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Boulder - Relay Foundation



The College Town

Overall Trends:

I don’t want to say college town and have it be a pejorative. I want instead to highlight the shared desire to learn while having fun and in the absence of ego. My experience in Boulder was that to the nth degree. The entire space is rife with opportunity and change; just living there requires adapting to massive environmental shifts.

I arrived in Boulder on a beautiful sunny day, no clouds in the sky and about 80 degrees. Shorts were worn. Sandals were worn. And I was smiling.

The next day we had 8 inches of snow and I was confused.

The next day it rained and I pretty much gave up trying to make sense of anything.

But the group I was staying with over at The Village (amazing people you MUST learn more about), to them it was nothing. It was just data. They looked outside, assessed the situation, and put on the appropriate shoes. They had no expectations; they were instead hyper-aware and adaptable (yes I am going to link this to the Lean Startup method, but don’t get ahead of me). I am not sure whether Boulder forces people to learn to adapt to craziness or if people who love change move to Boulder in the first place, but it makes for an interesting and able startup community.

So, outside of the constant state of flux externally, I would say a second major trend would be the openness of the startup culture. I was told by one startup CEO, Evan from ReWork, that if you’re a hotshot in the area and you don’t take meetings with up-and-coming newbie entrepreneurs, “everyone thinks you’re a jerk”. Full disclosure, he used a stronger word than jerk.

But he was right! Evan and I were walking down the street to get a bite and he just stopped to say hello to people he saw through corner-store windows. They were often in the startup scene, he always introduced them to me, and as a result Relay had a few more voices weigh in on this piece. People from Unreasonable Group, Educate!, and more were all at the table (literally) and talking about trends in impact investing and venture philanthropy. I was offered a place to stay in Uganda out of hand! This is what you get in Boulder, if you’re willing to work your behind off to build something awesome.

As another example, look at TechStars Boulder. Techstars is one of the premium incubators in the world, and this applies doubly for the Boulder chapter. I spoke with Eugene, one of the head honchos, and he walked me through how Boulder is different than other TechStars programs. First, they don’t have formal applications. They invite you. And they hear about you from parties and other events. It’s all by word of mouth because the community is so tight-knit. Second, the office has hula-hoops, which is just perfect.

I mean, wouldn’t you want hula-hoops in your office?

This man knows how to keeps his startups happy.

Question 1: What is Social Enterprise?

Key Handoff: People of the Earth

People of the Earth

Boulder is green. The mountains are white with snow, but the trees and the people are green. They care about issues like urban gardening and environmental sustainability, and they love snowboarding, skiing, and other outdoors activities. Yoga and meditation are big, too, and it all seems to lead to a sense of ease and calm by its inhabitants.

I argue that this has affected the social startup sector deeply.

You get startups like ReWork that focuses on finding talent for social startups under the branding of ‘Don’t Settle’. You get Hub Boulder bringing together more openly environmental and impact-heavy ventures than those in the LA Hub, for instance, which has been moving more towards art and Design Thinking. Then ‘like attracts like’ and you get a solid, concentrated group with a similar value system working in the same place towards divergent but linked impact (read: exactly the point of every co-working space). You also get the Slow Money conference, which focuses on pioneering new thoughts on shifting wealth from Wall Street into patient capital for the agricultural sector (primarily). And let’s not forget UC: Boulder, which really needs no introduction and is always just ten minutes away.

This is not to say that everyone is linked to sustainability, only that if you go to Boulder with your tech startup you should expect to do random runs through the mountains. They just happen. And you should definitely expect to be asked what your ‘Dream Average Wednesday’ is. The idea behind this question, according to the inhabitants of The Village, is to highlight the baseline of your dream life because that’s the goal for these people.

The rise of social tech here, I would argue, is based in these social trends, because that makes sense. You have a critical mass of visionary thinkers (Dan Epstein, Brad Feld, everyone at the Village), a body of good coders from local universities, and the funding from past successes of the visionary thinkers (the Google Effect). If you are looking for a cofounder to build the software for your energy waste reduction startup, Boulder’s a good options. If you are looking to get some insight from people who have made their living off of building startup ecosystems over organic yogurt from Alfalfa,Boulder’s a great option. If you want to figure out what kind of startup you want to build, like Berkeley, you should consider Boulder.

Which brings us to my next point…

Almost all of the people in this picture are founders.

Question 2: Getting people involved.

Key Handoff: Open Door Policy

I have already mentioned that the openness of Boulder is one of its defining features, the hallmark of any good startup community. Now link that to the last sentence from above and you end up with a city that is a great place to start your venture, but perhaps not the best place to scale it. I’m not saying you cannot scale your company in Boulder, I’m only saying that there are attributes that get in the way of you doing so.

