What can we learn from Boulder?

Wednesday night, on a tip from our tech entrepreneur friend Dug Song (who, by the way, just launched a new blog on Ann Arbor Startups), I went to hear a venture capitalist from Boulder, Colorado speak at the University of Michigan Business School. Professor David Brophy, the man behind Michigan’s annual Growth Capital Symposium, had arranged for him to come, to speak with his undergraduate venture finance students, and, as long as he had the successful venture capitalist here, he decided to open it up to the public. The talk was entitled, “Building an Entrepreneurial Community: Lessons from Boulder, CO,” and the speaker was Jason Mendelson, of the Foundry Group. Professor Brophy’s description of the event was:

…In the past 15 years, Boulder has gone from a little hippie college town to a little hippie college town also boasting an impressive and growing congregation of Internet entrepreneurs, early-stage venture capitalists, and bloggers. How did Boulder pull this off? And what can other cities, policymakers, and entrepreneurs who want to boost their own start-up quotient—and overall competiveness at a local level—learn from Boulder’s success?

Following are some comments made by Jason Mendelson in the course of the presentation.

• Mendelson, a U-M alumnus who still has family in the area, begins by stating that both the University and the Ann Arbor region need to be more “horizontal.” He said that presently there is too much “silo building” in the region, and that we needed to encourage more interaction between disciplines and business sectors. He said that what he had to tell us was going to be hard to hear, but that we should know that it comes from a place of love. He later said that, as a venture capitalist (VC), he’d love to have a reason to move to Ann Arbor. He said that right now, however, there wouldn’t be a way to justify it. There’s just not enough of an entrepreneurial community, in his opinion.

• His firm, the Foundry Group, operates a $230 million fund in Boulder. After earning an undergraduate degree in economics (he quipped that he would have failed to get into the UM Business school). He went to U-M for Law. He and his partners in Foundry chose Boulder three years ago because it seemed like someplace special (in an entrepreneurial sense). According to a study in Forbes, Boulder, among other things, had the highest number of graduate degrees per capita. Ann Arbor, according to someone in the audience, was 3rd on the list. Colorado as a state, according to Mendelson, also has the highest concentration of information technology (IT) workers. And, he said, the state of Colorado, “is extremely helpful and focused on innovation.” He says that there isn’t enough venture capital in the area to support all the new companies formed, but that they don’t have a problem drawing it from out of state. He says that, in general, the scarcity of local VC dollars is not an excuse for not achieving. There are 12 people in the Foundry group, and none of them were from Boulder originally, but a few had been there to start an office for their previous firm, Mobius Venture Capital. They started Foundry Group because they saw an opportunity. (And because it’s near an airport.)

• I his opinion, there are two Tier 1 VC communities. They are the Silicon Valley and Boston. There are two Tier 1.5 communities. They are New York and Los Angeles. And there are a number of Tier 2 regions. They include Austin, Boulder, the Research Triangle area of North Carolina and others. He thinks that Ann Arbor could/should be one of these… As evidence of the fact that Boulder has entered the second tier, he notes that Kleiner Perkins, one of the country’s premier venture capital companies, recently planted a flag in Boulder and are looking at some of the many cleantech companies. He said that this is likely due also to the fact that Boulder just received a great deal in the way of Department of Energy research funding (which should result in commercializable research).

• He outlines the necessary traits of a successful entrepreneurial community. They include; a dense concentration of technical, creative people, a strong research community / university (or, in the case of Seattle, Microsoft), an engaged community with desire to see their ecosystem succeed, a supportive legal environment, a culture of risk and respect for failure, and a history of success (which, he points out, is self -perpetuating). All communities have some of these, and lack others. For instance, he sees an erosion in Silicon Valley of folks wanting to see others succeed. In the case of Boulder, they are still young in their development and are still importing management talent from other areas (which he notes is a relatively easy thing to do given the quality of life in Boulder).

• And here comes the tough love…. He says the “perception” elsewhere in the country is that there may be a lack of management talent in Ann Arbor, that we don’t have an engaged entrepreneurial community, and that we don’t have a culture that tolerates failure. He also says that we don’t tend to accept failure. He says that the state of Michigan. He also says that Michigan’s laws, given the influence of the unions, are anti-business. (He does say, however, that they aren’t so bad as to keep him from doing business here.) He also says that we don’t have a lot of local venture capital, but, in his opinion, that’s not critical. He says you can’t control how many VCs set up shop in your community, but that you can be successful regardless.

• Mendelson spoke at length about the various entrepreneurial events they had taking place in Boulder. The first Tuesday of every month they have New Tech meetup. The beer and pizza event, during which four people stand up and talk about their new companies, now draws over 600 people between Boulder and Denver. They also have a Startup Weekend event, during which people assemble to create a company over a weekend. Startup Weekend has now spread to many other cities across the country including Ann Arbor and Detroit.

• The Foundry Group is part of a partnership led by David Cohen that launched an accelerator program called TechStars, in which they bring the 10 winning teams to Boulder for intensive mentorship. The program has gotten so popular, they’ve since started a second program in Boston led by Shawn Broderick. They presently have approximately one hundred mentors across the country who participate. He says that 70% of the companies, who are generally composted of folks around the age of undergraduate students, have gone on to acquire venture funding. He says that 2 of these have already had successful exit events (i.e. been sold, gone public, been acquired), and at least 2 have become successful cash flow positive companies. And the cost to run TechStars is relatively low. In the past, they’ve paid each participating company founder $5,000, up to a maximum of $15,000 per company. And, they get to come to Boulder for 4 months and receive mentorship. Of the companies that have gone through TechStars in Boulder so far, he says, roughly 80% have stayed in Boulder. Only two of these companies, according to Mendelson, were from Boulder originally, however. (At least one, if I’m not mistaken, was originally from Ann Arbor.)

