Know Your Place

Is geography destiny? Are some places really better than others for starting and growing a business? And if you live in a place that's "wrong," can you do anything about it?

Don't look for towns in Montana at the top of the "most entrepreneurial cities" lists. To the extent that the state is mentioned in such rankings at all, it's a near footnote to entrepreneurial oblivion. Not long ago, David Birch's think tank, Cognetics, placed Montana 49th among the states in its annual "Entrepreneurial Hot Spots" ranking. The regional rankings of rural areas showed western Montana trailing the Appalachian Mountain region of West Virginia.

Not so good.

Yet Bozeman, Mont. -- a college town of just 28,000 people some 90 miles north of Yellowstone National Park -- is home to a cluster of photonics companies, a handful of nascent biotech businesses, a couple of Internet-software outfits, and a growing list of small manufacturing concerns (including Vision 1, which was #153 on last year's Inc. 500 list). So maybe there's hope for Montana. Maybe entrepreneurial vitality is achievable in unlikely places.

Then again, do we really know what kind of place is unlikely? Is Bozeman?

I happen to live in Bozeman, which could account for my particular interest in such questions. But I have a better reason to care, which a few months ago began to drive me with increasing urgency to try to really understand what was going on here. The health of the local entrepreneurial economy, you see, has a large impact on my business. I'm what some people call a "venture catalyst," which means I help start-ups get the resources they need to grow, from capital to managerial advice. So understanding why new businesses do or don't emerge in the boondocks is essential to my career and the well-being of my family.

How, I began to wonder, did my location affect my chances of success? How would it affect my chances as an entrepreneur who was trying to build a company by helping other entrepreneurs build theirs? And would understanding the relationship between place and entrepreneurial vitality guide me to doing my work the right way?

I needed to see.

The personal importance of place
I never expected to find myself engaged in this kind of inquiry. Although I did most of my growing up in Montana and graduated from college in Bozeman, I, like a long line of Montanans before me and since, promptly left the state. After being validated with an M.B.A. from Northwestern in 1985, I landed a "real" job at the old Continental Bank in Chicago as a wet-behind-the-ears second lieutenant of commerce. My first task was to make loans to the entrepreneurs who were creating the cable-TV industry.

My lending career was doomed. Almost from the start I was inextricably drawn toward ever-smaller, earlier-stage businesses. I morphed from a banker into a venture capitalist during the decade I spent in Chicago and then in Dallas, where I cofounded a private-equity firm called Hoak Capital.

Then, in late 1995, something quite unexpected happened. At the time, I had been toiling away for a couple of years managing an undersized fund that had been raised during a downswing in the venture-capital industry. One day I looked up to realize that my partners and I were a draft away from releasing an offering prospectus for "Fund II," a $100-million-plus institutional round. Real money. That meant I'd be doing larger and even later-stage deals. It was a get-seriously-rich-on-the-back-end kind of opportunity.

An M.B.A.'s dream come true, right? Um...no, at least not for this M.B.A.

Until then my partners and I had been attempting to do roll-ups with a $20-million equity fund, which took a certain amount of creativity. Out of necessity, I had spent the early 1990s hanging around grassroots (by VC standards) entrepreneurs. By 1995 I knew that those were the characters I wanted to spend more time with. And that's not where Hoak's Fund II was headed. So I resigned from Hoak before the fund's launch. (Signing on as a partner of a venture fund is kind of like joining the marines: you don't change your mind after enlisting.) I had only a vague idea of what I was going to do next and no idea where I was going to do it.

"I happen to live in Montana. How, I began to wonder, did my location affect my chances as an entrepreneur who was trying to build a company by helping other entrepreneurs build theirs? I needed to see."

In the year before all of that transpired, my daughter was born. My wife, Shelley, had completed her own M.B.A. at Southern Methodist University and had continued her full-time career at AT&T. My parents, who had spent the previous 15 years on the West Coast, had relocated to Dillon, Mont. My youngest brother (who did much of his growing up in southern California) had made his way to Bozeman. Shelley's parents lived in the mining town of Butte, and her only sister lived in Bozeman.

Nevertheless, Bozeman -- so help me -- was not on our radar screen, other than as a preferred destination for holidays, ski vacations, and mountain-biking excursions. We enjoyed the urban life and had numerous friends in Dallas. But then serendipity intervened.

I had called one of my limited partners -- who had coincidentally migrated from Texas to Montana in order to hunt, fish, and live the good life -- to explain my departure from the fund. That conversation led to a series of events resulting in my getting an offer to join a high-end, "soft adventure" specialty-travel company based in Bozeman. My role would be to help engineer the restart of the business, whose product had an international reputation but was only marginally profitable.

What did we have to lose? I'd already torpedoed my budding VC career, and Shelley informed me that she had her sights set on child number two. If we were going to be poor, at least we could be near family and have a great view of the mountains. Even if the worst happened, we were only in our midthirties and felt confident of our ability to reenter the "real" world if necessary.