Battles Between States-Why We Need Coopitition

Yesterday I was up in Madison, Wisconsin at the Wisconsin Early Stage Symposium.  Zach Brandon has done a really good job of coordinating all the Wisconsin Angel groups and VC firms.  He has also carried on the mission that Joe Kremer started by reaching across borders to get deal flow and capital flowing into and out of the state.

In the early morning I was having a cup of coffee in the back of the meeting hall.  On the dais was the Lt. Governor of Wisconsin,  Rebecca Kleefish.  She was talking about the business climate in Wisconsin.  To be honest, it’s really good.  Wisconsin has a relatively low cost of living, and has a nice talent pool of labor.  It is also one of the prettiest states in the US, with some of the best fly fishing over near Platteville.  The only unfortunate thing from my perspective is the Green Bay Packers and the darned Wisconsin Badgers keep beating my Illini in football every year.  The Brewers and Cubs are a push!

Lt. Governor Kleefish also pointed out that Wisconsin is fiscally healthy.  That’s true, and if I were setting up a brick and mortar factory business, could be a difference maker as to where to locate.  She correctly pointed out that Illinois is in terrible fiscal shape.  I hope she keeps making that point, because it can’t be made enough.

Anyway, it was pointed out to the crowd that there was a “Chicago investor” in the back of the room and would he have anything to say?  So, I did.

This war between the states over start ups has to end.  Not that it’s really starting.  It goes back to my belief that Silicon Valley is unique and great in its own way.  Those that think this will become Silicon Prairie are missing a valuable point.  We aren’t Silicon anything.  We are the midwest, and we are knitting a midwestern quilt.  It’s different here, and that difference is a good thing.

As an investor, I don’t care if the company is in Wisconsin, Minnesota, Iowa, Indiana, Michigan, Ohio, Missouri, Minnesota or even Nebraska.  As long as I can get there in a day’s drive I am comfortable looking at, and investing in the company.  The frustrating thing for many people is that investors and start ups are agnostic.  We don’t care about boundaries.  We care about investing in and building great, scalable companies that create value-and ultimately make us money.

Let’s make this all about creating a humongous pie, and stop worrying about how we are divvying up slices of it.  I understand that politicians have a responsibility to their state, county or city.  The Lt. Governor of Wisconsin isn’t going to go out and sell Illinois!  But, when it comes to start ups, it’s a different sort of sell.  I wouldn’t put money in a start up company based in Madison, Wisconsin and compel them to move to Chicago.  There’s probably a perfectly good reason they are settled in Madison and who am I to choose for them?

However, as the company develops, there might be resources in a place like Chicago that’s advantageous to them.  They might even consider moving.  For me as an investor, I want what is best for the company that gives them the best chance of success.

I can think of a few examples.  Union Square Ventures out of New York City invested in Dwolla.  They are based in Des Moines, Iowa.  They aren’t leaving.  Accel Partners invested in Braintree.  Braintree is in Chicago, and they aren’t leaving.  However, Social+Capital invested in one of my portfolio companies, Alltuition, and they went to the valley.  They made the calculation that it was better for the future of the business to be in the valley at this point and time.  They recently launched BrilliantScholars and they are knocking the cover off the ball.  Capital is flexible, and so are entrepreneurs.

If Chicago develops are thriving start up ecosystem, that helps places like Madison, Wisconsin and West Lafayette, Indiana.  Champaign, Illinois benefits and so does South Bend, Indiana.  Those are university towns that will have an easier time monetizing research closer to home.  But towns like Gary, Indiana and Racine, Wisconsin benefit too.  If a start up ecosystem takes hold and starts to grow-all kinds of jobs will be created in those towns as well.

All of us need to stop thinking its a competition between Silicon Valley and the rest of the US (or world).  What we need to do is “coopitition”.  On entrepreneurship, let’s cooperate across state borders and ignore those map line divisions that separate us.  Sure, we compete on sports franchises and public policy within those borders.  But, then citizens can vote with their feet and the “market” decides.  I’ll never persuade a Packer fan to like the Bears.  But I can help a Wisconsin company grow and prosper every bit as much as I can help any company grow and prosper.  On that, no one should care.

In the debate that rages over state and national finances it’s not a big secret that I am in Lt. Governor Kleefish’s camp.  Defined contribution pensions ought to be standard for government employees.  We ought to transfer many government services to the private sector and shrink the size of government. Wisconsin has done a good job of that, and so has Indiana.  But, when it comes to creating a start up ecosystem, we need to ignore borders.  No one has the market cornered on good ideas.

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