Topics discussed: InnovateHER, Startup Weekend, Harrisvaccines and Merck Animal Health, community for accelerator graduate startups, media and recognition for funded startups vs bootstrapped startups
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Matt Patane, technology and innovation reporter for the Des Moines Register and Geoff Wood, community builder at Gravitate, sit down for an in-depth discussion of the companies, events and ideas making news in the Iowa innovation community.
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Transcript:
Geoff Wood: Hey there. This is the Minimum Viable Podcast episode four. I’m Geoff Wood, a community builder at Gravitate. He is Matt Patane, the Technology and Innovation Reporter at The Des Moines Register. Hi Matt.
Matt Patane: Hey Geoff.
Geoff Wood: Each week, we take an in-depth look at the company’s events and ideas, making news in the Iowa innovation community and discuss them here for your enjoyment. Matt, what have you been up to this week?
Matt Patane: Well, unfortunately now, I have tech coverage in my end. You noticed Global Entrepreneurship week. I know there’s a lot of events going on. I haven’t been able to make it to any, because there’s this thing in Iowa called the causes and having to be first in the nation in picking our next president or at least whittling the field, so I’m involved with some of that stuff.
Geoff Wood: Winnowing, right?
Matt Patane: Winnowing, whittling. That’s Iowa’s role or one of the roles.
Geoff Wood: I was at an event last night here at Gravitate that the Greater Des Moines Leadership Institute put on. I was talking with somebody who’s asking about how my caucus season has been going or something, then I was like, I lived out of state in the ‘08 election, which was the first Obama one and missed all the craziness that was going on here, and I thought that I’d be really excited to get back into that. I've paid very little attention beyond … I'm also not on the republican side, so I think that’s more interesting, like if I was over there and trying to debate between that ...
Matt Patane: It’s a huge field. You’re not the only one of republican or democrat or independent that I’ve talked to say that, because there are a lot of people that are involved and are really excited about this. At the same time, the caucuses are still two months out, three months out at this point, and then the election is about a year away, so there’s a lot of people that are like, “I’ll get interested when we’re closer,” so that could be January for some people.
Geoff Wood: Yeah, that’s true. As that process was extended, it’s not something that I’m faced with every day, because it’s constant so it’s easy to ignore. I also no longer watch regular TV so I don’t see all the ads. When Hulu does show an ad or something that is caucus related, it grabs my attention, because I don’t see them very often, but I just stepped up my Hulu subscription to the no ads version, so I don’t even see that anymore.
Matt Patane: Does that seem worthwhile to you? I ask because I’m curious, like why.
Geoff Wood: The Hulu specific one?
Matt Patane: Yeah.
Geoff Wood: Yeah, so we paid Hulu for years and I hated paying for it and seeing the ads, because it feels like you didn’t pay for it, you don’t see the [crosstalk 00:02:17]. They conditioned it to be over that time to expect the ads, and they got worse and worse and worse, and then they said, “Hey, here, pay five bucks more a month, and you don’t have to have the ads.” We debated it for two months, and one day my wife was like, “Just do it.” I did and now it's just like it's this whole new ... It’s weird.
Matt Patane: You could not subscribe to Hulu though, which I guess is the risk that they’re taking with their business model. When they first launched, they have that great idea like, “Yeah, one 15-second ad for every commercial break,” and then it became a minute of ads, which is a great business model for them.
Geoff Wood: Yeah, it is interesting to see what they’ve done. I do listen to some cord cutting podcasts and I don’t know that Hulu's doing great right now, but there’s actually a lot of news going on with them. They’re thinking about bringing out a new equity.
Matt Patane: I didn’t see that.
Geoff Wood: New network as an equity partner.
Matt Patane: That’d be interesting.
Geoff Wood: We’ll see. Anyway, caucus.
Matt Patane: Caucus for me. What about you?
Geoff Wood: This week, the Global Entrepreneurship week stuff has been going on. Big one here was InnovateHER which happened Monday night here, and we had four teams pitch. UpCraft Club, Elizabeth Caven won that. She did a good job, as she always does. KinoSol from Ames. They pitched as well, and they did a good job as did Poink, which is a deal app in that space. I know they probably say it's more than that, and I think it is. We had one coming from Iowa City called, “Girls With Ideas.” Allison Poss is the woman who’s in charge of that. She’s a PhD type doctor who does curriculum and is working on something to help instill leadership ideals in girls as they grow. Looking at that, like women’s leadership and all of those types of things that are going on, but embodying that younger with girls so that as they grow up, they have that ingrained, and she did a good job too. I guess that she’s just pretty early stage and UpCraft Club is pretty well developed.
Matt Patane: Yeah, Elizabeth has pitched UpCraft Club in a lot of different pitch competitions.
Geoff Wood: And won them all.
Matt Patane: Yeah, won, if not all, a lot of them. She seems to have her pitch down. I guess for those who don’t know, a UpCraft Club is, I'm probably not doing it justice, but it’s an online market place for sewing patterns, some sewing lesson videos, and just a huge market place that if you’re really into sewing, you’re probably going to check it out. I know she’s being plugging away at UpCraft for a long time.
Geoff Wood: Yeah, she’s got a couple different business lines that support that as part of it. There’s a certification of patterns and for things that she’s doing that is interesting. She's also just really put together as a presenter, so when you hear her pitch, it’s a real compelling pitch. She did good.
Matt Patane: I want to say that I saw that Western Wise won, the InnovateHER in Iowa City.
Geoff Wood: Cedar Rapids.
Matt Patane: Cedar Rapids.
Geoff Wood: Last night, yeah, Wednesday night. I don’t know a lot about Western Wise, have you covered them?
Matt Patane: I’ve covered them here and there, again, mostly around different pitch competitions, but Western Wise, again probably not doing it justice, but Western Wise is this system of tutors to teach English to students in China, this online portal to connect in person over somewhere to Skype calls basically to teach Chinese children English. Again, they're kind of like UpCraft Club where I’ve seen them in a lot of different pitch events, or their name comes up. Usually, the Cedar Rapids, Iowa City area, but they’ve been at it for a while now too.
Geoff Wood: Yeah, both of those along with winners and many other cities and locations, will get passed on to the national finals in DC and not everybody goes to that, the federal folks at the SBA choose 10 to invite in to do the final pitch. It’s an interesting competition, so we’ll see what happens with that going forward.
