SproutBox cofounder Mike Trotzke has built his career around startups. This Q&A with Trotzke, who started his first company while attending Indiana University, is the first of a three-part “About the Founders” blog series. Covering everything from Bloomington babes to valuable startup advice, Trotzke makes his case to the tech world: “Why not Bloomington?”

What attracted you to Bloomington in the first place?

Girls. That’s actually the answer. I went on the campus tour and there were all these good-looking girls laying out in Dunn meadow and that’s how I got here.

I’m sure you’ve heard: “Culture drives innovation.” How would you describe SproutBox culture?

Bloomington culture is a big part of SproutBox culture. Bloomington has an incredibly walkable downtown and there are all kinds of tech companies along the B-line trail and the courthouse square. We are very laidback. We walk together to lunch most days and have a very close relationship with our tech neighbors.

When I was thinking of setting up this company, I looked at other towns, like Boulder and Austin, and from a cultural perspective, Bloomington has a very similar vibe. Those towns have incredible tech scenes, and I thought: why not Bloomington? I think a lot of people on the creative and development sides of what we do are attracted to towns like Bloomington.

What is Bloomington’s advantage over established startup meccas such as Silicon Valley?

Certainly, there’s an obvious cost advantage. I don’t think it’s just about that though. There are a lot of problems with the valley in terms of it being an ecochamber of people following a singular path to profitability, or lack thereof. We put a Midwestern spin on that thinking by focusing on revenue earlier in the startup process.

Coming to Bloomington to launch your startup is like coming to an oasis where you can be completely focused on the product. The last two sprouts we’ve launched were from California. They recognized that coming here and focusing solely on the product is extremely effective.

I don’t think Bloomington can be or should be Silicon Valley. It shouldn’t be the tech capital of the world. But I think Bloomington can be known as a startup hub: where you come to startup and maybe grow into another location later.

What role does the university play in making Bloomington an ideal location for startups?

We have a tight relationship with IU’s School of Informatics and Computing. We are their corporate sponsor and their dean is on our advisory board. Their program is the first of its kind in the state. The core concept is that technology isn’t an entity in itself. Studying technology and another discipline is far more useful.

We also have a good relationship with the Johnson Center for Entrepreneurship and Innovation in the Kelley School of Business. It is a respected graduate program and they are a great resource for us as well.

What is your vision for Bloomington and the tech sector in the future?

The goal is to launch four companies a year. That’s 20 startup companies in Bloomington in the next five years. Some will stay, some will go, but it will have a permanent impact on the city. I’d love to see some of those companies thriving here in downtown. I’d love to see more conferences here as recurring events. I’d love to bring more people in to show what Bloomington has to offer startups.

Central Indiana is ranked first in the Midwest for employment growth in the high-tech sector. Why is it so important for the state to support and sustain this type of industry?

I think no one questions that the technology sector is by definition the future. It’s a focus on the future of how we live. Obviously, you do not ever want to fall behind in investment or in the interest of technology. As we struggle to figure out ways to have clean, high-paying jobs, the tech field is important in improving our ranking and position in that space.

Why is now a good time to get a web startup going?

There’s still in somewhat of a downturn, which I think is actually a great time to get a startup going. I think sometimes companies are overfunded, and a lot times I feel like companies raise too much capital and don’t have a revenue model set and bust. Not having enough pressure in the beginning can be a bad thing. I also think it’s a really convenient time because if you can survive right now, you’ll be in the position to dominate as the economy improves. And anyway, it’s always a good time to start a company.

What is the greatest challenge facing entrepreneurs today?

A lack of funding. Everyone is searching for funding. If you don’t have friends and family with money – not because of your idea or talents, but because of your background – it’s really difficult to get from idea stage to the actual product.

Senior engineering talent is another major asset. Building right the first time is difficult, and most companies go through that.

People also keep getting into these hit markets. By that I mean it’s like iPhone apps. One person started making a ton of money creating iPhone apps, and everyone thinks they can do that. So now there are thousands of people making iPhone apps and only a few good ones. It’s the same with facebook. There can’t be 12 facebooks. It’s a gold rush mentality, and I think it traps a lot of people who would be otherwise really talented.

What is the best advice you give entrepreneurs who come to SproutBox for help?

Limit the scope of your product in the first version. It’s really hard for entrepreneurs to do. They have this vision, and it’s big. They want to build this full product with all the features and they’re not completely wrong. The vision is right, but every idea changes. When you have an idea, you’re identifying a problem and the solution isn’t quite there yet. You have to build the product very simply, get it out there, listen to feedback, track behavior, focus on the metrics and adapt. Evolve your product based on what will generate the most revenue instead of what idea you had before releasing it. That’s not intuitive to most entrepreneurs and it wasn’t to me either.

