when moving to a new city at age 40.

9. If you could go back in time to Lisa from several years ago, what hindsight advice would you give yourself?

Operationalize whatever you can. Have a process for everything that is repeatable and a way to categorize and organize the information that you take in. When building a startup, life begins to fly past you at a thousand miles an hour, and it’s very difficult to sift through 800-plus pages of Apple’s notepad ramblings efficiently.

10. What can we do as a community to help you and Verdethos succeed?

For research, we’re looking to meet with various supply chain stakeholders where energy and agriculture intersect. The next phase of our platform will provide traceability, chain-of-custody, and compliance for sourcing biofuels. We’d like to connect with processors and energy companies to understand what information will be most valuable as markets shift so that they can continue to be profitable and competitive globally. We’re also hoping to more deeply understand how we can best help farmers and producers capture financial incentives. I personally would love for our first energy pilot to involve North Dakota companies.

About John

John Machacek has been helping local startups with the Greater Fargo Moorhead Economic Development Corporation since prior to his position with the GFMEDC. Before joining the team, Machacek was the VP of Finance & Operations at United Way of Cass-Clay and a business banker at U.S. Bank.

verdethos.io
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