Matt Patane: Maybe it’s too early. Is the plan to have more of those competitions in Iowa again or just like a one-time deal?
Geoff Wood: Well, since it’s a federal program, and then local people had to volunteer to say, “We want to host the competition," they can do that anywhere in the US. I would assume we would do this again if people liked it and if they do the federal competition. They’ve done a federal version last year too, that I didn’t hear about it until … I found about this from the Iowa Startup Accelerator people who actually ... Jocelyn there did all the logistics of getting us together, so I’m thankful to her to do that. I hosted and introduced everyone. Assuming that this goes well and we want to do it again, and they do the federal competition again, I’m sure we would.
Matt Patane: It must be interesting to see another series of pitch competitions around the same name crop up, because we seem to have a lot of those, right now where a lot of different ones have cropped up, Pitch & Grow, Invest in She, InnovateHER, the entrepreneur ones. I think we've talked about those before.
Geoff Wood: [Inaudible 00:07:37].
Matt Patane: There’s just a lot of these multiple pitch series around one brand name that had cropped up in the last few years. They seem to come from different people or different groups, trying to all go out for the same thing, but maybe there’s a larger discussion there for later about, “Is it enough? Is it too much?” It’s interesting to see these pitch competitions continue to crop up under different names.
Geoff Wood: Yeah, I don’t know how effective they are. That’s probably with the next ...
Matt Patane: Right. I think it might be what the question is like, “Are we just seeing pitch competitions just to be pitch competitions, because someone wants to have their name connected it? We also want to support more startups from different people. Are the pitches getting any better? Are they seeing the same, but there’s just more of them? Is the money that is being given out worth anything?" UpCraft Club has pitched at multiple different events as did HowFactory, as has ClinicNote from the Global Insurance Accelerator here in Des Moines, as have a bunch of other companies like Western Wise, SwineTech from the Iowa Startup Accelerator, Pitch & Grow, so the same names.
Geoff Wood: They got third place in nationals.
Matt Patane: Right. Is it the same people winning the same competitions? Certainly what’s the effectiveness of those competitions is probably worth discussing at some point.
Geoff Wood: Yeah, I don’t have a lot of data on that. It sounds like it might register.
Matt Patane: It's something I’m looking into. I think I’m going to mention them in the first or second podcast. This is actually our fourth podcast.
Geoff Wood: It is.
Matt Patane: We’ve made it about a month.
Geoff Wood: We have.
Matt Patane: It’s pretty good.
Geoff Wood: We've had had some nice emails from people that appreciate what’s going on. We appreciate you sending those. I guess the other thing this week is startup weekend, probably starting as you’re listening to this. There's been some changes. Originally, there are five locations, a couple doing it for the first time, Council Bluffs dropped out with a whole bunch of events, not really exactly sure what the story is there, but that event’s not happening. Quad cities combined their event with Iowa cities, so I assume they’re busting people over something, so that would be good there. I don’t know where Sioux City popped up and nobody knew they were really working on it.
There are four events going on today, Friday, starting tonight, so as you listen to this, Sioux City, Ames, Cedar Falls, and Iowa City. It should be good. We talked about I know last about the effectiveness, but I’m excited. This is a rough weekend, coming into Thanksgiving, like all of that stuff, so I wish the Global Entrepreneurship ... This is specifically done to coincide with Global Entrepreneurship Week. That’s just a rough thing in the US, because of that holiday for folks.
Matt Patane: Right. There's a bunch of caucus candidates in town if anyone cares, so I'm just going to throw that pitch in, so pay attention to politics at some point.
Geoff Wood: Are there names that are going to stop by at startup weekend?
Matt Patane: Maybe it might help some of their campaigns, if they need some quick innovative thoughts coming in. I don’t think that they would stay the entire weekend. Most of them probably have three or four events in the same time.
Geoff Wood: You don’t think they will pitch out here Friday night and then work on it through the weekend?
Matt Patane: I don’t want to speak for the candidates. I’m sure some of them might want to, whether they’ll stop by is a different question. I’m doubtful on that regard.
Geoff Wood: Any candidates who are listening, or your staff that’s listening, that would be interesting. I’m not advocating you do that, but just throwing that out there. That’s a free political advice from Geoff Wood there. One reminder again this week about the Patreon Campaign that funds the ongoing Minimum Viable Podcast, that’s at patreon.com/welchavenue. I appreciate everybody that has supported there. If you folks want to do that, that would be great too. We will continue doing that and support from you is great. You’re the best. Okay, should we talk about stories this week?
Matt Patane: Yeah.
Geoff Wood: Okay, so kind of slow week this week stories wise, but some big news out of Ames. Merck Animal Health is to acquire Harrisvaccines. They announced this week that they’d be acquired by international firm Merck Animal Health. While the terms of the deal were not disclosed, Harrisvaccines spokesman and vice president Joel Harris says, “Things will be business as usual for the company’s 45 Ames employees. The company hopes to continue its efforts to research diseases." Previously Harrisvaccines developed a vaccine to fight a deadly pig virus and received the USDA contract to produce the vaccine for the Avian Flu according to Ames Tribune. Harrisvaccines is located in the Iowa State University Research Park and is the most recent winner of TAI’s Prometheus Award for technology campaign of the year in the small-medium category. What do you know about this story?
Matt Patane: I would encourage people to go to One Register and check out [Christopher Durang’s story 00:12:27] about this similar …
Geoff Wood: I must have missed that. It didn’t show up on the technology or business page.
Matt Patane: Pretty late in the day, one day last week. Yes, it’s interesting that Harrisvaccines got sold to Merck, because Merck is this huge drug …
Geoff Wood: Company.
Matt Patane: Drug pharmaceutical company maker. Actually, this isn’t even their first connection to an Iowa company. Last year, NewLink Genetics, which is also in the Iowa State Research Park, licensed their Ebola Vaccine to Merck to basically ramp up manufacturing developments and just to get that out there faster. For similar reasons as Harrisvaccines selling itself, the need to get bigger, the need to get bigger faster, get development up there, and just to expand in general. Harrisvaccines has been in Ames for a while now, going after all these different animal health drugs mainly vaccines. They recently got approval by the USDA to go after bird flu vaccine, which anyone that pays any attention to Iowa knows that the bird flu is a huge deal this year.
