As the community evolves, challenges persist

I wrote this guest post for Clay & Milk after a wildly successful community conversation (Monetery) hosted by Dwolla. The original article is linked here and save in my blog for archival.
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Thank you Ben Milne for rebooting the conversation about our startup community during Monetery on March 20, your Dwolla team shined as a cohesive cohort of individuals.
I fondly remember from your launch events during the nascent days of Iowa’s startup community.
These are my reflections as an ‘aging’ member of Iowa’s startup community:
Brad Feld spoke for the first time in Iowa as a guest of Thinc Iowa conference in 2012. On the heels of Big Omaha and produced by its parent company—Silicon Prairie News—Thinc brought speakers from near and far. The event engaged about 400 people as attendees and sponsors observed one of the first startup conferences in Des Moines.
As a partner in now-defunct Startup City Des Moines, I sat and listened intently to messages from startup founders and advocates. Brad spoke from the heart about the newly introduced topic of Startup Communities, his eponymous book, and a nifty video produced by Kauffman Foundation. He followed up the conference talk with a fireside chat at Startup City with a couple dozen individuals from the community.
Fast forward to Monetery when Brad returned as one of the panelists to a Des Moines stage. As I sat in the back of the room once again listening to the same engaging Brad—whose blog I follow regularly—I couldn’t help but say to myself:

Things change yet they remain the same.

Des Moines’ startup community has grown significantly over the past six years. We have received an undeserved (in my opinion) amount of accolades and recognition, attention reminiscent of a future we want rather than a future we’ve developed.
Yet have risen, from the rubble of defunct incubators (StartupCity) or startups of 2012 (Pikuzone, Sharewhere, Real Estate Fan Pages, Mens Style Lab) such amazing entities as Global Insurance Accelerator, Funnelwise, Gravitate, Gain Compliance, Clinicnote and more. Geoff Wood remains the tireless advocate for the city’s startups and lone rangers; Mike Colwell has even more startups seeking his sage advice.
We have made amazing strides in connecting members of our corporate communities through these accelerators and brought several hundred (yes, several hundred) mentors who regularly volunteer their time and talent to grow startups. These have funded, bought the startups’ products and adopted the agile and nimble mindsets that are consistent with the startup lifestyle. Our chambers of commerce are no stranger to startup conversations and its leadership remains present, engaged and connected to new and established companies.
Des Moines may be a rare community whose chamber’s CEO is also an advocate for startups, invested in his own family’s startup (Homeditty) and knows the difference between startup (correct) and start-up (incorrect).
What hasn’t changed is the newcomer’s hunger for information. No matter the number of books, blogs, videos, guides and tweets, the new entrants to the startup community are seeking that early meetup, the startup weekend and the reassurance that there is funding for those who are sweating and bleeding on their way to success. There remains the same ‘failure rate’ from which new startups MUST be born.
The government is neither an ally nor an enemy – simply a feeder and supporter amongst many.
What we need is a continued conversation about these topics. Topics that will return to the Des Moines stage on April 5 with AccelerateDSM and then again in September with the Midwest Angel Syndicate’s meeting of angel and early-stage investors. Conversations that happen at Gravitate’s Full-Time Founders meetup. Conversations that need to happen at more venues, without relying upon Ben’s generosity (despite knowing that if he’s in town, he’ll likely show up and contribute!)
I’ve taken away the following from this recent conversation:

  1. When Drive Capital talks about funding 10 companies out of 3,500 applicants – they are exposing a very meaningful statistic – they funded 0.29 percent of the applicants. Startups need to do a LOT more to make their case for someone’s investment.
  2. Diversity remains a catalyst toward success. We, like a majority of the country, have a long ways to go to add this catalyst in startups, venture firms, cities, communities and teams.
  3. Awesome ideas, like Pi515, can starve to a quiet death without friends and allies. Kudos to Ben Milne and Brad Dwyer—who created a fundraiser last year for Pi515—for stepping up to the plate and writing a check that injected life into Nancy’s dream.
  4. We clamored for and got corporate partnerships. Now, the startups must step up, identify, and help solve the problems our corporate partners want solved.
  5. Let’s quit asking for reduced government regulation. If California can birth and incubate startups in one of the country’s most regressive entrepreneurial regulatory environments, regulation is a red herring.

