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Boulder's Startup Ecosystem: Pros and Cons

By Trevor Gilbert , written on August 20, 2012

From The News Desk

When I began talking to people about Boulder before I arrived, I got the impression that the ecosystem was overhyped. The ecosystem was doing well, but there were structural flaws.

After spending two weeks in the city, and talking to as many people as I could fit into a very tight schedule, it’s clear that there are a couple of small issues with the ecosystem. However, on a macro level, the benefits of starting a company in Boulder far outweigh the disadvantages.

As I did for the Seattle startup ecosystem, here is a breakdown of the pros and cons of the Boulder ecosystem.

Pros

Acceptance of failure, willing to take risks: Acceptance of failure is absolutely critical for a startup ecosystem. With so many startups popping up left and right, there are going to be plenty of failures to go around, and with that often comes a stigma. But in Boulder, the community not only accepts failure, but seems to welcome it.

Consider the idea of a “startup wake,” which I learned of in Boulder. When the community sees that a company is failing, it isn’t rare to have an impromptu get-together thrown to embrace the failure. The wake allows the founders to see that failure is acceptable. In addition, it helps the ecosystem by removing any negative feelings surrounding a failure.

For an ecosystem that needs to sustain failures as well as successes, this can be huge. As Feld notes on his website, "for all the entrepreneurs who are leaders of their startup community, make sure you do everything you can to make sure everyone knows failure is okay."

And what happens when the startup is finally gone, and the founders and employees are out of work? They can find jobs shortly thereafter, as dozens of people in Boulder attested to when I asked them.

Focus on the community: The community in Boulder is incredibly open and welcoming. As Mark Solon, a partner at Highway 12 Ventures, notes in Brad Feld’s upcoming book “Startup Communities,” “It’s my belief that Boulder is unique, because the entrepreneurs and other participants in Boulder’s startup ecosystem have a greater sense of community than anywhere in the country.”

This one sentence sums up what I've heard from every single person I spoke to in Boulder. Whether a well-respected investor, a startup employee, or a founder just getting started -- the opinions are the same.

Mike Lewis of Kapost shared a story with me about a founder that asked for an introduction with Brad Feld at Foundry Group to see if the firm would like to invest. Lewis said that he knew Foundry wouldn’t invest because it was outside of its investment themes, but was confident that Feld would do whatever was needed to help out.

Another example of this comes from Gnip COO Chris Moody. Moody shared with me that he came to Boulder and helped people out in the startup ecosystem continually, without asking for anything in return. Then, after dozens of introductions and favors done, Moody was introduced to Gnip, and ended up becoming Chief Operating Officer.

According to everyone I spoke to in Boulder, there isn't necessarily an expectation of a return, but regardless the community is willing to help out, time and time again.

Out of the box thinking: One of the more surprising parts of the Boulder ecosystem that I witnessed was an openness to trying new things. Nowadays, it seems like every startup I speak with is following some run-of-the-mill methodology that isn’t really pushing the boundaries. The business and product are innovative, but the actual management of the business is the same as every other startup I see.

But in Boulder, there’s a clear difference in how startups are being run, and how management is being approached. For example, two companies that I spoke with -- FullContact and SendGrid -- are giving employees the opportunity to help build the company. In FullContact’s case, the company is paying for employees’ vacations in addition to salary. This is supposed to help prevent burnout. In SendGrid’s case, the company is trying a location-agnostic approach, and is willing to open an office wherever the talent is. This means employees can work from California, Boulder, Denver, Germany, or even Romania.

This openness to new ideas and management techniques may end up paying big dividends down the road, in the same way that free lunches at Google are still paying dividends for the company’s reputation and recruiting efforts.

Boulder is a great place to live: For two weeks, there was a never-ending lists of things to do, not only people to meet with and companies to see, but a seemingly endless list of events. Impromptu performances on Pearl St., concerts on the weekends, mountains begging to be hiked, and trails asking to be jogged. I haven't lived there full-time, but from what I’ve heard, it’s rare that the question of "what should I do this weekend" goes unanswered.

This may seem unrelated to startups, but it really is important. There seems to be a mentality in Silicon Valley of, “work for years and then go sit on a beach for two months post-exit." That’s fine, but there’s a limited number of people in the world that such a life appeals to. But in Boulder, there’s the option of building a company all-day, everyday, and then spending the weekend doing an extreme activity only 15 minutes away.

Bigger companies have a presence in Boulder: There is one other positive thing about Boulder that stands out, and although it isn’t unique to Boulder, it is important. There are a number of big companies in the city that have satellite offices. For example, Microsoft has an office in downtown Boulder, as does Google. In addition, other bigger startups are opening offices, with a more recent example being Github. This not only provides validation, but potential opportunities for acquisitions.

Cons

Population limit: There's a natural limit to how big a company can get in Boulder, and this may end up being a con for the city. Now, this isn't a pressing concern for any company in the area at this very moment. But if the ecosystem is ever to become big enough to support an international technology company the size of Apple, Google, or Microsoft, it is something founders should be aware of.

Boulder has a population of roughly 100,000. For comparison, Apple employs over 60,000 people. Those Apple employees aren't all in Cupertino, but plenty of them are. If a company in Boulder does eventually grow to become a truly dominant technology company, it is entirely possible that they run into a size problem.

I asked Brad Feld if this would be a problem down the road, and he agreed that downtown Boulder has size constraints. But he also pointed out that this problem is well known, and that companies are free to move to the outskirts of the city while still being a part of the community. This seems like a good solution, but it also means that keeping the community tight becomes harder, due to physical distance.

The University of Colorado isn’t a catalyst for growth: The University of Colorado in Boulder is a good university, and it does churn out plenty of capable engineers and computer scientists that are welcomed into the community. This was verified by plenty of people in the ecosystem.

But there was also a distinct lack of enthusiasm surrounding the university. Yes, the talent is fine. But it doesn't propel the startup ecosystem forward in the same sense that Stanford does, or that the University of Washington does for Seattle. The university plays a role, hosting the local BDNT event while I was in town. But even so, the University doesn’t churn out talent like Stanford, Berkeley, or University of Illinois at Urbana-Champaign.

Of course, it’s hard to judge a university and its local footprint and say what successes would or wouldn't have happened without the university. But from what people told me on the ground, the impact of the university is a wash so far.

Neutral

VC money: There is one other part of Boulder worth mentioning, but which isn’t positive or negative: investing money. To be clear: the amount of venture capital money flowing into the ecosystem is definitely a good thing. For early stage startups with a solid business, product, and team, there shouldn’t be a problem raising money. This is great for the ecosystem.

But at the same time, the pool of potential investors is smaller. There are investors like Foundry which are locally based, and there are investors in Silicon Valley and New York City who are willing to invest in Boulder-based companies. But that doesn’t negate the fact that there is simply less money in the area. It’s too early to tell whether or not this will have a long-term impact on the ecosystem, and if that impact is positive or negative.

Added together, the pros and cons come out to together to form a picture of an ecosystem that is already strong, and will get stronger over time. There are a few hiccups, but for founders, they aren’t life-threatening. In fact, the pros reduce the friction in starting a company and helping it to succeed.

[Illustration by Hallie Bateman]