During the recent innovationIOWA panel discussion, panelists provided a pulse on Iowa’s entrepreneurial ecosystem, saying the state is in a healthy position with opportunities to double down and continue growing.
Panelists:
- Eric Engelmann, general partner, ISA Ventures
- Nancy Mwirotsi, founder and executive director, Pi515
- Lisa Shimkat, state director, America’s SBDC – Iowa
- Ellen Willadsen, chief innovation officer/executive sponsor, Holmes Murphy/BrokerTech Ventures
- Diana Wright, startup community builder, Greater Des Moines Partnership
Summarized below are some of the top themes from the panel. Video highlights from the event and the full video replay are available at businessrecord.com.
Building Iowa’s momentum and growth
Wright likened the concept of an entrepreneurial ecosystem to a garden with a foundation of soil, entrepreneurs as the seeds, and water and gardeners supporting the growth. She said she has learned through the MIT Regional Entrepreneurship Acceleration Program (REAP) that Iowa has “really rich soil for entrepreneurs,” but continuing that success means keeping up the momentum that is already built and supporting the addition of new entrepreneurs.
Mwirotsi, who is also participating in the Central Iowa MIT REAP initiative, said the experience has revealed what Central Iowa is doing “right” and that there are nuances between Des Moines and Ames’ ecosystems, like the resources available in Ames due to the presence of Iowa State University. In both communities, she said, everyone will need to work together to address the need to “upskill a lot of people.”
“I think we have a challenge on our hands, but it’s one we’re taking on boldly because we know we have capacity to do that,” Mwirotsi said.
Shimkat said working in a “semi-government” organization like the Small Business Development Center can lead to more reactionary innovation, making changes to fit the environment and new circumstances. In the last decade, she said, the SBDC has sought ways to be proactive, including starting the Rural Business Innovators program, which aims to bring business development resources to early-stage entrepreneurs in rural areas.
With a solid foundation laid, Wright said she and other stakeholders are setting a goal to “think 10 times and bigger,” by pursuing ideas like creating a $100 million venture fund focused on agtech.
“I think with MIT, it’s helped us realize, when we do look at all the assets in the community, what can we just dial in and just turn up a little bit that will make things easier?”
Entrepreneur and risk capital challenges
Willadsen and Engelmann said changes to the investment environment in the last year have resulted in investors giving startups competing expectations to meet.
“So many of them entered their venture with the mindset of grow, grow, grow, and that was all around top-line growth,” Willadsen said. “Now they’re hearing ‘OK, now we don’t care so much about growth, where’s your bottom line?’ and that’s a very difficult business model to switch on a dime.”
“They’re responding to investors, which is weird, like that’s what’s driving that behavior,” Engelmann said. “I think Iowa is a little gentler and less oscillating in that we’re a little more on [the side of], ‘it’d be really cool to be profitable’ … but it is changing. But I feel like Iowa has maybe not had quite as much on the edge behavior.”
Willadsen said the shift offers Iowa and the Midwest region an opening to provide stability.
“We’ve had many startups who have either delayed funding or are hoping to wait this period out, and I think that that’s a great opportunity for Iowa,” Willadsen said. “We hear a lot about East Coast money and West Coast money and how they differ in that. And Iowa and the Midwest actually have an opportunity to create Midwest money, that might be a little less reactionary, a little bit more supportive, in many ways.”
The investor and entrepreneur activity are areas Iowa can continue to grow, panelists said.
Engelmann said entrepreneurs need to have as many opportunities to get in front of investors as possible, because investors and venture firms are considering the company’s stage and industry as well as external factors like if it’s the “right time in the fund’s history” to invest.
“The filter is layers of Swiss cheese you have to jump through. The odds of getting through are pretty low for most entrepreneurs, so more investor opportunities and different investors focusing on different sectors would be a huge advantage.”
Engelmann said ISA Ventures realizes it’s not the right investor for every company, and like other Iowa venture firms, works to build connections with investors out of state, including through events like EntreFEST.
Wright said Iowa has a lower rate of new entrepreneurs, measured as the percentage of the population starting new businesses, compared with the nation and other Midwest states. Something that addresses this challenge is new startups spinning up companies that scaled, including Dwolla, Workiva and Roboflow.
“When you’re at a startup, you are taking a risk, and you don’t know necessarily the pathway of where that business is going to go, but those people really do start to kind of multiply when we’re thinking about how do we grow more entrepreneurs,” Wright said.
Creating education to employment pathways
Workforce attraction and retention needs persist, and Shimkat said rather than putting out singular programs, Iowa should focus on comprehensive pathways that extend from education to employment.
“Why don’t we look at a model that helps folks into the college sector to get some of that education that maybe is outside of the traditional paths that we look at, and figure out then how we can get to the next step to get them into your companies?” she said. “I think just having different people at the table is a start.”
Mwirotsi said Pi515 engages with schools, colleges and employers to help students connect to their next steps in education or employment. Principal Financial Group and John Deere have hosted and helped facilitate the nonprofit’s Tech Mentorship program, for example.