Fixing Milwaukee’s Startup Culture
Wisconsin is the worst state for startups. Why? And what can be done to improve?
Lubar Center for Entrepreneurship. Rendering by Continuum Architects + Planners.
There is a persistent discussion in the Milwaukee startup community about what is wrong with entrepreneurship here. The Kauffman Foundation ranked Wisconsin the worst state for startup activity in both 2016 and 2015. Since 2010, Milwaukee has lost a total 627 businesses, the second worst performance in the nation. Depending on who I talk to, I hear three different explanations for this:
- Milwaukee area investors are not active enough, there needs to be more capital invested.
- People in Milwaukee are worse at creating startups: the businesses created are not worth investing in.
- Milwaukeeans are too conservative, both for risky startup investment and for risky startup employment.
I have been on all sides of this argument over the past 5 years of running RokkinCat, which started out as a startup product company and pivoted into contracting as a form of “bootstrapping”. RokkinCat is now a software contracting company which often works with startups to build the first few iterations of their products. From my vantage point in the community, I can see that these three explanations all point to an underlying cause: the people who would build good startup products are leaving.
Our community needs to create a compelling reason for makers to stay in Milwaukee.
I find it hard to blame investors for not investing in Milwaukee tech companies: who will build the products that are being pitched? If Northwestern Mutual and Johnson Controls have so much trouble filling their staffing needs, how could a seed-round mobile app company hope to attract talent? Conversely, why would a solo-founder who has a idea for an app leave a comfortable agency job to start a company that seems highly unlikely to attract investment? Furthermore, if they did build a company and it failed, the result would be to go back to an agency job that does not value or compensate for the skills they built. And so, few businesses get started and everyone interested in working for a startup heads to the coasts.
There are many reasons for someone interested in working for a startup to run to Palo Alto or New York. The obvious one is that there are more startups there. But if they want to start their own, it is a bit less clear why it is so much better there than it is here. The short answer to that question as the one before it, there are more startups in those areas. However when you explore why there are more startups, you start to uncover reasons that don’t seem all that difficult to replicate.
More companies are willing to buy products and services from startups
The most important milestone for any new startup is getting its first customer. For a technology startup, that means talking to hundreds of people who have the problem they are trying to solve and convincing them to buy a product that probably doesnt exist yet. That is a very difficult sell in the midwest, where small businesses are conservative and big businesses are even more conservative. A successful startup is far more likely to buy a product from another startup than a traditional business is. They are willing to risk a few glitches along the way because they know startups need to work harder for their customers to survive.
A failure at starting a business is an asset, not a career-ending liability
In Milwaukee, if you start a startup and it fails; your best career option is to go back to the job you were doing before you started your company. The big problem with this is that the likelihood that your employer values your experience is very low. They will likely be concerned about how long you spent “out of work.” This phenomenon creates an additional layer of risk for innovators; if their idea doesn’t pan out, they are back where they started without the raise they would have gotten if they stayed. In Silicon Valley, if you start a company that fails, you are a prime candidate to be snatched up by another startup. Successful startup founders know that an employee who spent a year trying to make a business work is more valuable than an industry-expert in almost every case. Therefore, if you move to the coasts you can have much more confidence that pursuing an innovative idea is not a career-ending endeavor.
There are many others who think like them
Because all of the entrepreneurial people in the United States flock to Silicon Valley, it is full of people who are interested in the same things: business, technology, fashion, clean energy, and finance. Constant access to motiviation, inspiration, and access to fellow founders is invaluable when starting your own business. It is much harder to believe that you can successfully start a business when nobody you know has done it.
All three of the above aspects of Silicon Valley and New York are positive feedback loops. Having more startups makes a place a better place to start startups, and so there are more successful startups, and so it is an even better place to start a startup. If Wisconsin can start emulating some of the ways Silicon Valley is a good place to start a business through other means, it will be a much more compelling place to start a business. This will require local companies going out of their way to buy products from local startups, being willing to hire people whose startups did not pan out, and building communities where entrepreneuers can meet and collaborate.
Many programmers can’t wait for their day full of programming at work to end, so they can go home to program on the thing they wanted to be programming the whole time. Designers are constantly drawing logo sketches in the margins of PowerPoint handouts. They don’t call themselves entrepreneurs and they don’t come to startup events, but they are the missing other half of an entrepreneur ecosystem. At RokkinCat, we see this as an opportunity to build a bridge between the two communities, to create trust and confidence on both sides.
