Dwolla’s Series B: Three things it means for Des Moines (Part 2)
About the author: Geoff Wood is the COO and main connection point in Iowa for Silicon Prairie News, the co-founder of VolunteerLocal and founder of Eggcrates. For more on Wood, see the note that follows this post.
In this post, I look at how the Des Moines startup community could be affected by Dwolla's milestone.
1. They'll continue to 'Dwolla in DSM'
Dwolla co-founder Ben Milne has made being a Des Moines-based startup an integral part of his company's culture from the beginning. You see it in their T-shirts (left), in the quotes Milne gives ("my beach is a cornfield") and the way they involve themselves in the local community. They've always said what we, the local community, want to hear about never planning to relocate to the coasts. However, I'm sure I'm not the only one that considered that this capital raise could come with the rider that they must move on to a more traditional startup or finance hub.
That concern is all for naught as the company has announced that they only move their making is to bigger office space around the corner. Dwolla is the darling of the Des Moines startup scene and leaving could have had a tremendous negative effect. Dwolla’s commitment Des Moines is appreciated and good news; not just for now but also for the future.
2. New angels in the future
Union Square Ventures and the others with money in this deal didn't invest because they appreciated Milne's passion or because they thought making payments through Facebook would be fun; they did it because they see real potential for a return.
Assuming that Dwolla will ultimately be successful, that return will come only after an exit. The company will either be acquired by a large institution (more likely) or go public (less likely), like Facebook, LinkedIn and other technology giants have been doing of late. If and when such an exit occurs it will be great thing for the local startup community. Fred Wilson, Marc Eckō, Paige Craig and the other investors will make their profit but so too will Milne and the others who have a local interest. I don’t know how many of Dwolla's employees own stock options in the company – that's far more common in the larger innovation centers than it is in the Silicon Prairie – but certainly Milne and the others who do will not only upgrade their own net worth but they'll also likely look to turn that around and invest again in the next generation of new ideas. It's the network effect that we're starting to see in Kansas City after Zave Network's sale to Google – Zave's co-founder recently invested in Leap2 (above) – but have yet to see enough of in Des Moines.
3. Union Square Ventures likes to co-locate portfolio companies
In Thursday's post, I noted that in a 2010 post on Fred Wilson's blog, he shared USV’s thoughts on its portfolio companies working together. One other item mentioned in that post that's exciting for Des Moines is that they "encourage [their] portfolio companies to share space."
Dwolla is USV's only investment in the region to this point, but I think there is always the potential for this to become a catalyst for more. The total Dwolla Series B round was $5 million. That moves the needle tremendously locally but it’s not a whole lot to USV (who lead the round but didn’t provide the entire $5 million). They currently manage $450 million across their three funds.
First, I can see USV taking a long hard look at how far $5 million will go Des Moines and making sure their other portfolio companies are aware of Des Moines as an option as they look to expand or have the need for more talent. Second, I’m sure that USV will be looking closely at other area startups for dealflow, if they haven’t started already. Again, a small fraction of the fund will go a tremendous distance and they already have a vested interest in the space with Dwolla.
About the author: Geoff Wood is the COO and main connection point in Iowa for Silicon Prairie News, an organization working to increase the notability of the Silicon Prairie region – Des Moines, Omaha, Kansas City and surrounding area – as an innovation center and startup hub. In addition to a daily news blog, the Silicon Prairie News team also produces events like Thinc Iowa and Big Omaha. Wood helps organize Barcamp Des Moines and DSM Startup Drinks.