For the wins, Boulder is a great place to bounce your ideas off of people. Since everyone is working on something, there is little chance of someone ‘taking your idea’ (and I will come back to this little fear a bit later) and a large chance that they know someone you should talk to. Proving your market in Boulder is a great idea because you will get a network here far faster than anywhere else I have been thus far (outside of maybe Sydney). New York and Silicon Valley require you to either have a history of success, previously taken on funding, or know someone to get the real coffee conversations. Boulder has them for you if you prove you are willing to work.

For the not-so-wins, Boulder is a bit small. It’s a silo. They have connections, yes, but they are often to people inside of Boulder, so it’s hard to grow out of the city. The infrastructure to grow your venture is also there, but the choice of support program  (which incubator, which legal firm, which accounting firm you choose) is, from what I’ve seen, disproportionately limited for more types of social startups when compared to the larger startup communities. For standard tech startups, Brad Feld has a great piece here (we will be doing something similar but for services for impact companies). Funding is also a bit of an issue for social impact ventures. If you are pure social tech and fit the VC model, cool. You should be fine with the Founder’s Fund or TechStars or the Impact Angels Group. Otherwise you might need to go to groups in San Francisco or New York for state or foundation support because more often than not your startup buddies won’t be giving you your seed round (unless your friends are Teju or Dan from Unreasonable).

My recommendation is to go to Boulder for a few months. Make friends, ask questions, and research your problem set. Really get to know it, and then build your beta. Build the first product on a 3D printer or the first iteration of your website, and test it. Once you get some good feedback, plan a move to a scaling city like Silicon Valley or NY. But I won’t say ‘never look back’. Boulder is a solid example of what a startup community can and should be, it just seems tough to manage a growing social enterprise from there.

Every raised hand is a Patient Capital investor.

Question 3: The finance.

Key Handoff: Patience is the Key.

Boulder has Venture Capital. It has Venture Debt. It has grants. These types of funding we have covered in other postings, and if we’re going to hold to our mission to be wholesome and educational, we must solider on! And what we have not covered is a small group of people who keep growing in prestige through the use of Patient Capital (PC). They call themselves Slow Money, and they are the Anti-VC. Started a few years ago, Slow Money asked a simple question (that has no doubt been asked before), what if we focused on something other than financial returns with an investment? The rousing conversation that has followed has led to a few conferences and much debate.

But first we need some context.

Impact Financing has a spectrum: on one side you have financiers that are finance-first and on the other you have the financiers that are impact-first. Pure Finance-first Capital is as you think it would be; the money is looking for market-rate returns and only thereafter cares about the social impact. This is different than when financiers do Negative Screening, where the financiers choose not to invest in companies that do explicit wrong. The Finance-first Impact financiers here instead choose from those companies doing an explicit right; they just do so only after making sure the returns are going to be great.

On the other side of the spectrum is the Impact Financier. These people are what some people call ‘real’ impact financiers, and further to the Impact side of the spectrum you move, the more they care about impact. They pay attention to the tradeoff between money and meaning and will give up some personal financial return for more kids going to school. Most organizations today in the space are a mix between the two (Opportunity Fund, for example), and all finance institutions fall somewhere on this spectrum.

Behold! All of investing. Sort of.

Slow Money is an organization in the vein of ‘Locavesting’, and is as close to impact-first as you can get without being a straight grant of money with no strings attached.

Locavesting, by the way, is a movement that has been gaining steam recently that looks to transfer capital from the clouds of standard finance and the stock market to instead small and local companies. The goal is to build resilient communities by having more people engaged in the growth process. I’ve spoken to a few people in the space (Jenny Kassan over at K2 Consulting helps small companies run their capital campaigns and Direct Public Offerings and is an absolute joy), and the argument is tempting. I leave it to you as to whether or not you stand by their reasoning, however.

Slow Money embodies these sentiments and pools capital from a series of conscientious and long-thinking funders to build 0% interest-rate loans for social ventures that otherwise would have little chance to raise capital, like organic farms. Set up in chapters and similar in structure to the Angel Groups we talked about last piece, these organizations have long time-horizons and often don’t expect repayment. They would definitely like repayment; they just don’t expect it. Their goal is to enable capital-intensive social ventures to get moving, and having a high interest-rate on the loan could cause more harm than good to the venture taking the funding out.

Now, whether or not this same issue could be handled with a craftily-constructed royalty-based loan that we talked about before never came up, but I will be reaching out to see what they think about the idea. The reason I even care is based on what we talked about in the Chicago piece, where investors and other financiers don’t take ventures that get easy money seriously. This forces Slow Money to stay engaged for long periods of time (granted, this is something they don’t quite care about) but also could force Slow Money to put in second or third rounds of capital past what they initially signed on for. I’ll pop over their response.

Long story short, everything from grants to VC is found in Boulder, so many different startup models have access to opportunity. Even farms. So saddle up.

My best,