How A Local Government Can Help Local Startups

I get policy types asking me this question a lot – how can we help local startups?

Well one way is to use their products to deliver better and more efficient services to citizens.

The State Of Iowa is demonstrating how it is done today with our portfolio company Dwolla, which happens to be located in Iowa.

Today, they are announcing that:

  • The State Of Iowa will accept payments with Dwolla
  • This will allow the state to collect ~$100 million a year in taxes
  • New partnerships are on the horizon with property taxes, vehicle registration and others
  • They will explore new opportunities for collecting and issuing government payments 
  • Dwolla is hoping that this proof point will help them approach additional governments who are looking for better and cheaper options to take payments. And in reflection of that, Dwolla has launched a new landing page, dwolla.com/government.

    So if you are looking to help startups get going in your region, one way is to become a customer of theirs and help them demonstrate the power of their technology to others. It's great to see the State of Iowa do that with Dwolla.

    #Uncategorized

    Comments (Archived):

    1. takingpitches

      Wow – that is huge!It’s hard to get governments to accept tax revenue via credit cards because of the high fees that they charge, so they only accept them if the payor is willing to eat the fees. See, IRS:http://www.irs.gov/uac/Pay-…But 25 cents is a different story. And that is a potentially massive transaction volume for Dwolla.

    2. takingpitches

      A well-done, entertaining and sometimes painful documentary about online government payments during Web 1.0 is Startup.com which I would highly recommend to anyone.

      1. Elia Freedman

        I loved that movie/documentary. +1

      2. Jordan Lampe

        Netflix instant’d

    3. andyswan

      All government should be local government. Awesome for Dwolla…how it should be.

    4. awaldstein

      ‘Made in…’ is location based, proud in origin, based-marketing at its best and part of what governments can do really well.If New York proudly acknowledged its entrepreneurs like it acknowledges it’s apples this goes a long way.

      1. Joel Natividad

        NYC does have a “Made in…” program. Better yet, its run by the community thru http://nytm.org/made-in-nyc/.When we made the list, we even “scratched an itch” and created a logo and released it to the public domain when we found that there was no artwork to proclaim our “Made in NYC” pride – https://github.com/Ontodia/…As for the NYC engaging local startups, checkout the City’s latest design challenge – http://www.reinventpayphone…, which was even announced during December’s NYTM.The City went out of its way to use NYC startups Splashthat and Collabfinder to run the challenge itself.I just wish that NYC go a step further and create a “micro-tasking portal” – think of it as a Civic Kickstarter where small, say less than $10k projects can be carved out of the City’s humongous backlog and released to the general public without going through the usual, very-expensive RFP route which is not a good match for small projects.The govt saves money, citizens get more engaged, all while seeding the Urban Informatics ecosystem.Local citizens/businesses can even kick in additional funds for projects to supplement the kitty.Maybe this is the next “startup that matters” in NYC, leveraging its emerging Urban Informatics clout – http://youtu.be/vSyWM9Qtc30 😉

        1. awaldstein

          Thanks much for this comment.New York has loved and uplifted it’s heroes since the beginning and it’s a pleasure to see them doing this on a broader plane like you describe.The dynamics of the city down to a neighborhood level are fascinating and powerful. This is a city that turn inwards to itself to rise above it. I’m seeing this daily with a community wine shop project I run (www.thelocalsip.com) and my partners food biz that is growing exponentially by word of mouth within the neighborhood (www.lulitonix.com).

    5. karen_e

      I could say “hacking government for the win!” but I don’t really talk that way. I do think it’s really cool to infuse government with modern, efficient ways of working. I’m no Rand fan, I’m just responding viscerally to the total weirdness that happens when you march down to process a piece of paper at a government office and you see the ancient computers they’re working on.

    6. Richard

      Can anyone chime in on the IOWA startup scene?