Geoff Wood: Is that poultry farmers?
Matt Patane: Yeah, poultry farmers. Millions of chickens had to be basically killed off to prevent the future spread. In the last month or so, we’re just getting some of those farms up and running again. Harrisvaccines was there and seemed to able to turn around bird flu vaccine fairly quickly. I think that has to do with the process that they do. In Chris’ story on the register, he goes into it a little that instant of taking the entire virus to evolve a vaccine, they basically only take part of it
I don’t know the entire sense behind that, but basically they take part of it. It lets them go after a vaccine quicker and develop it faster. Harrisvaccines employee, that I’m forgetting the name of, was actually one of the Iowa Women of Innovation award winners, again also from the Technology Association of Iowa. For anyone that follows the Prometheus Award, Harrisvaccines won the bigger awards this year as well. I’m interested to see what happens to the company. It doesn’t sound like they expect any layoffs right now, but whether they start employing more people and employ more people at Ames specifically, I’m not sure how that turns out.
Geoff Wood: The Ames Tribune story said, “No plans for expansion, expecting to save 45,” but that’s double where they were 18 months ago, so it had ramped up.
Matt Patane: Harrisvaccines has been on this huge growth pattern, just with more employees, again partly because they got the bird flu vaccine. They have this Porcine Epidemic Diarrhea Virus, which in the pay world is a huge deal. They’ve been right there along with these viruses and have seemed to crop up with solutions pretty quickly. It would be interesting to see whether Merck invests more in Iowa because of this, or if some of that work gets transferred to Merck’s other locations around the US, I think they’re based out of Maryland.
Geoff Wood: Global, right?
Matt Patane: Global, yeah.
Geoff Wood: Yeah, it is interesting. It does say in there the terms of the agreement were not disclosed. Is this an acquisition, perhaps we’ll find out later in Merck’s filings when they do their annual reports?
Matt Patane: It’s possible. I don’t know. Again, I’m not super involved with the wiggle side of businesses so much, what the laws are for this, but it is fairly common for prices and terms to not be disclosed in deals, unless they absolutely have to be. I don’t know. I think this is something that we’ll just have to keep an eye on for Harrisvaccines. It’s good news for Harrisvaccines right now, especially because they came out and said, “We’re not expecting any layoffs.” They seem pretty confident about it in both the register story and the Ames Tribune story. Obviously, everything’s up in the air whenever there’s an acquisition, but they have a good team, and they’ve done a lot of good work, which the USDA has recognized by giving them a lot of these licenses. It’s probably better news than we would otherwise expect, I would think.
Geoff Wood: Why is that?
Matt Patane: I think because they’re being bought at a time when they have done a lot of work on these really significant viruses; the porcine virus, the bird flu virus. They’re working another one for canine influenza but in Iowa specifically. The porcine virus and the bird flu virus alone have major impacts on the state’s industry, and if you just work in agriculture nationwide. Plus, I think it makes sense because from some of the things I’ve heard about other drug companies, especially if they’re smaller, some of these drug companies were not actively looking for acquisitions, are in that mindset that if it comes along, if it makes sense, they’ll do it, because they don’t have the ability on their own to finish off the already expensive process of developing a drug.
That was one reason why NewLink said they went to Merck for their Ebola vaccine, because the NewLink has 120 employees right now. A lot of that was a ramp up last year, partly because of the Ebola virus work they were doing and also because of their main work which is on cancer therapies, but developing drugs is critically expensive. NewLink, I don’t know about Harrisvaccines, but NewLink didn’t turn a profit until last year, and last year’s a lot, because of these grants and these licenses that they got for their work.
Again, it’s very expensive work. It takes a long time to develop. Investors are in it for the long term and hoping that everything turns out okay. If you’re able to go to a bigger company and say like, “Hey, here’s the work we’re doing. We’ll sell it to you, license it to you or buy us.” That bigger company is going to take that work and get it up to speed a lot faster. Maybe for Harrisvaccines, that’s something that they couldn’t do on their own, so that’s why they looked toward Merck or someone else to get them up and running faster with some of these vaccines.
Geoff Wood: Well, I don’t know a lot about this industry at all. It is always interesting that they won a technology company of the year award. It shows the ever expanding role of technology in different industries. We’ll see what comes from this. It is an interesting thing and good for … There’s a story Gary and Bob posted in the Startup Iowa Facebook group about acquisitions in the Midwest, which I think was more about software, not necessarily about, what is this, biotech? Is that where we would …
Matt Patane: Biotech or you could maybe say adtech or bioscience.
Geoff Wood: It was a TechCrunch story, criticizing the Midwestern people taking early exits before they really build their companies. Did you read that story?
Matt Patane: I didn’t read all of it, but I’ve seen other stories or posts in that same vein.
Geoff Wood: Yeah, which is timely. It makes me wonder about the size of this, but I don’t have a whole lot of information on that right now, but good for Harrisvaccines and for the Harris family, I assume, and great for Ames that they’re going to stick around the research park. I don’t know if Merck already had offices in the research park, but now, they have this …
Matt Patane: Not that I’m aware of.
Geoff Wood: But just connects that community, that research park community to these broader things. We’ve seen that with lots of companies that have bought Iowa State research companies, and then they like what they see there, so then the global company then keeps an office there.
Matt Patane: It’s interesting to see that. Again, going back to NewLink, not that Merck bought NewLink or has any other direct company involvement, but it’s another company in Ames, basically in the same field, a few miles that has this connection to this major drug company. Despite of what you think of major drug companies, they can invest a lot of money. NewLink got $50 million for their Ebola vaccine work and through their connection with Merck. There’s a lot of influence that Merck can play with Harrisvaccines. Hopefully for the state, they like what they see and keep investing in Ames.
Geoff Wood: It’s probably two different divisions of Merck. Merck Animal Health versus the proper, and I don’t know what the relationship between those two are, where they split necessarily. It’s not like they’re competing or it’s not like they’re adding to that necessarily; two different divisions of Merck being connected to Ames. Next story, do you want to talk about co-working, accelerator grants, that whole thing?
