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Can the American Heartland Remake Itself in the Image of Silicon Valley? One Startup Finds Out

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Author: Vauhini Vara. Vauhini Vara Business Date of Publication: 05.23.17.
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Time of Publication: 7:00 am.
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Can the American Heartland Remake Itself in the Image of Silicon Valley? One Startup Finds Out

La Tigre

Ross Diedrich had gone pale and raw-boned. The CEO of a year-old startup in Denver, he’d stay at his office until the middle of the night, go home and sleep for about five hours, then chug a spinach smoothie and start again. He was just 27 years old, but he felt wrung out. Now he was standing in front of six angel investors, wearing a blazer over a T-shirt printed with the word “Covered”—the name of his startup—and regretting he hadn’t spent more time practicing for this moment. Postponing the meeting hadn’t been an option. It was early December 2016, and Ross needed $750,000 or his company would fail.

“I left my lucrative trading job to enter the crazy world of startups, and I haven’t regretted it at all.”

He had pitched some members of this group, the Rockies Venture Fund, before. Each time, they’d had issues with his presentation. Too long. Too complicated. Those pitches, however, had been practice runs—the company partners with a nonprofit group that would, for a fee of $149, give notes on your performance. This time the ask was for real. Ross had been really good at his last job, as a bond trader, which meant he’d been able to save up enough to fund Covered by himself for a while. But he’d blown through most of his savings, and he still hadn’t finished building his product, a website where ­people could shop for home insurance and buy it on the spot. Not that he emphasized this to the investors. Instead, he said, “I left my lucrative trading job to enter the crazy world of startups, and I haven’t regretted it at all.” He kept talking for 12 long minutes, while the investors—five men and one woman, most of them around his parents’ age—looked on with straight, unreadable expressions. When it was over, Peter Adams, the fund’s congenial, silver-haired managing director, smiled and said, “I think you started off this thing with a big thud.”

Ross Diedrich
Ross Diedrich

Chris Diedrich
Chris Diedrich

This was supposed to be fun. A year earlier, Ross had wandered into Denver Startup Week, a local entrepreneur­ship event. He’d just moved to town from San Diego, at the encouragement of his girlfriend and his older brother, Chris, who both lived in Denver. Startup Week was once a disorganized ­little get-together but had evolved into a stylish production, sponsored in part by Chase and Comcast. Last year, one product-­development firm hired the Nuns of Brixton, a Clash cover band dressed in habits, to play at a promotional event advertised as “the biggest, baddest, booziest party of Denver Startup Week.” Ross had never seen anything like it. He was a clean-shaven, straight-backed, old-fashioned South Dakotan. His best friends included his grandparents, and when he was in a good mood, he blurted out jokes like “What do you call a fake noodle?” (Impasta.) And yet, though he sometimes felt like he had to tamp it down, he had an innate ambition and attraction to the spectacular. As he watched entrepreneurs at Startup Week, he felt a kinship. These people had a warm vibe, but they weren’t ashamed of being driven. Some magic that Ross had thought particular to big coastal cities seemed to be working itself on Denver.
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America’s Past and Future Do Battle in an Unlikely Tech Incubator

Peter Thiel reportedly once told an audience in Chicago, “If you are a very talented person, you have a choice. You either go to New York or you go to Silicon Valley.” But there are a number of problems with his scenario, which together amount to one of the nation’s biggest economic quandaries: High-growth businesses account for nearly half of the new jobs in the US today. And the bulk of startups are launched in just a few places—San Francisco and San Jose, mainly. All that leads to wealth and job growth disproportionately accruing to a few select cities. (GDP growth in the San Jose and San Francisco areas outpaced almost every other region from 2010 to 2015.)

The good news is that over the past several years, it has been getting easier and cheaper to start a high tech business outside of the usual places, thanks in part to low-cost online tools. Entrepreneurs are turning up not only in Denver but in Charlotte, Nashville, and other places that share some common factors: cultural vibrancy, diversity, a concen­tration of universities and big companies. But the bad news is that the odds of making it big as an entrepreneur in tech are still better in Silicon Valley, where the amount of venture capital funding and the number of IPOs and acquisitions remain much higher.
Where the Deals Flow

City planners and politicians have long been trying to lure would-be entrepreneurs with promises of tech jobs and a lower cost of living. But some regions attract more venture capital than others.

