The Friday Indefensible Position: Fine Wines from Difficult Soil: Real Estate Constraints in Boulder are Good for Entrepreneurship (by Matt Burns)

In Boulder, commercial space can be hard to find

During the Q&A session at Silicon Flatirons’ Crash Course on Brad Feld’s Startup Communities book, one attendee asked the packed house: “How does Boulder screw this up?”

It is an excellent question.  After all, as goes the saying, nothing breeds failure like success.  For every innovation center that successfully adapts over time (see:  Silicon Valley), another fails to do so (see: Detroit).  What challenges are staring down Boulder?

One challenge cited in Boulder is real estate constraints.  As in, space is scarce for expanding startups.  Brad’s analysis, edited to be family friendly, was “We’re just [out of luck] on that.” Conventional wisdom is that this is a bad thing.  That is, the Boulder startup community would be better off if startups were able to expand and build offices and infrastructure here in town.

Today’s Indefensible Position:  Boulder’s real estate constraints are good for entrepreneurship in Boulder in the long run.

I can hear you laughing at me through the internet already, but hear me out.  The fact that Boulder real estate is constrained does a few things that benefit entrepreneurship in Boulder.

It’s kinda like this in Boulder sometimes.

First, it creates a physical crucible that magnifies the frequency and intensity of serendipitous interactions among smart people.  It ensures Boulder is one dense startup neighborhood (albeit one surrounded by open space).  Entrepreneurs who are space constrained are more likely to be found working in coffee shops and other collaborative spaces rather than in an office alone or with only their own staff. When the startup next door fails, a new one moves in and the random interactions continue without pause. The tendency to look outside and get outside of the office for ideas, talent, and inspiration magnifies the network effect in Boulder. Richard Florida talks about how the entrepreneurial landscape is “spiky.” In a sense, the real estate constraints in Boulder make Boulder’s “spike” taller by narrowing the base and forcing it upward.

Second, space issues prevent the presence of a single highly influential company (developed locally or imported) from swallowing the scene. In a town the size of Boulder, the company doesn’t need to be Google- or Microsoft-sized to have a significant influence. It can be smaller, a few thousand employees perhaps (Boulder already has one highly influential entity, CU, but because it is a university and not a for-profit company, the effects are much different.) A single highly influential company can have some negative effects on the entrepreneurial community and, intentionally or otherwise, Boulder’s real estate constraints block the presence of such a company and thus protects us from these negative effects. Before a company gets big enough to have that kind of influence, it is forced from the nest and moves to a new place better suited to its needs, a new startup takes its place in Boulder, and the circle of entrepreneurial life begins anew.

Boulder is not like this, and that is good.

The presence of a single highly influential company prevents the development of a hierarchical social order that reduces inclusiveness and chills creativity. When a large proportion of the technical talent in a particular area all work for the same company, events like the Crash Course series can start to have an “Us and Them” feel. Outside entrepreneurs may be made to feel excluded because they are not part of the company “club.”

Welcome to the company. Here’s your uniform.

A large company in the post-startup phase if its life cycle will focus on importing and developing worker-bee and middle-manager talent to the exclusion of entrepreneurial talent. That is not to say that employees without an entrepreneurial bent are not great people and contributors to society, but part of the theory of entrepreneurial communities is that there needs to be a critical mass of entrepreneurs. The risk is that the entrepreneurs are drowned out and Boulder becomes known as the home of one big company rather than as the home of dozens of startups. Fewer and fewer students at CU will be inspired by the entrepreneurs in the community and will instead be focused on getting hired at the bottom of the big company pyramid.

An expanded Boulder during a bust cycle?

Lastly, the real estate constraint prevents the business version of the broken windows phenomenon. If real estate could be easily built out to accommodate the demand during a boom cycle, there would inevitably be vacancies and neglected property during a bust cycle. Whether it is a single big company downsizing or many small ones going out of business, the outward appearance is that the town is no longer vibrant. The attitude in town changes and the remaining successful businesses may start to look at other, still-vibrant communities.

