#StartupsEverywhere profile: Tom Chapman, Founder and Managing Principal, Chapman & Company
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.
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In the Midwest, some local entrepreneurs—such as Nebraska’s Tom Chapman, the Founder and Managing Principal at Chapman & Company—are advocating for a fundamental shift in the way the U.S. approaches startup ecosystems. We recently spoke with Tom to learn more about his company’s work supporting the creation of high-growth startups, the unique needs and challenges for entrepreneurs in the Midwest, his latest startup venture, and how the Midwest’s unique startup system makes it well-suited to address the problems that have vexed more traditional U.S. tech hubs.
Can you tell us a bit about yourself and your background as an entrepreneur?
I live in Nebraska, but I’ve also worked around the country on various projects. I’ve started multiple businesses as an entrepreneur, covering everything from software to hardware. I run a consulting company and am now in the process of starting a media blog. I’ve raised venture capital, I’ve raised money for companies, and I’ve worked for a holding company that invested between $15-20 million dollars into early-stage companies. So I’ve been on both sides of the table when it comes to early stage deals. I have a pretty good idea of what's going on across the Midwest but, with regard to Nebraska, I have spent a lot of time here helping entrepreneurs and the entrepreneurial ecosystem. I often say that I am one of the 10 best people in the country at measuring entrepreneurial ecosystems because there are only 10 of us.
Tell me more about your consulting operation, Chapman & Company, as well as your new venture, mug.news.
Chapman & Company has different client sites. There are five different startups that we own, and mug.news is one of them. We primarily work with startups in Omaha and Lincoln. We help these firms find money and customers, we help them along the way with strategic mentorship. And we also occasionally work with corporate innovation. However, we tend to focus on startups that are creating a new product or service that is going to be spun out or purchased separately from the existing parent company.
We also consult with communities around the country in regards to entrepreneurial ecosystem building. We tend to work with communities with a population of less than one million that have a hard time utilizing traditional measurements to monitor the growth of entrepreneurship. We go out and we find new measurements that are “right-ish,” meaning they may need revising but they give us a snapshot in realtime of what is happening with the community’s startup ecosystem.
One of the things we discovered in our consulting is that there isn’t a lot of communication around entrepreneurial “heroes” in many communities. You might see an occasional article in the paper, or something less formal that was written by someone doing work with the startup, but there isn't a consistent stream of conversations, insights, and stories. And that's a problem. Mug.news is intended to work across 15 states in the Midwest to ensure that this type of information is out there, and that good “hero stories” about entrepreneurs get publicized. We want entrepreneurs to leverage that public knowledge to grow—whether that's through customers or to push a policy agenda.
How can entrepreneurs build startups in the Midwest, and what challenges do they face?
One of the biggest challenges that startups in the Midwest face is a dearth of early adopting customers, whether it’s corporations or individual customers. You might have a product that makes sense, but you have to launch your product in Los Angeles, San Francisco, or New York because the local population doesn’t give entrepreneurs the same opportunity to test their product. Part of that is density and scale. Lincoln, for example, has 300,000 people in the area, and that might not be big enough. Even if 10 percent of the population are early adopters, that is still only 30,000 potential customers who would be willing to try out the startup’s new offering. It is different in a fairly dense city, where that 10 percent is a million or two million people, which makes it much easier to stumble through and find people.
A second challenge is that there isn’t a ton of capital. You have large corporations and wealthy people in most Midwest cities, but they don’t necessarily invest their money locally. A lot of the pension funds and institutional investors in the Midwest actually invest on the coast. They put their money in the coasts because we have institutional rule structures that make it really hard for new funds to get started in the Midwest. The coastal funds have relationships that they have cultivated with Midwest investors over 30 or 40 years. From a policy perspective, I think that it is less of a “we need to change the rules” issue, and more of a “we need to do a better job of making sure that some of that capital stays in the Midwest.”
When it comes to opportunities for entrepreneurs, I think there are a lot of problems in Omaha and Chicago that aren’t the same problems that entrepreneurs face in San Francisco. For example, with “Ag Tech,” we tend to treat it all in one bucket, although there is Ag Tech relating to livestock, or crops, or just agriculture in general. Even within the region, different cities are suited to solve different types of problems, but we treat everything as though it's all in one bucket.
What are some of the startup-related policy concerns that you believe should receive more attention from state and federal lawmakers?
At the federal level, one of the things that I am constantly frustrated with is how much money goes into research and development, but the results never get commercialized. If you look at the National Science Foundation and if you go through the top 50 public universities in the country—many of which are located in the Midwest—the number of the companies spun-out based on that federally-funded R&D is woefully lacking. A large part of the problem is the bureaucracy of executing tech transfers.
We have this huge engine of R&D that comes from the federal government through our universities but then just never makes it to market. I think that figuring that out would be really big for the Midwest.
At the state level, we also have to do a better job of pushing forward opportunities that are efficient. What we need to be doing is allocating resources by considering where they can be used most efficiently, rather than making those resource allocation decisions based on scoring political points.
For example, in Nebraska, certain opportunities can be executed in rural areas much more effectively than in urban ones—such as those around building and testing irrigation hardware. But, as those companies get larger, they need different pools of talent which naturally leads them to open offices in larger talent hubs: places such as Omaha, Lincoln, Des Moines, or Kansas City. This is not necessarily the case for software. Because the Midwest’s infrastructure regarding broadband access and Internet speeds is a bit spotty by state, county, and community, you really do end up with haves and have nots. North Dakota has really crushed its Internet connectivity across a relatively sparsely populated state, but Nebraska has not. Many communities in Nebraska do not have the bandwidth for startup software companies to be created. Building in the cloud is simply too cumbersome from an infrastructure and talent perspective.
For rural states to succeed, this type of national, state, regional, and community policy needs to be aligned across each level—not just where a politician’s home town, is or where another government official might prioritize for political points.
In light of the COVID-19 pandemic, are there any policy issues that are impacting the Midwest in particular?
I think the pandemic has increased awareness of a lot of existing issues. It may not be unique to the Midwest, but it is certainly apparent here. Access to opportunities—for children in both wealthy and poorer communities—is tied to how strong the broadband networks are in their area. For example, a Native American reservation in the Midwest may have bad broadband. But if you go to a rich neighborhood in the Midwest, then they have good broadband. That’s a problem!
If you look at infrastructure at-large, the Midwest is behind, and our urban cores are decaying. It’s because we don't have much by way of infrastructure spending. And it's not just socioeconomic; it's typically tied to other factors. For example, Omaha is lucky because there is an air force base here. But, if you go to areas of Nebraska where there are no military installations, there is also limited broadband access. We have lots of these types of problems. Because of the geography, the Midwest is particularly adversely affected by those types of things—especially in areas with 500,000 people or less.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email edward@engine.is.