*Combines San Francisco and San Jose metro areas. Sources: Apartment List, Brookings Institution, Pitchbook
*Combines San Francisco and San Jose metro areas. Sources: Apartment List, Brookings Institution, Pitchbook

Not long after Startup Week, Ross and Chris’ grandmother passed away. So the two of them, with Chris’ wife, Sarah, drove north in Chris’ ۱۰-year-old Infiniti to make it to Rapid City for the memorial service. Ross was in the driver’s seat and Chris, next to him, had his computer balanced on his lap—they were supposed to write a couple of words to read at the service. As children, Ross and Chris would make elaborate plans for imaginary companies they dreamed of starting together (hoverboards, flying cars, high tech skiing). It had been a long time since the two played this game, but in the car, Ross got to talking about an idea for building a website to help people buy insurance—home, auto, whatever. The brothers had discussed the website before, but now they were getting serious.

Ross realized he’d have to pour more of his savings into Covered than he’d expected—at least $75,000 to keep it going for a year.

By the time the Diedrichs crossed into Wyoming, the night darkening, Chris was sketching designs in the passenger seat and his wife was chiming in from the back. Ross had been asking Chris to be his cofounder. Chris had a steady job, but he recognized when his little brother really wanted something. “I’m in,” he said. “Let’s do this.”

By Christmas, Ross had a desk at a tech-focused coworking space called Galvanize, in a handsome, copper-domed brick building near downtown, for $299 per month. (An equivalent spot in Galvanize’s San Francisco office ran $550.) His workspace was just a seat at a long table in a big room, surrounded by other not-yet-­somebodies, but the scene made him feel like a real entrepreneur.

One day in the summer, an email from Galvanize appeared in Ross’ inbox: The next morning, Hillary Clinton would be visiting their office as part of her presidential campaign. Ross had a meeting planned that he couldn’t reschedule; he moved it to the café a couple of doors down and skipped the candidate’s visit. So he didn’t get to hear Clinton’s speech—the one in which she detailed her plan to “keep America on the cutting edge of technology and innovation.” The election was laying bare the economic gloom that had settled over much of the American heartland. Donald Trump promised to revive disappearing industries like mining and manufacturing. Clinton favored a different line of argument: that the old jobs could be replaced by new ones in emerging, fast-growing industries. “It’s not an accident that Denver, and Colorado in general, have a lower-than-average unemployment rate, because there are opportunities here, there are magnets of jobs and futures that people are drawn by, and we’re going to continue to build on that,” Clinton told her audience, standing in the open space where Ross spent most of his time.

What was on Ross’ mind, though, was his relationship. He and his girlfriend were drifting apart, and Covered was partly responsible. His girlfriend wanted to buy a house, get married, have kids. But Ross was realizing he’d have to pour more of his savings into Covered than he’d expected—at least $75,000 to keep it going for a year, rather than the $50,000 he’d planned. A down payment seemed impossible. And he was investing too much time and emotional energy into Covered to start a family anytime soon. One warm, beautiful night that summer, he and his girlfriend were sitting on the porch of their rented house, and she turned to him and told him she was worried about what Covered was doing to them—not just to their relationship but to his own health and emotional state. For Ross, it was a turning point: “I realized the new business was going to be much harder on me and our relationship than I’d thought.”

Sweat-damp and spent, they sat together on the mat below the climbing wall, and Ross led Ozmen through his pitch. But Ozmen wouldn’t commit.

By then, though, the relationship was too far gone. Soon, Ross moved into Chris and Sarah’s basement. He kept a quote from the movie Fight Club on his phone, which he read each morning: “It’s only after we’ve lost everything that we’re free to do anything.”

