It's been a decade since I moved to the Twin Cities from Silicon Valley, the epicenter of the technology world. At the time, my friends and family wondered aloud how this lifelong computer nerd could be leaving all the action in "the Valley" to move to the quieter plains of Minnesota.
I was confident that I could have a successful entrepreneurial career anywhere, and over the last handful of years I helped launch a technology company based here in Minneapolis called Kipsu. We provide a solution that allows service organizations to engage their guests using text messaging and other digital messaging channels.
Most early conversations we had with prospective customers ended with, "I just don't understand why they wouldn't just pick up the phone and call us." Our fledgling start-up was fortunate to find a first customer in the Mall of America. Dan Jasper, public relations director, and his team at MOA saw the potential in our concept and became our first paying customer, and without them, our company simply wouldn't be here today.
As we gained scale after that first customer, nearly all of our initial accounts came from outside the Midwest. For the first four years of our company's existence, none of our customers, save MOA, were from here. As we grew, we continued to pitch new prospects at home, but it became increasingly apparent that the risk of working with a small company, particularly a local one, wasn't appealing to those in Minnesota.
The vague reactions we received ranged from, "Oh, we don't need that kind of thing" to, "We already have that." We've now overcome those objections on a global scale, but, as we've reflected, what is startling is how often those types of excuses came up here at home but not at other places. We joked with ourselves that maybe we should say we were from Silicon Valley to see how it changed the responses we received locally.
Often, when we talk about the necessary ingredients for a thriving start-up local economy, we focus on the availability of capital and a pool of entrepreneurial talent. What we rarely talk about are the first customers that take the jump into the unknown with the entrepreneurs. For a typical start-up, its first buyers are usually "brother-in-law" customers — one of the founders may have a social connection to them — and they are almost always in the same geographic area as the company.
These initial customers that sign up to test something brand-new take on a lot of risk, including their reputations at their companies and the capital they put up to make use of the product that is relatively unproven. These early risk-taking customers are essential to entrepreneurial success.
I have spoken to other entrepreneurs in town who also feel that our local market lacks the entrepreneurial support system that is found in other places. Serial entrepreneur Phil Soran, who has co-founded and grown two companies, Xiotech and Compellent, to public-company scale, always thought that he would have a "home-field advantage" selling to large companies and government agencies based in Minnesota. But Soran found otherwise. "It was tough to get the meetings, let alone make the sale," he recalled.
Silicon Valley is known for being a land of ideas and for its endless amounts of capital coming from Sand Hill Road. But what often goes unrecognized is that Silicon Valley is also the first customer for many of the companies that start there. Buying from a start-up doesn't feel like a risky proposition when you see companies in your backyard like Facebook, Apple and Google become large enterprises in relatively short order.
In Minnesota we have the most Fortune 500 jobs per capita, a statistic we should hold high. At the same time, we need to recognize that this is an accomplishment we won't be able to brag about forever. If you look at the list of Fortune 500 companies 50 years ago, you will note that 88 percent of those companies no longer exist. The creative destruction process of renewal that happens in our economy is happening at an even faster pace, and with our limited entrepreneurial community we are exposed.
Just ask Rochester, N.Y., what happened to Kodak when the digital camera took off.
Start-up companies rely on their initial customers to validate their offerings, and those customers become the references that help others believe their products are worth buying. We have an opportunity to play a role in seeding the next 3M, General Mills or Target, by taking an interest in emerging companies in our backyard.
The economy that will be here to support our children and our children's children depends on us embracing our own today.
Christopher Smith is the CEO and co-founder of Kipsu, a start-up technology company in northeast Minneapolis.
