Starting Up In the Flyover States

What one city did wrong (and right).

Susan Sons

Day Job: Senior Systems Analyst, Center for Applied Cybersecurity Research

 

Other Hats: Staff Director, Internet Civil Engineering Institute; ISO Emeritus, NTPSec

 

hedgemage@binaryredneck.net

http://security.engineering

Andrew Kirch

Day Job:  Senior Solutions Architect GoVanguard, New York City, NY

 

Previously: Community Manager, Zenoss Corp, Austin, TX

 

Other Hats: NRA Lifetime Member hat.

 

trelane@trelane.net

Usual Disclaimer

The opinions herein belong to the authors.  These opinions haven't been vetted by, and might not be shared by our workplaces, the meeting venue, our future selves, our families, etc.

 

To be honest, we don't always agree with one another.

 

That's what keeps life interesting.

Austin, TX

circa 2003

Capitol City

College Town

Some 2003 Austin trivia...

  • Population: just over 650,000 people.
  • Austin didn't have a web site.
    • The State of Texas listing for Austin pointed instead to a page maintained by a private citizen, because it was prettier, more usable, and more handicap accessible than the unfinished official site.
  • Biggest employers were
    • University of Texas at Austin
    • Dell Computers
    • Motorola
    • IBM
  • Median household income: $42,689
  • Per capita income: $24,163

Living in Austin meant...

  • Low cost of living

  • Amazing food

  • Live music everywhere, especially Rock, Bluegrass, Jazz, and Country

  • An energetic community where the Texas conservatism and independence clash with the capitol city lobbyists and academic leftists...and friendly debate over dinner and boardgames was considered a local sport.

Working in Austin meant...

  • Growing up in Texas, or being transplanted there by military service (Army veteran formerly stationed at Fort Hood, Fort Sam Houston, or Fort Bliss).

 

  • Building a career at one organization, probably Dell, UT Austin, IBM, Texas Instruments, or Motorola.

 

  • Getting to work early (7-8am) so you can leave early.  Supper starts at 5pm, and family/friends are expected to be there.

 

  • Buying a big house in sprawling suburbs, or living cheap in the city.

Running a business in Austin meant...

  • Low overhead (cheap real estate, low taxes, etc.).

  • A decent-sized regional airport.

  • A steady stream of UT grads, Army veterans, and Texas A&M grads into your hiring pipeline.

  • The occasional opportunity to poach experienced senior hires from big mainstay organizations.

  • Outside investment is hard to come by, investors are very inexperienced.

  • Most-visible new businesses were "old economy"...service companies, government contractors, manufacturing, automotive.

Austin, TX

circa 2016

Big City

Big Problems 

Some 2016 Austin trivia...

  • Population: 2,010,860 people.
  • Austin has a web site.
       (see right)
  • Biggest employers:
    • Government
    • Dell
    • IBM
    • AMD
    • Apple
  • Median household income: $ 52,431
  • Per capita income: $ 31,387 (this is actually approximately $1,000 less than in 2003 when adjusted for inflation)

Living in Austin means...

  • The Safest Downtown Area in the Country
  • Quietest downtown, too: busking has been outlawed, vibrant culture of off-the-wall street music eliminated in favor of tightly-licensed venues that favor mainstream-friendly music.
  • Ironic, copyright-controlled "keep Austin weird" merchandise at licensed booths at the convention center remind us of Austin's past.
  • The lowest African American population in a capital city
    (and the diversity problem has gotten worse since 2003)
  • 40 minute 3 mile commutes to work
  • Due to higher housing prices, many startup employees dont live in Austin, so commutes run over 2 hours
  • Austin, Lake Travis, and Round Rock are now indistinguishable
  • Median housing prices exceed $300,000

Working in Austin means...

  • Bouncing between startups

 

  • Long hours, lower pay

 

  • Higher cost of living

 

  • Out of touch City Council

 

  • Lack of Transportation Infrastructure

Running a business in Austin means...

  • Access to poach employees from Dell, IBM, Microsoft

  • Access to the Austin "Startup culture"

  • Cheap UT Grads

  • Large turnover as your employees are poached

  • over 80% of employees at Zenoss were gone in 2 years

What can we learn from Austin?

"There was a point in the late '90s where all the graduating M.B.A.'s wanted to start companies in Silicon Valley, and for the most part they were not actually qualified to do it."

-- Marc Andreessen

Austin imitated SF...

...and brought SF to Austin.

By tying themselves so tightly to SF startup culture, Austin didn't do much to create new opportunities for Austin people.  They hamstrung their startups in the process.