Matt Patane: Yeah, so this is an interesting development that popped up between the guys over at Vault in Cedar Rapids which is the co-working facility over there and you here at Gravitate. What’s going on with you guys?
Geoff Wood: Well, as we’ve talked about a lot here, we have two companies come back from Iowa Startup Accelerator in the last couple of weeks following Demo Day, and just talking with those founders about how they get involved, reintegrated into the Des Moines community again, what their needs are. Couple of things that I’ve noticed, and this is true of the … There’s been five companies from Gravitate, which didn’t seem … It feels like a lot to me that we’ve had that many companies with ties here go on to Accelerators, and the amount of time that we’ve been around here, but it was bought which went … TECSTAR’s first, really before we opened, but had already secured office space in the community. Jobsite Unite going to Capital Innovators in Saint Louis, and then WorkHound goes to …
Matt Patane: Straight Shot.
Geoff Wood: Straight Shot in Omaha and then [inaudible 00:22:37] ISA in Cedar Rapids. In talking with all these companies when they come back about getting re-involved in what’s going on, what I found is aggregated information from them is like, well, we don’t have the supportive community that we had in our Accelerator. Everybody is working 90 hours a week, 24 hours a day, that type of thing. We don’t have the space that’s dedicated to that, and really we have no money, because I think the promise or the idea with Accelerator is you get a little bit of cash up front, but there’s this maybe idealized version of Accelerator is that you’re going to pitch at Demo Day and then people are going to close rounds …
Matt Patane: You’ll immediately get money, which is not the case.
Geoff Wood: At least with these Midwestern ones, nor was that probably the case with Men’s Style Lab who’s the first or NextStep.io, first two companies in Iowa that did this, and probably I missed saying somebody in there, but it took them a while to close rounds and things like that. Anyway, we had that, and I was talking to Eric Engelmann, who’s the director of the programs at ISA, about how we can support these people more, because we want them to be part of our community. The whole idea of this is to provide a platform where people can build companies and stay integrated here. We just had the idea of, “What if we just gave free office space to them?”
It really allows folks for hanging around here anyway, because they didn’t have anywhere to go, and they were previously part of the community, so it formalized the relationship. I’m excited for where this goes. It was just an idea that Eric and I had on the phone, chatting it through, and rolled it out and it seems to have gotten a good response in both places. As we’re talking about it too, the idea here was about Des Moines companies. The idea there was about Cedar Rapids companies, but why not just open up to all of the companies? I don’t know how many GAN, Global Accelerator Network, is the certifying body for accelerators, and I think accelerators pay quite a bit to be a part of that.
Matt Patane: Right, that’s where a lot of the connections to mentors, startups, entrepreneurs in general come from, like the Global Insurance Accelerator is connected, Iowa Startups Accelerator connected, Techstars, all of them.
Geoff Wood: It gets you an inside track towards applicants for you to start, and I think it also teaches you how to set up your accelerator. There’s that piece too. There’s a lot of value, I assume, in the GAN. We said, “Anybody, if you had a reason, and you wanted to come to Des Moines, or you wanted to come to Cedar Rapids, up to 12 months after your Demo Day, come join our community, part of our community for basically no cost.” We decided on having just a little bit of a fee there of $15 a month, which is less than you probably drinking coffee at …
Matt Patane: Every day, for some of us. Well, I think it’s interesting, because one thing that I’ve been curious about with accelerator programs is, this is a hypothetical, say you’re a Des Moines company and you go to an accelerator in Omaha or Lincoln, Nebraska, or Wisconsin or Minnesota, or Missouri or whatever, you go through the program, you spend three months there, you build up a network and you build customers, the program ends, what do you do? Do you stay in St. Louis or Omaha? Do you come back to Des Moines and not necessarily start over, but essentially have to rebuild, because you may not have those customers connections?
I think the accelerators, wherever they are, one of the benefits that they can make or one of the pitches they can make to the startups that just went through their program is, “Well, hey, you were here for three months. You made friends. You have mentors. You have potential investors. You made connections to customers, just stay here.” Essentially move your headquarters, where your office or chair or desk, here, and then stay that way, whereas if they move back to Des Moines or Iowa City, unless they were from there originally, they may not have that support system. I think especially in the Midwest from what people have told me, that’s important. If you just come back and you’re on your own, how likely are you to keep going if you don’t have anyone to talk to?
Geoff Wood: Right. Yeah, it is interesting. I don’t know that we had, just thinking through the accelerators I’m aware of, anyone who has come to an accelerator and decided to stay in that community. Although JobSite basically going to St. Louis, which is a bigger market, has made that the headquarters. They always had a presence here at Gravitate as well. They always had staff here throughout the whole thing, so it’s definitely a node for the …
Matt Patane: JobSite had a requirement through a grant that they got that they had to stay in St. Louis to a point. Even if those companies move back here, not that they would necessarily move to Omaha, if they just finished up in Omaha, but where are they going to spend more of their time? Their home might be here or their main office might be here, but if all their connections are around Omaha, at what point do they stop being a Des Moines company, which in some regards, that’s just the PR saying where they’re from.
It matters more what they’re actually building, but if Des Moines wants to claim these companies, but they’re spending two-thirds of their time in Boulder or Omaha, why can’t Boulder or Omaha claim them over us? From a community building standpoint, this makes a lot of sense. Plus, if it’s open to all of the Global Accelerator Network companies, instead of been through an accelerator, hopefully, I would think, where you guys are standing is that hopefully that brings in some of these outside people to the state, even if they’re just passing through.
Geoff Wood: Right, and that would be outstanding. I don’t know that this specific program’s going to do that. I think that’s actually a really big issue for our state is that people aren’t choosing to come here to start.
Matt Patane: You don’t move to Iowa to build a startup necessarily.
Geoff Wood: Right, and I would hope that we get to a point that you do. I think that’s the long-term win of any of this. Are you going to move to Iowa to have free office space and part of a community? I don’t know, but maybe you are in the financial tech field or a mortgage field or an insurance field, or an animal cultural type thing, and being in Des Moines makes sense for you, and you graduated, that could make some sense now. It doesn’t mean you have to be here for 12 months. It could be that you’re just going to be here for two or something like that.