      1. Jordan Lampe

        What would you like to know? John Eligon from the New York Times wrote a great piece: http://www.nytimes.com/2012

    7. CliffElam

      God bless anyone who can get through a full legal procurement cycle with any government.Per my comment a few days ago about how Dwoalla, square and their ilk are commoditizing payment processing, here is another proof point. Once the gov has decided to accept electronic payment outside the typical 3rd party system that charges so much, then adding paypal, etc, etc is no big deal.Race to the bottom is a good thing for consumers. Stockholders of processors, maybe not so much.=-XC

    8. John Best

      Being endorsed by a local authority will lend credibility to any startup. Well done to both Iowa and Dwolla.

    9. Guest

      I paste a comment, but where is it now?

      1. StartUpJerkFest

        time is circular. you have to spin around three times, and POOF! there it is!

    10. Drew Meyers

      Awesome partnership for Dwolla. How long was it in the making? I’d guess 12 months?

      1. Jordan Lampe

        There was a sense of urgency here to “do better government” from the very top. We were extremely impressed with their ability to mobilize on this within 4-months.

    11. William Mougayar

      Congratulations. Just like in the Primaries, Iowa is leading the way.I predict a landslide victory for Dwolla as they will win every other State!

      1. LE

        “Just like in the Primaries, Iowa is leading the way.”Basis for a great press release actually. I would go with that. But they need to modify the site first per my other comment or they will miss the opportunity.

    12. jason wright

      this is… significant.The United States of Dwolland.

      1. Ataub24

        upvote for you sir.

        1. jason wright

          thanks. ‘Jason’ will do 🙂

      2. Matt A. Myers

        Dwolla Dwolla Bill Y’all

    13. StartUpJerkFest

      I’m feeling stupid. I went through about 10 pages on the dwolla website but I don’t understand what Dwolla is. If a merchant accepts it, how does a shopper pay with it? Is it a credit card? Does a person need to fund an account before they can pay with it? Does it pull money out of a traditional bank account? The goal of the website is to get me to create an account. But I don’t understand what I’m getting into.And how does it allow Iowa to collect ~$100 million a year in taxes? What was preventing Iowa from collecting these taxes previously? Does it increase the number of people who pay taxes? Or does it make it easier to pay taxes? Or does it reduce the fees incurred by accepting credit card payments? Inquiring minds want to know. Not my mind, mind you.

      1. LE

        Since the first time I checked out this site it looks essentially as if it’s had a graphic redesign.But you are 100% correct it is really lacking in any significant info. I’m not even seeing a faq.The pages “for individual” “for business” etc. have practically no information. It’s all “sign up and start”. I don’t think it’s a surprise that people would want much more info before signing up. That doesn’t mean overwhelming them so they are frozen and don’t make any decision. But this doesn’t even come close to selling the service.When dwolla first was featured on AVC I actually pitched it to the local chinese restaurant. The owner was really interested (I hyped how they would save on the cc fees). I mentioned it when leaving and when I came back the next week he wanted to know more. So I gave him the site address. When I came back later he looked confused and I left it at that.The home page is fine and clearly details the use cases “individual” “business” “developers” “non-profits” that’s good. The above the fold is good and to the point. The “want to know more” though has no links on the graphics and points it is making. Clicking the “business” link at the bottom brings you to a page that says to little.All easily fixable. So get it fixed. I suggest actually showing the site to end users and businesses and seeing the questions that pop into their heads and modifying based on that (not that I couldn’t off the top think of obvious things that are missing). Not just in Iowa. In other cities as well.

      2. kidmercury

        they’re so focused on getting you to sign up they don’t explain what it actually is. i can’t stand stuff like this, my number one internet pet peeve. probably works though, at least in a misleading statistical sense. in any event here is a URL that may answer all the questions you present: http://help.dwolla.com/cust

        1. markslater

          Daily, Weekly and Monthly active users are the only measure. Not downloads or sign ups.

