Madison equipped to become a startup city

Startup scene continues to blossom
Madison equipped to become a startup city

In case you haven’t noticed, a startup scene is surging all across Madison. Ideas are taking shape at coffee shops and on campuses, in coworking spaces and accelerators. Emerging new companies and academic spinoffs are launching products and services. They’re attracting consumers and clients and finding and growing resources to give their dreams a go. If local entrepreneurs and civic and business leaders capitalize on the city’s size, location and unique culture–and make inclusivity a priority–Madison has all the makings of becoming a startup city.

If you’re looking for evidence that your mother’s or father’s Madison, Wisconsin (think hippie college town, good local food, great protests), has become a bonafide startup city, you have to talk to a lot of people experimenting in this emerging space. There weren’t many startups a mere five years ago, or even three, but that’s not the case anymore. That’s a very good turnabout because startup density is a leading indicator of what’s known as an “entrepreneurial ecosystem.”

The evidence gathered is now crystal clear: Communities that notice and nurture emerging businesses will be the best places to live, work and play well into the future. What that means is whether you are in Wisconsin or California, Madison or Manhattan, such an ecosystem can be fertile ground for a variety of entrepreneurs, from software developers and brewpub owners to insurance agents and cancer drug researchers. Despite the perception of Madison as a domain of the public sector, the reality is quite the opposite. Between eighty and ninety percent of the job growth here is happening in the private sector, according to the U.S. Bureau of Labor Statistics. “It’s an important phenomenon,” says Dan Kennelly, economic development specialist for the city of Madison. “We are almost carrying the state on our shoulders.” And those companies that start small could one day be the next Oscar Mayer, American Girl or Epic but will sport new-age names like Murfie, ConfPlus and adorable.io–just three local brands in the local startup marketplace.

But there’s a catch. Greater Madison Chamber of Commerce president Zach Brandon says that “we, as a community” must support and sustain these emerging businesses, and must “create a culture that’s not afraid to fail and is open to creative ideas and fosters and celebrates innovation.”

A former entrepreneur, city alderman and deputy secretary of the Wisconsin Department of Commerce, Brandon talks about smart public policy that “smooths the glide path to make it easier to do business here.” He talks about growing Madison’s appetite for “buying local” by embracing locally owned businesses that are both virtual and bricks and mortar, both local and global, both cheeseburger and medical device. He’s also bullish on educating people to think about the current and next economies as an integrated whole, and about how to accept the reality that some businesses will succeed while others will fail. That’s how it’s always been. If it’s a good idea with real potential, Brandon says to get behind it. Root for the home team.

“How do we get that same emotion, that visceral reaction to these startups and emerging companies that we get to Ale Asylum?” asks Brandon, referring to the successful north-side business that opened as a small microbrewery in 2006 and is now one of the top craft breweries in the state. “That was done not because investors from Silicon Valley came in or because people in Vegas discovered their beer. It was because our community wrapped itself around a great product and was proud of it and supported it.”

Brandon’s worldview echoes that of entrepreneur and venture capitalist Brad Feld, author of Startup Communities: Building an Entrepreneurial Ecosystem in Your City. Feld developed what’s known as the “Boulder Thesis”–Boulder, Colorado, being the breeding ground and birthplace of his ideas. The entrepreneur, Feld posits, must lead startup communities. That’s the first of four arguments in his thesis. As you might expect in Madison, the entrepreneurial growth has in large part taken root organically.Madison equipped to become a startup city

The drawing board

Five years ago, branding and design freelancer Eric Oakland produced an education video for a client that turned out to be his company TruScribe’s first real customer.

“Like any entrepreneur, you say, ‘Yes, I can do that,'” says Oakland, seated in his Fitchburg headquarters, where he now employs twenty people, plus another five in Minnesota. “And then you do everything you can to find out how to do it.”

“It” turned out to be whiteboard graphic illustration and animation. Now a global marketplace phenomenon, back then there were only a handful of companies doing it.