For those reasons, it is to entrepreneurs’ benefit that Boulder has real estate constraints. It is said that great wines are created from grapes that suffer because the vines are growing in difficult soil. Perhaps great companies are created by entrepreneurs that suffer because they must grow in Boulder’s challenging real estate environment.

La Rioja in Spain is a rocky place where grape seeds can find no purchase, but when they do, the result is world-class.

Matt Burns is a veteran of CU Law’s Entrepreneurial Law Clinic and currently a Fellow at the Silicon Flatirons Center in Boulder. He lived with the hassles of trying to develop real estate as a construction manager prior to attending law school. He now lives with the space constraints of Boulder every day… in his cubicle.

The Friday Indefensible Position: A “C” is better than an “A” (by Ben Deda)

From the first day we are in school, we are taught that our goal on anything should be a grade of 100%. One hundred percent is better than 90%, 90% is better than 80%, and 80% is better than 70%.

A perfect score?

So you always want to strive for the 100% solution, right?

Absolutely wrong. In a lot of cases, the 70% solution is exactly what you want.

But how can the 70% solution be better than the 100% solution? It has to do with dynamic environments, some weird thing called the OODA loop, and the idea of tempo. You’ll find that the 70% solution is a great tool for startups and fits well with the ideas of Minimal Viable Product and Build-Measure-Learn of the Lean Startup methodology.

Dynamic Environment

Let’s start with the idea of a dynamic environment. A dynamic environment is one in which actions are not constrained to a set of rules. Rules like alternating turns and set amounts of time create static environments. In these non-dynamic environments you have a set amount of time to maximize your solution. Therefore it is best to strive for the closest you can get to 100%.

What about when there is no allotted time or set of rules? What do you do when it is a free for all and it is all a matter of actions and reactions that constantly change the environment? Do you still want to strive for 100% in this dynamic environment?

Hell no, just take the 70% and your C.

All of you honor students out there are probably thinking I’m crazy, but stay with me. What if every time you answered a question on the test you were allowed to choose the subject of the next question as long as your answer wasn’t completely wrong? Think Jeopardy with a curve. You want to make sure you keep the game in your strongest category. Wouldn’t you want the 70% solution instead of the 100% in this case?

This kid is happy, but he’s doing it wrong.

The OODA Loop

This is a portion of some incredible theory developed Colonel John Boyd of the United States Air Force. The story goes that Boyd was tasked with finding out why the U.S. was losing so many aerial dogfights in Korea compared to  WWII. Popular opinion was that it was an issue with the pilots. After countless hours talking to survivors and eyewitnesses, observing in the field, and study, Boyd determined that it was actually the planes that were the problem.

“Nonsense!” was the response of the establishment. Everyone knew the U.S. had the fastest and most reliable planes in the world. Boyd acknowledged that this was a truth, but what they were missing was the fact that the planes’ designs greatly hampered the pilots’ ability to see what their opponents were doing.

Boyd believed that all decision making took the form of a reoccurring series of the same steps: Observe, Orient, Decide, and Act (OODA). You first observe your environment, orient yourself to the environment based upon your internal point of reference, decide what action is best to take, and then take that action. You then start all over by observing the new environment caused by your action. As in all things military it became an acronym. The OODA Loop.

U.S. pilots were having problems effectively seeing the situation and therefore their OODA loops were delayed. Opponents were completing their own OODA loop faster than the U.S. pilots and gaining an advantage.

Boyd became a major proponent for a change in aircraft design to more maneuverable craft with better fields of vision which led to bubble cockpits, the F-16, and the F-18, which are all still in service today.

The F-18′s bubble cockpit is also useful for communicating. Keeping up foreign relations. You know, giving him the bird.

It should be pretty apparent how this ties into the 70% solution. The 70% solution allows you to cycle through your OODA loop faster than someone who is taking the time to put together the 100% solution.