Thanks, Ben, and the Dwolla team for the reawakening.

Archive | Segregation isn’t the solution to lack of diversity

I submitted this rebuttal to an article in Clay & Milk on May 16, 2017  and am saving it here on my blog for archival.


Sometimes you set aside your vulnerability just to curtail chances of preventing harm. As a guy who frequently sees the stories about a lack of women at the table in venture capital, I too wonder why. As a state comprising of a fairly even male to female ratio of workers, it is puzzling to see why more women aren’t investing as VCs and angels, especially since many Fintech employees in Des Moines’ are women.
The recent Clay & Milk article, “Making the case for female-focused investment firms in the Midwest”, highlights the core problems as there being simply too few women partners at venture funds and too few venture funded companies have women CEOs.
More investment groups focused on women-led businesses and women-specific groups for investors and strong communities were two of the solutions highlighted. I’m not sure that would work to solve the original issues.

A brief history

I was exposed to many of our city (and state’s) startups during my time at StartupCity Des Moines.  The core problem of access to capital led several of us to the table to discuss options, one of which was simply a directory of capital resources. The directory’s limited success led us back to the table and formation of a Des Moines based Plains Angels investment network. At its onset its membership saw as many as 125 members, 14 of which were women.

Progress

The network grew and, over its 4 year history has made 19 investments from 400 applications. As I reviewed applications, I looked for the business growth characteristics, capabilities of its leadership team, and the financials. Not once did the demographics – men, women, foreign-born, native-born, black, white, Asian or any other diversity factor come into play because they weren’t relevant to the investment.  As I look back, four were led by women – a datum I know only because I went back to look.
I believe our city is different from the larger cities of the coasts and elsewhere in the world. Either due to size or relative economic homogeneity, we have been lucky to operate more as a melting pot than larger cities like Chicago, New York, and London (England). We’ve largely avoided the separation inherent in a little-India, Chinatown, little Italy or mini Mexico here. Our city’s diversity is distributed throughout Des Moines and suburbs.
As evidenced by our own citizens and others, we are a prosperous and growing community.

Our strength, therefore, is not in division but unity.

One of the basic tenets of sound investment philosophy is diversification. Any investment in a vacuum is an island in itself.  Removal of bias is necessary to make sound investment decisions. The removal of bias happens naturally during investment discussions amongst a diverse group at the table. Investing, as a discipline, is agnostic to gender, geography, culture, religion and age.
Since the recent creation of women-only investment groups, I have seen Plains Angels membership of women fall. The group that once had up to 14 women in the room, 3 extremely regular, now rarely sees one. And without diversity of opinion over time, I can see the group dwindle further; a receding tide lowering all boats.
I strongly urge my fellow female angel investors, government sponsors and non-government organizations to collaborate not separate. We have wonderful examples of cities around the world that have struggled with these battles when it was too late – cities such as New York, Sydney and London built up cultural enclaves as the ethnic groups populating them supported from within, propped up new entrants, and removed the early struggles of language, economics and religion. Clustering, which once was part defense and part survival, now displays indelible borders.
As alluded to by the original article, women engage in deeper understanding of an investment. It also states that despite deep professional expertise, women aren’t yet used to making such angel investment decisions. Assuming both to be true, wouldn’t it be beneficial to engage in dialogue across genders, geographies and experiences? Better investment decisions can be made when men and women come together to harmonize their diverse ways of thinking, acting, researching, and evaluating. The silos being constructed in our community aren’t the way to achieve harmony.
If an end goal is more women partners at venture funds, let’s not begin by separating men from women.
Segregation doesn’t work as a mechanism to resolve lack of diversity. It makes it worse.