“One of the first advantages we had in the space was being the most visible and the most responsive,” says Oakland, whose savvy online presence and good customer service gave them their edge.

That competitive advantage, though, would soon be tested when commercial marketers discovered the product and whiteboard videos became one of the hottest advertising trends around. But like any innovative entrepreneur, Oakland pivoted, creating a signature style of graphic animation he trademarked “scribology,” and introduced a new product into the marketplace.

Oakland’s client roster includes Microsoft, Hewlett Packard, NASA and other Fortune 500 companies and “the first gene sequencer that could map the human genome in twenty-four hours.” Among his more noteworthy clients is “Weird Al” Yankovic, a successful entrepreneur in his own right. Oakland recalls a conversation when Yankovic hired TruScribe to produce the music video for his song “Mission Statement,” a parody on corporate doublespeak.

“I asked him, ‘Why did you pick us?'” says Oakland. “And he said, ‘I looked around and you guys epitomized the style.’ Plus, we had more video out there than others to create more touch points. And simple, approachable imagery that just feels comfortable.”

But despite these kinds of local success stories, which start to feel ubiquitous the deeper you immerse yourself into the entrepreneurial ecosystem, status reports like the 2015 “Kaufmann Index: Startup Activity,” which ranks Wisconsin’s startup growth dead last in the nation, suggest a different, if not dismal, picture. Reading the headlines, some people might think twice about starting, investing in or supporting more startup activity, which brings us to the second argument in Feld’s thesis: Entrepreneurial leaders must have a long-term commitment. Oakland’s business is humming along, but because TruScribe is global it’s becoming increasingly clear that his workforce should reflect that diversity as well.

Poor rankings notwithstanding, the talent and diversity quotient can go both ways: Madison’s smaller footprint is beginning to give it a more favorable reputation as an asset versus a liability, especially in the quality-of-life category. More companies are recruiting top talent who like shorter commutes and cheaper housing, and the gospel is spreading about Madison’s farmers’ markets, plethora of parks and bike trails, quality health care and friendly Midwestern vibe.

University of Wisconsin-Madison alumnus Matt Ford, who graduated in 2011 and studied entrepreneurship, cofounded his second company in Madison. His business created the app for Make Music Madison, the daylong community summer solstice extravaganza that’s now the second-largest event of its kind in the nation behind New York City. Now he’s in Austin, Texas, as cofounder and CEO of Solstice, a music-promotion company building proprietary, scalable software for the music industry. Being in a musical ground zero like Austin has been good for business. Even so, says Ford, he met his cofounder as well as his first angel investor back in Madison.

“It’s a small city, which means there’s not a crazy amount of resources, but there’s enough if everybody works together to empower people with good ideas and some skills for being entrepreneurs to keep doing their thing,” says Ford. “That’s really going to make all the difference; it’s made all the difference to me.”Madison equipped to become a startup city

Size matters

Ford’s not the only one who waxes nostalgic about Madison as a special place where people listen to your ideas and then go out of their way to help you succeed. San Francisco resident Dale Emmons remembers being nervous the first time he ever pitched his idea to create a platform for real-time editing, sharing and management of videos to a roomful of people during a 2011 Capital Entrepreneurs’ pitch contest. Three years later, he sold Vidmaker to YouTube for an undisclosed amount. Emmons, who left to pursue the business before completing a UW-Madison degree in computer science, says Madison was his launching pad. But Emmons did feel he had to move to grow and eventually sell his business. He went on to complete the prestigious TechStars accelerator in San Antonio, Texas, finding the technical resources and financial investments he and his team needed at the time. Lack of access to capital has been a point of contention in the Madison and Wisconsin startup community for years.

Matt Younkle, CEO of the cloud storing and streaming music startup Murfie, says he’s had pretty good luck here. But he has found that once you get past angel and early-stage funding, most of the action for a business like his that’s seeking larger venture capital investments, strategic partnerships or acquisition is happening on the coasts.