      3. Ataub24

        Simply- dwolla is a payment network, not so different than Mastercard (MC) and Visa. Just like going to a store or going online and paying with MC, where-ever MC is accepted- same with Dwolla- the merchant and consumer need to have dwolla accounts. In terms of Iowa state- they were accepting those taxes with checks. Dwolla is a great replacement of checks, as it is cheaper and faster. If you have any other questions- go for it here or email me at [email protected]

        1. StartUpJerkFest

          thanks for reply. i’ll lists questions here so others benefit from the responses.1. have you written any articles that explain the biz dev process behind this event, something the startup community could read and get insight into the work involved for a deal at this level? or would that be giving away too many secrets?2. if Dwolla is a network and assuming you need the network effect to make a merchant want to be a part of the network, do you have an extremely high concentration of users in Iowa, is that why IA took the initiative, or was the cost so low / free (and the acceptance process so easy) that it was a no-brainer to accept Dwolla?3. Did you demonstrate how much they could save versus MC/Visa, or demonstrate / promise the benefit of receiving money faster using Dwolla than by processing mailed-in checks?4. Did you need to do trial runs and recruit a mass of users in Iowa that promised to use Dwolla to pay for transactions with the govt?5. Do you have User Experience staff members in house who test your website against outside eyeballs, to overcome the confusing experience I had trying to figure out what it was? @kidmercury shared a link in your help section, but the explanation that it was a payment network and you do need a traditional bank account to fund your Dwolla account wasn’t explained until 75% toward the bottom of that page.6. do people really signup for this service without it being explained to them what it is and how it works? especially with something that involves money changing hands…

          1. Dave Pinsen

            As a Dwolla user, I can answer #6 for you. I signed up after reading a Business Insider article on Dwolla in the fall of ’11. I have used it since to pay contractors I had previously paid with PayPal. The contractors like it, because Dwolla lets them keep more of their money.

            1. StartUpJerkFest

              thank you. i see the advantage to recvrs, but i wonder if dwolla is leaving too much on the table by making under $10 free? are vendors like paypal charging so much because they can, or are there existing costs that need to be covered by their fees? and wondering if dwolla can build a large enough war chest for future needs, especially against large powerful established competitors like V MC & PP.

            2. Dave Pinsen

              I don’t know how they can make a profit charging 25 cents per transaction.

            3. Matt A. Myers

              Quantity. (It’s a joke)

            4. ShanaC

              scale. yesterday’s post.

            5. Dave Pinsen

              I don’t know if Dwolla is making money charging 25 cents per transaction. If it is, then scale is great: it will make even more money as it scales. If it isn’t, then it will lose more money as it scales (unless it raises its fees or adds new sources of revenues).

            6. StartUpJerkFest

              here is the link http://www.avc.com/a_vc/201…yes, it talks about the need for scale, so dwolla needs to get big volume and transactions above $10 in order to make money, but it is a fixed revenue, not percentage based. so they need to work extra hard. as Fred mentioned, “not for the faint of heart”.

            7. StartUpJerkFest

              another thought i had is maybe if dwolla’s costs are so low, the big guys can’t ever complete on their level. but it seems like they’ll need heavy word of mouth to spread the word (if they can’t afford expensive brand advertising costs), which relates to my point above about not understanding the website intro pages.

            8. Dave Pinsen

              I wouldn’t be surprised if they got most of their users through word of mouth. Consider me. I heard about them from an article, and I got two contractors to join. They have probably asked all of their clients who were paying them with PayPal to join too, since having them do so saves them money. So I might be the only one out of dozens in that example who didn’t hear about Dwolla through word of mouth.