Two years ago, RokkinCat started a hackathon series called Hack & Tell which encouraged makers (programmers, designers, quilters, etc.) to show everyone else what they spend their free time building. No business plans or startups, just excited people sharing what they are excited about. We believe that connecting these makers to each other, and getting them to share their enthusiasm is how good businesses are started. Many investors will tell you that they invest in teams, not products. RokkinCat is trying to build teams.
Milwaukee has a serious chicken and egg problem. If you are reading this you can be part of the solution. If you can build then build. If you have money, look for ways to invest in young people with bright ideas. If you need software, look locally to see if you can invest in companies to build a business that solves your problem instead of building in house and getting nowhere. If you can hire look for people who have taken a risk and failed, they learn fast and can think critically about your business. If you think this is important work or that you want to help, email me and let’s work together.
Our last event attracted 100 enthusiastic makers. Our next Hack & Tell is April 8th, and we hope to see you there.
Nick Gartmann is a Partner at RokkinCat
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The best thing people can do, especially thoughtful, creative, educated, people, is to leave Wisconsin. This is exactly what I and my friends did 20 years ago and we have all thrived as entrepreneurs on the west coast and jave never looked back. It is a cultural thing. People want economic and social freedom but Wisconsin offers neither. Wisconsin has draconian regressive social policies like, no right to die law, no legal cannabis and gay and abortion rights are under threat plus it has high taxes and lots of regulations within a state that has little to few markets due to the 30 year highs in poverty rates in Wisconsin which have spiked under Walker. Nobody wants that! No business can be done when everyone is broke, unemployed and drunk a lot of the time. $7.50 jobs with no benefits under Walker plus chronic mismanagement by his administration (DOT budget fiasco, crumbling roads etc) has not helped at all. There is a reason Wisconsin is consistently dead last in the country for entrepreneurs and Washington State where I live is consistently #1. Freedom, economic and social abounds out west. People in Wisconsin are very obsequious and “inside the box” Thus they take no risks and are provincial to the point of xenophia. This is a toxic combination. It takes, guts, resolve, conviction, hard work and risk to make it work but at least you have a chance. Ask my buddies from Eau Claire that owns his own winery in Napa Valley or another who owns hos own media business, the best thing to do as an entrepreneur in Wisconsin is to leave Wisconsin! Honestly, the only.thing that would instantly bring a huge entrepreneurial boom to Wisconsin is for the state to finally end its atrociously failed policy of cannabis Prohibition. Entrepreneurs are minting money out west right.now all while shutting down the black market cannabis cartels and creating a far safer, more egalitarian system. I don’t have people killing each other over a bag of weed on Seattle like they do every day in Kilwaukee. Forget that. Sadly, the old timey, high tax, big government, nanny state Republicans in Wisconsin will never wisen up so yet another generation shall be forced to flee and invest elewhere. Hey, you might be dead last for entrepreneurs and new business start ups Wisconsin and you have the worst cannabis laws in the USA now but it ain’t all bad. Wisconsin is still consistently #1 for drunkards and alcoholism! Forward, Wisconsin, Forward!
“Fix it”? Yeah right?! Wisconsin is the Mississippi of the Midwest nowadays! “Fix it” LOL! Just vote with your feet and taxes and get the hell out of Wisconsin!!
mI agree minus your long venting on cannabis. Put the bong down because some of what you have to say has some truth in it and get lost.
Wisconsin is very conservative in general and that is not a bad thing. What is hurting new business from my view is a cultural and policy approach. First the the cultural. We naturally tend to go with a sure thing but that is not the nature of start ups. Second we tend to not see any success in the start ups here. Its a circle. Plenty of well educated risk takers born in WI leave because the money is elsewhere and the connection to the world is limited by geography and transportation and easy accessibility. Ever try to fly regularly in and out of WI to business meetings around the world from here. It stinks. If Chicago or Minneapolis was not so close the state would have no HQ. . We are high taxed but not more than MA or CA and pay less so I dont see the problem on the living expense. Its more about loans, talent, transportation,. We need to do more to welcome more businesses beyond paper mills, metal working, warehouses, food only but also tech and those that have a global foot print to attract and maintain talent. We spend alot on educating the best for those up and coming industries but neglect the companies and requirement they need to put down roots in the state. The state is terrible when it comes to tech and if I were to come back I would choose Minneapolis before any WI city
I really wish it would change but those that still live there have to push on the backs of there elected officials to make it happen. Not much hope
Here is a follow up for Urban Milwaukee. Good series content.