Goodbye, Pikuzone

Today was the day I took the final steps to shutdown pikuzone. Created to provide a safe place for kids to be able to send emails to parent-approved contacts, it served several thousand messages for several hundred kids over the site’s three year life. It is being retired because of a cultural and a commercial shift.
pz
Culturally, the children gravitated toward the tablets and smart-mp3 players. They utilize games and secure text messaging applications and, just like Facebook, email is the old people’s platform.
Commercially, the size of the market served is limited to parents who care about privacy and security of electronic communication. Many of these parents are hard to find and, therefore, expensive to market to as they themselves like to not be found :). Out of various marketing approaches we attempted, the one that worked best was Google Adwords – adwords that targeted highly-educated moms from blue states with two or more kids. Unfortunately, the size of the market didn’t leave the project to be commercially viable and we have run its course.
At the end of the day, the project paid for its daily operation costs but the commercial realities would never recoup the effort expended in creating the site. We end the company in black, notwithstanding development costs. Thanks to all the parents and friends who supported Erin, Joe and me in this wild adventure.

A Congress Paralyzed From Fear over Immigration

This post appeared in the Des Moines Register’s Business Technology and Innovation Section on July 20, 2014.
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The battle over so-called H1B visas threatens to hamper the growth of Iowa’s startups, growing technology sector, biotech research centers and agricultural sciences.
Our public and private colleges teach students from sub-Saharan Africa, India, Malaysia and beyond. Our corn and soybeans are consumed by humans and animals around the world. John Deere and Vermeer equipment drills, mows, seeds, and crushes in parts of the world many Iowans would have trouble finding on a map.
The GOP, with thought leaders like U.S. Sen. Jerry Moran of Kansas, understand the economic impact of immigration, especially in Midwestern states that depend on immigrants for net population growth. Iowa, which barely represents 1 percent of the US population and far less of the global population, sells its goods to a disproportionately larger world.
Eric Cantor lost the Virginia primary earlier this summer and his party quickly moved to shelve immigration reform. The epidemic of paralysis that gripped the GOP and, therefore the House of Representatives, has done more to damage to the country’s economic prospects than the President’s hope for comprehensive reform.
Unlike Congress, we cannot allow a state of paralysis to affect our state’s next century of growth. The young minds at Iowa, Iowa State and all other Iowa colleges see a state that provides a wonderful place to live, grow and prosper. Many will go back to their home countries because of arbitrary quotas for H1B visas or decades-long line for green cards.
H1B visas are issued to people in a wide variety of profesisions. Medical, engineering and physics careers, to name a few. Those who hold them are our neighbors in rural and urban Iowa, generating economic multipliers through taxes, spending and investing.
Do we really want a paralyzed Congress to euthanize this growth in one of the most prosperous states in the Union?

Clubbing the Patent Trolls

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Image courtesy CEA (Consumer Electronics Association – ce.org)

I just wrapped up a very full day meeting in Washington with several Senators and their staff on the issues surrounding patent reform.  This day was coordinated by the Application Developers Alliance, an advocacy group I connected with in December around the time of the House vote on the Innovation Act (House Bill 3309). 
Before I go further, political correctness stalwarts as well as trolls themselves are calling for the name trolls be dropped and Patent Assertion Entities (PAEs) be used instead. I will use the term troll instead… it is not only the industry standard name, it also labels these entities accurately.
Imagine receiving a letter like –

Dear CEO – you owe us $1000 per employee at your company for each networked scanner that emails scanned documents and one or more of your employees potentially uses that feature.
or
Dear Kevin – we noticed that when you picked up groceries for your mom and sister during your recent shopping trip, and delivered them on your way home, you violated our patent on efficient routing for purposes of grocery delivery between retailer and one or more consumers. You owe us $1200 per delivery point for this violation.