Suddenly the law of diminishing returns becomes relevant. The longer you wait to gather more information and mull over your decision, the less you gain from the incremental “correctness” of your decision. If you wait for the 100% solution, you might find yourself providing an answer to a question that is no longer relevant.

Tempo

How do you know what equates to a 70% solution?  It’s not like the decisions we need to make are all numbered questions that we can track. This is where the idea of tempo comes into play.

Oodles of OODAs

If you notice, in each example I frame the decision in a competitive environment. The 70% solution loses its impact in a static environment where you are not competing against another entity. But truly static environments are pretty rare; you almost always have something with which you are competing. It doesn’t have to be another company or person. It can be the market or simply just time. You simply need another force that can impact your environment even if you do nothing.

Those other forces will help you determine what constitutes 70% through relative speed, otherwise known as tempo. Tempo is nothing more than your speed in relation to your competitor’s speed. By understanding what that tempo is, you can determine when you reach that point of diminishing returns, which is the 70% solution.

The Result

I’ll give you a great example from FullContact. When we initially started commercializing our product we started at a price of $0.03 per match. We gained some initial traction, but we just weren’t seeing growth as quickly as we wanted. From some initial reactions from customers it appeared that our price was too high for an API.

We could have done in depth market analysis, pricing surveys, and held numerous meetings to discuss our options.  But, we had a competitor that had a bit of a jump on us in the market and a potential capital raise on the horizon.   So instead we took the data points we had, reviewed pricing from some API companies we respected, and started tweaking our pricing.  We first added an additional plan at a lower price and reduced the number of free calls.  We didn’t see the results we wanted from that so three weeks later we cut our prices 50x.  Yes, 50x.  Next thing we knew we had customers signing up at a consistent rate.  Then our competitors made it seem like they matched our pricing and also modeled their website after hours.  We had forced their hand by using the 70% solution, going through our OODA loop (or Plan Measure Build) faster, and iterating.

In conclusion, recognize when you are in a dynamic environment, be cognizant of your OODA loop, and know how quickly you are moving through that OODA loop in comparison to the tempo of your environment. Don’t stress out about trying to turn an uncertain and chaotic environment into the 100% solution. Take the 70% solution, execute, and get ready to do it again.

Improvise, Adapt, Overcome.

Ben Deda is Vice President for Business Development for FullContact, a Denver based TechStars company providing cloud-based contact management solutions. Ben is also a decorated former Marine Corps Captain adept at executing OODA loops under extreme stress.

Of Indefensible Positions and Town Gown Crashes (by Matt Burns, SFC Fellow)

Boulderstartups.org gained traction during 2011-2012 as a useful resource for entrepreneurs concerning the CU and Front Range startup scene.  In particular, the startup calendar (at right on the site), resource listings, and several blog posts received favorable community response.  We’re not as viral as, say, Carl Rae Jepsen playing with the Roots .  But the blog is useful.  And less likely to be an ear worm.

A challenge of a blog with several guest writers is, well, coherence.  In a blog, as with dinner parties, individuals talking past each other is not as interesting as people having a good conversation.  As we look ahead to our 2012-2013 Entrepreneurship Initiative, we aim to take the next steps forward in the blog by generating more community, more coherence, and greater interaction.  Toward this end, boulderstartups.org blog kicks off three new blog series.

#1:  Friday’s Indefensible Position: This series’ purpose is to have some of the best minds in the entrepreneurial community present a position that is counter to the community’s conventional wisdom.  This series intends to spark conversations by spotlighting disruptive angles about startups and the entrepreneurial community. Topics can be funny, controversial, or bizarre – just so long as they stimulate critical thinking on the subject.  The Indefensible Position is intended to challenge widely-held ideas that otherwise receive little scrutiny.  Bonus points for humor, good writing, and a pointed perspective.  The Indefensible Position series will come out on Fridays and, when successful, should give you something to argue about with your friends and co-workers at a Friday happy hour.

