Scale Venture Partners

The Startup Tapes #024

The money seems to find them

Success & Startups outside Silicon Valley

Like most founders, Adam Fish didn’t start his company in Silicon Valley — but he did end up making his way there. We compare startup experiences in the South, Europe, East Coast, and West Coast. Are you at a significant disadvantage in getting funding and finding a path to success if you build outside of Silicon Valley? Or will great founders & great ideas be discovered no matter where they come from?

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Building a Startup in Louisville, Kentucky

Adam Fish, CEO of Roobiq: So that’s really where I got involved and started meeting with a lot of entrepreneurs and just wanted to go try for myself.

Tim Anglade, Executive in Residence at Scale Venture Partners: Right. And so you were just kind of like quote unquote stuck there at the time and you were like, I want to do a startup, I want to do this, and that was where you had to, or you were like all things being considered, did you feel like it’s just as good as any other town?

Adam: Yeah, I mean it had a lot of things going for it, like the mayor of the city was a former entrepreneur, and there was a number of leaders in the city that were promoting it. One guy had moved out from New York City and had kind of created this little ecosystem downtown with coffee shops and stuff, and so you know, there was like a very small but clear startup scene, and I also would put on startup events and stuff, so to some degree I was kind of helping to promote it myself but yeah, I mean it had enough of the roots to get things going, and so

Tim: But eventually you did kind of make your way here.

Adam: Yeah, I mean at the end of the day I think when I look at it, or kind of think about regional ecosystems, you need to connect with the benefits and the capabilities of the area, and you know Louisville, the Midwest, every city has its key aspects that it offers, but software development is definitely not the key area in Kentucky.

Regional Ecosystems

Tim: So there’s a lot to be said about that though, I’ve seen a lot of medical stuff pop up in Boston for example, or biotech in general, I’ve seen considering the amount of talent there that there is in like biology, medical research, you know Genetech is over there, you kind of feel like that’s not necessarily a bad place at all to actually like set up that kind of startup, but a lot of plays, you know software being kind of the chief one of them, it seemed like there’s more resources here around San Francisco to do it.

Adam: Yeah, definitely in like the pure play software stuff, I mean in Louisville, or in Kentucky, there’s young brands, so there’s a lot of fast food stuff, and there are entrepreneurs, like there’s a really cool product called the FreshFry, which is this bag that you put in the oil and it removes all the toxins from the oil so you can keep reusing it, and it’s like, that’s a clear product where you could scale rapidly and it’s similar to software. Because like you could put that in every Taco Bell, and so those are the things where it’s like, if you match with the area, you can still have the scale that people are attracted to here for software.

Funding

Tim: So what about just let’s say you have some random idea and you’re looking for somewhere cheaper than San Francisco or your stock’s somewhere other than San Francisco, what would you seek out, what are some of the things you would recommend people kinda look for or try to build or you know try to skip town if wherever they are doesn’t really have that basic infrastructure or networking, what is it people always talk about money, they talk about talent, talk about stuff like that, has that been your experience, that is kind of a prime situation when you’re starting?

People fall back on the crutch of oh, there’s not enough money here — but you would meet very successful entrepreneurs, and the money seems to find them.

Adam: To some degree I think people fall back on the crutch of oh, there’s not enough money here, and I definitely heard a lot that in the Midwest where it’s like, oh we need to build more angel networks, get more people involved, but you would meet very successful entrepreneurs, the money seems to find them. So I don’t really like to kinda say that’s a crutch, I mean, yes it’s true, Silicon Valley has so much excess funds that crazier ideas kind of

Tim: Do you feel like something that, you know it’s very, very true that something that would never get funded outside, it’s Silicon Valley is easier to get funded in Silicon Valley, or do you feel like if you have a bad idea, you have a bad idea, it’s not gonna get funded anywhere.

Adam: No I think you can get bad ideas funded more easily here, just you know kind of the boom cycle, but over time bad ideas are bad ideas, so I think it kind of evens out. In my mind though, I look at the challenge of finding access to that capital, it seems like in the Midwest or other areas, like the business plan, the numbers seem to kind of play the story stronger than maybe out here, the pitch and relationships do.

