Indianapolis startup scene gains momentum

One night each month, the sanctuary of a downtown church/community center fills to the brim with 20- and 30-somethings. Dressed in jeans and button-downs, they snack on party-size sub sandwiches and drink keg beer while talking about their latest business and technological endeavors.

Then the event’s 24-year-old leader, Matt Hunckler, calls the chatter to a halt. Crowd members sit in folding chairs to take in the show: mostly young entrepreneurs, with the help of iPads or MacBooks, showcasing their business ideas in casual presentations peppered with tech terms such as SEO, freemium models and smarter remarketer.

It’s not exactly a typical business meeting or crowd, though some familiar tech-startup heavyweights make regular appearances. But the group, dubbed Hackers and Founders, is perhaps the most clear and strong signal that Indianapolis’ young entrepreneur community is reaching a critical tipping point.

A group of eight 20-somethings started the group in the summer of 2009. Since then, its membership—people join for free through a website—has swelled to more than 400. Monthly meetings at the Earth House Collective typically draw a crowd of about 200.

Aning

“It’s sort of a smaller example of what’s going on in the entrepreneur community in Indianapolis,” said 25-year-old Yaw Aning, one of the group’s founders.

The growth in the city’s young entrepreneur ranks is hard to track, but both Aning’s contemporaries and their more established counterparts say anecdotal evidence of the expansion abounds.

The Orr Fellowship, which connects college graduates with internships at startups, has grown from an inaugural 2002 class of nine to 28 fellows this year. Startup Weekend, an event that brings together mostly the 30-and-under crowd to create businesses in a weekend, expects its local event to attract 80 participants next year, up from the 35 at the first Indianapolis event in 2008.

Gatherings catering to the same crowd as Hackers and Founders are happening a few times weekly. That’s not to mention the less formal collaboration on social media sites Facebook and Twitter and at Broad Ripple coffee shop Hubbard & Cravens on Friday afternoons, when many congregate for work and idea-sharing.

Programs such as Orr Fellows have helped draw young entrepreneurs here, observers say, and events such as Hackers and Founders are bringing them out of the woodwork. There’s also a confluence of other factors—from the accessibility of bigwigs here to the string of successful startups—that have helped make Indianapolis a draw.

“The fact is, you can build a world-class enterprise here,” said Chris Baggott, 50, CEO and co-founder of software firm Compendium Blogware who also helped launch ExactTarget. “Now you have lots of people seeing that as an example, so we’ve become this cluster.”

Leaders in the entrepreneurial community want to continue fostering the growth. This year, several hope to launch a workspace where young entrepreneurs can work on their endeavors, as cities such as Los Angeles and San Francisco have.

Why Indy?

When Drew Loftus, another of the original Hackers and Founders, graduated from Indiana State University in 2008, his college business partner, a Stanford University alum, tried to persuade him to move to the mecca of startups: Silicon Valley. He contemplated it, but decided his opportunities were better in Indianapolis.

“There was kind of a spark of something that was going to happen” in Indianapolis’ entrepreneurial community, said Loftus, who handles business development for the local software startup TinderBox. “The ability to succeed and the opportunities in Indianapolis were second to none.”

Many other young entrepreneurs share that philosophy. It’s harder to compete in hotbeds such as Seattle, London and Silicon Valley, but because Indianapolis’ community is still budding, there’s a bigger opening to excel and have access to tech-startup godfathers such as Baggott.

He’s a regular at Hackers and Founders meetings and, like some of his fellow seasoned founders, is willing to offer advice and foster the movement.

“Somebody needs to be out here … like a patron of the arts,” Baggott said. “Picasso deserves to be supported; these kids deserve to be supported.”

The city also has some positive logistics working in its favor. Housing and office space are affordable, and several universities are within easy driving distance.

And in the weak economy, there’s less competition to draw graduates from those schools to startups.

“When the market was really hot, people would just hop on a plane and head out to Silicon Valley,” said Marcus Chandler, chairman of the entrepreneurial services group at Barnes & Thornburg, a local law firm. “The bad economy has worked in favor of a lot of early-stage companies.”

Scott Brenton, chairman of the Orr Fellowship program, has seen that firsthand. He said the caliber of candidates for the program has risen in the last few years. The challenge has shifted, he said, from finding enough qualified applicants to finding enough companies to accommodate the large number of qualified applicants.

Room to grow

Indianapolis still has a ways to go to become a true young entrepreneurs’ hub.

One pressing need is having a space where they can gather to work. Examples of this in other cities, such as San Francisco’s SOMAcentral or Santa Monica, Calif.’s Coloft, have been big successes.

Having such spaces is critical because—more than a work space—they provide young entrepreneurs a venue for networking, said Chris McCann, CEO of Silicon Valley-based Startup Digest, an online publication that provides information on jobs and events in Indianapolis and elsewhere.

“It kind of amplifies things because you’re concentrated in one place,” McCann said. “It’s not that startups need space to work. You could work at your house if you needed to. It’s really the community that’s more important.”

Plans for such a space in Indianapolis are in the works, though those involved say it’s too early to discuss specifics.

Leaders from the city and universities have expressed interest, along with groups such as TechPoint, the state’s tech-industry initiative.

“I’m confident something is going to happen [with the space] in 2011,” said Mark Hill, a TechPoint board member and managing partner of Collina Ventures LLC, an investment firm focusing on technology companies. “This group of young people is inspiring things to happen.”

There’s also a need, Baggott said, for smaller bundles of early-stage funding to allow young entrepreneurs to continue to work on their ideas. Angel investors tend to dive in with bigger amounts at later stages.

The growth of the young entrepreneurial community hasn’t yet translated into a spike in startups. A May 2010 report by the Kansas City, Mo.-based Ewing Marion Kauffman Foundation said just 0.26 percent of Indiana residents ages 20 to 64 started a business from 2007 to 2009, a number virtually unchanged from a decade earlier.

But those involved in the startup community say it takes time for young entrepreneurs to get established. And the evidence of a few Orr Fellowship alumni starting their own companies—Compendium’s co-founder and 2003 fellow Ali Sales Roach is an oft-cited example—show the efforts are starting to bear fruit.

“Most people that build businesses have some experience,” said Hill, now 54, who started his first company, banking software maker Baker Hill Corp., at 27. “I’m always encouraging people, ‘Wait until you get some experience.’”

Young entrepreneurs are confident their community will only get bigger. Hunckler said Hackers and Founders will launch a new name and rebranding initiative later this month in hopes of growing its core audience.

He and others see plenty of potential.

“In a way, our generation is riding on the coattails of the [established entrepreneurs], but at the same time, we’re paving our own way,” Hunckler said. “I think the growth is very much in the beginning stages.”•