Smooth sailing, then controversy

Ethical questions shine on U students’ start-up. They say ‘that’s business.’
By
July 13, 2011

While his classmates saw the sandbox and swing sets of his third-grade playground as a chance to let loose, Maxwell Arndt saw the location of his first business venture.

When most stores in his area had sold out of Warheads, the sour, hard candy, he took it upon himself to find the only place that still had a supply — a car wash.

With help from his first investor, his mother, he purchased their entire stock and sold them to friends during recess.

“I guess I’ve always had a little bit of business savvy in me,” he said.

Years later, his entrepreneurial spirit carried over into his latest start-up: The Toepener. With the success of his new company, Arndt found his phone ringing with product orders and interview requests. Then, just this month, the attention turned sour.

As part of an entrepreneurship class at the University of Minnesota Carlson School of Management, Arndt designed the Toepener, a gadget that allows people to open doors with their feet rather than touching handles, therefore reducing contact with germs and paper towel waste.

The Toepener was financed with a $15,000 start-up loan through the class. It started to sell units and began to attract attention.

Initially all positive, recent press coverage has called into question whether Arndt and his classmates acted unethically in researching for their business plan. Some called it chopping the competition, but Arndt says “it’s just business.”

On July 7, Arndt sat with his business partner and fellow University graduate Andrew Oppeneer in the Carlson Business Hatchery and discussed the development of their company.

Arndt, a self-professed germaphobe, said he came up with the idea for the Toepener in the middle of the night last fall.

He presented his idea to his class Sept. 23, 2010, and began to “scout out” the competition. Later that week he said he ran a Google search to assure he had an original idea.

He didn’t.

Arndt contacted a leading company in Missouri with a similar product, StepNpull, to research the market. At least two other companies also sold a hands-free door-opening device at that time.

None of the companies have patents on their products.

Arndt purchased a StepNpull on Sept. 27, 2010, according to receipts. He contacted StepNpull President Mike Sewell for a phone interview soon after.

Both men said they shared a “light-hearted conversation” about the StepNpull’s development. Today, Sewell admits he “probably shared more than he should have.”

On Oct. 4, 2010, Arndt sent an email to Sewell expressing interest in licensing StepNpull for his class. By this time, the class had narrowed hundreds of sticky notes down to just two finalists — one of which was the Toepener.

Arndt said he never received a reply on his licensing request, and began developing a series of different prototypes. The 12-person group finalized Toepener’s “L”-shaped design and they began marketing for the startup.

Now their company is StepNpull’s competition.

Though Arndt said he was honest from the beginning about his intentions, StepNpull co-founder Ron Ely  calls Arndt’s actions plagiarism and said the entrepreneurs misrepresented themselves and “played up” their status as college students from the very beginning.

Arndt said Toepener’s only ethical indiscretion occurred in December, when a member of the group contacted Ely under a false identity to obtain information.

“The spirit was not ‘I’m doing research to develop a product competitively with you,’” Ely said. “If they had said that, we probably wouldn’t have given them the time of day.”

Still running

After the false-identity incident, StepNpull contacted the University.

“It was very serious,” Oppeneer said. “We talked about it extensively in class, and had to meet with the dean.”

The dean, Alison Davis-Blake, and the student, who asked for information under the pretense of being the son of a restaurant owner, wrote letters of apology to StepNpull. Arndt called it a valuable lesson in business ethics.

Sewell later emailed Davis-Blake, saying he admired the school’s handling of the situation. The conflict seemed to be over.

But Toepener is still running and selling its product, and both Sewell and Ely are upset.

“[Carlson] had the opportunity to shut this thing down as soon as they knew this stuff was going on,” Ely said. “I won’t be sending my kid there.”

Arndt and Oppeneer maintain that, outside of their classmate who purposely misled Ely, they’ve done nothing wrong.

“It sounds bad to say this, but competition drives capitalism,” Arndt said, pointing out the array of brands for similar products. “In business, if you can make a product better, why not do it?”

‘That’s business.’

Oppeneer and Arndt graduated together at the end of the spring semester.

While the rest of the Toepener team moved on to full-time jobs, the pair decided to take the attention Toepener had received and run with the product.

They have sold more than 300 units, and are aiming to sell enough to pay back the loan they received from their entrepreneurship professor and take full ownership of the company, which they named Forge LLC .

Everything was looking up in May, they said. Several media outlets contacted Arndt for interviews after he was selected as a finalist in the Minnesota Cup, a statewide entrepreneurship competition.

But on July 3, the media attention turned negative after the Star Tribune published an article questioning their tactics with StepNpull.

“I couldn’t believe it,” Arndt said. “I thought that was all behind us.”

Arndt stands by the fact that he thought of the idea on his own, but added that a business is about more than ideas.

“Nobody ever got rich off an idea,” he said. “It’s how you execute it. That’s business.”

Lessons learned

Arndt and Oppeneer say they’ve executed their business well. Sewell and Ely from StepNpull admit that Toepener’s marketing — a series of clever slogans, logos and videos — has worked.

All four businessmen said the scuffle boils down to a dispute in the difference between business ethics and real-world ethics.

And that’s where the agreements between the two companies end.

“The business world is not really a nice place,” Sewell said. “Stuff like this happens all the time. But it’s the responsibility of colleges to make sure it doesn’t.”

Neither Sewell nor Ely went to business school, which they say may be the difference between the two groups.

“We didn’t have any business classes,” Ely said. “We were raised to shake somebody’s hand and do what you say you’re going to do.”

Oppeneer and Arndt said they plan to move forward with their company and use the lessons they have learned in the future.

Oppeneer, who raps and plays piano on the side, said there are no ill feelings with StepNpull and they hope everybody can move forward.

Sewell said he and Ely will be more cautious when they receive inquiries in the future, but they don’t foresee the incident hindering their future as a company.

“We’re not on a witch hunt. We’re not trying to ruin their lives,” Ely said. “They can do what they want to do.”

Arndt, who said he learned his leadership skills serving as his high school’s student council president, said he would love to separate the real world from the business world in a discussion over his other passion — homebrewed beer.

“It’s been clear, based on this whole thing, that we made mistakes,” Oppeneer said. “If we could do things differently, we definitely would. But all we can do now is learn and grow.”

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