“You kind of have to suck it up and get on a plane now and then to fill the gap,” says Younkle, who also attended a TechStars program in Boston in 2012.Madison equipped to become a startup city

Midwestern edge

SOLOMO Technology CEO Liz Eversoll is no stranger to travel, pitching her location-based technology as “the holy grail for digital marketing” to investors from coast to coast. Eversoll is fifty and female, and also no stranger to the experience of being the only woman competing in a pitch competition. This relates to tenet number three in Feld’s Boulder Thesis: “The startup community must be inclusive of anyone who wants to participate in it.”

Last September, her pitch to AOL founder and startup evangelist Steve Case pitted her against eight other Madison companies as part of “The Rise of the Rest,” Case’s road tour to spotlight fledgling startup cities region by region across the country. Eversoll won, picking up a $100,000 investment and advancing to the $150,000 round at South by Southwest Interactive in March in Austin. By then, her pitch was near perfect, and she gave her all-male competitors another run for their money, delivering her value proposition and marketing strategy–even her decision to be in Madison–with calm, cool confidence and conviction.

“It’s important for us to be in Madison, where a Midwestern work ethic is a competitive advantage,” Eversoll matter-of-factly told the crowd full of spectators and judges. While Case praised her on a “great presentation and a great pitch for Madison,” his vote went elsewhere, and Eversoll came home empty-handed.

Down but not out, Eversoll returned to Madison to focus on SOLOMO and to open the second location of a startup accelerator called Capital Factory, a successful Austin-based venture, with its founder, Josh Baer, and partner Patrick Vogt. She also serves as chairman of the board of the Doyenne Group, which champions women and entrepreneurship in Madison and Wisconsin–a city and state where female-led startup ventures lag behind their male counterparts despite the research showing that businesses owned and led by women outperform those of their male peers.Madison equipped to become a startup city

Courting inclusion

The good news, though, is that Madison’s startup community is aware of and acknowledges its own struggle with diversity. More important, not only are its leaders, both male and female, talking about it more openly and freely than ever, but many of them are acting on solutions. In 2010, Murfie’s Younkle cofounded Forward Festival, a startup in its own right that is evolving into a great example of welcoming business innovation by anyone in any type of business. Last year, attendance was up twenty percent from the year before.

This year’s festival, August 20-27, is accelerating the theme of inclusiveness. Scheduled events accommodate working families and busy summer schedules. Organizers added a “Parentpreneur” seminar to address life-work balance and offer childcare at the Badger Startup Summit. In addition, for the second year in a row, the Doyenne Group’s 5x5x5 pitch competition (five businesses, five pitches, five thousand dollars) will take place during Forward Fest.

Capital Entrepreneurs, another Forward Fest organizer founded in 2009, has recently shifted its popular meet-up times to earlier on weeknights to attract a larger and more diverse crowd. Now boasting a membership of more than three hundred businesses, Capital Entrepreneurs is widely considered a catalyst in the half-decade uptick in startup activity in Madison, especially downtown. Its launch was fueled by a five-year, $3 million grant from the Kauffman Foundation, the philanthropic heavyweight that focuses on education and entrepreneurship. That infusion rapidly increased entrepreneurial activity across a variety of UW-Madison disciplines, including law, business, computer science and engineering. And instead of moving to other startup hotbeds after graduation, budding entrepreneurs began strengthening the innovation pipeline from campus to community.

Badger alums include Capital Entrepreneurs’ president Forrest Woolworth, gener8tor startup accelerator cofounder Troy Vosseller (who started his first business, Sconnie Nation apparel, in a dorm room), software entrepreneur Scott Resnick and Chris Meyer of the hackerspace Sector67. Years later, they’re still very tight and connected. They are also very white and male. But they get it, and they’re making a concerted effort to fling the doors wide open to anyone who wants to be part of the startup scene, which will soon have a hub called StartingBlock Madison, where many of these entrepreneurs will relocate. In June, Resnick, who also made an unsuccessful bid for Madison mayor this year, was named StartingBlock’s first executive director. The nonprofit will be located in the 800 block of East Washington Avenue.