• He says that Austin, Seattle, Boston, Rochester (NY) and Hunstville (AL) all have active entrepreneurial central nervous systems churning out new ideas. He says his impression, from what he’s seen on the software / IT side of the venture world, is that the business plans coming out of Ann Arbor are usually slightly altered versions of companies that already exist. He says that he’s spoken four times in Ann Arbor, and that this crowd – which may have numbered about 150 – was the largest that he’d had. He doesn’t think that we have that same central nervous system. He expresses frustration about “glossy” entrepreneurial programs that exist in name only.

• He says that you never know where the spark will come from. At the University of Colorado at Boulder (UCB), where he’s an adjunct professor teaching both law and business students, it’s the Law School that’s contributing the most, specifically the Silicon Flatirons initiative. Apparently they run a campus-wide business plan competition (modeled on MIT’s). He says that at UCB they also have a program called Entrepreneurs Unplugged, which is for undergrads only. He expresses on a few occasions that the best ideas come from the undergraduates. He says that they’re trying to create a culture like they have at Stanford where entrepreneurship is part of everyday life. They want students to know that they don’t just have to get an education in Boulder, that they can also launch companies.

• Mendelson says the old model, where a University just works to get its graduating students recruited by big companies, doesn’t work. He says that, unlike at U-M, Microsoft can’t recruit from Stanford of Boulder. He says no one wants to work for them, and give them their ideas.

• 10 years ago, he said, it took a million dollars to start a software company. Now, thanks to cheap backend systems and cloud computing, that price has dropped to $10,000, if that.

• In discussing their need to recruit up to half their management talent, Mendelson mentioned a program that had been quite successful. Through Boulder dot me, 20 or 30 high tech companies chipped in $5,000 each and launched a targeted online recruiting initiative. From the resumes that were received, several individuals were chosen, and flown to Boulder with their families, where they interviewed with a number of companies. This, according to Mendelson, resulted in 20 successful hires. (This initiative, he says, was started by the guy who began Startup Weekend.)

• People want to live in places like Ann Arbor and Boulder, he says. Many people feel the intensity and quality of life of the Silicon Valley are not healthy, especially when you figure in the cost of living. He, it would seem, thinks Ann Arbor would be a better place to settle down and raise a family. Unfortunately, though, people don’t see it as a viable option because of this perception that nothing is happening business-wise.

• At some point, Dug Song takes the stage to say that things are in fact happening, that our startup events are multiplying, and that our companies are getting funded. The feeling in the room was optimistic.

There was more… a lot more… but I have to get out of the house for a while. Hopefully, someone who was there can join in on the conversation and fill in the blanks in the comments section.

This entry was posted in Economics, entrepreneurism, Locally Owned Business, Michigan, Observations, Sustainability and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.


  1. Sanjay
    Posted April 4, 2009 at 11:28 pm | Permalink

    Michigan needs Froghammer.

  2. Haunted Chicken Coop
    Posted April 4, 2009 at 11:39 pm | Permalink

    Thanks for sharing this, Mark. Agree with him about ‘perceptions’ elsewhere that little is happening business-wise (entrepreneurially-speaking) in Michigan. This topic initially seems to elicit groans from coastal investors and you can almost see auto industry images dancing before their eyes. Detroit has earned (and maintains) a negative rep. among even those living outside the state and, in most cases, Ann Arbor & Ypsi are seen as a broader extension of DTW.

    There have been some efforts to publicize the innovative efforts in Ann Arbor, but I think more has to be done.

    Would also be interested in hearing if anything additional was said on models for attracting and retaining management talent in Boulder.

  3. Posted April 8, 2009 at 9:04 pm | Permalink

    I just posted a response to this post on the front page. You can find it here.

  4. Posted April 24, 2009 at 1:49 pm | Permalink

    Houston, Texas falls clearly into the Tier 2 category – recently pushing the envelope into the 1.5 space. The ingredients for a sustainable startup scene are all here – we have talented entrepreneurs, some investment capital from both a strong Angel network and a dedicated VC community and most importantly – we’ve got momentum. The major universities, public officials, and private business have all recognized that innovation and the spirit of entrepreneurship are the things that are going to build onto our existing community and drive growth. Most of Jason’s comments about Ann Arbor could easily apply to Houston except that we’ve already taken his advice and are making things happen here.

  5. Colorado Denver
    Posted November 26, 2009 at 12:07 pm | Permalink

    I am a few college students online from college of University of Colorado Denver. We make love and read blogs. Tonight we make love and read Mark Maynard dotcom.

  6. E squared
    Posted November 14, 2011 at 6:21 am | Permalink

    Jason Mendelson is coming back to speak.


2 Trackbacks

  1. […] I’ll go ahead and use the same title as Mark Maynard’s original post: What can we learn from Boulder? […]

  2. By Is the Boulder model tenable for Ann Arbor? on April 8, 2009 at 8:57 pm

    […] what he saw as the challenges facing our region relative to entrepreneurship. And, as I often do, I posted my notes here. Since then, I’ve received quite a few emails from folks. Most have been in agreement with […]

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