Start by surveying college grads that left the state as to why they left. I just got back from Boston. Yes they have Harvard, MIT, Boston College, Northeastern, Boston Medical. etc. But Milwaukee a smaller city have Marquette,MSOE, UWM, Wisconsin Medical College, etc. The vibe and start up action is so different. Why? International Airport. Yes. Thriving college communities, yes, Start ups and jobs available. Yes. Milwaukee is closer than most other cities to change so its need to be tweaked not overhauled. The biggest thing is the transportation internationally and making the city friendly to tech and health not just manufacturing.
Prescriptively prioritize the results of a survey on the last 10 years of WI college grads and where they left to and set a campaign on those who already left. Look at those results and set a strategy to bring them home. Also put a plan in place to expand the airport and make it a true international option to Ohare. That is the best hope. Considering what we spent on the Zoo interchange image if that money was spent on the Airport where international commerce and ease of transport could have been. Milwaukee could and still can be a great city for the whole region and all of its citizens.
Suck it Caligula.
Putting aside the Red State/Blue State arguement and the point about outmigration, I’m still left with why Wisconsin is WORST. Worse than Kansas, a redder red state? Worse than North Dakota, where the population is racing for the state line? How is this possible? Worse than, are you kidding, Mississippi? It seems to me you can blame Gov. Walker for a lot of things, but this may not be one of them. Anyone who has looked around the country has been struck by the lack of intellectual and fiscal capital in Wisconsin, especially compared to the coasts, but what are those special attributes that make it WORST? Any thoughts?
Lots of wisdom here in the comments.
I’m in about as low-tech, high-touch industry as there is. Grew up in MKE, went to Marquette, moved around a lot–most recently spending 16 years in San Francisco–and returned to the Midwest (Chicago) about two years ago.
It is definitely cultural. Caligula’s point about pot is well taken, especially when you consider the six or so DUIs it takes before a drunk gets his license revoked. Man, I never truly understood the drinking culture I grew up in until I moved away, especially to California. I mean, people drink all over, but for cripes!
Of course, MKE has things to learn from cities and regions who already do start-ups well. And, I would encourage it too really focus on its strengths in terms of current or cultivate-able industries. Look to water, measurement/controls, etc. Whole it’s true that universities play a key role in all this, it’s important to understand that Silicon Valley grew not simply because of Stanford, but because of its proximity to Moffet Air Force Base and all of the other military bases that used to exist in the Bay Area. WWII and after were critical periods of tech development, and the driver was the military. Now, it’s hard to talk about start-up businesses without meaning tech. Perhaps MKE can find its own niche.
I wrote the featured article about why milwaukee sucks for startups in Milwaukee Journal Sentinel. It still sucks lol I moved to Madison, best decision I ever made. MILWAUKEE IS DEAD LAST IN STARTUPS. Wont change city is wack and always will be.
I agree that cultural as well as policy issues are a factor.
A key part of that relates to Walker/GOP legislature polices relating to environmental and other issues.
Dating back 100 years, and until recently, Wisconsin led on virtually every aspect of environmentism, from conservation, ecological restoration, Earth Day, you name it. Now climate deniers have taken over state government. Why would anyone interested in alternative energy, transit, etc. stay or come to Wisconsin. Walker killed train-making Talgo, revoked the 800-million high-speed rail contract and has been rolling back anything relating to protecting the environment (green jobs are a growing aspect of the national economy.)
Yes, some conservative (reactionary) people keep getting these economy-wreckers elected. But not everyone here is so short-sighted. It’s just that those who can vote with their feet are smart to move to “greener” pastures.
I’ve been thinking in the past week that, while MKE can grow organically and gradually, it might also benefit by thinking uber boldly.
