Start up

Entrepreneur is on the road with startup platform Rise of the Rest. Check out  for stories from the October road trip as well as for insights from thought leaders and community leaders showing there’s an entrepreneurial world outside Silicon Valley.

Today, we toured Denver on a bus to see an entrepreneurial ecosystem that, actually, compared to many places, is doing pretty well. According to the , Denver is one of the top five cities in startup activity, and Colorado ranks fourth out of 50 states. Two decades ago, that wouldn’t have been the case. As we visit cities across the country, we often hear what’s not working –we need more capital, more connectivity, better founders.

While Denver is self-aware that they can do so much more, they’re on an encouraging pathway to how a community can do its best. At lunch, talked about the “three Ps” of the . In reflecting on Denver, I saw three Ps that have made Colorado a great startup community. What can other cities learn from Denver about how the rest can rise?

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1. People 

Nearly every entrepreneurship leader in the country has read , a book written by legendary Boulder, Colo.-based entrepreneur and venture capitalist Brad Feld. In our pitch event, Brad highlighted what has made Colorado entrepreneurial over the last 10 years — what he’s called a “doer-ocracy.”

In Colorado, says Feld, the way you get ahead in the entrepreneurial community is to give to other people. They even have a hashtag: , which means to give without an immediate expectation of return. This mindset is critical to long-term  and isn’t common everywhere. Feld has found that very often, the communities that have been less successful have had the people who want to be involved in entrepreneurship not actually be helpful to entrepreneurs—investing in them, sitting on boards, helping them navigate .

Finally, founders need great people to grow, and in Denver, we saw the city investing heavily not just in the founders of the next great company, but employees 2-1,000. and are two great examples of best-in-class coding academies that are filling the future jobs of Denver.

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2. Place

We had breakfast at , founded 20 years ago by Gov. John Hickenlooper, who was a lifelong entrepreneur before running for office. Hickenlooper promoted a phrase that rivals “doer-ocracy” in its local resonance: “topophilia.” (I promise Denver is more than just idiosyncratic terms!) Topophilia means a love of place. Twenty years ago, downtown Denver was not trendy, but people like Hickenlooper made the city a place where young people wanted to live and work. The city has invested heavily in bike paths, easy access to the outdoors and a million other things that create a high quality of life.

, founder of , arguably Denver’s fastest-growing startup, moved to Denver because it’s where he wanted to raise a family. He told a story today about how in the early days of his company, he would go to to raise money, and investors at the end of the meeting would say, “This has been a great conversation. When are you coming back here next?” His response, “Well, I’m here now. Are you in the deal or not?” Today, Bryan says that he won’t take an investor’s capital unless they get on a plane to see him in Denver — and with his revenue growth and market share, he’s a massively attractive investment target for anyone, anywhere.

If you’re a city, own where you are and make it a great place for the best entrepreneurs to live.  As Steve Case said, “In the 21st century, the capital will follow the people more than the people will follow the capital.”

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3. Purpose

In Colorado, entrepreneurs and investors have picked up the idea of “purpose-driven companies,” and rallied around a greater meaning than just financial returns. Whether it’s “impact investing,” “conscious capitalism,” or another phrase you prefer, the idea of building great businesses that also yield a more prosperous society is in the DNA of Colorado.

One of the most successful startups in Colorado over the last 20 years is . It’s now a 100 percent employee-owned company that will allow janitors and administrative assistants to retire comfortably. There are also organizations such as the Gary Community Investment Collaborative that are seeking to level the playing field for founders from backgrounds, making sure that, in the words of one Colorado leader, the benefits of startups don’t just accrue to “hipsters and college students.” And we’re seeing emerging sectors like education technology—three of the eight teams pitching for $100,000 were in ed-tech.

Ultimately, Denver still has work to do. The city still doesn’t have a massively valuable startup like, ,or that can re-define the community for a generation. And the entrepreneurship community is still fragmented in ways that leaders hope to change. But as we seek to promote the Rise of the Rest, it’s helpful to see examples of a community that can provide instructive thoughts to the rise of others.

When one hears the phrase “Startup Hub,” the mind’s eye most likely automatically conjures up images of locations like New York City, San Francisco/Silicon Valley, Boston. However, the Midwest region has been developing some real challenger cities to the “Startup Hub” throne. According to , which is an “umbrella of annual reports that measures U.S. entrepreneurship across national, state and top 40 metro levels,” Columbus, Ohio’s capital, is the fastest-growing city in the country for startup activity. According to CB Insights, Ohio had less than.

Few know this better than Tom Walker, the president and CEO of Columbus-based venture development organization . Rev1 Ventures describes themselves as “part VC, part accelerator — with the expertise and connections to fuel startup success.” And that expertise involves recognizing potential and talent in places where others aren’t looking.