Around that time, Ross found out that Fatih and Eren Ozmen, owners of a large Nevada-based defense contractor, Sierra Nevada Corporation, were starting a VC firm and putting their then 23-year-old son, Kerem Ozmen, in charge of finding investments. As it happened, Ozmen’s older sister was one of Ross’ closest friends. When Ross asked if he could make a pitch, Kerem Ozmen suggested they do it at a climbing gym he liked and invite a couple of other buddies to come along. And so Ross Diedrich flew to Reno and started ingratiating himself to his first would-be investor by teaching Ozmen how to do a muscle-up while suspended in the air. Afterward, sweat-damp and spent, they sat together on the mat below the climbing wall, and Ross led Ozmen through his pitch. But Ozmen wouldn’t commit. Any decision, he said, had to go through his parents.

Ross had another potential financial connection in South Dakota, an acquaintance who was a friend of his father’s and a member of the Black Hills Regional Angel Fund in Rapid City. In August, Ross pitched the group. He thought it went well, but his father’s acquaintance told him, “Don’t get your hopes up.” The group didn’t have a long history of investing in high tech. (Their investment portfolio included a startup that made an oat-based sweetener and one that sold a water-treatment process.) But later, at a bar, Ross’ contact said he’d been impressed and thought he could bring the others around.

Ross had also been writing blind emails—“I’d be happy to buy you a cup of coffee or a beer”—to contacts all over Colorado. That effort helped him reach a managing director at Techstars, the company in Boulder that helps startups. In September the director invited Ross to apply to Techstars and attend an exclusive event for promising applicants. Ross, not sure if Chris was invited, went alone, only to find that most everyone else had shown up in cofounder teams. Sitting in the front row as the others gave presentations about their companies, he felt a flash of loneliness.
The Winners Take All

VC money has increasingly flowed not only to the San Francisco Bay Area but also to other big coastal regions like New York and LA—leaving the country’s smaller tech hubs with a shrinking share of the cash.

Source: Pitchbook

“Everybody always talks about how they want to re-create the Valley, right?” Jim Deters, CEO of Galvanize, tells me one afternoon. “You can’t. You know, it’s so funny, ‘Silicon Mountains’ and ‘Silicon Plains.’ Shut the fuck up. It’s so stupid, because you can’t, you can’t re-create it. The density, the energy, the amount of capital, the amount of entrepreneurs. There’s nothing like it on earth. Right? I mean, it is the epicenter.”

We are sitting in a conference room in Galvanize’s second Denver campus. I’m surprised at Deters’ candor. He professes that Galvanize can help non-coastal entrepreneurs get around their challenges by hooking them up with investors and other well-connected people in San Francisco and New York, where Galvanize also has offices. But when I later ask Deters if he can think of any startups from Denver or Phoenix—two emerging tech cities where Galvanize operates—that have successfully used Galvanize’s resources to go big, he is quiet for a while, then says, “I can’t think of anybody.”

“We were creating a destination for millennials,” Colorado governor John Hickenlooper says, “and those young people would bring the wave of a new economy.”

This doesn’t sound good for Ross. But, more important, it challenges assumptions about entrepreneurship voiced by politicians and businesspeople: that luring young, creative, techie people to non-coastal cities will relieve economic pressures in the middle of the country as they start their own companies.

When John Hickenlooper became the mayor of Denver in 2003, he read Richard Florida’s The Rise of the Creative Class, a seminal book about urbanism that had recently come out. In it, Florida argues that cities have to make themselves attractive to creative, educated people in order to spur economic growth. Hickenlooper carved out bike trails, helped new music venues open, and improved Denver’s public transit. “We were creating a place that would be a destination for millennials,” Hickenlooper, now the governor of Colorado, tells me, “and those young people would bring with them the wave of a new economy.”

By 2010 it seemed that his policies had made a difference. According to a report by the Kauffman Foundation, Denver and its surroundings had the fourth-highest concentration of tech startups in the country, after San Jose, San Francisco, and Cambridge, Massachusetts. As time went on, though, many of those startups were stalling, partly because of the difficulty of finding experienced tech executives and partly because investors weren’t showing up to fund them.

