A few months ago I sat in on a panel hosted by the Greater Des Moines Leadership Institute. This post is an adapted answer from a sample question they sent over ahead of time:
Q: What does it take for startups to begin building around Des Moines' strongest industries of insurance, finance, bio-ag in Ames etc.?
I think it's already happening — at least in the financial industry. Most of Central Iowa's strongest startups (and many companies who have left that label behind in recent years) are in financial tech. Companies like Banno* (acquired by Jack Henry & Associates in March), Dwolla, WebFilings (Ames) and Social Money (parent of SmartyPig).
I think we'll know that what has started is truly blossoming into a cluster when we regularly see individuals at the large financial companies in our community (Wells Fargo with 13,500 employees and Principal Financial Group with 6,131 are the first and third largest employers, respectively, according to the Greater Des Moines Partnership) decide not only that they have an idea that will serve the customer better, faster or more efficiently (and hopefully more profitably) but that they're willing to take a risk and go all in on making that idea into a business.
While I do think will happen on its own in time, I think we should do what we can to accelerate the formation of a financial tech startup cluster in Central Iowa as soon as possible. The financial industry is one of our community's inherent strengths and thats particularly valuable when you think about the mentor and capital pool:
Mentors
We already have a tremendous financial industry mentor pool in the community. There are thousands of experienced individuals with something to offer to potential fintech startups, whether it be a sounding board, advice, connections or otherwise.
Take this example from a few years ago: I talked with Ben Milne on the eve of his announcement that Dwolla had raised their first $1MM investment round. Initially, Ben thought he needed $8MM to make Dwolla available nationally and he was actively trying to raise that amount. The advice of Suku Radia, the CEO of Bankers Trust ("Iowa’s oldest and largest independently owned bank"), helped him see there was another way:
“I had coffee with Suku Radia one morning, having no idea who he was, and he said something like “have you considered doing it like this…” which basically changed my life, direction, and how we structured the deal. From this “bigger picture,” involved accomplishing the same thing, but with the right partners and only $1 million in growth infrastructure capital.”
— Ben Milne
Suku later joined Dwolla's first advisory board.
Capital
With the preponderance of established financial companies in our community it's logical to think there are a number of high net-worth individuals with the potential to become "smart money" angel investors for new fintech startups trying to get off the ground.
In addition to individuals, there are business entities that are willing to provide money, too. In the aforementioned Dwolla raise, the money came from Veridian Group (associated with Veridian Credit Union based in Cedar Falls) and The Members Group, a payment-processing and technology solutions provider, owned by an association of Iowa credit unions.
*Yes, based in Cedar Falls but with a team in Des Moines
Photo Credit: Dice.com on Facebook
Geoff Wood is the founder, connector and space captain at Gravitate, a workplace community for entrepreneurs, freelancers and remote workers in the heart of downtown Des Moines. In addition to writing here, he hosts a podcast, speaks at conferences, organizes events and has been helping tell the story of the Iowa startup community since 2009.