#StartupsEverywhere: Des Moines, IA

#StartupsEverywhere Profile: Geoff Wood, Founder of Gravitate

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This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country and the policy issues relevant to them. This interview has been edited for length, content, and clarity. 

Des Moines, Iowa may be most fondly known for the fried foods at the Iowa State Fair, but it also has a bustling startup scene due to the state’s low interest loan program and investment tax credit, according to Des Moines local Geoff Wood. And on his policy wishlist are measures to make it less risky to start a business in the relatively risk-averse Des Moines, including making healthcare insurance more accessible and finding a way to ease the burden of student loans.

How did you get involved working with startups in Des Moines and what is your role in ecosystem?

I came to Des Moines in 2009 from Indianapolis. I hadn’t worked with startups before, but I had just finished my MBA and felt confident that that’s what I wanted to do. I didn’t even know if there was a startup community here, I just sort of trusted that there would be one. I got involved by interviewing people who were building the Des Moines startup scene and compiling their stories into blog posts. This effort allowed me to grow my network and I ended up joining together with a group of people who were doing something similar in Omaha. Together, we launched a company called Silicon Prairie News, which served as the primary source of startup news coming out of Des Moines, Omaha, and later, Kansas City. At that point, when it came to startups, people were still focused on the Valley, so shedding light on the Midwest was really a novel effort. I was with Silicon Prairie for about four years, during which I focused on putting on grassroots ecosystem programming.

In 2013, I left Silicon Prairie to start my current organization, Gravitate. Initially, I was consulting on ecosystem issues and looking to help the Iowa ecosystem grow. Around this time, there was a local incubator that had decided to shut down. It’s leadership held a few meetings around what should happen next for our community, and ultimately, everyone decided that access to low-cost office and event space was still critical for local startups. There really were not any other places for individuals to go who had recently moved to Des Moines or were transitioning from corporate jobs. In response, I wrote a blog post in which I said that I believed I could build something fulfilled these needs, which ultimately became a coworking space and entrepreneurial support organization. Now, we have two spaces—one downtown and one in a neighborhood called Valley Junction.

I see Gravitate as a front-door; it’s a defined place you can walk through to access the community. When I wrote that first blog post about what people were looking for in our community, I said that Des Moines needed an “entrepreneurial center of gravity.” From that, one of our first members actually suggested the name Gravitate and now, it’s kind of baked into the DNA of the organization and central to who we are.

What were you doing before you moved back to Iowa in 2009?

My first career was in local government consulting. I studied City Planning at Iowa State University and for about 10 years, I worked for civil engineering firms that consulted local governments on technology projects. About five years into that career I moved to Indianapolis and eventually decided to go back to school and get my MBA at Indiana University. That experience really opened my eyes to the startup world.

Was it difficult to break into the entrepreneurial community or was it still in its infancy when you came to Des Moines?

Des Moines has always had entrepreneurial companies, but in 2009, building a startup ecosystem felt like a new endeavor. At that time, it was easy to get started because there were no gatekeepers or significant barriers to entry and the community was eager to be involved. Now, people recognize that startups are necessary to keep the Des Moines community growing and they know that infrastructure has to be built around them.

What’s the most exciting thing to happen for the Des Moines ecosystem recently?

The easiest thing to point to is a shifted focus on the city’s core industries, which can be attributed to a regional economic development group called the Greater Des Moines Partnership. They’ve drilled down on both insurance tech and ag tech by developing accelerators for each (the Global Insurance Accelerator and the Iowa AgriTech Accelerator). These aren’t backed by any one company, the first is backed by 14 insurance carriers and the second by 7 agriculture companies, many of whom are headquartered in the state. This has helped to funnel the ecosystem into one of those two buckets. The result has worked out well for Des Moines because our mentor base and high net worth individuals (early angel investors) are people who have great amounts of experience in these industries.