Does either sound ridiculous? Yet, one is real and the other… well… the other could become real.  In the case of the former ‘letter’, a trolling entity has divided the US into territories where patent attorneys are actively sending demand letters to businesses using scanner to email function. Each letter demands the $1000 compensation. It has ticked off enough complaints and confusion in the business world that state attorneys generals have been called into action.
In a remarkable move, 42 Attorneys General have urged Congress to take action and to provide the Attorneys General to utilize the powers granted to them in assisting the citizens in their states and territories. This letter generated significant buzz during our visit and was largely being seen as a positive action toward patent reform.
Fast forward back to today – and what brought me here to DC. Meetings today covered members of the press, a dozen senators, a number of legislative staffers from senators’ offices, and two representatives from national VC firms – Brad Burnham of Union Square Ventures and Jason Mendelson of the Foundry Group.
Trolls aren’t a headache JUST for large technology firms. They are beginning to affect everyday businesses through measures that can best be described as extortion. Send vague letters to businesses large and small claiming that the business is infringing on a patent. Given them a short window to respond with payment or the penalty will go up. If the business chooses to litigate, the ‘fines’ will go higher and potentially private and personal information extracted through discovery of the company’s systems, mobile devices, phones, etc. This is a national problem that affects all of us and household names in my own state – Kum & Go, Bettrlife, Kinze Manufacturing,Iowa Bankers Association, HyVee and more have gone on record documenting their problems with trolls.
It was good to have two very large VC firms and a relatively small angel group represented in DC by our group of three. As Iowans we have an unusually significant sway – whether it is in the first in nation status in the caucuses to having two very senior senators who are respected universally. Senator Grassley’s position as a ranking member of the Judiciary committee makes him particularly powerful in this realm. Those who have read this know that I’ve spoken with him and his staff in the past about immigration issues and found him receptive – even though party politics (and the 2012) election rocked that boat past his control.
Patent reform has taken the form of a 325-91 support in approving the House bill (H.R. 3309) in December 2013.  The bill, also called the Innovation Act, immediately received support from the White House . The companion Senate bill (S.1720) was introduced in December and is currently being studied by the Judiciary committee while other bills make their way around the Senate. Our direct request today was for the Senate to move forward toward passage of patent reform in the senate that can pave the way to conference that will resolve the difference between the House and Senate bills before the President can sign it into law.
The key provisions we asked for are –

  1. Clear identification of who is suing (who has the financial interest in the claim)
  2. Clear identification of why the claim is being brought – specifically which portion of the company’s patent is being infringed
  3. Clear identification of how the infringement happened – specifically what did the infringer do wrong
  4. A fee-shifting provision (about who pays what)
  5. Potential for pre-litigation review of a business-process patent through an expansion of the covered business method statute

I reached out to several attorneys in Des Moines who are know for their work in intellectual property, including patents.  Several who represent small, innovation focused companies, warn of a chill that could befall such small companies due to the need for paying winner’s attorney’s fees, as they fear that large companies could simply bury the small company under legal costs. Similarly, members of the software community who have business process patents are naturally against provisions that could expand a review of a previously issued patent. I feel that the innovation community is at a greater risk of being attacked by trolls who are using old patents from now defunct companies. These patents, issued in huge quantities after their 1996 allowance, and bought up during the dot-com crash, now are utilized by entities that exist solely to litigate.
Though we haven’t seen this in the Iowa investment community, Jason and Brad both talked at length about how the companies they see closely tend to come into the trolls sights right about the time they receive serious funding or exhibit commercial viability and success. Companies are actively being formed to go acquire patents from companies in bankruptcy for the sole purpose of litigating with that portfolio.
The meetings at Senators’ offices proved very detailed. There was hardly any fluff in the 20-30 minutes we had with each senator, and the Senators and staff did an equal amount of talking and asking. Since we didn’t need to push an agenda with senators  who are already on board with patent reform, we offered help and the meetings entered meaningful discussion about ideas, alternatives, and potential solutions. Today, there are the Leahy-Lee (S 1720) and Cornyn-Grassley (S 1013) bills that represent the Senate position and the underlying conversations.  Sen Schumer adds teeth to the Leahy-Lee bill via Schumer (Senate 866).
I am a huge fan of the Cornyn-Grassley bill as it clearly covers most of my desired outcomes. Passed independently, either the Leahy or the Cornyn-Grassley bill would resolve a lot.  If Leahy-Lee-Cornyn-Grassley-Schumer got married into a single bill, our work today would be very productive.
I left DC with that hope, and plan to remain engaged with the Iowa Senators. The fitting end to the day was flying along side with Iowa Attorney General Tom Miller and being able to thank him on his action on this issue.