Dedicated desk space, a collegial environment, good coffee— for Ken Davies, the coworking space at 20Fathoms was a no-brainer. It was 2018, and Davies was working remotely in Traverse City for Microsoft as its director of innovation, energy strategy and research. The tech-focused coworking environment he found at 20Fathoms was the perfect way to get out of the house (remember those days?) and connect with like-minded co-workers, all while enjoying a million-dollar view of the bay.
Turns out that desk-with-a-view was worth quite a bit more. Like $70 million more.
That’s the amount of funding Davies has gained access to for his own startup since being nurtured by and graduating from 20Fathoms, a tech startup incubator that is changing the landscape for entrepreneurs and businesses in Northern Michigan.
It seems the entrepreneurial environment, mentorship, education and support at 20Fathoms was contagious— months after joining the coworking program, Davies left his post at Microsoft and was inspired to co-found Birch Infrastructure, which develops data center industrial parks and the renewable energy infrastructure needed to power them. In 2019, Birch received its first outside investment from Casey Cowell, founder and principal of Traverse City investment firm Boomerang Catapult.
Davies, now co-founder and chief strategy officer of Birch, credits local entrepreneurship leaders 20Fathoms and Boomerang Catapult, in part, for the company’s early success. “Both organizations were instrumental in launching Birch and getting us to this point,” he says.
As funding flowed in and the team grew, it was time for Davies to leave the nest and set up offices on State Street. Birch Infrastructure graduated from 20Fathoms in the summer of 2021, the fourth scalable tech startup to graduate since 20Fathoms’ founding in 2018.
But at this lively incubator, things have only just begun to hatch.
Photo by Michael Poehlman
Tech incubators seem less an Up North thing and more the stuff of Silicon Valley whiz kids in expensive turtlenecks and minimalist eyewear. For good reason—they were born in the heart of that tech-boom headquarters. One of the first tech incubators in the U.S. was established in 1981 by Atari co-founder Nolan Bushnell to help launch startup and early-stage companies.
The point was to encourage bold-thinking entrepreneurs so they could create the technologies of the future, realizing that those ideas needed nurturing, mentorship and cash. Money, however, is not the sole predictor of what makes a startup flourish or fail.
According to the Bureau of Labor Statistics, 20 percent of all startups fail within the first year, and 75 to 90 percent tank before year five. Cash flow is certainly an issue—it takes money to grow, and growth is essential for any startup’s success. But a survey by startup studio Wilbur Labs asked 150 company founders for their recommendations. The consensus was that a great way to raise the odds of startup success is to learn from current and past entrepreneurs, and also that strong business planning is the surest way to avoid failure.
That’s where incubators like 20Fathoms come in. With guidance from a board of directors, nonprofits or private organizations provide mentorship, education, support, networking (in particular, connection to potential funders) for aspiring entrepreneurs from the idea stage all the way up through stacking a team, growth and scaling.
“Our roots are in tech and innovation incubation,” says Eric Roberts, executive director of 20Fathoms. “More and more companies don’t have all the resources, skill sets and access to get off the ground. What we’re doing is creating an environment where those startups can thrive and launch, and then they graduate.” In addition to Birch Industries, previous graduates include ATLAS Space Operations, HealthBridge and SampleServe, with more in the works.
Removing barriers for startups isn’t just good business for entrepreneurs; it can also have a profound impact on the area’s economy, Roberts adds.
“If Covid has taught us anything, it’s that nothing is a given and diversity and flexibility for any local economy is a must—particularly one so focused on one industry, tourism,” he explains.
Attracting and nurturing more year-round industries is a key focus for 20Fathoms, as well as local economic development leaders such as Traverse Connect.
“If we can get good jobs here that will support a population that can go to our restaurants in February, that pay for road improvements and keep hospitality folks employed, it’s more stable,” Roberts says. “We take less of a beating. It’s a healthier type of economy.”
The 20Fathoms mission is to provide industry expertise, business resources, educational programming and an energetic community and workspace.
But what does that look like to a Traverse-area entrepreneur with a dream?
In 2015, ATLAS Space Operations was a scrappy California startup with a handful of employees and a mission to connect humanity through space. The company specializes in antennas that communicate with satellites in space and provides satellite communications as a service.
In just two short years, Morgan Stanley named them a top 12 disruptor in the satellite industry. But as they grew, co-founder Mike Carey, who was splitting his time between California, Colorado Springs and Traverse City, began looking for support on the business side of things.
“I’ve found starting a business to be far more challenging than I ever expected,” he shared in a recent interview with a local podcast Terrapin Small Biz Connection. “And one of the things I’ve learned is that there’s a lot of people who want to try to help you succeed. The colleagues who are kindred spirits in the entrepreneurial world are just really, really refreshing because this is a hard grind, and a lot of energy goes into creating a new business.”