The Doyenne Group will also move to StartingBlock, designed to house gener8tor, Sector67, business services offices and coworking spaces. Doyenne leaders and ambassadors are often called upon by local organizers to help plan and strategize to ensure diversity representation. Younkle is a big fan, and he says their presence has made a difference.

“We’re looking at the ecosystem more holistically: What is the lifestyle of the entrepreneur, and what kind of life can you lead in Madison? And that’s where Madison shows us its strengths,” says Younkle.

But that’s not the whole story, Younkle admits. “We can still do a lot better. We want to be more inclusive in terms of gender and ethnicity. While no one actively discriminates, there are just certain biases there. But being aware of the biases–it’s the first step.”

Like other tech entrepreneurs in Madison, Cathy Liu moved here to work at Epic, the healthcare software giant and former startup. In 2012, Liu, a Chinese immigrant with a master’s degree in computer science from the University of Texas-Austin, cofounded ConfPlus, a mobile app platform for event management. While event apps are increasingly prevalent, Liu is targeting the education sector with a customized social platform for attendees, exhibitors and sponsors to get and stay connected beyond the lifetime of a single conference. As an early-stage tech startup, ConfPlus has customers, and the official app was released in early 2013. It would benefit from outside funding known as angel investing, and the company is currently seeking $500,000 in equity capital. So Liu and her cofounders entered the Wisconsin Technology Council’s Governor’s Business Plan Contest, competing for a share of $150,000 in cash and in-kind services. While they made it to the final round, ConfPlus came in second in the business service category. Still, the prestigious program is an investors’ showcase, where finalists often land their first big investment. Either way, Liu is not deterred.

“Even without any funding,” says Liu, “we’ll make a go of it, but it will be slower.”

Three critical steps in the company’s path to the business contest were participating in the year-old Madworks grant-based accelerator program last summer, working alongside other startups in the program’s coworking space at University Research Park and developing strong relationships with a mentor. Those steps might also bring the company closer to making that long-term commitment to Madison that Feld talked about in his Boulder Thesis. Liu has a husband and two young children and talks of “building a life here.” However, she and cofounder Vicky Hu, married with no children, say they feel some pressure as women of color when the typical image of success does not look like them.

“The expectation is different,” says Liu. “If you are a businesswoman, people always want to look at your family–is it happy? That plays a very important role in your success and career.”

While they’re busy strengthening their networks and their product, both Liu and Hu say the satisfaction they get from being entrepreneurs keeps them going despite the hard work and sacrifice.

“We do not view failure as failure; we view failure as experience,” says Hu. “Passion is a tiny fire that you can burn for a long time.”

Keep it going

Passion is to the entrepreneurial ecosystem what hydrogen is to the universe: One simply cannot survive without the other. Survival is also deeply dependent on “continual activities that engage the entire entrepreneurial stack,” according to the fourth and final argument in the Boulder Thesis. In the Madison of 2015, that stack is gaining heft. On any given time of any given day of any given month, the startup scene is alive with activity.

Inside 100state, a social enterprise startup at 30 W. Mifflin St. and just up the street from its State Street birthplace, the joint is jumping. On a recent Monday around six in the evening, the 6,250-square-foot space was buzzing with conversation. A workshop on starting a brewery was just ending while a Lean Startup meeting was just beginning. Make Music Madison organizers were huddled around a table while a coworking group was hard at work at another. A “solopreneur” was tapping on her laptop while the “Paragraph Break” writers group was finessing prose. Founded in 2013 by four white men, 100state has evolved with intention, attempting to engage the entire entrepreneurial stack that Feld prescribes. A membership-based nonprofit, 100state recently added a female Epic expat, Megan Orear, and an African American marketing entrepreneur, Gregory St. Fort, to its leadership team.