By this, I mean: Ehat would it look like for Milwaukee, itself to become an incubator, an urban laboratory where the best and brightest could come to disrupt systemic challenges and simply to have a large scale lab in which to create. Think Johnson Controls. Instead if just becoming the “efficiency partner” for the new Bucks arena, how about for the whole city? Elon Musk? He’s got big ideas, ex. Hyperloop. Invite him to use (and better) the MKE by incubating and testing on a grand scale. Google’s testing driverless cars in Pittsburgh. Why not MKE? As goofy as it might sound, why not MKE as the city of the future?
I know there are plenty of obstacles, and totally believe that business cannot solve all problems, but–from the business end–shake things up a a lot. (Come to think of it, maybe as part of something bold, actually change Milwaukee’s name to MKE. Stranger things have happened!
Anyway, by der, I gotta get back to M’waukee so I can touch dat bronze Fonz down by Gimbels’s, and de go get me a brat.
Do you know how those early Progressives in Wisconsin reached people and got their votes? They put forward ideas that work and stayed away from demonizing others even in the face of people like WCD. It isn’t even that hard, we can see that most of the right wing, reactionary policies plain just don’t work.
Just show people a way to solve their problems. Even if right wingers take the idea and implement it, it’s still a win. Let them turn liberal.
Wisconsin and Milwaukee are riddled with excuses but the truth is people fight to preserve exactly what they have rather than do anything different. It’s terrible, and I finally left last year and I feel so much better because I don’t have to fight to be employed at a decent salary or constantly explain the value of what I do to people (I’m a UX designer, branding designer). Every last client I have from Wisco is late on their payments, nickels and dimes me over everything even if I cut the cost. It’s just not worth it. Caligula is right. GTFO.
Here’s an idea for Urban Milwaukee. Consider using this platform, which attracts and engages a lot of creative people (and yes, some grumpy naysayers) to regularly publish articles about ways to help spark creativity in Milwaukee—on any front–or ones that already are.
Tim and Midnight Son offered some ideas in that vein.
Yes, I’ve noticed a lot of defeatism in Milwaukee, but also plenty of can-do energy. Innovation is generally a result of optimism. I can picture sharing that kind of energetic spirit being part of Urban Milwaukee.
Or maybe it could be as simply as having an engaging question of the week inviting online discussion. Topics or Qs could even be from readers. UM could be an incubator of ideas and change.
I left and it was the best decision I ever made. When most people spend their days recovering from a hangover you’re not gonna find people who want to build businesses. The whole damn city is full of potential but most are too busy tailgating and doing kegstands.
This is so sad for Milwaukee; but the article and many of these comments are true. I have a blog post at http://mketechfund.com about the low number and dollar amount of investments in Milwaukee-area startups. My next post (soon) will cover reported 2017 Q1 investments in tech startups. My initial work on this article indicates it was three investments and less than $1 million total.
Well maybe the of investment in Milwaukee has something to do with the outright venom that is constantly spat at this city from elsewhere in the state. Seriously who makes a profile on urbanmilwaukee.com just so that they can smack talk the city in the comments section? Your grouchy rants are unhelpful.
I think Milwaukee just lacks a significant population of people who have the money, smarts, and enthusiasm about this city to make the leap. I would love to start a business in Milwaukee but I can’t really afford to invest much energy into it with the hours I work to make ends meet and if I missed a month’s pay it would be a personal disaster.
It also doesn’t help that we have a State Government that seems to be only interested in protecting Wisconsin’s legacy companies from the future.
This was a very thoughtful article and I think does begin to identify the barriers and challenges that we has Milwaukeans face in the start up community.
To that end, we have assembled a group of health technology entrepreneurs to begin to build community around this. If you are a CEO or founder of a health technology company in the greater Milwaukee area please join our effort.
Jay Mason
Healthtechmke.com
Hello,
I have started a Network Transportation Company like UBER, that service the Greater Milwaukee area called CyberZoom. The challenge that we are facing is supporting. Our service is for the community, I say this because we have lowered our pricing to more than half of what you will pay for UBER so that the people of our communities can get around to doing things without breaking the bank. I was not given any funding to start this company I used all my money and at times that can be hard.
I ask that MILWAUKEE please support locally on Network Transportation, and if anyone has some great funding ideas please email me at ogladney@ridecyberzoom.com.
PLEASE visit our website (www.ridecyberzoom.com) and download our app called CyberZoom.