“We like to sleep in our beds and don’t like to be on the road all the time,” says Jeremy Liew, a prominent Silicon Valley venture capitalist who was the first investor in Snapchat. In 2006, companies in the Bay Area brought in 21 percent of all venture capital invested in tech in the US. By 2016, that figure had risen to 35 percent. By contrast, Denver companies attracted less than 1 percent of the funding.

Add to that, when VC funders invest in inland companies, they tend to spend less: “Colorado companies are going to be discounted just because we’re based here and we’re not in San Francisco,” Deters, the Galvanize CEO, says. “A lot of people locally might hate me for saying that, but I’m going to speak the truth.”

Local VC firms, like Boulder’s Foundry Group, can pick up some of the slack, but there just aren’t as many of them. Often, the most available source of funding is local groups of angel investors, like the ones Ross was talking to—rich individuals who fund startups in their spare time—but they tend to have less money, less tech experience, and fewer connections.

Jonathan Baughn
Jonathan Baughn

Reyna DeLogé
Reyna DeLogé

As summer faded into fall, Ross’ hours at the coworking space got longer and longer; most nights, no one else was around but the custodian. Even so, Ross wasn’t making fast enough progress. He still didn’t have even a basic version of the software that he could demo—an “MVP” in coder parlance, for minimum viable product. Chris was still holding down his full-time job; he didn’t want to quit until Covered had some funding in hand. The lead development engineer that Ross had brought on, a big, quiet nerd named Jonathan Baughn, was juggling a bunch of projects and wasn’t as available as Ross had expected. But Ross didn’t want to put too much pressure on Baughn. As a contractor, he was within his rights to work for others. A junior software engineer Baughn had brought to the project, Reyna DeLogé, tried to manage on her own, but they kept blowing past their self-imposed deadlines.

One candidate demanded an obscene salary. Another accepted Ross’ offer, then went to another startup that promised more.

Ross was also working hard to convince software companies that were digitizing other aspects of the home-buying process to add Covered’s insurance-shopping engine to their online products. But it was hard to get these companies on board, especially when he had no product to show them.

Finally, Ross met John Paasonen, the CEO of a successful Denver startup called Maxwell that makes mortgage software for loan officers. In September, at a Starbucks, Ross made the case that Paasonen had nothing to lose by integrating Covered into Maxwell. Paasonen was interested. So a few months later, Ross drove to Paasonen’s office to try to seal the partnership. It all seemed to be going great—Paasonen greeted him like an old friend, and they gossiped about Techstars and a mutual acquaintance. Then they got to the subject of a partnership: Paasonen hadn’t read the informal contract Ross had sent over. Ross grinned—a nervous tic. Then he pivoted, opening his laptop so he could show Paasonen the latest version of Covered. He navigated to the demo site, typed in his password, and tapped on the mousepad. Then he tapped again. Nothing happened. The demo was broken. “What the heck is going on here?” he murmured. He put his hand on his face. “That’s OK, it’s an MVP,” Paasonen reassured him. It wasn’t looking so viable right then, though. “Maybe an MP,” he said. “Call it an MP.”

It was hard to build a great product, and convince people like Paasonen of the product’s greatness, without much of a staff. Denver has a decent number of programmers fresh out of college or coding boot camps, but the startup scene is new enough that fewer super-experienced coders—the kind who can run a team and help strategize about a company’s future—have put down roots here than in more developed tech centers. Ross had been trying for months to hire a senior developer. But one candidate demanded an obscene salary while declining to do any coding himself. Another accepted Ross’ offer, then turned around and went to another startup that promised more. In frustration, Ross put the effort on hold; Baughn and DeLogé, the contract developers, would have to manage on their own.

When Chris told the candidate that their funding round was about to close, he was describing an aspiration, not a fact.

The need for a marketing person was also urgent. Ross and Chris had been courting one guy who was well connected among entrepreneurs and who was interested, but they had to stall; they were afraid to hire him without getting funded. In a meeting, Ross said, “We’re excited to bring you on board”—just not yet. Then the guy dropped the bomb: He had another offer. “I’d much rather work with you guys,” he hastened to add, “but they’ve moved forward more quickly.” Ross and Chris exchanged looks of alarm.