One floor below 100state lives yet another beehive of entrepreneurial activity. It’s the home of gener8tor, one of the country’s most successful business accelerators for high-growth, high-potential startups–the venture capital-seeking kind of startup. Three times a year and alternating between Madison and Milwaukee, five companies from Madison and across the country (including one recently in Puerto Rico) receive elite-level coaching and angel and venture capital investing, culminating in a Premiere Night pitch showcase in front of the startup scene’s who’s who, as well as institutional and accredited investors from coast to coast. The whole concept is fresh and invigorating, and it inspires awe to see these fledgling companies flourish.

The invitation-only Premiere Night in May drew a huge crowd and a high-profile keynote speaker, American Family Insurance president Jack Salzwedel. His two-year-old, $50 million venture capital fund American Family Ventures is gener8tor’s flagship sponsor and a significant investor in StartingBlock. Headquartered on Madison’s far east side, AmFam’s VC startup has offices in the new 100Block building on State and West Mifflin streets, which also houses tech-based VC firms 4490 Ventures and HealthX Ventures. So far, Salzwedel told the crowd that night, American Family Ventures has invested in twenty-five home and vehicle automation startups “that will allow us to leapfrog where we’ve been in some kind of internal operation.” Of today’s generation of new businesses, Salzwedel predicted: “They’re going to be the next American Family, the next Epic. I really believe that.”

Also on the evening’s program was Lorrie Keating-Heinemann, former state Department of Financial Institutions cabinet secretary, founder of the Wisconsin Angel Network and vice president at BrightStar Foundation, a unique venture philanthropy fund that makes a $50,000 investment in gener8tor companies based in Wisconsin. It is also the most active early-stage investor in the state. The foundation invests only in Wisconsin companies, and all earnings are reinvested into the nonprofit’s portfolio, now nineteen companies strong–eleven in Madison, and covering both the tech and biotech sectors. “Help us keep the best and brightest here in the state of Wisconsin” was Heinemann’s message that evening.

The swanky event was held at the Barrymore Theatre and opened with a boisterous performance by the UW Badger pep band. Live streaming the evening was Field59, a video tech startup and recent graduate of the Madworks Accelerator with fellow participant ConfPlus. Themes of resilience, risk taking and reward dominated the evening, and it’s not hard to see why: Three-year-old gener8tor’s thirty companies have raised more than $40 million in what’s called “follow-on capital,” a series of financing milestones for companies to scale quickly or secure an acquisition, depending on the founders’ goals. EatStreet, a gener8tor alum and an online restaurant software ordering platform founded in 2010 by UW-Madison grad Matt Howard, employs about 115 people working in hip, cool downtown Madison offices. An evening highlight, Premiere Night emcees and gener8tor cofounders Joe Kirgues and Troy Vosseller received surprise recognition when Wisconsin Alumni Association president Paula Bonner took the stage to honor them with a prestigious “Forty Under 40” award.

Developing change

Coincidentally, a “premiere night” of sorts was taking place on that same warm, spring evening, though miles away from the crowds at the Barrymore but easily as celebratory. Inside the YWCA Empowerment Center near Fish Hatchery Road, YWeb Career Academy, an innovative new computer coding school targeting people of color and women, was honoring its first class of graduates. Nine students out of an original cohort of thirty had just completed a grueling six-month training course–four hours a night, four nights a week from October to May–in website development.

Premiere night for them was more like a job fair, where high school students and graduates ranging in age from seventeen to twenty-five participated in a speed networking meet and greet with representatives from nine local companies–including Hardin Design & Development, American Family, Zendesk and Widen Enterprises, Inc.–for a chance to make a connection that will lead to a formal interview, a paid internship and a path of opportunity for family-supporting and sustaining wages. Jim Remsik, YWeb cofounder and CEO/founder of the website application development company adorable.io, says salaries for qualified web developers start around $30,000 and can grow to the $80,000 range.

