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Matt Hunckler

How To Re-Invest In Midwest Startups

Indiana and the surrounding Midwest has an exciting history of software entrepreneurship.

Large sales of companies like Software Artistry and Baker Hill in Indianapolis, and Resite in Bloomington, started a movement that has snowballed into a powerful Midwest startup community.

In this interview from the The Innovation Showcase, entrepreneurs and business leaders from around the Midwest share their perspective on how to keep the momentum going and re-invest in Midwest startups:

First you have to have success. And early software successes in Indiana made way for even bigger wins for the state, including an Angie’s List IPO, Compendium acquisition by Oracle, and of course an Exact Target IPO and subsequent acquisition by Salesforce.

Meanwhile, hundreds of software startups have launched. Some have folded, some have stabilized, and others have flourished.

“We’ve generated a bunch of small companies,” says Mike Trotzke, co-founder of SproutBox. “It’s time for us to start picking the winners and doubling down.”

This year’s Innovation Showcase, with more than 70 fundable companies, resulted in one company walking away with $128,000 in resources to continue their growth. We’re recalibrating venture funding in the Midwest. What else can Indiana and the Midwest do to double down on entrepreneurship?

Drop a comment below and let us know. You can also read the full transcript for the video above:

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Matt Hunckler:

We have had a lot of success here. We’ve built on the successes of Software Artistry and going back to Baker Hill. A number of the Indianapolis companies that have exited, obviously Resite in Bloomington and what that spawn was Sproutbox; and that whole movement, all the way up to Angie’s List IPO and the Exact Target’s IPO, and subsequent acquisition.

What do you think that means? What do you think those exits and those pieces mean for Indianapolis and Indiana, in general? And what do we need to do to build on that momentum? It’s kinda like what do you do after you have the Super Bowl here? Do we go for the next 2.5 billion dollar exit? Or we just keep getting small wins?

John Wechsler:

John Wechsler, founder of Launch Fishers.

I have some very strong feelings about this, and I have— for the last couple of years when I was with Mike Kelly and Jason Vasquez, and the others at Developer Town. Couple of years ago, I’ve seen..guys, 2014 is gonna be the bellwether year for entrepreneurship. And in actual, it’s 2013.. turns out it’s probably gonna be 2014— the bellwether year for entrepreneurship and startups in Indiana. For many reasons, one, the ecosystem that’s building. But, several of these major exits and liquidity events that have created dozens, if not hundreds of millionaires with the temperament, the interest and the financial capacity go out and try at themselves. And that is first and foremost, what you need in an ecosystem. You have to have that success and that, you have to have those that were successful go out, try it again and pull others into this wacky world of entrepreneurship, right? And that’s really what makes Silicon Valley so special. It didn’t just happen in the last ten or twenty years. If you think that, you’re misinformed.

The first place I went to when we moved out there was— in fact, JP and I might have actually done it together.. the Palo Alto-Hewlett Packard garage. And literally stood there and just look at it and thought, “man, forty years ago at that time.” Now, forty-two years ago it all started right there. And it took several spin-outs, and exits, and multi-billions of dollars coming and going to build that ecosystem. And it won’t happen overnight. You have a few of these happen. You have a period of entrepreneurial kind of growth. And then it happens again. And we can already see those next special companies that are growing up right now. I won’t embarrass anyone or take my shots at naming the ones that I think are gonna win but man, you can see this.. building. And there’s a lot of excitement and a lot of opportunity.

John Hanak:

John Hanak, Director of Purdue Research Foundation.

And I think, John, related to that is when you look at what’s happened and where there have been exits, almost all the founders, almost all of the key employees are still here. I mean, they’re still in Indiana; they’ve not left. We have cases— John Wechsler, that left and came back which is awesome. I’ll always remember that first time I called you when I found out you were coming back. It was so critical.

We have successful companies in Indiana that have been started by people that came back from Silicon Valley. Dan Haze, up with the Health Call in Merrillville. Jeff Reedy was Scale Computing. We have lots of examples. And what’s happening is.. what I really believe is happening as you talk to everybody that does come back or that doesn’t leave; they’re staying for quality of life. And that is just absolutely huge aspect to this ecosystem in Indiana.

Mike Trotzke:

Mike Trotzke, co-founder of SproutBox.

So, our first fund is now about five years old. And we are definitely focused on what I think is that next phase. This has been a topic of conversation with us a lot. We’ve generated a bunch of small companies. Two, three, four, five, six people companies. And it’s time, from our standpoint, for us to start picking the winners out of those. Start doubling down into the companies that we think are really gonna be the big ones. And, I think a lot of these ecosystems that have popped up— the small, little groups, are in that phase.

Whether it’s now, it’s time to look at the companies, call the herd, get behind some. Take advantage of the fact that there’s a ton of new capital available in the state; to help fuel the growth of some of our winners, and take them to the next level. I think the co-working models are essential, but the next phase is to start having companies at least in Bloomington that are in bigger shops; going out and getting their own office. They’re starting out 10 employees, 20 employees, and 30 employees so that we can get the cycle going. Like what happened with ReSave, we are the only one. We built this company, we sold it and reinvested. We want to take that 20 companies we’ve created, and do that with all 20 of them now. And that’s kind of our next phase. So, I’m very optimistic about that, given the climate of the rest to save Indiana.

Jeb Banner:

Jeb Banner, CEO of SmallBox.

Just to kinda go back to what John (Hanak) was saying about quality of life, I think that can’t be underestimated. I think that a lot of focus is given to funding and talent. And that’s great! We need those things in terms of the ecosystem. But, when you think about the other side of that— it’s the habitat, right? Anyhow, that’s the co-working spaces, but also the cultural trail. It’s the bed and breakfast going into Broad Ripple finally, right? A place people can actually stay.. about going either far north or for south. So, I think that the tech community, and especially the people with a lot of money which now we’ve got a bunch more or soon have a bunch more— need to look at that ecosystem. Think of the quality of life aspects if they really wanna make a long-term bet. Make those investments as much as the investments in the company, and find ways to build-up that infrastructure so that this is the habitat for the talent. And I think that was the approach of the Speak Easy that we took is let’s just build the space. We’re not gonna tell them really what to do. And the animals came. You know, they happen. It took over. They ran the zoo now. And I think, that’s the way it works.

Mike Kelly:

Mike Kelly, Managing Partner at Developer Town.

So, I think from my perspective, one of the things in terms of the people that we talked to who are starting companies today versus the people we talked to three years ago– it’s just night and day difference, right? And it’s not only the people locally who are now just becoming serial entrepreneurs, but it’s also the people who look at Indianapolis– who wouldn’t have looked here before, right? So, the number of deals that we see potentially coming out of Chicago, who would have never looked at Indiniapolis three years ago, but now, legitimately look down here and say, “well hey, we’ve heard about Indianapolis and some of the things you guys have going in there.” It’s really nice news once company sell for really big, large amount of money, right? That gets attention. And so, it’s not only the capital that is created here and stays here, hopefully. It’s also what that attracts to the space. And I think, Verge— and everything that you’ve done over the last couple of years, and there’s a ton other groups at that point. There, just that attention, and the attention of Startup America and the attention of some other things that are going on here, creates a gravity that brings in better opportunities which is ultimately what drives the wheel, right? The better ideas you get, the more people out there pitching. And you know, as those flow to the top, that’s how you drive that engine. And I think, for us, it’s really great to work with these companies. And to move that forward. But, it all starts with those exits coming back here and working here, right?

 

About Matt Hunckler

Matt's a founder and organizer at Verge. He's a connecter, writer, and habitual start-upper.

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