“We are closing our funding round right now, so in the interest of transparency, that’s what’s holding us up,” Chris said. The guy was willing to wait, for a bit. But, “in the interest of transparency,” he said, parroting Chris, his last salary had been around $75,000. “You wouldn’t be taking a huge pay cut,” Ross promised, “and you’d be getting the equity.” They talked about salaries, and Ross noted that in Denver they were a bit less than elsewhere. “But now rents are going up,” the guy countered.

When Chris told the candidate that their funding round was about to close, he was describing an aspiration, not a fact. The truth was that Techstars had gone silent on them, and their contacts in South Dakota weren’t returning most of Ross’ calls. Kerem Ozmen was still interested, but because of his inexperience, he didn’t want to be the lead investor, and while the Black Hills group was interested in leading the round, some of its members still harbored doubts. They wanted Covered to raise $500,000 from other investors and sign on with an established software company that would integrate Covered into its own systems. Ross was far from reaching either of those goals.

After going to Rapid City for Thanksgiving, he returned to Denver to find an email from Techstars. They’d chosen their next cohort, and Covered hadn’t made the cut. When Chris showed up at the office the next evening, he looked drawn. Ross had confided to me that his brother had talked about finally quitting his job and working on Covered full time—if they’d gotten in.

The brothers met that evening with Chris Franks, a big, lovable tech bro who goes by his last name and had been advising them on marketing. Ross told Franks about the Techstars rejection, and Franks offered a sympathetic scowl. “I know you’re a little bit butt-hurt,” he said. Chris started to answer (“We put a lot of work and effort into it—”), and Ross chimed in: “Now we don’t have the distraction.” It was an answer that a Silicon Valley CEO might have given, the bad news so thoroughly spun that Ross himself seemed to believe it.

As cities make themselves attractive to young, creative ­people, the economic gains are accruing to the privileged newcomers—not to longtime working-class residents.

One afternoon around this time, I found Reyna DeLogé crouched in front of a whiteboard propped on the floor. She’d written, Where would we like to be by Jan 1? DeLogé knew her answer. She yearned to finish the MVP, in part because Ross had promised that he’d then bring her on as a full-time employee. But roadblocks kept appearing: They couldn’t figure out how to pull insurance quotes from the online service they’d planned to use; plus they were missing some of the credentials they needed.

DeLogé, a Montana native, was a college dropout who’d worked for years as a barista before enrolling in Galvanize’s coding classes and finding a new life as a programmer. She loved programming and was good at it, and she was proud that she’d pulled herself out of the minimum-wage grind. Still, all the uncertainty was wearing on her. She’d been working so much that she’d neglected her beloved cat, who was starting to get aggressive. “It’s basically my fault,” she said.

The executives at Galvanize loved to trot DeLogé out as one of their proudest success stories. But her experience was hardly representative. She told me about students who’d started the coding program but dropped out because they couldn’t keep up. Other people she knew had completed the course more recently only to find that there was more competition now for the available programming positions. Nor were most of her classmates college dropouts like her. They tended to be graduates looking for a career change.

As cities make themselves more attractive to young, creative ­people, and those people arrive in large numbers, the economic gains are accruing to the privileged newcomers—not to longtime working-class residents. Tech startups often hire highly skilled white-collar workers. For those startups that never manage to make it big, that’s especially true. You don’t need an office manager if you don’t have an office.

The problem is that any recent gains by middle- and working-class people in prosperous cities have been counteracted by the rising cost of living.

It’s to Denver’s credit that its economy, with big health care, aerospace, and energy sectors, is more diverse than that of, say, San Francisco or San Jose. The strength of the city’s economy, of course, has more to do with that mix than with tech in particular. Still, economists generally agree that innovative, fast-growing companies generate jobs in other sectors, for middle- and ­working-class people too; UC Berkeley economist Enrico Moretti has pegged it at five jobs for each one that goes to a high tech worker. Denver’s low unemployment, for example, is partly because of all the laborers needed to build housing and office space for the newcomers. The skyline, lately, has been punctuated by construction cranes and half-built structures. The problem, according to Richard Florida’s recent research, is that any recent gains to middle- and working-class people in prosperous cities have been counteracted by the rising cost of living in those places. In Denver, home prices have risen more over the past year than in any other cities in the Case-Shiller index except Seattle and Portland. According to Florida, Denver’s neighborhoods are also segregated by education level more than every other large metropolis but Austin.