            9. StartUpJerkFest

              ok so in your case, the major attraction was lower cost to the vendor / $ rcvr. so what happens if someone else comes along and offers 10 cents per transaction? i’m wondering what the barrier to entry is in this market?and how does a merchant (say an ice cream store) process the payment? if a shopper uses their phone to pay the merchant, do they show a confirmation code to the merchant at POS, and the merchant is satisfied with that proof of $ transfer? or does the merchant need a dedicated terminal that shows proof and prevents fraud? does the merchant need to tie their POS cash registered into an API to handle payments? I would need to know all these things prior to “signing up”. if there is a high cost of implementation, most mechants would not act until their customers were demanding they be allowed to pay with dwolla. they would need proof of demand prior to taking action.

            10. Dave Pinsen

              I have conventional merchant accounts to accept payment for my business, so I don’t use Dwolla for that at this point. But I don’t accept PayPal for payments for my business either. I use Dwolla in lieu of PayPal for paying contractors.

            11. Ataub24

              Dwolla is really going after ACH- 34 trillion dollar industry (biggest thing out there in terms of size) where the average transaction is over $10.

            12. Jon Thompson

              They used to not. The problem then is that <$10 credit card transactions are then actually cheaper for shops that do a lot of credit card sales. I’ve been a proponent of Dwolla since 2009, when I co-worked with Ben. I’ve talked to quite a few local retail and dining establishments about the positives and negatives of using Dwolla. This was a pain point to entry.

            13. Ataub24

              Dwolla built its own infrastructure so we don’t owe people money- so its just opportunity cost under $10. Paypal owes a bunch of people money (existing legacy infrastructure) which is why their fees are such.

            14. StartUpJerkFest

              maybe the “free under $10” thing could be thought of as a (non) advertising expense, since it word help spread word of mouth.

          2. Ataub24

            Sorry for delay. Was traveling yesterday- in the airport/air for 11 hours.I’ll try to answer each one here:1. Are you talking about the state of Iowa deal? I personally cover online integrations- which is ecommerce, gaming, nonprofits, marketplaces, etc. Another member of our team led this deal. A high level thing I can tell you- Iowa govt reached out in the summer and the deal was closed and up and running in under 6 months. Not bad for a govt deal! Maybe the person that led it will write a personal blog post about it- maybe not.2. They were using checks. A huge use case for dwolla is replacing checks. Most other digital options are more expensive than a check. Dwolla is not. On top of that, IA wants to support the entrepreneurial community- this was a logical step for them.3. If this is for the IA deal- I’m not sure. But in general- our value prop is savings- you can use this calculator we built to show the savings- http://paymentsystemfees.com/4. No. We have users in every state and growing quickly- we had technology that would allow them to save money and go digital. No brainer.5. We have a product and design team. The first thing you see when you get to the homepage is “The best way to move money.” Would you rather it say something else? How would you describe dwolla? Saying a payment “network” like Visa or MC is more jargon- in my opinion. We love feedback- so keep it coming.6. I think we can definitely do a better job at education- but each tab (individuals, businesses, nonprofits, developers) shows a different way people, biz’s, etc are using dwolla. And yes a lot of people sign up for dwolla, daily.