Matt Patane: Right, or a day or a week or whatever. I think from the community standpoint, there’s a lot of emphasis here on connections. Even if someone just passes through, if they meet one other person that’s from Des Moines and they’re from Omaha, and they happen to meet at Gravitate or at Vault, just because that’s where they both happen to be on that day, again maybe not a huge news story, maybe a company doesn’t get built, but it’s another connection that’s made to Iowa for this other company.
I don’t think this will be a major game changer, but still, it’s one more thing to offer and you actually can do it, my reporter instincts are kicking in and saying, “Can you guys afford to do this?” But you’ve got that stipend in there, how much of a cost is it for you guys to sustain this long term? Obviously, if it’s a service you guys are offering, I think that makes a lot of sense.
Geoff Wood: It may change if there were 200 companies that reached out to me tomorrow and said, “Hey, we want to come to Des Moines and use the space,” that wouldn’t necessarily be feasible. They said [inaudible 00:30:16] supporting our community already that went out to these places and bringing them came back. If we add one or two companies that are actually here too, they want to come to Des Moines, and this helps, or they want to come to Cedar Rapids, I think that’s a big win for the ecosystem. It’s interesting.
I think there is a long-term discussion here beyond this specific program, what happens with accelerator companies after they graduate? We haven’t seen from the two classes now out of ISA, the one class out of the GIA. I don’t know that we’ve seen a lot of movement as far as scale or anything to those companies, or even big round’s raise. I think several of them have raised small rounds. A couple of them have closed, since the business is …
Matt Patane: Right.
Geoff Wood: It’s interesting to just see. I’m glad we have those programs here. I think they provide a lot of benefit. Especially if you’re in those industries, I think it’s something to talk about, which is part of the whole …
Matt Patane: It’s probably worth pointing out that the Global Insurance Accelerator did an informal version of this for their company. The six teams that went through, [inaudible 00:31:30] and the crew over the GIA, basically looked for a couple of months, we’re going to be open, we’re not just kicking you out of the nest. If you need an office space, because you can’t move back to Australia right away or Germany, or you can’t find another place to go, you have a desk here, we don’t have another program until February, I think, is when they start up again, so just stick around, keep your connections going, keep your growth going and just let it in. Again, it was just for their teams, it’s not like they opened the doors, but still that was better than saying, “All right, you’re done. Leave. We got to move on.”
Geoff Wood: I think that’s pretty common with accelerator programs to do that. I don’t know how often people take them up on that. Two I know of did that here, ClinicNote and Pablo.
Matt Patane: ClinicNote took advantage of it.
Geoff Wood: Took advantage of it, maybe others that I just wasn’t as connected to. I think maybe the difference between what they’re doing and some of the discussion with Eric and I probably came from … I’m sure they did that too, I just didn’t specifically ask, but let’s formalize that, so there is a program that you’re joining. I think the bigger thing is also, it’s not just about space. It’s more about people. If the rest of your door leaves, and you’re the last one or two hanging out there, it’s great that you have a free place to go work, but are you really being supported? The staff is doing that, but they’re also moving onto the next project probably.
That’s part of what they’re doing in Cedar Rapids I think is continue with mentor meetings and things like that through that. It’s maybe a parallel to a program like that, but more formal or a little bit more formalized and then saying … Actually what it makes me think about is if you’re going to a summer camp or something like that, and you have that fun experience of being away from your family, and you’re with all your friends or whatever, and the program ends on Sunday or whatever and everybody goes home, if you’re the last kid there, it’s great that you’re still there, but it’s not the same as when you were in the program. You get some benefit from that, I don’t know. I went to a lot of summer camps as a kid.
Matt Patane: I think that makes a lot of sense. If WorkHound was the last one to leave Straight Shot, because a lot of the other companies were in Nebraska, so they all went home, but WorkHound was just there, was anyone there working with them or were they just in their own world?
Geoff Wood: Yeah, so being able to join that community … That’s where I think Gravitate probably where the mission focus is. What I hope we excel at is it’s that support community. We’re not an advisory service. We’re not like those types of things. There’s great options out there for things like that. I think it’s more about like, “Be part of this community and get the benefit.” There’s all sorts of statistics that I don’t have handy about working alone, where the drawbacks are, and one part of that is just loneliness.
As a solo founder of my company, I totally get that piece of having other people around that you can bounce ideas off of and you can ideas which is really good, so let’s help these companies out with this next piece. I don’t know what goes beyond that, and maybe in three or five years, when we had so many classes go through these two accelerators, and hopefully, other people that have gone to these other crazy accelerators out there and have come back, hopefully brought ideas with them.
Matt Patane: Right, or brought experience from those accelerators and what they need.
Geoff Wood: I think it’s going to be really good thing long term. I don’t know that it’s really going to change day to day here at all.
Matt Patane: I don’t think any of this is a game changer, but still, if it’s something that you guys can provide while being physically responsible, because you don’t want to shut down all of a sudden, if 200 people come in and out. I don’t think that will happen. I don’t think it will get 200 applicants, but even if someone says, “Hey, I graduated from the ISA. I was based in Omaha. I had to go to Cedar Rapids. I got to drive through, and I want to spend the night in Des Moines, can I have a place to work?” That’s better than I think from, or at least what I would think would be your point of view, that’s better than just sitting in a coffee shop and having bad internet connections all day.
Geoff Wood: Right. More of that to come, I guess. We haven’t really got to start with any of that, but that’s the thing that’s out there that we hope to go forward with. Should we get to this week’s question?
Matt Patane: Yeah.
Geoff Wood: This question today came from Derik Balsley from the Art of Education in Osage, Iowa? Have you been to Osage, Iowa?
Matt Patane: I might have driven through Osage. I might be going there this weekend.
Geoff Wood: Really?
Matt Patane: Yeah.
Geoff Wood: On the caucus trail?
Matt Patane: On the campaign trail.
Geoff Wood: Yeah, nice. I don’t know if I have ever been there, but I do know that my grandmother’s from that part of the state and would talk about Osage a lot, so very far north I believe. What Derik said, he said, “I’m interested lately in higher growth startups versus bootstrap success stories, and how the two are covered in the startup media. Are we emphasizing one approach versus another? Are we looking out for the best interest of entrepreneurs or the investor/community? How much overlap and needs, mentorship and otherwise are there between the two groups? How can we get successful bootstrappers more engaged in the startup community?” It’s five questions, but basically the same topic.