In early November, when Ross had been more optimistic about getting funding, he’d told me he didn’t plan on pitching the Rockies Venture Fund, because the group was notorious for spending a long time on due diligence. But now, with the new year approaching, his options were narrowing. Ross kept up an upbeat demeanor, but Chris told me, “The bank accounts are running pretty dry.”

Ross had once heard that if you’re trying to persuade someone to give you their time, you have to offer them something in return. So, one afternoon, Ross called Ozmen, who had been promising to visit, with a casual suggestion: If he could come to Denver, Ross would introduce him to some experienced angel investors. It would be good relationship-building for someone new to the business. Maybe it would even be fun. When Ross hung up, he was grinning. Ozmen had agreed, and Ross had accomplished two goals at once: He’d persuaded Ozmen to come out, and through Ozmen, he had found an excuse to call the Rockies Venture Fund and set up a real pitch—not just a practice run.

Things were looking up. Before he met with the Rockies funders, his contact at the Black Hills group in South Dakota had assured him that a $200,000 deal was looking probable. Ozmen was considering adding up to $200,000 as well—though he’d told Ross, “No guarantees yet.” Ross had a few other small commitments and needed about $250,000 more—and that was if the other funding came through.

Promises of disrupting trillion-dollar markets might fly on Sand Hill Road, but in Denver, that kind of talk got people’s backs up.

Which is how he found himself in front of the investors for a real pitch, wearing that T-shirt printed with the word “Covered.” “In summary,” he told them, “what we’re doing is disrupting a trillion-dollar market.” But then, anxious to make sure he included everything, he felt himself veering off script. The investors’ past advice flashed in his mind—too long—yet he kept talking. Then came the comment from Peter Adams, the managing director, saying Ross had started with a thud. He didn’t like that Ross had started by summarizing Covered’s complicated business model: It was too much information, and it had gone over his head. “It’s like Charlie Brown,” Adams said—those scenes where Charlie’s in class, bored out of his mind. “I’m hearing the teacher go, wah wah wah wah.”

The others piled on. One said Ross had lost him with the hyperbole: promises of disrupting trillion-dollar markets might fly on Sand Hill Road, but in Denver, a city that prided itself on unpretentiousness, that kind of talk got people’s backs up.

By this point, Ross was burning with mortification. He attempted a grin that looked more like a grimace. Then he tried to move on. He told them that he was about halfway through filling his round in a deal that valued Covered at $3.75 million. He added that he’d been in touch with one firm that had looked at some of Covered’s competitors and compared their progress to Ross’. “They told us that we should be closer to $8 million.”

The investors eyed one another and smiled. He’d gone too far. “Where are they located? Bay Area?” one of them asked, referring to the other companies. “Yes,” Ross affirmed. “That’s no surprise to us,” the investor said. “We just had a conversation about valuations, acknowledging that on both coasts they’re just not realistic.” The investor was kind but stern. “Don’t get caught in that,” he warned.
The Tech Bump

From 2010 to 2015, GDP grew in the nation’s largest metropolitan areas. But the San Francisco Bay Area (including San Jose) saw one of the biggest percentage increases—largely due to the tech sector.

All figures are for metropolitan regions. Source: Bureau of Economic Analysis

A week later, I drove to a high-rise building in Denver, not far from where Ross pitched the Rockies Venture Fund, to visit one of the city’s most talked-about startups. Its founder, Bryan Leach, is a handsome, charismatic, well-spoken lawyer who studied at Harvard, Yale Law, and Oxford and clerked on the US Supreme Court. He came up with the idea for Ibotta, a coupon app, after moving from Washington, DC, to Denver so that his kids would grow up near nature. Five years later, Leach has raised more than $70 million and has 400 employees.