#2:  The Town Gown: This series highlights the intersection of CU-Boulder and the area’s startup scene.  It goes beyond calendar announcements of campus events to highlight substantive activity at CU that the Front Range should know, but don’t (yet).

#3:  Crash Course:  Silicon Flatirons’ in-person Crash Course offerings, which provide a focused discussion on startup topics for free to the public, have proven popular in the area startup community.  We now hope to port some of these insights to the blog.  The Crash Course series will pass on some of the insights of the members of Boulder’s entrepreneurial community. Our community possesses a vast wealth of experience in entrepreneurship (both good and “character-building”) from entrepreneurs, investors, lawyers, accountants, and even customers. Crash course posts aim to share these insights.

We look forward to building this on-line community.  Ideas for blog topics or ways to enhance the blog are most welcome.  If so, please feel free to post a comment to this blog post or to reach out to me at matt.burns at colorado.edu

Matt Burns is a Fellow at the Silicon Flatirons Center. He is an engineer and J.D. and when he’s not at work you can probably find him outside taking the hard way up.

Hey Boulder: Be Awesome!

Awesome: adj, causing feelings of great admiration, respect, or fear

We toss that word around about things like a cup of coffee or a dinner with friends, but how often does something really fill you with feelings of great admiration or respect?

The Awesome Boulder foundation’s goal is to make Boulder a more awesome, happy, super cool place to live. They do this by choosing one project a month and giving the creator $1,000 to make it happen. The Active Entrepreneurs Club was immediately inspired to apply for a grant (and you should be too) When our project was selected, we couldn’t contain our excitement.

This Thursday and Friday, October 4^th and 5^th from 9:00AM to 5:00PM, the project will come to life in the UMC fountain area as the AwesomeBoard. The AwesomeBoard is a four sided, eight-foot high whiteboard on which you can write, draw, collaborate, share ideas and inspire (and then grab some free food and meet some cool people). When you’re done, or see something awesome, take a picture and share it on the Facebook page or on Twitter and Instagram using the hash tag #AwesomeBoulderCU and the handle @AECUBoulder. Then check out the AwesomeBoard webpage for a real time feed everything happening on the board. Each side of the board will have a theme: “What would you do with $1000?,” “Ideas for inventions and startups,” “Bucket List,” and “Artwork.” While the board and its contents will be awesome, the people the AwesomeBoard will bring together from all over campus will spark many more awesome ideas all around Boulder.

Who are we and why are we doing this? The Active Entrepreneurs Club is a student group at the university built around a collection of student-founded companies. While the primary objective of the club is to build and grow these companies, we also promote entrepreneurship to students and connect them to the incredible startup community in Boulder. The AwesomeBoard gives us an opportunity to promote the vast resources that CU students have access to, including Active Entrepreneurs, StartupCU, Silicon Flatirons, the New Venture Challenge and the Deming Center, just to name a few. We will also showcase the first version of an info-graphic we are working on to help provide a visual of the resources for students on and off campus. So come share your ideas, learn from others, and promote entrepreneurship on the AwesomeBoard!

Fletcher Richman is a third year Electrical Engineering student at CU-Boulder. He is involved in the entrepreneurial community as the president of the Active Entrepreneurs, a participant in the New Venture Challenge, and founder of The College Life Guide.

The Friday Indefensible Position: Two Bent Corners and a Boulder Beta iPad (Jason Lewis)

Entrepreneurs exploit opportunities hidden to others.  One might not think there could be competitive advantages involved in the random act of drawing business cards.  I beg to differ.

Adapt and overcome!

My Friday Indefensible Position:  I am better than you at winning random card drawings out of a fish bowl.  I have innovated and succeeded.  And the glory of the Boulder Beta championship – and a shiny iPad3 – is now mine to show for it.

