Welcome to the Year of the Gazelle, an exploration of the fastest-growing startups in southeast Michigan by the Startup team and the New Economy Initiative for Southeast Michigan (NEI). Not only will we identify the local gazelle companies that are perfecting innovative new products, creating jobs, and generating lots of revenue, we will give you a full accounting of each one. The stories behind the entrepreneurs that build these businesses. The investors that back them. The resources they leverage. How they have all worked together to build Metro Detroit's new economy, and how they plan to do it in the future. In return we will only ask you to do one thing: keep up.
There is a common saying that most overnight startup successes were several long years in the making. Joe Hessling knows about those long years.
He launched 365 Retail Markets in 2008 with the idea of leveraging RFID (Radio Frequency Identification) technology in the vending machine industry. That evolved over the next couple of years into its current MicroMarket Technology, which features coolers filled with drinks, sandwiches and snacks next to a self-checkout kiosk. All of it is primarily based on the honor system so it's open 24/7, accessible to anyone in the building, and convenient to its patrons. Check out a video of it here.
By 2011, 365 Retail Markets had nearly 90 units in the field and about $1 million in revenue. It was a hard road just to get that far and Hessling knew if he wanted his company out of that rut he needed seed capital, and a lot of it. Hessling scored $1 million in a seed round in 2012. That extra cash and the launch of 365 Retail Markets' second generation self-checkout kiosk, which won the National Automatic Merchandising Association innovation award, allowed the company to take a big step forward. It was producing 40 units a month by the end of 2012 and clocking $5 million in revenue.
"It really ramped up after that," Hessling says. "Once you really have money you can act on things you want to do. It was the lack of money that was holding us back from doing the things we wanted to do."
That growth allowed Hessling and his team to think about big-picture issues. A more strategic mindset freed them to scale the company faster, instead of putting out fire after fire in the paycheck-to-paycheck lifestyle of running a business.
"Before that we were thinking more tactically," Hessling says.
365 Retail Markets sells about 200 units a month today, and has close to 3,000 units in the field now. The company clocked more than $15 million in revenue last year. It employs 70 people after hiring 20 in 2014 and another eight so far this year. Making that possible was a $1 million Series A round in 2013.
"That's when we started to need additional cash," Hessling says. "That helped us beef up our workforce and round out our team."
The Series A was led by Plymouth Ventures, the Ann Arbor-based venture capital firm that scored a big exit a couple years ago when Accuri Cytometers was acquired for $205 million. It came with the guidance of Jeff Barry, a partner with Plymouth Ventures.
"He helped me learn what investors wanted and guided me through the process," Hessling says.
Hessling has since done some mentoring of his own. He helped guide a vending machine tech startup,AirVend, from early phases to investment to exit. 365 Retail Markets acquired it earlier this year and now uses its offices as its Utah office.
Today the big challenge for 365 Retail Markets is finding enough people to keep up with its growth curve. The company always has a handful of positions open and technical talent is consistently in demand. It's a challenge Hessling enjoys tackling.
"It's easy to sit back and say, 'Congratulations. You made it,'" Hessling says. "That's the difference between a lifestyle company and one that wants to grow."
Written by Jon Zemke. This story originally appeared in SEMichiganStartup here.