He took me on a tour of his 38,000-square-foot headquarters, which might as well have been in San Francisco or Palo Alto—sit-stand desks for all, conference rooms named after Malala Yousafzai and Stevie Wonder. For this, he says, he pays $30 a square foot, less than half the going rate in downtown San Francisco.

Cities like Denver could be homes for useful, if unglamorous, tech companies—in other words, Main Street businesses with code.

Leach is an ardent promoter of this city—the home screen of his app includes the tagline “Designed and built in Denver, Colorado”—but he, like Ross, faced Denver-specific challenges early on. When he tried to raise seed funding, he got meetings with Sand Hill Road types, but none of them committed. So instead he persuaded dozens of his rich friends and relatives to give him a total of $3 million. Also, there were no big mobile-app companies in Denver, which meant there weren’t a lot of people with strong mobile experience. Leach got around that partly by teaching the necessary skills to existing employees.

Denver might attract more capital and talent, Leach believes, if it had better stories. “You’re looking at Photobucket, you’re looking at MapQuest, and those companies are on their way to irrelevance,” he says. With a couple of exceptions, the newest startup cities, Denver included, haven’t bred big, name-brand startups that employ lots of people and come to be worth billions of dollars. “What we need,” Leach says, “is a big exit that really gets people paid.”

To me, that was starting to seem like a long shot. But it did look like there could be another path. Most companies, after all, are more like Covered—a boring product that serves a need—than like Snapchat. Somewhere between the billionaires and the flameouts, there are less dramatic potentialities. People like Ross could be testing a different future: for cities like Denver to be homes for useful, if unglamorous, tech companies—in other words, Main Street businesses with code.

After leaving Ibotta, I drove a couple of blocks to Covered’s holiday party. Ross and Chris had decided to hold it at an “escape room,” a sort of adventure game. Their team was locked in a room and had limited time to solve a series of puzzles in order to grab a pile of fake cash and get out. Inside, things got intense. Baughn and DeLogé were doing algebra, and Ross and Chris were jimmying locks. Chris’ wife, Sarah, and I were standing in the back of the room, biding our time until dinner.

Ross didn’t know it that night, but he was about to get good news. Just before the holidays, his main Black Hills contact would email to tell him to expect a vote on the deal in January: “I think we will have a positive outcome and our team fully supports it,” he’d write. That would give Ross the confidence to hire the people he needed—the marketing manager, Baughn, DeLogé, and a third developer. He figured he could take out a loan, if needed, to cover a couple months of payroll until the deal closed. Shortly after that the Maxwell CEO would agree to sign the letter of intent. In February—finally, blessedly—the MVP would be built. And soon after, $700,000 of funding would close, the first of the payments from investors would start to arrive, and Chris, true to his word, would quit his job to focus on Covered.

But none of that had happened yet when, toward the end of the hour in the escape room, Ross and DeLogé stood near a vault containing the cash. If they made a misstep, they risked triggering an alarm. Ross eyed the vault. “Just do it,” DeLogé said. “I’m just going to fucking do it,” Ross said. He tiptoed across the room, careful not to trip the alarm, opened a cupboard, and got the bounty. DeLogé gave a little whoop of celebration.

Then came an infuriating development. In order to leave the room and win the game, they had to remember each of the great many numerical codes they’d used throughout the evening. What was being asked was nearly impossible. In desperation, they tried a bunch of numbers, some remembered, some guessed, but the clock ran down. They’d lost. An employee gathered everyone together for a group picture. In the photo Chris and Baughn are smiling gamely, and DeLogé is mugging, crossing her arms and glowering like a bank robber in a mug shot. Ross, though, is tight-lipped and serious, his hands clasped behind his back.

Afterward, walking to dinner, Ross asked me if I thought the game had been fun. To be honest, it had seemed rigged to get people’s hopes up, though failure was likelier than success. Still, I could see how a certain kind of person—a person like Ross Diedrich—might find a complicated sort of enjoyment in the whole quixotic quest to grab a prize and make an exit, and I didn’t want to spoil the moment. Sure, I told him. It was fun.

Vauhini Vara (@vauhinivara) moved to Colorado in 2015.

This article appears in the June issue. Subscribe now.

Portraits by Julian Rentzsch
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