A fast growing Minnesota startup has officially left Minnesota for the golden state in move that was confirmed today by Co founder and CEO Jon Dahl.
Zencoder makes and sells web-based video encoding software to enterprise customers like PBS, Posterous and College Humor. The company launched a year ago, gained an inadvertent boost from Google and most recently closing a $2m funding round.
The news is hot off the qwerty and many questions remain unanswered; rumors that have been circulating were corroborated in four short words: “Yes…sad to leave”. The action was publicly hinted at by Dahl early as May 20th:
And indirectly declared yesterday morning:
Updated 6/3 interview with Jon Dahl
JP: Thanks for taking the time to share Jon. Why did you move Zencoder from Minnesota to California?
JD: We had grown to ten people across three offices (Madison, Minneapolis and San Francisco) and that’s not the way to build a great company. So the first decision was to centralize. We decided to centralize in San Francisco for a number of reasons. Paradoxically, it was easier to get people to move here than to move from one midwest city to another. There are other advantages too – most of our investors are here, and it’s a supportive community for startups.
We didn’t move because startups can only grow in Silicon Valley. We moved because of our specific circumstances. Good startups can and do happen everywhere. Great Plains Software is a great example of that – they built a hugely successful software company in Fargo, which was not a traditional software hotbed.
JP: How has this transition affected you personally as well as the business operations?
JD: It’s exciting and sad at the same time. I’ve been in Minnesota for a long time, and my family and I love Minnesota. But it’s also exciting to try somewhere new, and San Francisco is a great place. Logistically, it’s made the last few months a bit hectic, but it will be worth it in the long-term.
JP: How would you describe the fundraising scene in Minnesota?
JD: The problem is that for every investor who says yes, there are usually 4 who say no. So if you want to raise from 5-10 people, you need to pitch 25-50 investors. That means you need to raise from a large ecosystem, and there aren’t a lot of active software investors in Minnesota. It’s possible to raise your round from the first 5 people you pitch, but that’s unusual. We ended up raising some of our money from Minnesota, but most of it came from the west coast. There’s a lot of money and mentorship out west whereas there’s some money and mentorship in Minnesota.
JP: What advice would you have for an early-stage entrepreneur starting off in Minnesota?
JD: You can build a great startup anywhere, and the same lessons apply in Minnesota that apply in Silicon Valley. It doesn’t hurt to start building a network in the Bay Area early – eventually, every startup should have relationships out here. But of course, it isn’t as easy as getting on a plane, flying into SFO and raising a million dollars in a few days. It’s hard to build a startup in Silicon Valley, just like it’s hard to build a startup anywhere.
JP: How did your early experiences with accelerator program Y Combinator impact the company?
JD: It impacted us in a number of ways, of course. Y Combinator helped us build strong relationships in the Bay Area even while we were headquartered elsewhere. Beyond that, we also probably picked up a bit of the Silicon Valley culture during our time out here.
JP: Gone but not forgotten?
JD: I would love to be back to Minnesota someday – it would be great to raise my children there. Beyond that, I’m also a big fan of the engineering talent in Minnesota. Who knows – maybe we’ll open up an engineering office there at some point?
JP: Anything else you would like to add?
JD: I’m always happy to meet Minnesota startups, so look me up if you’re a Minnesota entrepreneur visiting San Francisco.