Another important development is that our capital markets have matured enough here that people are finally able to take on significant angel capital investment or series A rounds. I remember when online payments company Dwolla successfully raised their first $1 million-round in 2010 and it was a huge community event. That seemed like so much money at the time for our community, but now companies here do that on a regular basis. It’s fun to see how much Des Moines and the entire state have evolved since then.

Are startups able to raise capital in Iowa or do most go out of state to get funding?

Both. We have a lot more infrastructure around the regional investment community than we’ve ever had before, but there are still a limited number of “sweet spots” where money is available. Groups like Next Level Ventures can generally provide $1 to 4 million, but if you’re seeking a large seed or smaller series A round, you have to go out of state to find that. Unfortunately, the coastal and Chicago-based groups do not actively look for deals here. People that are very serious about raising big rounds are typically going back and forth to the coasts to find them.

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What makes Des Moines an ideal place to start a company?

Like a lot of other Midwestern communities, there’s low cost living which makes it a great place to raise a family and still live inexpensively while building a company. In addition, the state government is very supportive. For example, the Iowa Economic Development Authority has several programs for low-interest loans for early stage companies.

Even broader, Des Moines is a great location because it’s large enough to matter in the national consciousness and at the same time small enough that you can get a hold of anyone within two phone calls. That didn’t seem as possible in Indianapolis or Kansas City even though they are only about triple our size.

What are some of the challenges entrepreneurs face when they are trying to build a company in Des Moines?

Because we’re small, the talent pools can be very shallow here, especially when looking for engineers to hire. Startups are also competing for hires with all of the big players who traditionally have better compensation packages, like Wells Fargo, who has its mortgage division based here. You really have to have someone who’s committed to working in a startup environment.

Additionally, due to our background in insurance and agriculture, we’re pretty risk averse as a community and as a culture, in general. People in Des Moines are still working through the notion of “why start a company when you could just take a traditional job?”

Are there specific public policies or government initiative that have enabled startup growth in Des Moines?

The healthcare exchange used to be a tool that was helpful for people wanting to leave corporate jobs and benefit packages—while still needed access to affordable health coverage—in order to start companies, but we only have access to a single insurance provider now, which has certainly hurt some would-be entrepreneurs.

Locally, seven years ago, the state developed an investment tax credit for firms who were based in Iowa and wanted to invest in Iowa companies. This initiative led to the idea of certified Iowa Innovation Funds—although there have been some challenges related to that, as we have only seen that one fund develop. A few others have sought that certification, but were not able to raise enough money. There’s definitely room for improvement there.

Probably the most beneficial policy for Des Moines startups has been the low interest loan programs that the state offers. More than anything, this has helped people to continue through those tough initial stages when they are really starting to get serious about their company

Do you find that your government representatives are active in your startup space?

They’re pretty hands-off, although on a federal level, Senator Grassley has gotten involved in patent issues and other things that go through the Senate Judiciary Committee. On a local level, even our mayor and council members are not involved in our startup events, which is something I’ve seen in other places. That said, Debi Durham, the state economic development director, and Jay Byers, the CEO of the Greater Des Moines Partnership, do play an important and active role. Iowa Governor Kim Reynolds recently announced that she’s going to speak at 1 Million Cups Des Moines in March, so that’s a start.

Any wishlist items when it comes to policies?

If health insurance coverage wasn’t an issue for people starting businesses, I think we would have a lot more people doing it. I think that goes for the student loan issue as well; Iowa prides itself on education and tremendous amounts of people go to a four-year college here. It’s what’s expected of Iowans and it forces a lot of talented people with student debt into traditional workspaces.

What are some of the Des Moines startups we should keep our eye on?

There’s a bunch. Here are a few that are definitely going places:

  • UpCraft Club: an online marketplace for sewing patterns;

  • Hatchlings: a very successful social gaming company that’s recently started rolling out AR apps for iPhone X (like Magic Sudoku);

  • WorkHound: an employee communication and satisfaction software for distributed workforces (currently focused on the trucking industry); and

  • Rocket Referrals: an automated customer referral/retention software.