Tim: Yeah, it makes sense, and then I guess here it’s more of an opposite thing, where it’s not like false positives, it’s also the false negatives you would get, if you’re out in the middle of the country where people don’t recognize the potential of your idea, or are too kind of, they’re a bit leery of going into a big player, making a big bet on something, whereas you know it might be easier to get those kind of plays funded here, right, that’s more what it’s like. So what else, you know we talk customer, we talked money, what about stuff like talent, ecosystem, you know, competition, stuff like that, do you feel like that was kind of very good or missing in your experience of building something in Kentucky, or

Talent

Adam: Yeah I mean to some degree the talent was more of a struggle to find.

Tim: But people build distributed now, right?

I would meet people in Kentucky that I just never would have thought were there

Adam: Yeah, I mean that’s the thing, you can balance that out. The one thing that is kind of cool about any of these towns is that there’s more of a civic connection to making small business work and stuff, I don’t know, it’s the underdog story, and so you can I think connect with more people in different areas, partly ‘cause it’s just smaller but also because I think there’s just more commonality to make it succeed, and so that has ways of finding interesting talent that would constantly surprise me and I would meet people in Kentucky that I just never would have thought were there, you know through the university or through relationships, and so it’s definitely there, it’s just you gotta do a little bit more effort to find it.

Tim: So the other one I’ve mentioned as kind of missing from a lot of places that have capital, that have talent, you know that have customers, places like London for example that’s kind of an often example of why isn’t there a bigger startup scene in London, and the argument I’ve heard is that it’s lacking that competition, even if there is startups they’re kind of like, there’s only one startup doing one thing, and there isn’t somebody that you can kind of be like, oh I really want to get those guys or stealing plays from or steal ideas from there isn’t that kind of energy. Do you feel like that’s something that was actually missing, or was actually pretty good?

Adam: Um, I don’t know, yeah I don’t know if the competition

Tim: Did you see yourself kind of like on a national level already, you know right away?

Adam: Yeah, I think so, I mean when you start to have to recruit distributive teams, I think naturally you’re already thinking kind of national, and we had early customers that were on the coasts and stuff.

The Drive of Local Competitors

Back home, people always look for national competitors, you never think of yourself as, “I’m doing LinkedIn for France, so I’m competing against LinkedIn”, you think “oh I hope there isn’t another LinkedIn for France” coming out

Tim: If you could identify I guess with those competitors I guess it’s something coming from Europe which is kind of really weird now that I think about it out loud is, you kind of always look for national competitors, you never think of yourself of like oh, I’m doing LinkedIn for France, so I’m competing against LinkedIn, you always think of like oh I hope there isn’t another LinkedIn for France coming out, but you’re right, it’s maybe just a weird European thing that’s happening, that most American startups wherever they’re based out of in the US think already about the national market or the global market even.

Adam: Yeah, I mean in Kentucky one of the other Louisville other fairly successful software startups there that got started when I was there is a enterprise mobile messaging platform.

Tim: Okay so close enough to what you were doing with Roobiq.

Adam: Yeah, I mean, and I’m sure they consider Slack, you know, obviously a competitor, but they have their niche in the market and so they have been able to kind of take advantage of the local companies and stuff and kind of own that.

Tim: But it didn’t kind of, you didn’t have this kind of pressure to emulate them or to take inspiration from them, or compete with them for talent or anything of the sort.

Adam: Definitely, definitely did, I mean that’s I think

Tim: It’s a bit of a driver, right?

Adam: Yeah it’s definitely a benefit of like when there are overlapping companies that talent just coalesces and it is harder unless you’ve got something feeding it.

Silicon Valley just goes Faster

One of the things that shocked me coming over from Boston was just the pace: it seems like stuff goes a lot, lot faster. It’s just more frenetic.

Tim: And so what’s kind of the biggest changes I guess, one of the things that shocked me coming over from Boston to here, same as coming from Europe to here, was just the pace, it seems like stuff goes a lot, lot faster, did you have a similar experience, where like, it’s hard to describe even, ‘cause people are like what do you mean, you do longer hours, I’m like no, it’s just kind of more frenetic, it’s just this weird kind of yeah, thing, it seems like things do go a lot faster here, right?