Let me explain.  Boulder Beta is not my first door prize rodeo.  As with startups, innovation often comes from unexpected corners.  It turns out, when it comes to card drawings, I have a proven method.   It involves corners.  More on that in a moment.

My card-from-a-bowl talent first emerged at the Harper County Fair when I was around the age of 7.  The winning goods?   A matching set of Coleman coolers ranging from a water jug up to a massive ice chest.   OK.  It wasn’t every kids dream prize.  But it allowed me to start honing my skills as an amateur Door Prizeman champ.  I was a prodigy.  And 23 years later, I’m still at it.

For the benefit of the Colorado startup community, I’m now ready to share my card drawing trade secret with the world.  Here goes:

When it comes to contests involving the draw of business cards, you have several possible competitive advantages.  Card placement, card size, card shape, card textures, and card thickness are each options.   Each is important to gaining a competitive advantage within the fish bowl.

Yet there is one tried and true method that tops all others:  The Corner Bend.  This method carries with it 23 years of winning tradition.

As with startups, each situation has to be analyzed based on the dynamic environment presented.  In fights within the fish bowl, exactly what type of bend requires adjustment and calibration.   I base my bend(s) on the number and quality of the door prizes.  Too big of a bend, and you get drawn first for a free xxxl t-shirt or stress reliever ball.  Too small of a bend, and your competitive advantages never come to fruition.

Easier than IKEA instructions

After analyzing the goods at September’s Boulder Beta, I went with a 1/3 of an inch bend in opposite corners with one facing up, the other facing down.  Not enough to get drawn first, just enough to increase the odds of being drawn later.

The Door Prize Champion and his shiny new trophy

Did it work?  Hell yeah!  My days of being an amateur Door Prizeman are over my friends.  My certificate of reaching expert Door Prizeman…… a brand new shiny iPad3!!    I want to thank Boulder Beta for making this happen and to my family for putting up with me.  Without their support I might not ever realized that the static-cling trick, while considered an advantage, actually ends up taking both you and another door prizeman down, a discovery that lead me to develop my own winning techniques.

Many thanks to Jason Lewis for kicking off our new blog series. Check out the blog next week for more on our exciting fall lineup. – Ed.

Mark Your Calendars: SFC’s 2012-13 E.I. (i.e., Information Entropy) (Brad Bernthal)

As we enter year five of Silicon Flatirons Center’s 2012-13 Entrepreneurship Initiative (“E.I.”), the phrase information entropy, borrowed from Princeton sociologist Martin Ruef, evokes what the E.I. aims to accomplish.

Entropy is energy dispersal and, sometimes, is described as the presence of disorder in a system. Information entropy – the disorderly transfer of ideas at CU-Boulder among and between people in what has been dubbed America’s most creative city – gets to the essence of the E.I. It is my pleasure to announce our 2012-13 lineup below. With events like Rally’s Zach Nies (September 10), GetSatisfaction’s Wendy Lea (December 3), and TeleTech’s Ken Tuchman (March 7), I hope you’ll mark your calendars to join us for a year of entrepreneurial energy dispersal and the right kind of startup system disorder.

The E.I.’s information entropy highlights the importance of interaction within a scene. Providing a nerve center where the startup community connects with the CU-Boulder campus is among the E.I.’s most important contributions. Great startup communities share much in common with other creative neighborhoods. Like 52nd Street in New York Citywhich in the 1930′s and 40s produced bebop jazz, startup scenes facilitate networks that are marked by information spillovers, helpful competition among participants, and spontaneous interactions. In a continuation of last year’s efforts, the 2012-13 E.I. continues to emphasize congregations that combine a powerful research university with a world-class startup community. The ambition is to create a scene with high velocity campus/community interaction. Beyond the campus, through Startup Colorado – led by Executive Director Dave Mangum and Co-Chairs Phil Weiser, Brad Feld and Jan Horsfall — SFC is increasingly affecting entrepreneurship scenes throughout the Front Range. Now in its second year, Startup Colorado has done much to strengthen startup networks between Boulder, Colorado Springs, Denver, and Fort Collins.

