Fixing Milwaukee’s Startup Culture
Wisconsin is the worst state for startups. Why? And what can be done to improve?
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