            1. StartUpJerkFest

              thanks for the follow up and no problem on the delay. my intent was to try to have a dialog to help the startup community learn from actual startups experiences. hope it’s going in that direction…1. Wow. Surprised to hear that Iowa govt reached out, but those are my prejudices about govt. Hope to read a blog post about it, it would help other to learn what is involved big deals with many stakeholders to deal with, like in the SPIN selling book.4. is your “spots” map (browser version) showing all users, or just merchant’s that accept Dwolla? So far it appears to be merchants. I’m also wondering why the dwolla id isn’t the merchant’s phone number? it seems like it would be easier that way. Also the spots map popups doesn’t include any kind of link to the merchant’s website, which might help drive traffic to the merchant, or at least show up in their webstats.5. IMO “move money” sounds like a gangster phrase, LOL. Maybe “cheapest way to pay someone / get paid”. I understand the lower costs for the merchant, but what is the value prop for the shopper? Is the shopper rewarded with a good feeling for helping the merchant avoid high fees from payment gateways? if it had that “save small business” vibe, i could understand that value prop.6.dwolla.com/businesses doesn’t show me anything on how they are using it. it shows a photo of a coffe shop owner. if it showed a photo of a shopper using their phone to pay the merchant for a coffee, then I would understand a basic “how it works” concept. of the 4 icons on the biz page, i would replace increase profits with a graphic that shows how it works, especially in brick n mortar shops, i.e. do they need a terminal? the “stop losing money” icon should link to your gateway fee calculator, which is convincing proof of the lowest cost. maybe even link to a video showing more about how it works.now, just for the hell of it, i filled in the form to create an account. i did this from the business page. but the personal tab was pre-chosen. i think the business tab should be pre-chosen since i’m on the business page. after submitting that form, i was sent to the register page, which showed an error message that said “a valid password is required”. but it didn’t say anything info about what makes my password value invalid, or what the password requirements are. so i didn’t continue with the signup. let me know when that is fixed so i can try again.so there’s some feedback for ya 😉 thanks for being open to suggestions and responsive.

        2. ShanaC

          Alex, it might be more efficient to say it is a payment system for checks with lower fees for everyone unlike the credit card system.

      4. JamesHRH

        I am fighting, really hard, and losing the battle. I have to say this: maybe if you changed your moronic user name, you wouldn’t feel so stupid.Nuts. Random, mean spirited negativity. Really cold here is my only excuse. Regret it already ;-)Seriously, your comments are too strong to come from such a weak handle. I had the same, although much less deeply considered & articulated thoughts when I first was exposed to Dwolla.

        1. StartUpJerkFest

          my weak handle has generated some strong emotions in you ;=) now grab your ax handle and start chopping some wood. it gets cold up there at night.

          1. Techman

            Ha ha ha.

    14. Richard

      Thoughts on Paynearme?

    15. jason wright

      OT, but I can’t find an open 3D printing post.http://www.guardian.co.uk/a…How about ‘The Wilson House’? Sell a house and print the dream.

    16. Pete Griffiths

      And it is a good idea to NOT do stupid things. Like hitting startups with taxes they don’t know they are liable for until they are hit with penalties. Infuriating.

      1. LE

        “Like hitting startups with taxes they don’t know they are liable for”Such as?

        1. Pete Griffiths

          A city employment tax.

          1. LE

            Are you talking about a wage tax (% of salary that employee pays) or a per head tax or? Philly for example has a wage tax. I’ve seen a per capita tax in other areas. Which one are you talking about? Or something else?Since it seems you are in SF you are probably talking about this:http://sftreasurer.org/inde…When I had a business in Philly many years ago the PR tax (which the employee paid) was close to 5%!. It’s since been lowered a bit. If you either worked or lived in the city you paid that (was a little less depending on which it was though). Even though the employee paid it in a sense the employer had to factor it in to employee offers. Of course if the employee lived in the city it didn’t make much of a differenceIn any case I don’t see how this is “hitting startups with taxes they don’t know they are liable for”. Taxes are something you check out before starting a business. I’ve run a business in a few different places and it’s what I did. In one place I was thinking about living they had a wage tax and in the next township over they didn’t. But the property tax was much lower where there was a wage tax. Depending on your income it could be advantageous to locate one or another place so I made the calculations based on projected income and went with the place with higher property taxes but no wage tax.In any case please clarify if this is what you meant.

            1. Pete Griffiths

              Yes I am talking about the payroll tax and the fact is that I didn’t know. Incidentally, I know that I am far from the only person who didn’t know. First I heard of it came with penalties.As it happens, I don’t think it would have altered my decision to locate there, but it was annoying.

    17. Dan Wick

      Outstanding. I’m originally from Iowa and there are so many smart things going on in the state to encourage startups and entrepreneurs.My dad is an educator in Iowa, and I also know some school districts are using Dwolla as a payment for their hot lunch programs.

