Why Utah Matters To Virgin, Amazon, And LeBron James

The Foundry, a Salt Lake City training ground for entrepreneurs, is challenging some long-held notions about how startup incubators should work—and captivating everyone from Armenian businessmen to Zappos CEO Tony Hsieh.

The Foundry is disproving assumptions that starting a business is inherently a fail-prone endeavor.

The company is one of a host of new ventures to emerge from the Foundry, a University of Utah-sponsored peer-based training ground for entrepreneurs that’s challenging some long-held notions about how business incubators should work. University of Utah post-doc Rob Wuebker and the program’s other founders believe they’ve hit upon a method of fostering entrepreneurs that is not only dirt cheap and easily replicable but—crazy as it sounds—also has the potential to catalyze urban redevelopment and foster the growth of the creative class in places with fledging hipness quotients, from Salt Lake City to Armenia. Recently, the Foundry even caught the eye of Zappos CEO Tony Hsieh, who wants to build his own incubator in Las Vegas. “My MBA would’ve been a complete waste without meeting Rob and his team,” Paul says. The Foundry gave him “the tools to make the idea a reality.”  

See more about why Salt Lake matters to Virgin, Amazon, and LeBron James here.

According to Bill Schulze, “The Foundry came together really as an experiment." Schulze is chair of the Department of Management at the University of Utah’s David Eccles School of Business and part of the Foundry’s brain trust. “Our fundamental premise was that we wanted to create entrepreneurs," he says. "We weren’t interested in creating companies, we wanted to create entrepreneurs.”

Wuebker says the Foundry is disproving stale assumptions that starting a business is inherently a hard, risky, fail-prone endeavor. The free program is open to university students and community members alike (about a quarter of particpants come from outside the university). Since it was founded in May 2010, the Foundry has produced 64 revenue-generating companies and 75 jobs, generating about $12 million in revenues, Schulze says. And that’s without any seed money from the program: The Foundry provides a modestly furnished office space in a university-leased downtown building, whiteboards, Internet access, coffee, and pizza. The university has invested less than $100,000 in the entire program, Schulze says.

So what's the secret? The founders say it has a lot to do with social capital: Students form a tight-knit cooperative network, and as the number of viable business ideas dwindles over the course of a semester, they hire each other. This is in stark contrast to the typical incubator, where a competitive zero-sum-game vibe dominates. Participants remain accountable to the group by filing weekly reports, which they upload to Dropbox at least 24 hours before the peer-led weekly meeting at 7:30 a.m.—yes, 7:30 a.m.—Monday morning. In lieu of plodding lectures, students digest the basics of entrepreneurship via bite-sized YouTube videos, so they can spend their Monday meetings helping each other problem-solve. When it works the way it’s supposed to, the instructors are relegated to pouring coffee.

When it works the way it’s supposed to, the instructors are relegated to pouring coffee.

A relentless focus on testing, tweaking, and retesting business ideas maximizes a product’s likelihood of surviving in the economic wilds, and keeps risk low—spending money is considered a last-ditch step, when there’s no other way forward. “What’s different about the Foundry is they use a scientific method based on data,” says Ben Hadley, a Vail-based corporate development exec who mentors Foundry students. “I’ve never seen that methodology brought to the notion of business discovery.”

See more about why Salt Lake matters to Virgin, Amazon, and LeBron James here.

The ventures aren't limited to technology. Board-game enthusiast Phil Kilcrease launched his company 5th Street Games on his bike, pedaling his creations to game shops as far away as Provo and Ogden. He’s since successfully leveraged Kickstarter to raise nearly $37,000 and expand his lineup. Redflower Inc.’s Patrick Duke-Rosati launched a line of bottled aguas frescas drinks and has secured an agreement with Whole Foods. Erik Larsen’s cupcake-delivery business Heaven Cupcake made it onto Food Network’s “Cupcake Wars.” Power Practical founder David Toledo just raised over $126,000 on Kickstarter for his PowerPot, a cooking pot that turns cooking heat into an electrical charge.

Here's where the urban-redevelopment part comes into play: Such a diversity of business models bodes well for the Salt Lake economy and the city’s attempts to revivify gritty urban neighborhoods like the light-industrial Granary District (where the municipal redevelopment agency subsidizes the Foundry’s rent). “You could have a lawn-cutting business, a coffee cup business, a restaurant idea and the Foundry will help you,” says Hadley. “That is really key to urban renewal.”

Wuebker, a Santa Monica native, dreams of establishing in Salt Lake the kind of trendsetting “creative class” better associated with places like San Francisco, L.A., or Austin.

“My interest is in contributing to GDP, job growth, and making a difference inside the ecosystem,” Wuebker says. “What I think is happening is that we’re creating a significant creative core of entrepreneurs who are both vibrant and capable. They’re choosing to stay here, and build their businesses here.”

It doesn't hurt that Utah has one of the most business-friendly climates in the country. Relatively low operating costs, a low corporate tax rate, above-average employment, a growing population, and a burgeoning tech sector led Forbes to label Utah the “Best State for Business and Careers” in the magazine’s annual 2010 and 2011 surveys. In Salt Lake, the University of Utah was ranked no. 1 in creating startups based on university research in 2009 and 2010, topping powerhouses such as MIT and CalTech, according to the annual survey by the Association of University Technology Managers.

See more about why Salt Lake matters to Virgin, Amazon, and LeBron James here.

Wuebker sees the Foundry as “a regional development engine in a box,” though it’s worth pointing out that it is an engine still being unboxed. The city’s Granary District remains a far cry from San Francisco's Mission District or Brooklyn's Williamsburg, and Scott Paul says the crew at Google Ventures still laugh at him when he calls the area Silicon Slopes. “I’m always wondering, ‘Should I be leaving?’” he says. “There’s a huge pull now to go to San Francisco and start your team there.”

Perhaps the more immediate measure of the Foundry's method, however, is the extent to which it’s being imitated by similar programs at places such as George Mason University in Washington, D.C., and Rensselaer Polytechnic Institute in New York. There’s a budding Foundry-style incubator in the Armenian capitol Yerevan of all places, launched with help from visiting Salt Lake students. Lately, the Foundry has captivated Zappos CEO-turned-urban renewal champion Tony Hsieh. Hsieh has a $350 million project aimed at building a vibrant urban core in downtown Las Vegas, where his online shoe company is headquartered. Wuebker says he is scheduled to meet with Hsieh and his team in a few weeks to share ideas—Hsieh’s Vegas Tech Fund plans to dole out seed money to community-minded tech startups and, à la the Foundry, spur the growth of a downtown creative class.

“Rob’s created a pirate ship,” says Ben Hadley, who introduced Wuebker to Hsieh. “I wanted the guys in Vegas to know about this pirate ship in Salt Lake City. You know you’re onto something when Tony opens an attachment and says, ‘This is very good.’”

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