the folks that were putting together 4490, the notion of a place that has a lot of interest in entrepreneurship, that has a lot of smart people, where you could build a company capital-efficiently, was something that resonated with me. But to be honest with you, originally Madison wasn’t on my target list, just because I’m on the west coast. I’m looking at places a little closer to home. But once I got out here and I met people and saw the opportunity, I recognized that Madison definitely belonged on that short list, with a Portland, with a Boulder, an Austin, of places that represented the right type of entrepreneurial environment—a place where there’s lots of interest in entrepreneurship, and where there’s an ability for someone to come in and, with the right pool of capital, can make a real difference.
X: Can you expand on this idea of capital efficiency?
GR: The cost of building businesses in some of the larger startup meccas—Silicon Valley being one—the cost of real estate, of engineering talent, of management talent, is extremely high. At a lot of [Peninsula’s] startups, $200,000 was the average salary for an engineer. Hopefully in Wisconsin it’s going to be lower. Real estate is probably 3, 4, 5 times more expensive in Silicon Valley versus Wisconsin. So when you start to factor all those things in, a company that wants to hit the same milestones, I’m guessing is going to be able to do it in Wisconsin for about half the money, maybe even less—which is obviously a good thing for both the entrepreneur as well as the investor.
X: What’s the biggest lesson you learned at Peninsula that you will apply to 4490?
GR: It’s the conviction around the capital efficiency and deploying a prudent amount of capital along the way as you hit your milestones.
I’ve seen too often where companies are overly confident that they’re ready to scale to get to that next milestone, and invariably the product or the team or the market isn’t ready, and you end up spending a lot of money doing something that you’re not ready for. Sometimes you can recover from those mistakes, and often times it’s very difficult.
I’ve seen just as many companies fail because of too much capital as [with] not enough capital. It’s all about that healthy struggle to find that right balance of capital. It should be hard to raise money, in my opinion. That makes you appreciate that money, it makes you make that money stretch, and all of those things are very critical in creating the right kind of culture and really the right kind of problem-solving mindset that startups need to have.
X: In your early observation, what do you think is the top challenge for Wisconsin startups right now?
GR: I think one of the challenges of the broader ecosystem is the fact that there’s not a large network of people that have done it before, built it up, and have been really successful, and then can act as seed fund, mentors, advisors to the next generation of companies. That’s what makes Silicon Valley so special is you do have a wealth of people that have done it before and can lend that expertise and those resources to the next generation. It’s a challenge with any location that’s newer to the whole entrepreneurial world, just trying to find all the pieces that round out that entrepreneurial ecosystem. And that starts with people who have seen it and done it before. It takes time.
I think a lot of times in early environments like this, the tendency is to, if you can get a single out there, you’ll take it. You’re not going to really slug for that double or triple.
I feel like I need to challenge people to be able to think about, a single’s great, but maybe the double or triple is within your grasp. Let’s talk about how we fund that.
When I’m talking about trying to build bigger companies, bigger outcomes, it’s can we build companies that are $50 million and $100 million in size. That would be a big win, obviously, for the ecosystem here.
