SnowShoe Tries to Succeed With One Foot in Madison, Other in SF

12/23/13Follow @MichaelXBD

To stay in the nurturing environment of the place where you were raised, or to strike out into the unknown to find your fortune?

It’s a quandary even for startups—especially when they become the local favorites and standard bearers.

An example is SnowShoe, a startup from Madison, WI. The four-person tech firm was born in the supportive environment of a tight-knit startup community, but according to SnowShoe co-founder and CEO Claus Moberg, it’s time for the company to look beyond its geographical roots for new talent, investment, and ideas.

But instead of relocating completely, SnowShoe—a graduate of the Techstars Boulder 2013 accelerator—is trying to make it big in San Francisco while remaining close to its Midwestern roots. It’s a challenge Moberg believes will be worth it in the end, making it possible for SnowShoe to gain vital exposure and access to investors that having one foot in California will bring while allowing it to give back to its hometown.

Made in Madison

SnowShoe is making a product it calls the SnowShoe Stamp, a device that the screens of smartphones and tablets can identify when they run apps with SnowShoe software. A user only needs to load the appropriate app and touch the stamp to the screen. The smartphone or tablet uses the same capacitive sensor it uses to track fingers to find the touchpoints on the stamp, and that pattern can serve as a password or ID. SnowShoe says there are more than 2 million possible stamps that can be created for each app that uses its software.

Moberg said SnowShoe still is looking for the killer use case. So far, the stamps and an accompanying app can be used by coffee shops to run loyalty programs or grant access to in-house wi-fi networks. Video game companies can use them to link physical products or memorabilia to digital avatars, and the stamp can be used to verify that a person is in the same place as the stamp or to provide two-factor authentication for transactions.

Earlier this year, SnowShoe was invited to the prestigious Techstars accelerator program in Boulder, which required it to temporarily relocate to Colorado.

Madison has been a surprisingly fertile breeding ground for Techstars startups. Five companies have made the cut to participate in the three-month bootcamp (held in various cities), which offers connections to mentors and potential investors, $18,000 in seed funding in exchange for 6 percent of a startup, and the option to take a $100,000 convertible note. Thousands of companies have applied to the accelerator, which turns away a greater percentage of applicants than an Ivy League school.

SnowShoe went through the program this summer, and after demonstration day Moberg and another employee decided they needed to relocate to San Francisco to be near investors and potential users. But the company is working to retain a presence in Wisconsin.

“As much as possible, we’re trying to get new technical employees in Wisconsin,” Moberg said.

From a business perspective, that offers a few advantages. First, the market for programmers and developers is much less competitive in Madison than it is in Silicon Valley. Salaries are not as high, and employees are more loyal and stick around with the company longer, Moberg said.

But there is an intangible component as well. Madison and the Midwest were good to SnowShoe, Moberg said.

“Madison is a startup community small enough that everybody is rooting for each other,” Moberg said.

And they certainly seemed to be rooting for SnowShoe. The startup earned a number of plaudits during its early years, when the company was still trying to determine its course. Moberg and a SnowShoe engineer were part of the team that won the 2012 TechCrunch Disrupt SF Hackathon with Livebolt, which allowed users to unlock doors with iPhones. That earned them $5,000.

SnowShoe also was invited to attend an accelerator program run by Finnish mobile phone maker Nokia, according to an article in the Madison-based Wisconsin State Journal.

“We very quickly became a big fish in a small pond and had people rooting for us and trying to help us,” Moberg said.

That goodwill helped SnowShoe raise $719,000, split between a $219,000 equity investment and $500,000 in debt. The investors include Wisconsin Investment Partners and Silicon Pastures, angel groups based in Madison and Milwaukee, respectively.

Hitting the road

SnowShoe

By the standards of Wisconsin tech, SnowShoe was becoming a big deal, but that came with a catch. A couple, actually.

Relatively small communities that are tight-knit and supportive can be great places to start, but most entrepreneurs convinced they’re on to something big will want to grow beyond their hometown. That’s true with SnowShoe, and that required it to be realistic about a startup’s prospects in the Midwest.

First, while people are more loyal (and generally nicer), there are just a lot fewer folks with the technical talent and experience scaling a company that many startups need, especially when they hit their growth spurt, Moberg said.

“The supply of accomplished developers in Wisconsin is much smaller than in San Francisco,” he said.

So is the pool of investors.

“It’s pretty hard to raise money in the Midwest,” Moberg said. “There’s not a ton of investors focused on IT startups that you would see at Techstars or in San Francisco or in New York City or in Boulder. We’re sort of the outlier, and raising that money in Wisconsin was substantially more difficult than it would have been outside the state.”

And sometimes, an atmosphere can be too supportive.

“Because the bar is higher [in Silicon Valley], you actually have to have a better product. In Wisconsin at times, it was pretty easy to drink your own Kool-Aid,” Moberg said. “People almost didn’t care what the product was, they wanted to help however possible, so you could continue down a long road that was actually going in the wrong direction and never get the feedback that what you’re doing isn’t going to work.”

That wasn’t a problem in Techstars and afterward, Moberg said. Outside Wisconsin, SnowShoe’s reputation meant little, and its ideas were judged on their merits and the company on the steep growth curves established by other successful startups.

Moberg believes SnowShoe is on its way, though, and currently it is trying to get its hardware and software into the hands of test customers. That’s involved field testing the product to see exactly how potential customers would use it.

The company also is working on raising a Series A funding round, and an announcement about that could be forthcoming.

“We’re off and running,” Moberg said.

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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