#StartupsEverywhere Profile: Carl Erickson, CEO and co-founder of Atomic Object, and Jennifer Wolbers, Owner, Smart Blue
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
Grand Rapids may be in Michigan, but that doesn’t mean its economy or startup ecosystem is auto-centric, like nearby Detroit. We chatted with two Grand Rapids insiders about how the Midwest work ethic, a sense of community success, and the necessary tools to attract and retain talent and investment make this Michigan metro area a startup hub.
What’s your role in the Grand Rapids-area startup ecosystem?
Carl: I have taken on a few different roles here in Grand Rapids. I am an angel investor, the managing director of a venture fund called Tappan Hill Ventures, a board member of Grand Angels, an advisor at Start Garden, and the CEO of Atomic Object.
Jennifer: I am a 35-year veteran in management and marketing for consumer products with a primary focus in health and beauty. My role in start-ups is incubating ideas to create something that can be taken to or expand in the consumer market.
Can you tell us more about what your company does?
Carl: Atomic Object designs and builds custom software applications, while Tappan Hill Ventures invests in early stage companies where software is a strategic differentiator.
Jennifer: Smart Blue is consulting company where, at any given time, I am working on three new early stage startup companies. Most recently I was the operating manager for Rob Lowe’s Profile Men’s Grooming and now I am the operating manager for Aktive’s Hemp CBD Lifestyle Solutions.
What’s the most exciting thing that has happened for Grand Rapids in the past year?
Carl: Blue Medora, a local software company in the management and monitoring space, just closed on a B-1 round of financing at a post-money valuation of $53 million. That’s almost certainly the largest valuation of a software firm in Grand Rapids ever.
Jennifer: The Michigan Venture Capital Association (MVCA)’s 2017 West Michigan Entrepreneurial Study revealed that in the past three years, there has been a 20 percent increase in the number of startups in West Michigan (which includes the Grand Rapids, Holland, and Kalamazoo metro areas). The 28 venture-backed startups in the region represent 20 percent of the total number of startups in the state, which is comparable to Detroit’s 25 percent share of Michigan startups.
Additionally, Grand Rapids' workforce grew 4.4 percent last year making it the top city in the U.S. for job growth (among cities with more than 1 million residents).
What makes Grand Rapids an ideal place to start a company?
Carl: There are several reasons why Grand Rapids is a great place to build and scale a company. We have:
A deep and wide talent pool;
A reasonable cost of living and tech salaries;
A strong design community
A good number of capable development consultancies; and
An open and welcoming business community.
Jennifer: Grand Rapids is a great place to find top creative and technology talent with a strong Midwest work ethic. The community here believes that if one business is successful, then everyone will benefit. This sense of community and dependability has been critical when our founders have been relient on contracted workers, not full-time employees, in during the early stage of their company.
What industries have historically thrived in Grand Rapids? How has this shaped the startup ecosystem there?
Carl: Grand Rapids has always had a strong base of privately held and family owned companies. This has resulted in longer-term thinking, willingness to invest, and caring about the community. Our economy avoided an over-reliance on automotive business, unlike other parts of Michigan, and our diversity has also been a strength. We have a blend of entrepreneurs with experience in our strong local manufacturing base, as well as the next generation of entrepreneurs with their eyes on software and services.
Jennifer: Historically the industrial base here has been automotive, consumer products, office furniture, and bio-tech. Many of these companies are or were privately held for years, which produced high wealth individuals and families -- including the Meijers, DeVoses, Van Andels, and Cooks -- with a personal mission to give back to the city. These successful business owners have made major donations to biotech, the arts, downtown infrastructure, and the local facilities of our booming tech sector.
What is the biggest challenge you face in the Grand Rapids?
Carl: A few years ago it was capital. In the last five years though, available venture capital in the state is up 42% according to the 2017 MVCA report and the number of venture-backed startups are up nearly 50%.
Jennifer: Grand Rapids tends to be economically conservative. It is much easier to generate round two funding when there is a track record, than it is to get someone to take a risk in phase one funding. Initiatives like Start Garden’s 100 Ideas is changing that. This initiative allows startups to pitch their idea to enter to win $1,000, and down the road, another $20,000.
What are some of the inputs that have helped your ecosystem grow?
Carl: Certainly out-of-state capital has played an important role. Many well-known, successful VCs now have presence in Michigan. Moreover, for every Michigan venture dollar invested, nearly $5 is raised from out-of-state VCs.
I also want to add that strong local universities with healthy, growing programs in computer science and entrepreneurship, as well as a generous community of successful business owners, angel groups, incubators, and advisors play an important role in our ecosystem.
Jennifer: The local business executives are always willing to lend a helping hand to brainstorm ideas, steer strategic direction and recommend resources. There is also a great deal of support from organizations like Start Garden and Grand Angels.
Are there specific public policies or regulatory landscape features that have enabled startup growth in Grand Rapids?
Carl: West Michigan tends to shy away from government support, sometimes to our detriment. I think the prevailing attitude is that rather than be actively engaged in selecting winners and supporting new business or business growth, it would be better to “get out of the way”, take a neutral stand, and just be really good and efficient at running basic governmental services.
Jennifer: With funds always tight for a startup, ownership and stock options have become a critical compensation component, and therefore tax structure and incentives have also become very important. Often, top talent is accessible to startups only with the incentive of future stock payouts. It was concerning when the new tax plan penalized stock with a change in taxation. There was a huge sigh of relief from our community when that provision was changed in the final bill.
Are there some startups to watch coming out of the Grand Rapids area?
Carl: Absolutely. Some of the ones I am keeping my eye on are:
Envoy just made a prestigious list of ecommerce suppliers, alongside of some very big names. They’ve made huge progress on relatively little capital and are poised for big growth.
Blue Medora is 10 years old, but only took venture capital a few years ago, kicking off an impressive growth period.
SalesPad made a big bet a few years ago and has grown substantially.
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