Matt Patane: Basically, it’s bootstrapping versus high growth getting investment.
Geoff Wood: It’s interesting, because something else came up this week. I was talking with Torey from Rocket Referrals, who’s somebody that works in the same building, but I don’t see her very often. We used to see each other a lot back at Startup City. It sounds like their business is doing very well, and they’re exciting, they’re hiring, things like that right now, but totally on the bootstrap mentality, and did that I think by choice; spent a lot of time trying to raise money. It didn’t really work out. It wasn’t progressing the company, so decided we’re just going to knuckle down and bootstrap this and now we’re seeing successes of that path. Let’s start with the media question. Do you see a difference in how bootstrap companies are covered versus companies that are looking for investments, or I guess high growth companies?
Matt Patane: Yes. Again, from the top down view and with the caveat that I wouldn’t classify myself as a tech engineer reporter. I’m not reporting what TechCrunch reports or some of those, I do have a more general view. At the same time, this is a question that I think most journalists would think about in any part of their coverage like what is important is that the people that are doing stuff quietly, but doing important stuff, or is it the people that are splashing, making a lot of headlines, even if they are also doing a lot of stuff? I think in the startup world, it’s easy and important to cover the big investments. Hypothetically, if Dwolla raised another $10 million, if that’s something I’m going to cover, I’ve covered every investment. Me and Marcus Santana, the previous register reporter have covered every investment that Next Level Ventures has made, which is the big investment group here.
Geoff Wood: Biggest fund amount.
Matt Patane: Biggest fund, is the right word to describe it. I’ve covered seed rounds. Obviously, the bigger investments get more readers involved. They are bigger headlines, partly because of the money amount. At the same, the people that are bootstrapping by nature are just quieter, because they bootstrap. They are knuckles down, heads down working to build something that hopefully they have success two or three years later. Whereas the investment people and neither one of these is better or worse, the investment people are saying, “We’re getting these investments so we can do that same work, just doing it faster.” I don’t know that it’s necessarily that reporters value the money angle over the bootstrap angle.
I think it’s the nature of what happens sooner, and it’s that payoff question. The investment story from us is that happens now. If you’re getting your investment, you’re getting more advisers, you’re doing that today or this week. The bootstrapping people are doing that over a year or two years, so by nature, that story just takes longer to come out, or the results of it take longer to come out. I guess that’s where I would fall. I don’t know that we value one over the other, but at the same time, money talks, to use that term.
Geoff Wood: Yeah, I would agree. I would guess you have infinite number of stories you could cover, so you have to make choices.
Matt Patane: Right.
Geoff Wood: An investment round in notable. It’s public often, because the company wants it out there as a sign of progress, not necessarily attraction but like, “Hey, we’ve done something,” or the fund wants it out there, because they’re trying to raise another round or something, and they want to show they’re doing work. It’s a note of a progress. It’s public. They’re probably reaching out to you and telling you about it. At least here, I don’t know if that happens everywhere.
Matt Patane: But somebody knows.
Geoff Wood: Right. What are the equivalent milestones are for bootstrap companies, is it number of users? Is it amount of revenue? A lot of those things bootstrap companies probably don’t want to share, so what is that?
Matt Patane: Because they may not have revenue. If they’re six months in and they’re bootstrap and they may not have revenue, but it doesn’t mean two years later, they won’t. It doesn’t mean two years later they won’t raise money, but again, it’s the longer timespan. At the same time, that does exist for even companies that raise money. We talked a couple of weeks ago about Dwolla and their CME Group.
Geoff Wood: Dwolla.
Matt Patane: I’m going to keep saying it wrong. I think that’s just my nature now, but Ben Mills’ company got investment from CME Group in September 2014 and a year later, which depending on who you are it’s either not a lot of time or a long amount of time, saw some payoff in that because they got a connection into CME’s exchange system. That is progress. At the time the story was the company raises 9.3 million or whatever it was, and then a year later, now they’re doing stuff on the exchange. Those tradeoffs exist for both companies. This goes into any story ever, money grabs headlines a lot easier, or more easily than no money.
Geoff Wood: It’s the type of thing people want to read about too.
Matt Patane: Right. I will say it like that doesn’t mean that journalists don’t value the people that are bootstrapping or the people that are trying to build things. Those stories are also valuable. There’s just a different angle to it.
Geoff Wood: Would you say we’re emphasizing one approach versus another? I don’t think consciously. I just think the decisions that we’ve talked about have led to the … I think it’s easier to cover, and it’s more notable to cover.
Matt Patane: It’s more exciting, especially in the Midwest where they don’t happen all that often. If it’s six months or three months in between a round that’s over a million dollars, whenever that happens, that’s exciting for some people. There are some people that aren’t going to care. Whenever that happens, it’s exciting and people love it, and they think it’s great.
Geoff Wood: It’s something from a community standpoint that we can look to and say, “Oh, maybe I can raise money, because I’ve seen so and so raised money.”
Matt Patane: Or if it’s not I can raise money it’s, “Look. People can raise money here.” I think a lot of people look to Ben and his experience, was one of the first public tests of a startup raising money that’s still based in the state. They didn’t move to California. They opened an office here, but that’s different than moving the entire operation.
Geoff Wood: That came later.
Matt Patane: Right, exactly, that came after one of the investments. It’s not like they packed up their bags and moved and then started raising money. They did it while they were still in Iowa.
Geoff Wood: His next question, are we looking out for the best interest of entrepreneurs or investors/community? I would say that’s probably not your job.
Matt Patane: Well, as a reporter, no, that is not my job. I’ve told a lot of people that my job is not to be a cheerleader, it’s hopefully to offer the more startup new things. From the community standpoint or if you’re an entrepreneur trying to build a company, I don’t think this is the case. I don’t think it’s the case that Iowa is only emphasizing raising money. I found a lot of discussions with folks on both sides of the aisle on what’s more important. It seems to me, whatever fits your business model, if you absolutely need to raise money, or want to raise money because you want to get somewhere faster, do it. If you don’t want to do it because you can’t find the funding or you don’t want to take the risk, or you don’t want to take on those other owners, then don’t do it.
