Moreover, the risk-averse Haines was a perfect foil for the aggressive Nichols. "I told George I had a drawer full of ideas and that if he wanted to take the time to do market research to find out which ones were more viable, that maybe we could do something together," he says. Nichols, in the meantime, would continue with his consulting business. "It was such a radical change from anything I had ever done before," admits Haines. And that's exactly, as Nichols had suspected, what was appealing to Haines.
For the next two years Haines drew down his bank account, and his family's patience, fiddling full-time with Nichols's ideas and eventually zeroing in on the plastic septic chamber as the most promising. If engineered correctly, the product would replace cumbersome stone-and-pipe leach fields with lightweight but high-strength polymer chambers, making it easier and faster for contractors to perform installations. Census data revealed that the market was potentially enormous.
But there lurked a major obstacle: the product would require state regulatory approval. "In the regulatory community, risk and reward mean nothing," explains Haines. "If regulators say no, they avoid trouble. We found that the way to work with them is to establish a rapport." As it happened, Nichols and Haines did much more than that. They formed--of course--a relationship.
Randy May, at the time the principal sanitary engineer at the Connecticut State Department of Environmental Protection, recalls being unimpressed when Haines first approached him about the possibility of securing regulatory approval. "I told them I had been working on ideas like that for a long time," says May. But after that initial three-hour meeting in 1985, May realized that Haines and Nichols brought a critical element to the equation: they had the engineering expertise and the business acumen he lacked. Haines and Nichols saw that May was an expert in the field, and he could explain the science of septic systems in a way that was both comprehensive and engaging.
Nichols and Haines could turn May's musings into reality; May could give Nichols and Haines instant credibility with other state regulators. There was only one thing to do: join forces. "Randy had the knowledge of the science, the technology, and the market that we didn't," says Nichols. The upshot? The duo offered May a 6% equity stake to join them, a proposal that he accepted after changing jobs to avoid a conflict of interest.
PERSUADING REGULATORS
Winning Them Over with Patience
The regulatory community would dismiss them entirely if their technical knowledge wasn't absolutely solid, May told Haines and Nichols. And so he schooled them, helping Haines gather and study reams of technical papers to support the prototype product.
Early in 1986 May met with East Coast state regulators, undeterred by their initial misgivings. "Even if they were unwilling to do what I wanted to do with the chamber, we'd continue to talk," he says. "I'd talk to them about their problems that had nothing to do with our product, try to help them out, convince them I was knowledgeable."
His presence as an advance man got regulators talking to one another, which kept the fledgling Infiltrator Systems on their radar screens. It was a slow process and one that required tremendous patience; sometimes May would return to meet with regulators several times, building relationships that gave him, and hence the product, credibility. The result? The Infiltrator received regulatory approval in Connecticut and Maine.
It's an approach Infiltrator Systems still uses. "The regulatory people know we're there to sell a product, but we don't sell right away," says Roy Moore, Infiltrator Systems' vice-president of manufacturing and national sales manager. "We try to find out what makes the program in their area tick, what their beliefs are about how septic systems work, what their problems are."
Infiltrator Systems' salespeople are trained to exercise the same type of patience. Each new employee receives one-on-one training from May, spends time in the field watching installations, travels with more experienced salespeople, and visits regulators. "We don't expect them to be effective for six months to a year," says Moore. "It's a big investment." It pays off. Infiltrator Systems' salespeople gain the kind of technical knowledge they need not only to sell products to customers but also to maintain relationships with regulators--relationships that Nichols believes will smooth the way for the introduction of new products and create a barrier of entry to competition.
GETTING MONEY
Finding Investors Who 'Understand Septic'
Nichols, Haines, and May made some early attempts to interest bankers, venture capitalists, and a potential joint-venture partner in their idea, but trying to sell septic products to the uninitiated was, well, a waste. Then Nichols, recalling the casual remark Sid Holbrook had made seven years earlier about raising money, figured out the problem: what they needed were investors who "understand septic."
So Nichols, Haines, and May devised a plan to sell seven $50,000 shares--an amount small enough to interest individuals but large enough to promise significant returns if the business panned out. The $350,000 would pay for the building of their first mold and cover expenses. Holbrook agreed to split a share with his sister, and to put Nichols, Haines, and May in touch with 2 other potential investors in the septic industry and one private investor. May brought in another investor, and Nichols took the offer to his friend Peter Matthews, an investor in a mushroom-growing business. By November 1986 Nichols and Haines had made their pitch to 11 potential local investors, about half of whom had hands-on knowledge of the septic industry. The other half were doctors, lawyers, and businesspeople willing to take a flier on the prospect of potentially huge returns.