In my role in business development for Sproutbox I see a lot of entrepreneurs and business plans – some good, some not-so-good. Rather than give entrepreneurs a laundry list of suggestions on how to make a good application, I figured I’d borrow questions from one of my favorite authors on entrepreneurship, Amar Bhide.

Bhide believes(and I agree) that there are really three major questions that every entrepreneur must answer:

1. Are my goals well defined? This is the biggest thing I look at when I’m looking at a business plan, and also the place where I often see major mistakes. If you haven’t clearly defined your goals, even in broad terms, then you aren’t there yet with your business. We use our unique application process for new sprouts to review how an entrepreneur has thought about their goals. When I read a business plan or talk to an entrepreneur I’m usually looking for a few highlighted points under this question. For example, does the entrepreneur show that they have their heart in their business, but do they balance that with the need to earn revenue? Does the entrepreneur have a tolerance for risk? Does the entrepreneur know what it means to be scrappy to focus on the goals at hand? At Sproutbox we look for highly dedicated entrepreneurs who want to make money and will stay focused on the goals of their business in order to keep moving forward.

2. Do I have the right strategy? This is really one of my biggest jobs at the box. When an entrepreneur gets going they often haven’t been able to clearly define what the strategy is, how they’re going to grow the business and how they intend to sustain that growth. Sure, I’m biased, but this is one of the best things that Sproutbox offers our Sprouts. Once selected, we take long hard looks at the businesses, their market opportunities, the costs of customer retention and acquisition, and how, based on our experience, they can experience off-the-charts growth. We want our Sprouts to not just succeed, but to dominate their markets, so getting this right is unbelievably important.

3. Can I execute the strategy? At our foundation this is how we work with our Sprouts. There aren’t many good ideas that can be executed without a great team. We realize that our Sprouts don’t have the resources to build and launch their software on their own, and that’s the central service we provide in exchange for equity. Once the product is built, do you have the skills to build an organization and grow market share? If you can’t confidently answer this question, you may want to think about adding a co-founder with complimentary skills. At Sproutbox, our job is to look at an entrepreneur’s answers to these questions and to help them achieve their dreams via their responses. We’re here to help build, guide, and shape businesses for success.

So, have you thought about these questions? More importantly, do you have what it takes to make a new business grow? We hope so, and we hope you’ll apply to build your business with us. Applications are online at http://www.sproutbox.com/apply and will be open until December 5, 2009.

In the last decade or so I think we can all agree that the internets have come a long way.  Cloud infrastructure, application technology and hardware have evolved beyond my expectations.  The market is abuzz with third party, value-add products that make application service providing (ASP) easier and easier every day.  The clearest sign of civilization is specialization right?  ASP’s are becoming more and more specialized.  The industry even has a new name for it: Software as a Service (SaaS).

All these years, systems administrators and application developers have been concerned about application uptime, points of failure, fault tolerance, disaster recovery, geographic redundancy… oh you get the idea.  I haven’t noticed much evidence of the evolution of thought on these subjects as the technology has improved.  I think that’s because of fear.  See, if an application is down.  Someone is to blame.  No, not a router, not a hard drive, not a line of code.  A person.  People make decisions.  Fear causes bad decisions or worse, indecision.  Removing the possibility of failure reduces the potential to be blamed.  Um, yeah, but at what cost?

The tubes are now all about agile specialists.  The more agile you are the better.  The environment is actually feeding itself.  Successful SaaS providers use each other to be faster; to get their service to market quicker; to concentrate on what they do best.  Successful companies aren’t afraid of downtime. They are not concerned with geographic redundancy.  If they were, they’d be spending too much time mitigating their fear.

Ok, I’ll admit, I started writing this post because I heard about downtime one too many times recently.  My latest app, CheddarGetter is a SaaS application.  We specialize in pricing and subscription management.  It’s important stuff but It’s nothing to be afraid of.  Any application developer worth her salt can read the paypal api docs and include rudimentary billing support for a web application.  But if it’s not your specialty, why would you waste your time?  Sure, if you use CheddarGetter to bill for your app and the service is down, you can’t signup a new customer.  Well, guess what?  If CheddarGetter is down, no one can sign up for CheddarGetter either.  See, CheddarGetter uses itself to bill for itself.  That’s built in motivation to eliminate downtime, to increase fault tolerance, to limit points of failure.  That motivation only increases as the customer base grows.  Which application do you think will have the best uptime?  CheddarGetter or the ill conceived, limited, proprietary, likely undocumented, single-use billing functionality written by a developers who may or may not be on vacation or currently working for a different, successful SaaS company.

Stop living in fear.  Start making money.