Adam: Yeah, it definitely is, I mean there’s definitely a benefit to being a little bit more detached in terms of the focus you can have, but you can also get lulled into just a slower pace. I mean here, it’s even it’s not just direct competition, that drives it, having competitors at your doorstep, but I think it’s just seeing other companies and friends that are out there pushing the limits on whatever they’re doing in totally different category, and that seems to create this faster pace.

Tim: Yeah, maybe that’s really the root, right, it’s not necessarily competition per se, but more that emulation and that pace, right that the Valley’s really good at driving for whatever reason, ‘cause you know, I go to like, it’s not California ‘cause I go to places like L.A. and it’s not as fast-moving, you know for better or worse I’m not saying that fast-moving is the absolute thing you should aspire to but it’s pretty intrinsic I think as to how our startups are done here, right. What else kind of shocked you, so you’re kind of you’re in AngelPad, you’re plugged in, what are some of the biggest changes between what you were doing before and doing that here?

That faster pace limits how much you can get involved civically. That was one of the benefits I see that all over the country that there’s a little bit more engagement from the business sector locally, civically

Adam: I think the other major change is because of that faster pace is that it kind of limits you in how much you can get involved more civically, and so that’s definitely seems to be one of the disadvantages, I mean you could argue everything else you do could be distracting to the startup at hand, but that was one of the benefits I liked, you know and I see that all over the country that there’s a little bit more engagement from the business sector locally, civically.

Tim: Yeah here it kind of feels like the startup pool in many ways kind of lives like sur-imposed with the real city underneath, what I call the real city, the actual city underneath. It doesn’t feel that tied into a lot of culture, I mean it’s funny ‘cause you go to like coffee shop and they’re like just down the block, but that’s not really like actual involvement in the city in the way that those places can really be part of the ecosystem. I remember, yeah, in much smaller markets like Boston or Paris or London, this was much more intertwined with their economic policy, with politics, with job creation, in a way here it kind of feels very disconnected, right, and it feels like people do their own company and that’s kinda it, right, they don’t really interact much with the rest of the ecosystem.

Adam: Yeah, and I mean it’s kinda designed that way, with all these perks and stuff, and like you know, lunches

Tim: To keep you productive, yeah.

Networking

Adam: Yeah, I mean, you know it’s like it’s funny, it’s like everyone is in the one place, but the actual direct mixing that happens day to day is a lot more limited than it could be, because of these kind of silos that have formed.

Tim: Yeah, it’s kinda crazy, it’s its own kind of sur-imposed network but you don’t really have a lot of chance meetings, like the new meetings, you’re gonna run into someone you know on the street, or at a restaurant or whatever, but have you met fellow entrepreneurs or investors like just randomly at a coffee shop, have you struck up a conversation? I feel like that doesn’t happen in the way that it happened in some of the smaller markets.

Adam: Yeah I mean it definitely has, I mean I’ve run into people at gyms and all that stuff

Tim: Okay, so maybe I’m just bad at networking

Adam: I mean it isn’t active, but you put enough people in the same place, I mean it’s bound

Tim: But them famously I once walked past Paul Graham and like everybody that I was talking to was like no, no, like we’ve gotta say hi, and I was like, what’s happening, and apparently he just like, so I’m really that bad at recognizing people and networking, so maybe it’s just me. No that makes sense, so if you had to do it again, having some contacts now and having the experience you do, would you go and set up a company somewhere else because you know it’s cheaper and more involved, and it’s not that bad from a talent standpoint, or would you like absolutely come and do it here?

Adam: No I mean I think there are trade-offs and if the company had the right fit with the regional ecosystem, the talent, and everything that was there and it kind of made sense, like there was a clear way that this company would scale where it’s at, I would definitely do it.