You have to figure out what’s best for your company. There are consequences with raising money. You might get lucky. There are people better than me to talk about this like Jackovin or anyone in this state that’s raised money, but every time you raise money, especially in large amounts, you take on other owners, other people that want to see return on their investments. It’s not just you and your three co-founders anymore.
Geoff Wood: Which is part of the discussion I had with Tory from Rocket Referrals. Now that they’ve got to this sustained level where they’re excited about where things are going, he’s like, “I’m glad I don’t answer to investors. If I raise the money I try to raise, then I would have a different set of problems,” not a set of problems, but different set of …
Matt Patane: Different priorities, maybe, or different issues, unless you’re really lucky that you get an investor that’s saying, “We invest in you because you know what you’re doing,” which depending on the investor may or may not be the case. I don’t know that people are consciously saying, “You have to raise money.” Again, it goes back to, “It’s exciting.” At the same time, if a company bootstraps everything, and then three years later, successful and either has an exit or they have a million customers, or they go public, which is I guess would be a form of an exit, that’s also exciting for people. It just takes longer to pay off in that regard.
Geoff Wood: He asked about overlapping needs, which is a little different topic. I want to talk about his last question here too. How can we get successful bootstrappers more engaged in a startup community? From my understanding, Derik and his wife, as his co-founder, they have this company, Art of Education, super successful. They’re probably not well-known, like a Dwolla would be, or a higher learning technology who’s raised a lot of money and folks like that. If you hadn’t picked up on that, that’s probably a little bit of where this question comes from based on experience. What do you think about that? How do we get them engaged to the community? How do we get them engaged in startup media?
Matt Patane: I guess my counter question would be like, “Does it differ, just because they’re bootstrapped? Are they not allowed into the community? Do they not think if they’re allowed in the community? Why would that differ if you’re raising money versus bootstrapping?”
Geoff Wood: It’s a good question. This is a post that I’ve had halfway in my head for a long time too about participation in the startup community that I’ve never finished. I think that people who are bootstrapping, we tend to see them less. Well, actually it’s probably the same. At least you’re in central Iowa, not eastern Iowa or other parts of the state, but in central Iowa, we have a lot of community activity around getting started, and you see people a lot, and then they get engaged to their companies to a level where they can’t really be there. I don’t know if there’s a time where they return to the community and get more engaged or not. Maybe we just haven’t because the system isn’t developed enough to know.
Matt Patane: Sure. I see what you’re saying. In other words, when they have an idea and they need some help, they’ll go to 1 Million Cups and they’ll come to the co-working space and they’ll start talking to people. Once they have a company and they need to actually knuckle down, they’re going to spend time in their office or they’re going to spend time talking with customers, then my question is that doesn’t necessarily mean they’re not involved, but should they be spending all that time just mingling with folks?
Geoff Wood: Right. I don’t know if “just mingling” is how I would describe it.
Matt Patane: I’m being harsher than I should be.
Geoff Wood: 1 Million cups, that can be two hours out of your week every week, so that can take up a lot of time depending on how you choose to spend that. I did a lot of these things, just because my business is community and I get tired of it. I was at two events last night, and I missed three other events that were going on. When all the West Des Moines Business Incubator stuff was going on, I didn’t get the chance to go to.
Matt Patane: For those who don’t know the West Des Moines Business Incubator, it just celebrated its fifth year on Wednesday, I believe.
Geoff Wood: A couple companies graduated. Startup Drinks was there. All of those events combined. Luckily events are combining, so there’s that piece so you can go one place and get both. Let me twist the question then, although I think that’s a good topic for us to talk about some other time, what do you want to cover from bootstrap companies? Because you’re talking about getting funding is exciting, and people want to read that, so that’s the story you’re going to cover. If somebody’s not getting funding, what would the register, or you as the big reporter, what are you really looking for in a company like Rocket Referrals?
Matt Patane: Sure. With the disclosure that this can change day to day or week to week and honestly it changes my head all the time, and for those of you that I’ve met and I’ve talked with you, Geoff, about this a lot is what is best for the readers not for the startup community, because the startup community probably knows what a lot of these people are doing, whereas the overall Iowa readers or Des Moines readers don’t. This goes for any startup whether you’re raising money or bootstrapping. I’m more interested in who you are, what is the problem, and why is that problem a big deal.
Geoff Wood: That sounds like a profile piece to me.
Matt Patane: Well, that can go different ways. To use WorkHound again as an example, they’re going after the trucking industry and communication in that industry. I have written about WorkHound and I did a short mini profile when they entered Straight Shot, because there was an instance where Straight Shot announced who their companies where. I saw there was a Des Moines company. I didn’t know who it was, and then I saw Max and Andrew were connected, so I gave them a call, and I wrote that in a couple of hours. At the same time, I think for them or from my angle, the more significant story is this problem of communication in trucking.
Laying out here’s the problem, here’s why it’s a big deal, here’s what trucking companies are facing, by the way, here are these two or three companies, so not just WorkHound, that are trying to address that problem. I’m interested in the companies our readers … I think some of the readers are interested in these specific companies, so whether that’s a profile or Q&A piece or something else that would work. I think for the general audience of the register it’s, “Here’s an issue that affects a lot of people. Here’s someone who’s trying to go after that.”
Geoff Wood: You profiled them. When do you want to talk to WorkHound again? What is the type of story that WorkHound] could come to you and say like … Assuming it’s not a funding story, what is the piece that’s going to get your attention of like it’s time to do a follow up?
Matt Patane: That’s a difficult question. [Crosstalk 00:51:38]. That’s the thing is I think different journalists are going to have different answers. There’s also different things that go around it like the timing that I have, the timing that they have, who I can talk to, what the issue is. If they have a new product, maybe if they’re raising money, it depends on the amount. I don’t think people or journalists want to hear about every couple 10,000 that you raise, not that people are coming to me and saying that. I don’t know.
I think the any startup that’s looking to talk about a potential story, it should be based off of what they think is a major milestone for them. Whether that’s raising money or they hired an actual CEO, or they reached 1,000 customers, or they pivoted, or they’re shutting down, whatever that milestone is that would be a good way to start. Then it’s up to me to work with them or to try and think of a way to say, “Okay. That’s okay important to them. Is it important to everyone else?” This goes for every industry, every company, every story. Not everything that’s important to the state government is important too Iowans, or not everything that’s important to [inaudible 00:53:00] is important to Iowans, so there’s a mix there. A good place to start is just what milestones have they hit that they think are important.