 

The majority of new startups were run by transplants from outside Texas, who preferred hiring transplants from outside Texas for most positions.  This caused massive population growth for Austin, pushed long-term residents out of their homes, and left start-ups to compete with for SF talent by paying SF salaries, instead of being able to leverage the low cost of living and the workforce that once existed in Austin.

 

Austin startups found themselves having to give up more equity to raise more capital earlier, often on ridiculous valuations, in the hope of getting it back in a fast exit.

Austin set out to imitate San Fransisco, and succeeded in producing all the worst that SF has to offer: high cost of living, long commutes, longer workdays, workforce shortages, and high startup overhead.

Austin wasn't wrong about everything.

Enablers for Entrepreneurship

Food and Culture

     Entrepreneurship is draining.  We need to eat, to decompress, and it's easier to come up with cash than more time.

 

Infrastructure : Networks, Power, Buildings

     Young companies can't build out their own, it's cheaper to be a tenant on existing infrastructure.

 

People : Investors, Advisors, Employees, Collaborators, Suppliers

      Building a company is an inherently social activity...it requires community.  Having a critical mass of that community locally is a massive advantage.

 

"Almost all absurdity of conduct arises from the imitation of those who we cannot resemble."

--Samuel Johnson

Community building is a balancing act...

 

We want to learn from other players in the space, without trading away the unique things we have to offer.

 

We cannot be SF or NYC as well as they can.  If someone wants SF or NYC, they will go there.  We need our own value proposition.  Screaming "me, too!" is not enough to be outstanding.

Many people see starting up today, especially in the midwest, as high-risk.

Today is a great day to start up in the midwest...

...if you grok the landscape.

" During dark times, real entrepreneurs come out. They are not competing with 10 look-alike companies for engineering talent, so it's a great time to invest and help build companies."

 

-- Douglas Leone

" Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon."

 

-- Winston Churchill

Some thoughts about starting strong in Bloomington...

Work hard on finding and maintaining your senior staff, then doing internal professional development.

 

Indiana University, Ivy Tech, and other local sources give us a nearly endless supply of cheap, relatively-skilled entry-level labor.

 

However, Bloomington has only a few big employers from which you can try to poach senior hires: IU, Crane NSWC, and Cook.  None of these are known for incubating large numbers of highly-productive senior experts who also enjoy being the adult supervision in fast-paced, early stage startups.

 

Bloomington is awash with juniors. If you do things right, your best hiring pipeline for mid-to-senior level employees will be internal.

Use expertise from inside and outside of Indiana.

 

Indiana has a massive amount of expertise you may not expect: in fabrication, in information security, in medical technology, in research methodologies, and so on.  Unfortunately, we don't have the experience building communities that breed large numbers of startups with a "survival of the fittest" attitude.

 

Successful startups will have advisors from both inside and outside the region, to leverage our strengths while compensating for our weaknesses.

Don't look for the fast (<5 year) exit.

 

Our entrepreneurial community is still growing.  It's not enough here (and I'm not convinced it's usually still enough in the Bay area or NYC) to build an MVP, get a few customers, and sell out to someone bigger than you as fast as you can.

 

There aren't many local buyers, and non-local buyers tend not to understand our employees and our customer bases.  Also, our companies tend not to grow quite fast enough to stay ahead of unrealistic valuations (hint: most SV startups don't either, 9 fail for ever 1 that exits with its pants on).

 

In Indiana, you need to play the long game.  Build a company you'll like enough to stick with for a while.

Look around.

PEOPLE are your most important resource.

Meet smart, motivated people.

 

Cultivate good relationships with these people, even if you haven't yet figured out how they can help you.  Take the time to help them.

 

If you don't yet have the social and time management skills to do this effectively while protecting your sanity and your schedule, make that skill development high priority.  It is an absolute necessity for every founder and senior startup hire.

One final reminder...

The Pour House is a charity organization, and supporting us by providing this meeting space.  Please support them with a purchase or donation.

Thanks!

Please stick around and meet the organizers, as well as fellow attendees.

 

If you'd like to reach out, we can be found at:

Susan Sons

hedgemage@binaryredneck.net

@HedgeMage

http://security.engineering

Andrew Kirch

trelane@trelane.net

@trelane

Fine print: This presentation is released under a CC-by-nc license.  If you aren't sure what that means, or wish to use it under other terms, please contact the authors at their email addresses above.  We'll do our best to be helpful.

Starting Up In the Flyover States

By Susan Sons

Starting Up In the Flyover States

How one city did it wrong (and right). Originally written for the 25 August 2016 meeting of Bloomington in Business, this presentation describes changes in Austin from 2003 to 2016 as a result of their moves to germinate more startup culture, and how the presenters believe that Bloomington, Indiana can do better. Content by Andrew Kirch and Susan Sons.

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