A chance encounter in California with a member of the Michigan Angel Fund investment group led to a pitch and an offer to invest in ATLAS Space Operations—with one catch. “They said, ‘Hey, we’ll invest in your company, but you have to move it to Traverse City,’” Carey recalls. “What they didn’t realize is that I lived in Traverse City and commuted to California. I looked up at the sky and said, ‘Thank you, God.’”
Carey explains that satellites don’t care where you control them from, and he could frankly do this work from many places. But the nurturing and community provided by 20Fathoms and regional investors, as well as the skills of local talent, allowed him to headquarter ATLAS Space Operations here.
Photo by Michael Poehlman
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Over the next three years, ATLAS projects the need for an additional 10 hires in their technical functional teams, including full-stack software development, data science, network operations, security and technical sales writing—and his preference is to locate these positions in Traverse City.
“The fact that we have the opportunity to do it in Traverse City is just a gift,” Carey says. “I don’t see any particular challenge at all in sustaining this business in Traverse City. It’s generally speaking a disaster-free zone. We don’t have to worry about earthquakes. Yeah, it gets cold. So, I just advise those that come here from California to use a hat.”
Not every 20Fathoms startup is as dazzling and futuristic—but they have a common emphasis on software technology.
Member Steve Johanson started out at 20Fathoms as a one-person business. Johanson had worked running product management at LLamasoft, an Ann Arbor-based supply-chain software company, but he felt the company was missing opportunities to do things better, faster and smarter.
So, he founded Starboard, his own supply-chain software company in 2019. “Since then we’ve gone from making just enough to keep one person employed to a team of six employees with six contractors,” Johanson says. “20Fathoms took us from startup to early growth. At first, it was a lot of referrals: everything from nuts and bolts like website management, or accounting,” he explains. “Then I hooked into two mentors who really guided me in branding and positioning the company.”
Johanson describes the mindset struggle many entrepreneurs face, particularly if they come from working inside a big company. “Suddenly, you’re doing it all. Previously you could write a six-figure check and solve problems; now, you’re trying to figure out absolutely everything on your own. Sometimes having someone accessible as a mentor even for an hour or two is enormously valuable.”
And those mentorships can have double value, as many are tied into Michigan programs such as the Business Accelerator Fund with direct connections to advisors with money to spend. “I don’t have to spend hours going to find these programs,” Johanson says. “20Fathoms brings these people in to us.”
Ditto for the space, the community and people to knock ideas around with, he adds. “You need to funnel your energy and find those people and programs—sorting through them is hard,” he says. “To be introduced, and led to them—it’s priceless.”
The hopes of a handful of big-thinking entrepreneurs may not feel very personal to many of us carving out our own dreams here in the North. Which raises a rather blunt question: What’s in it for the rest of us if 20Fathoms’ efforts are a success—or not?
This is where 20Fathoms has dedicated itself to investing not just in the growth of businesses, but also in the human capital of the region through education. A constant flow of programming is available to members and non-members alike, providing expertise on everything from managing intellectual property to closing a sale or building trust within your team.
In particular, the focus has shifted to providing tech education to help grow a workforce able to meet the demands of new businesses. Tech professionals like software developers are some of the most in-demand people in the country. However, businesses in rural areas like Traverse City often find it difficult to hire enough qualified tech employees due to a limited talent pool.
In 2019, before the pandemic struck, 20Fathoms taught coding and cyber security to 250 people in the region. “Some of those people were starting down a new career path and learning the fundamentals. Others have been working in tech for years and learned new skills that positioned them for promotions,” Roberts explains.
That education effort got a boost in late 2021 when the Michigan Department of Labor and Economic Opportunity – Workforce Development awarded 20Fathoms a $250,000 grant to support its tech education and workforce development programming.
Photo by Michael Poehlman
“With this new grant, the first and most important thing we’ll be doing is reconvening with local companies and listening—that’s job one,” Roberts says. They’ll be identifying the tech and IT skill sets needed and then developing in-house, hands-on coursework around those skills, including the continuation of the tccodes learning community for software developers, expansion of tccyber for cybersecurity professionals and introduction of a new program focused on data analytics, machine learning and artificial intelligence.
20Fathoms will also work to create and expand workforce development programs with its partners, including Northwest Michigan Works!, Northwestern Michigan College, Michigan Technological University, Traverse Connect, Newton’s Road, TCNewTech and local employers. Courses are slated to begin in early 2022 with options available for those at all stages of their careers.
The bottom line, Roberts says, is that communities capable of providing a steady and reinforced pipeline of tech talent will attract employers and provide an increased tax base that benefits the entire community. “We’re doing a lot of work to attract business and bring pay levels that sustain families. This is a dream place to live—and I’d like it to stay that way.”