YWebCA is so far made possible by YWCA Madison, a Wisconsin Department of Workforce Development grant and a grant from the Madison Community Foundation. Remsik and his partners at adorable.io put up the money for a portion of the expenses, including paying the difference between purchasing thirty MacBook Airs instead of Chromebooks–to provide the students a more common toolset. The people at adorable.io also give their expertise pro bono.

“At the program’s core is showing them what’s possible and building up confidence that they can do this,” says Remsik. “And having a small impact on these marginalized communities by sending home a breadwinner.”

For Remsik and his wife Jen, who merged her events-consulting firm to concentrate on adorable.io and volunteer projects like this one, YWeb is one small contribution they felt they could make to address the racial disparities the city is grappling with as well as the tech world’s own struggles of opportunity for people of color and women. The Remsiks are alarmed by the idea that Madison is becoming the next Silicon Valley, Austin, Boulder or Kansas City, which didn’t start correcting for the problem until it was painfully obvious there was one.

“I would go to conferences in these other cities and meet people and think, ‘These people would love Madison if they come visit,'” says Jim. “As I look back, the people I was talking to, they were people like me. The system is already primed for this to happen, and there has to be significant effort to avoid re-creating the problems that exist in the rest of Madison.”Madison equipped to become a startup city

The equity advantage

But here’s where Madison’s progressive, forward-thinking instincts could kick in, advancing an entrepreneurial ecosystem that distinguishes itself from its startup brethren by realizing the potential for economic prosperity for all. In fact, people like the Chamber’s Zach Brandon contend that Madison’s acknowledgment of, attention to and intentional work on equity and diversity are a competitive advantage. And so he stays busy accelerating its evolution because, like Salzwedel, he believes that new businesses today will be the American Families and Oscar Mayers of tomorrow, no matter who it is that launches them. Madison is “on the cusp,” says Brandon, of becoming a startup city, and he’s beginning to brand a more business-friendly Madison to an ever more global economy.

“The business community in sheer numbers isn’t tech and biotech, but if you look at competitive advantage from an economic development standpoint, job creation and wealth creation, we know those sectors are the next economy,” says Brandon. “That’s a place where almost any other community in the country would beg to be.”

Doyenne Group cofounders Amy Gannon and Heather Wentler agree, and they laud Brandon for opening the doors of the Chamber to a new generation of businesses and branding them as integral players in the larger economy. Wentler, an education entrepreneur, and Gannon, interim dean of the Edgewood College School of Business, point to the Governor’s Business Plan Contest, run by the Wisconsin Technology Council, as a growing pipeline of opportunity for entrepreneurs of all ages and stages, genders and ethnicities. This year’s winner is a Madison woman inventing better tests for infertility. Wentler and Gannon praise their fellow entrepreneurs, advocates, organizers, mentors, connectors and investors who are highly visible around town and try hard to make Madison a startup community that squares with Brad Feld’s Boulder Thesis. An expert in entrepreneurship, mentoring and organizational behavior, Gannon refers to all of these assets as “artifacts of culture.” They are in line with the Boulder Thesis’s core elements of a thriving startup community, including talent, density, access to capital and good public policy.

Wentler talks about the need to recognize innovation regardless of where it occurs–in startup companies, nonprofits, schools or anywhere else.

“You can be an entrepreneurial spirit and make things happen,” she says.

In his book, Feld talks about entrepreneurs as “leaders” and the other pieces of the ecosystem as “feeders.” Gannon says once we see enough diversity and inclusion–in all sectors and in all demographics–in both of those places, we will know we have arrived.

“I think what we’re really trying to do in Madison is figure out how you take the entrepreneurial ecosystem and make the city the ecosystem and not just pockets of startup scenes,” says Gannon. “If it’s going to be a startup city, it has to include everyone. We’re poised to do that really well here.”