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Nutshell's CEO, founder on building startups in Ann Arbor

When I first sat down last spring to talk with serial entrepreneurs Guy Suter and Joe Malcoun about the companies they’ve launched and their plans to boost Ann Arbor’s startup ecosystem as a whole, it was a fun, freewheeling conversation.

Malcoun and Suter have their hands in a number of local companies and projects. They’re investors as well as entrepreneurs, and they want to help make Ann Arbor a place that does a better job of hanging on to the talent it produces by giving early-stage companies affordable office space and a place to go for funding, networking, brainstorming and moral support.

“Guy and I are an explosive, dangerous mix, because we have a hard time saying no to cool ideas and we love risk,” Malcoun told me.

That risk appears to be paying off on multiple fronts: Notion, the e-mail optimization startup that Suter runs, is currently in beta testing (more on that in a future article); Nutshell, a customer relationship management (CRM) startup led by Malcoun, announced the closing of a multimillion-dollar investment round this week, led by Plymouth Ventures; and a shared downtown co-working and event space in partnership with Coolhouse Labs’ Jordan Breighner is set to begin construction this fall.

Nutshell began as a side-project originally conceived as a “homebrewed” way to tackle CRM at Suter’s previous company, BitLeap. In 2008, BitLeap was acquired by Ann Arbor computer security startup Barracuda Networks. As part of the deal, Suter and two of Nutshell’s co-founders, Lindsay Snider and Ian Berry, were absorbed by Barracuda, so they relocated to Ann Arbor from Pennsylvania.

While at BitLeap, Suter had become frustrated by Sugar and Salesforce, the market leader in CRM software, because he felt they were too labyrinthine for a lean startup.

“They were hard to use and hard to train people to use. Salesforce isn’t even CRM anymore, it’s a platform. Our generation is so used to a rich app experience -- if you show the average 20-something salesforce, they’d probably throw up.”

In 2009, Suter, Snider and Berry recruited Andy Fowler to serve as Nutshell’s chief technical founder.

“Suddenly, what we were working on at Barracuda exploded, and we had no time,” Suter said. “So Andy built the product slowly and without pressure, focusing on the pain points we had at BitLeap.”

Nutshell officially launched in 2010, and with only minimal marketing efforts, it grew to have thousands of users. Nutshell’s co-founders realized the company’s potential was much more exciting -- and CRM in general much more susceptible to disruption -- than they originally expected, so they began to take the business a bit more seriously.

Malcoun, who worked as an executive at DTE Energy before leaving to try his hand at early-stage investing, came aboard as Nutshell’s CEO in 2014.

“Guy and I met at a David Brophy class on a Tuesday night,” Malcoun said. “I knew everyone on the panel except Guy. Then, about a month later, I read an article about Nutshell and thought, ‘Who are these people?’ Guy was so deep inside Barracuda building stuff that he didn’t know anyone. We became fast friends, and our wives and children became friends, and now we spend a lot of personal time together.”

Today, Nutshell is an industry leader when it comes to providing CRM software services to small and mid-size companies, Malcoun said. “We want to be with the scrappy entrepreneurs and the companies that are growing,” he added. “It’s a really beautiful product, too. There are so many CRM products that are hard to use and badly designed.” (The list of CRM software companies is long, indeed, but some other notable players include Close.io, Insightly, Nimble, and HubSpot.)

Under Malcoun’s watch, Nutshell has secured funding -- he declines to say exactly how much -- from investors including CKM Capital Partners, Cahoots Holdings and Plymouth Ventures. The company, which has 24 employees, plans to use the latest investment round to hire about 10 more employees and expand its sales and marketing departments.

Evan Ufer, a partner at Plymouth Ventures who joined Nutshell’s board as part of the new investment round, said the relationship between his firm and Nutshell has been especially collaborative.

Ufer said he got to know Nutshell by being one of its customers, and its technology appealed to Plymouth Ventures because it was built from scratch by engineers to fit the needs of smaller companies.

“It’s easy to integrate into existing platforms, it’s intuitive and easy to understand, and it’s affordable. A lot of CRM is complicated and very expensive. With Nutshell, you can download it and start using it in five minutes.”

From day one, Ufer has felt that Plymouth Ventures is entering into a genuine partnership with Nutshell. “We believe in the same thing: building a great business and keeping it in Ann Arbor,” he said.

That sensibility is something that Malcoun and Suter also share. As they got to know each other, they bonded over what they agreed was going well in Ann Arbor’s startup community, and what wasn’t.

There were a number of things that needed to happen before Ann Arbor could become a haven for startups the way Boulder, Colorado, and Austin, Texas, have, so they made a list of what’s missing. At the top was a “center of gravity,” a physical location that could serve as the nerve center of the ecosystem.

The other problem? Ann Arbor is a thriving, relatively affluent city. As a result, downtown office space costs a fortune.

“If you want to create density, you have to be downtown, but almost nobody can afford the space,” Suter said. “There is no place where startups can create density, no clear path. We spent months talking to people until one day we realized, why are we trying to get other people to do it? Why don’t we just do it ourselves?”

Suter, Malcoun, Berry and Snider decided to pool their resources, and they found neighboring buildings for sale on Huron Street between Fourth and Fifth. Soon, they began the process of buying them. Cabrio Properties will manage the endeavor, and Breighner’s Coolhouse Labs will be an anchor tenant, as will Nutshell and Notion. One they tear down the walls separating the individual buildings, they’ll have a massive, 24,000-square-foot space complete with room to hold events, a rooftop deck and a coffee shop on the ground floor.

“It’s very high-end, inspired tech office space,” Malcoun said. “It’s all-inclusive; we’re not renting it out by the square foot. Plus, our tenants will be mixed up with different companies with varying levels of success.”

As for who will get a spot in the new building, Malcoun said they want to be “careful with curation -- we want there to be some alignment among the companies.” Roughly 200 desks total will be available for non-anchor tenants, and the goal is to complete renovations by Spring. They plan to call the space Coolhouse.

Malcoun’s and Suter’s plans don’t end with Coolhouse’s construction. They want to formalize relationships with Dan Gilbert’s Madison Building in Detroit and Rick DeVos’s Start Garden in Grand Rapids to increase collaboration and cross-pollination.

“We know if we connect these places, we have the chance to build a solid network,” Malcoun said. “It’s actually a terrible idea to tie up a bunch of our capital in a real estate deal, but we’re doing it because we have to -- there’s no billionaire wanting to do cool things in Ann Arbor -- and you can’t build great companies without a great community to support them.”

Ufer, for one, is a fan of Coolhouse and all it might do to enrich Ann Arbor’s startup ecosystem.

“I think it’s a wonderful project,” he said. “We’re big supporters of their efforts, even though we’re not involved financially. It’s a very neat thing to buy much-needed space that young companies can afford, and where they can scale.”

This article originally appeared in Xconomy.
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