SFC’s public facing events in turn inform our scholarly ambitions. Over the past year we examined angel investing as well as differences between venture capital and private equity. Our 2012-13 work will further examine angel finance, the JOBS Act, as well as explore dynamics around entrepreneurial communities. In August we held a terrific roundtable on what levers help support and hinder entrepreneurship with Denver Mayor Michael Hancock and entrepreneurial leaders from Denver. Continuing this discussion thread, on October 15, we’ll explore the ingredients of great startup scenes with the release of Brad Feld’s new book, Startup Communities. And on March 21, our Annual Entrepreneurship Conference will explore The Future of Venture Capital.

E.I. information entropy works in direct and indirect ways. The Boulder Apps Privacy Summit with the Federal Trade Commission’s Julie Brill (October 2, http://devprivacysummit.com) will directly provide useful information to startups. Similarly, the Crash Course for Entrepreneurs series provides straightforward insights on startup topics ranging from Lean Startup methods (Zach Nies, September 10) to how to pitch (TechStars’ Nicole Glaros, October 24) to how to create effective startup board of directors (Grotech’s Joe Zell, November 15) to privacy (Bryan Cave’s Jason Haislmaier, December 5). The Venture Capital class, which I co-teach with Foundry’s Jason Mendelson, features a record student enrollment and continues to raise the transactional IQ of Colorado Law and MBA students. And our Entrepreneurs Unplugged series, co-sponsored by ATLAS, highlights entrepreneurial storytelling with a point. Unplugged kicks off on September 24 with BlogFrog co-founders Rusty Banks and Holly Hamman. Of course the direct content of these offerings are highly valuable. Over the years, however, I’m struck at how important the indirect effects are. Informative E.I. discussions are accompanied by networking where unplanned interactions occur laterally, as if arriving out of attendees’ peripheral vision. The indirect connections at E.I. events are often as powerful as the direct results we intend.

The disorder of the E.I.’s information entropy creates the context for messy, bottom-up innovation. Thomas Friedman and Michael Mandelbaum highlight Carlson’s Law, named for Curtis Carlson, CEO of SRI International, who observes that”[i]nnovation that happens from the top tends to be orderly but dumb. Innovation that happens from the bottom up tends to be chaotic but smart.” Nowhere is bottom up innovation and the power of connection more on stage than at the New Tech Meetup. On the first Tuesday of the month, the heart beat of the startup community convenes in the law school’s Courtroom. The Meetup, led by Robert Reich, evokes what Brian Eno calls “scenius” – viz., the communal form of genius. Such is the formula for innovation. Further support for innovation is found through the free legal help provided by Entrepreneurial Law Clinic. And students start ventures and meet mentors through the fifth annual cross-campus New Venture Challenge presented by SFC and many partners across the CU-Boulder campus.

As is E.I. tradition, the vast majority of SFC’s entrepreneurship offerings are free to the community. We last year led or co-sponsored 48 E.I. events with over 6600 attendees. We’re planning for a similar clip this year. It is important to say thank you to those whose generous support as SFC’s E.I. sponsors and E.I. Board members makes the program possible. Additionally, for those who would like to provide E.I. support, there are several avenues for involvement. You can directly contribute to the Entrepreneurship Initiative, hire a CU student as an intern, join the Startup Summer initiative, sponsor the 2012-13 New Venture Challenge, or contribute to the Entrepreneurial Law Professorship Fund (look for a Press Release coming soon). For more information on how to support the E.I.’s in any of these or other ways, please reach out to our incomparable Program Director, Anna Noschese (Anna.Noschese@colorado.edu).

Here’s to useful chaos and disorder in the 2012-13 E.I. lineup. I look forward to seeing you soon.

Brad Bernthal is the Director of the Entrepreneurship Initiative at the Silicon Flatirons Center and is an Associate Professor of Law at CU Law School.