You Can Find Big Customers from Anywhere

Tim: Right, you’ve just got to figure out the right location for your industry, I guess. I mean it’s interesting you say that, I mean I think I could see how it works, but that’s been kind of the economic development plan for much of Europe where they have those kind of competitive zones they call them, you know where they like, well this area is a lot of like car manufacturers, so that like why don’t we create some car startups here and we have some laboratories for work on research on cars, and it hasn’t really worked that well as far as I can tell, I mean definitely on the job creation standpoint, that’s real job creation, it seems to be okay, but how much of it is from actual startups innovating and creating jobs, it’s a bit more murky, but it doesn’t really seem to work that well as the example that you’re mentioning about you know, if you’re doing stuff about fast food you know, might as well go into a place that has a lot of fast food companies, but that might be more specific to the way business is done in the US, right, it does seem like it’s much more likely that the a startup you can get a contract from even a large company, whereas in most other countries, we were talking with the previous guest about China, you know there’s much more built on relationship. In Europe, same thing, you need to have a certain pedigree to be able to be a vendor for a very, very large company, but maybe it is more accessible right, to create your startup in a smaller market in the US, because doing business is much more like a schmooze, right, much more approachable I guess in those markets, so that’s an interesting one.

ExactTarget was in Indianapolis, a billion dollar company.

Adam: Yeah, I mean it’s possible, like it’s possible for any idea to really work, I mean at the end of the day I kind of look at it as like, you’ve got to have hard work, luck and relationships, so in the right ecosystem you can kind of push those in your favor, but at the end of the day you’ve gotta have that mix, and it can be found anywhere. I think from a software perspective, I definitely see enterprise software being able to be a lot more distributed, because at the end of the day, if every company, whatever they’re doing, they’re running software now, that I think, you know you can find your early customers, you’re probably not pushing the boundaries of computer science in what you’re building, you’re driving business process, and so that works, I mean ExactTarget was in Indianapolis, a billion dollar company.

As long as the VCs get the money I don’t think they care if you’re headquartered, necessarily if you’re headquartered in Seattle versus San Francisco or just somewhere else at this point.

Tim: There’s a few right, like Denver has a good string of enterprisey startups, you know between Boulder and Denver proper, yeah you’re right, I think enterprise software is trying to distribute a bit ‘cause there isn’t that focus on engineering resources and sales talent now is pretty distributed, and those are usually the two core things that seems to be in short supply, right to build companies, and investors I think are really warming up to like decentralizing a lot of that stuff away from Silicon Valley, since you know the prices have been getting so high here, so that makes sense. Yeah it is changing, it is changing, I wonder, well actually everybody’s trying to make their own Silicon Beach, like in L.A. Silicon whatever, I wonder if that we’ll actually get to see that happen in the next 10 years, ‘cause it does seem like now it’s not just a bunch of smaller cities or smaller startup cities clawing at Silicon Valley, there’s also Silicon Valley saying like, you know we don’t want to have every company here, we don’t want to have all the people and all the deals and all the ideas happening all in this one place, you know, as long as the VCs get the money I don’t think they care if you’re headquartered, necessarily if you’re headquartered in Seattle versus San Francisco or just somewhere else at this point.

Looking at the cities in the US, I get a little sceptical when I hear let’s make our Silicon X, just ‘cause you really can’t reproduce it.

Adam: Yeah I definitely, I mean internationally bullish around Israel and China and you know, ‘cause a lot of military, science, engineering work happens there, and that just feeds a lot of the talent that can go into the companies and I mean China, it’s just kind of limitless when you look at it, so yeah, definitely quite bullish on those, but looking at the cities in the US, I get a little sceptical when I hear let’s make our Silicon X, just ‘cause you really can’t reproduce it, yeah.

BBQ

Tim: Right, what’s the name for Louisville, like what’ Silicon for Louisville, did you have one?

Adam: No, didn’t have

Tim: You should make one Silicon Barbecue, or something

Adam: That would be very controversial

Tim: Oh really? Oh I see, I see, okay, I’m stepping into

Adam: You know, are you Texas,

Tim: Oh, I see, I see. You could claim it first, you know, that’s how it works!

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The Startup Tapes chronicle the highs & lows of building a startup, through candid, immersive interviews with founders, operators & advisors. Tim Anglade, an Executive-in-Residence at Scale Venture Partners and formerly with Realm, Apigee, and Cloudant leads the project with the goal to de-mystify the process through which startups emerge, grow & succeed. His unfiltered interviews transcribe the conversations we often hear in the boardroom, amongst our portfolio community and with entrepreneurs and partners we engage with every day.

Learn more about Scale Venture Partners at scalevp.com.

For guests suggestions, feedback or questions, email tim@scalevp.com
© Scale Venture Partners 2016, all rights reserved.