Dan Grigsby is one of the Twin Cities’ high-tech heroes. He founded Merchant Planet, one of the earliest e-commerce companies, which was eventually acquired by Microsoft. He went on to work for Microsoft, create a number of other software-based firms, and cofound MinneDemo and MinneBar, local techie gatherings that have grown steadily. His current venture, Drivetrain, is a microstartup that builds software that powers mobile, social network, and web applications. An interim CTO, CTO coach, business-development guru, and frequent speaker on technological issues, he’s bullish on, not anxious about, the area’s tech-biz future.
The Line sat down with the high-energy Grigsby over dark roast in the One On One Bicycle Studio café on Washington Avenue in Minneapolis.
The Line: Dan, What’s your assessment of the state of the tech industry here in the Twin Cities?
Dan Grigsby: A lot of folks spend time lamenting that we’re not Silicon Valley or Boston or New York or even Chicago. But what I think is a better and more optimistic approach is to look at the Twin Cities and say, wow, there are all these giant consumers of interesting tech here.
The number of Fortune 500 companies here is disproportionate to our population. We’ve got companies that are very brand-heavy — Best Buy, Target, General Mills. We’ve got an incredible amount of health care and med tech. That sets up an environment where it makes a lot of sense for people to be entrepreneurial on a small scale in the tech world — because all of those kinds of companies are big consumers of tech.
The Line: So tech firms here can start and grow by servicing these giants’ tech needs?
Dan Grigsby: Rather than by being Silicon Valley or by trying to create a new Facebook, a big whale-in-the-ocean kind of business, we can thrive by creating a portfolio of companies that have very small but interesting things to do. It’s about recognizing that we have these huge brands — let’s focus on what they need and our products can come later.
My company is building sophisticated mobile applications. Our big companies are making large investments in mobile. Medtronic has been buying iPads for all of its sale force. Obviously electronics retailers like Best Buy are going to have a large mobile presence.
In town right now there’s this company Code 42 — they’ve got a product called Crashplan. And they’re getting all kinds of attention. It’s a backup software that’s kind of caught on. This company has gone from half a dozen really smart people doing consulting to a $10 million-a-year business employing a hundred people. And they did that without going externally for money.
The Line: That’s the other big concern here: the lack of angel investment. But Code 42 didn’t need it?
Dan Grigsby: No. You can say, we’re not getting venture capital. It’s true, but I don’t think it’s a big issue. When you need thirty people to create a company, venture capital is important. When you need three, it isn’t. Drivetrain, my firm — we’re three middle-aged fathers. We started our company in January, and we decided that we wanted to make enough money so that none of us had to change our standard of living. We did that in the first quarter. Because of our brand and our skill set we were able to line up enough clients that instead of having to go out and get somebody’s money, we just earned our money. We have an upper-middle-class life and we have the time to be present fathers rather than absent fathers to our kids. In a 30-person, venture-backed startup, you’re supposed to work 60-hour weeks and put that above all else.
The Line: How does a young entrepreneur or group of tech entrepreneurs get started here?
Dan Grigsby: Say you’re a technologist and you have a kind of entrepreneurial bent to you. You go from having a job to setting up a consultancy that works with several firms. You do essentially the same kind of thing you would do with a job — write code — but you’re your own boss. You pick a technology that’s emerging, like mobile, so you get a higher rate. That higher rate gives you a surplus of income, so now you have extra time, and if you organize things right you also get the intellectual property rights to what you develop — and soon you go from having this income-replacement business to having what I call a cash-cow business. You build up a portfolio of intellectual property in an emerging space like mobile and ultimately this leads you to product.
The Line: And really small firms can thrive and grow because of the way tech itself has changed, right?
Dan Grigsby: Things that used to be expensive have become free. Processing power is free. Bandwidth is free. Storage is free. What that means is that in the past in would take hundreds of people to do a large project, then it became ten, and now I can do it with three.
And then there’s the niche issue. When it was expensive to build software, you had to build software that had giant markets. You wanted to produce something that every single computer needed. But now that it’s inexpensive to create software, relatively speaking, you can go after little tiny niches. The technology and tools have gotten good enough that a comparatively small team of people can go after a comparatively small market and make themselves rich doing it.
The Internet takes geography away to an extent, so we can be here, and small, and agile, and still have a global market. It’s what happened with television — where you went from three networks to cable with 500 networks, to YouTube with a million networks. My kids’ favorite channel is YouTube — every night before they go to bed they watch YouTube. Well, that same movement from one-size-fits-all to micro-targeted content applies to business too, right?
The Line: Are we supporting young technologist/entrepreneurs? It can be tough to resist just going to work for a big firm when you get out of college.
Dan Grigsby: The Holmes Center is the entrepreneurial program at the University — it’s run by a guy named John Stavig, a former venture capitalist. What they’re doing is basically providing a launch pad for folks who want to do entrepreneurial ventures. I can see a number of success stories of young people who have been smart enough to get out of school without a ton of debt. I think we are doing a good job supporting young entrepreneurs. You see it also in Project Skyway.
What I haven’t seen as much of here are the people who are good at the business of software. This is something we can learn from Silicon Valley. In Silicon Valley there is a role called the PM — product manager. A PM is typically a person who is in marketing and is responsible for the makeup of a product and its delivery to market.
He or she is responsible for figuring out how it fits into the market given its capabilities and functions. PMs have to convince the engineering teams to build a product in a certain way, and convince customers to buy the product. It’s almost a diplomat’s job! I think PMs are the future CEOs of startup software companies.
They have to earn the technical respect of the people who build the product, and they also have to guide the product to market success, so it’s validated from a business perspective. We don’t have a core of PMs here. There aren’t enough software-based businesses to have genuine product managers. It’s very hard to leave a Fortune 500 company — say you were the brand manger of the shoe department at Target — and right away become a software company PM.
I had this idea a few years back that what we ought to do is get coastal software companies to come here and set up development shops. Some major software companies have made an investment here already. Microsoft has an office here; Adobe has an office here. I’d like to see the state create an active development policy encouraging coastal software companies who are trying to expand their operations to move here. We have a great tech skill set, and they could do business here for a whole bunch of reasons. And when those companies came here, the product manager jobs would follow and we would go on to build the next set of companies.
The Line: So all in all, you’re pretty optimistic about the future?
Dan Grigsby: For a long time everyone thought we were headed down, because we lost Control Data, et cetera. I don’t think we’re headed down. What’s happened is that big technology buyers have changed the kind of people they buy from. So it’s created opportunities for these little, agile companies like mine to pop up. What you’ll see in the next decade is that those agile companies will grow up; we’ll have a cadre of small but profitable privately held companies with a reasonable number of employees. I think there is going to be job growth in the Twin Cities based on this model.
There’s an optics problem, of course. It’s very hard to make a 110-person company seem important when a Ford plant is closing. But we are moving from large employers to a larger number of small employers. And it’s just hard from a political perspective to point to a bunch of little companies and say, Look at this.
The Line: Well, that’s what we’re trying to do at The Line! Thanks, Dan.
Jon Spayde is the managing editor of The Line. This article is reprinted in partnership with The Line, an online chronicle of Twin Cities creativity in entrepreneurship, culture, retail, placemaking, the arts, and other elements of the new creative economy.