    18. Emily Merkle

      How does doing a deal with the government differ from business with private clients? I imagine there are a plethora of bureaucratic hoops to jump through…

      1. Richard

        OPM

    19. jason wright

      …but i wonder how long it will be before a vested interest begins a quiet lobbying campaign in DC against this?

    20. Bennett

      One can only hope that similar initiatives are put forth across to country to foster start-up communities.

    21. iamronen

      … and that can work both ways … the more startups become attuned to their localities the more such symbiotic relationships can form.I have a feeling there is are entire domains of startups that have yet to be explored around the need of that which is “local”.

    22. Max Yoder

      That must have been quite the sales cycle. Good for Dwolla and, I hope, good for Iowa! I’m always happy to see this kind of progress in the Midwest. Keep us posted how things turn out, Fred. Thanks!

    23. matthughes

      Related: the city council in Raleigh, NC recently voted against crowdfunding via SeeClickFix for city projects (e.g., bike racks, fixing pot holes).http://www.raleighpublicrec

      1. ShanaC

        why?

        1. matthughes

          They cited ‘equality’; i.e., wealthier neighborhoods could afford to do projects that others could not.A poor decision in my opinion.

          1. Dave Pinsen

            Deleted. Sort of.

    24. Jordan Thaeler

      I think GovWorks.com aptly proved that governments are a failing business model – even with $60M in funding. I love Dwolla, and if they recursive billing we would switch from our overpriced provider. But if Dwolla is looking to state/federal governments for new market share, man it might be a long road for investors.

      1. Dave Pinsen

        Not exactly: 1) What Dwolla is doing is much more difficult – a “schlep business”, to use Paul Graham’s term. Governments were able set up web services without them. Replacing ACH is orders of magnitude more difficult (of course governments can keep use existing, more-expensive payment networks and just pass the costs on to their residents).2) Dwolla isn’t just selling to the government sector.3) Different founders.

      2. Matt A. Myers

        Wasn’t GovWorks just a completely failed execution with way too much money thrown at it early on with no revenue or business model?

      3. ShanaC

        totally depends on what part of the government is your model.

    25. David Petersen

      Reminds me of the way the state of Arizona has helped us with our businesses for the past 10 years. Only exactly the opposite.

      1. PhilipSugar

        We should talk.

      2. JamesHRH

        David – random referral here: if Phil is interested, you should talk to him.

        1. ShanaC

          ha.

        2. David Petersen

          Will do!

    26. Douglas Craver

      Fred, I’d be interested in your opinion on the bureaucracy of Economic Development and Venture Development Organizations. IMO they waste more money than the value they add.

    27. ShanaC

      I was reading recently about Pigouvian Taxes. This sort of reminds me of that. Governments can in fact shape the contours of externalities. If they shape them properly, they can in fact encourage innovation.Maybe this should be called “Pigouvian innovation”

    28. ei_dscanlon

      This is something we take very seriously here in Ireland: the government agency where I work has created a dedicated team to help small business target and win public sector contracts, as well as helping other government agencies understand the benefits of working with small (but growing) local suppliers.More on our programme at http://www.enterprise-irela

    29. leigh

      This would be a huge reason for wanting to live in the US vs. Canada. So much more support in general for startups.

    30. pointsnfigures

      Putting a finer point on this-governments ought to stay out of the way and not meddle. Just allow themselves to become customers of startups-no strings attached. Revenue cures a lot of problems.

    31. Abdullah Alshalabi

      I did this short report on “How a Government Should Invest in Startups?”. I did it to show it to the Kuwaiti Government, but I think it applies to other countries as well:http://www.slideshare.net/A… Cheers,

      1. ei_dscanlon

        Interesting report Abdullah – you might be interested in looking at how we support startups here in Ireland, see http://www.enterprise-irela

        1. Abdullah Alshalabi

          Irland is a very interesting case, the amount of effort and support for startups is astonishing. Best of luck