Geoff Wood: I would probably add to that. People need to reach out to you, get a relationship, meet you and …
Matt Patane: That certainly helps.
Geoff Wood: Because if you just get a random press release where someone says, “We hit 1,000 users,” that’s probably not something you’re going to write about.
Matt Patane: Unless I know that it’s in Iowa, it’s pretty much going to be deleted off the bat. Even if it’s in Iowa, that doesn’t mean … The disclosure that I make to a lot of people is you could send me whatever you want, because I want to hear about everything, because even if I don’t use it, it’s always stuff to build a story later. If a company says, “Hey, we hit 1,000 users,” or, “Hey, we just hired our chief technology officer,” I’m probably not going to write that you hired chief technology officer, but if I write a story six months later, I know that you have a chief technology officer, so I know that you’re doing something. The disclosure is always, we don’t guarantee a story. Ultimately, it comes down to what we think is valuable to our readers, and what we think they’re going to enjoy. Sometimes that just lines up with the milestone at a company.
Geoff Wood: Right. I pitched you many stories.
Matt Patane: Yes, you have. A lot of people have. There’s a line I haven’t written about, again not because I personally don’t think it’s important, or I don’t find it interesting, but it’s just working with, again, what the general audience is going to get value from.
Geoff Wood: I get this from time to time just being adjacent to media, like press releases from especially moderately sized companies in Des Moines, those probably aren’t going to work with anybody. If that’s what you’re doing, especially if I don’t know or I may know the company name, there’s nothing for me. Actually [inaudible 00:54:56] Dwolla taught me this years ago, get to know the reporter, get to know what’s interesting to them, pitch them a story that fits their interest. There’s a lot better chance that you get … Probably don’t pitch the same story to everybody, because interests are different. I also tell somebody asked this week how to get the business record to write about them and I of course don’t work for the business record or anything.
What they told me a long time ago, which I think is probably still true, is they don’t write startup stories. That’s not really interesting to them, because that’s not their readership. Their readership is people that are CEOs and executives in Des Moines or people that want to be, so pitch them a story, pitch why your startup is interesting to those people or the effects it’s having on their community and there’s a lot better chance they’re going to read it. If you’re just sending them press releases or whatever and they’re not picking them up, that’s probably why, it’s because you’re not tripping their interest triggers to say, “We need to write this.”
Matt Patane: I said this at 1 Million Cups a couple of months ago now, but that relationship helps. Again, I’m not saying that … My job is not to ignore people. My job is to actually talk with people all the time about different stuff, but if I know who you are, even if we’ve exchanged one email, and I have your phone number and you have mine, that helps, because at least I know who you are, I know some of your backgrounds. The other finer details we can talk about later. Getting stuff out of the blue, especially now when we’re talking about caucuses, or if it’s around election or around Prometheus awards, or launch date, the accelerator, whenever there’s a bigger event, getting stuff out of the blue, that usually doesn’t work.
Even on average Wednesday, if it’s 3:00 and you’re sending me an email about something that you think is important and should be written that day, that’s not going to work, unless it’s the most extreme example. Harrisvaccines being bought, that’s an extreme example, because that doesn’t happen every day. They’re a big enough company where that matters. Relationship helps, but a good starting point is if there’s a milestone that’s important to you, start with that, it’s what I would say.
Geoff Wood: Okay, sounds good. I think we can wrap up from there. Great question from Derik. I really appreciate that. You can send us questions at least one a week, mvp@gravitatedsm.com is an email address to you, or hit either of us up on Twitter for that. Do you want to wrap up with your trivia question this week?
Matt Patane: Yes. This is what I came off of the bat. We got to get better at trivia questions. This is non-tech related and I don’t know why I’m thinking about this but, “What is the brand of motorcycles, it’s a classic brand of motorcycles, but it’s made in northern Iowa, and has a storied history?”
Geoff Wood: A stored history of motorcycles that’s made in Iowa, so it’s a brand I would know as a non-motorcycle …
Matt Patane: Well, if you’ve read some of my stories in the register from a year and a half ago, you might.
Geoff Wood: Is it a company that’s typically thought of as a motorcycle company, or is it a different …
Matt Patane: Yes. Their parent company is motorcycle or vehicles.
Geoff Wood: Northern Iowa is Winnebago.
Matt Patane: No, it’s not Winnebago.
Geoff Wood: I didn’t know that they had, but that would be Northern Iowa-
Matt Patane: But that would be northern Iowa.
Geoff Wood: -on manufacturing, that’s what I know too, Forest City. For some reason, Indian is jumping into my head.
Matt Patane: There you go. That was my trivia question.
Geoff Wood: Where did they manufacture that?
Matt Patane: They’re made in Spirit Lake, so that was a big deal a couple years ago. I don’t know why I’m thinking about this now. I think because I got a press release that they have another version coming out, but a couple of years ago.
Geoff Wood: Where is that company based?
Matt Patane: Polaris is the owner of Indian motorcycles.
Geoff Wood: Okay.
Matt Patane: Polaris is based in Minnesota, but they have a pretty decent size of manufacturing plants in Spirit Lake where they make all of the Indian motorcycles. If you want to see pictures, the register has a bunch online.
Geoff Wood: That’s a great trivia question.
Matt Patane: Yeah. It’s random, but it works.
Geoff Wood: If we go back to our cord cutting, if you go watch American Pickers on Netflix, they’re always collecting Indian things which is also …
Matt Patane: They are classic motorcycles and Polaris re-vamped them a little bit when they picked them back up two or three years ago.
Geoff Wood: I always think of Polaris as snowmobiles.
Matt Patane: Usually, yeah. Their main business is ATVs and snowmobiles and those vehicles.
Geoff Wood: Nice, that’s a great one. Good question. You think ahead for next week. Come up with another one.
Matt Patane: I’ll do my best.
Geoff Wood: All right, and we will be back next week with another edition of Minimum Viable Podcast. Thanks everybody.
Matt Patane: Thanks.