“When people want to see great art, they go to the Louvre,” Walker said. “That is, until they realize that there are also great paintings in museums right in their own backyards.”

While Columbus is gaining serious steam on the startup front, there are still very real obstacles to overcome. According to Walker, the West Coast, New England, New York City and even parts of Texas, attract more than 90 percent of available early-stage venture capital. While that leaves less than 10 percent of early stage venture capital for the rest of the country, it also leaves the door open for branding and growth.

“Instead of challenges, we see opportunities,” Walker said. “Our strategy is to create our own Midwest brand of ‘startup hub,’ with technology, talent and early stage capital. And all of this is connected in a way that’s uniquely Midwestern — we call it ‘the backyard effect.’”

And the “backyard effect” isn’t something to be ignored. MentorcliQ is an award-winning mentoring software solution that helps organizations launch, support, and grow high-impact employee mentoring programs. It’s a Rev1 portfolio company and one of the company’s co-founders, Andy George, moved from California to Ohio to capitalize on the Columbus startup scene.

“The community here is so close-knit and so supportive and helpful in wanting to see you succeed,” George said of Columbus. “It’s the best of both worlds, a close startup ecosystem and a really supportive corporate environment.”

According to , Columbus is headquarters to at least 20 Fortune 1000 companies. In addition, blue-chip firms such as Limited Brands, Chase, Kroger and Anheuser-Busch have major facilities in the area.

“The reality on the ground is that capital is portable – it doesn’t stay on the coasts if there are good opportunities in Ohio,” said Ian Sigalow, Partner and Co-Founder of Greycroft, a VC firm based in NYC and Los Angeles. Approximately 50 percent of Greycroft’s portfolio is in New York Tri-state area (NY/CT/NJ) and Los Angeles, 35 percent is elsewhere in the US, and 15 percent international. Greycroft funded out of Columbus and out of Cincinnati. “Companies outside of New York and LA typically seek us out because we can help them expand into our core markets,” he added.

“The plusses begin with affordability. Eight of the 20 cities on list in 2015 are in the Midwest, and 50 percent of those — Cincinnati, Dayton, Columbus and Akron are in Ohio,” Walker said. “ Whether you’re a software engineer paying off student loans or an entrepreneur trying to launch a startup, cost of living matters.”

Seth Miller, a 2014 graduate of Ohio University, is the co-founder and CEO of , an app that allows users to record sharable freestyle raps over instrumental beats. He’s traveled all over the US trying to grow his brand, and he knows exactly what Walker is talking about.

“The cost of living is a huge plus. The cost of talent, too. Out West a programmer will cost you at least $150,000, whereas a good programmer in Ohio can be employed for half of that,” Miller said. “And you can’t ignore the fact that there’s less competition. If you’re in the Valley trying to pitch firms on Sand Hill Road, you’re going against the best of the best…every single day, and you’re all fighting for the same investment dollars.”

Growing a startup in general is extremely hard, no matter where you are geographically,” Miller added. “A couple challenges you face in Ohio are a relative lack of funding resources and a paucity of talent, specifically with developers. But, both of those are beginning to change with new funds like Drive Capital and Rev1 Ventures.”

According to Sigalow, “the challenge in every upcoming market is hiring talented managers at every position, not just developers,” he continued: “How many CFOs in Columbus have taken a start-up public before?  How many heads-of-sales have scaled a SaaS company from zero to $100 million in revenue?  How many CTOs have scaled a developer organization to over a hundred people?  You can probably count all these candidates on one hand. They all have to be relocated. named Miller’s RapChat one of their “seven favorite companies from the 500 Startups Batch 15 Demo Day.” And according to TechCrunch, over 2.5 million raps have been created through the app and they have over 50,000 monthly users.

Miller lived on the West Coast for most of 2015, but he’s currently back in Columbus with the goal of making his hometown RapChat’s headquarters. In his mind, location doesn’t necessarily play a determining role in startup growth.

Miller also said that the type of startup plays a huge role in the funding one receives.

“It seriously depends on the type of of startup you have. For example, if you’re in bio-tech, SaaS or health-tech, Ohio is one of the best places you can be,” he said. “If you’re in consumer mobile like me, it’s still not a great place to be, but hey, we’re trying to change that.”

When it boils down to it, all signs are pointing to a startup surge in Columbus. Walker, George and Miller have all seen the signs.

“I’m seeing more and more opportunities in Columbus for companies at the “concept” stage,” Miller said. “That’s generally different than all the places I’ve been to. There are groups and people here who legitimately want to help companies take an idea and help them evolve it into a real company. That’s huge. If you go to the traditional hubs, they probably won’t even hear you out until you have a live product and thousands of users.”