Editor's note: We've been taking a virtual tour of U.S. cities to see how the 2008 financial crisis changed the entrepreneurial landscape, for better or worse. Read about New York, Houston, Washington, Baton Rouge, La. and Boise, Idaho.
In 2011, Michael Coffey temporarily moved his family from the San Francisco Bay Area to Indianapolis, where the marketing software company he founded, Sequoia Technologies, had a major client. “We were starting to hit rough waters with our operations here, so I brought my family to Indy for three months while I worked with the team,” says Coffey.
To his surprise, the city wasn’t a black hole of culture or innovation. On the contrary, “I was blown away by what was starting to emerge,” says Coffey, who after about a year in the city lobbied his board to relocate the company to Indianapolis, to no avail. When pressed to choose between his company and his adopted city, he says he chose Indy.
Today, he’s immersed in the startup community and working on a different new venture, MYTM8, a sports-team management platform that allows managers and coaches to handle events and team communication from any device. “There’s a lot happening in Indy, but people here are so humble you tend not to hear about it,” he says.
Long known for its motor speedway and basketball courts, Indiana's capital city of about 830,000 people is quietly bringing up creative new ventures and high-tech enterprises.
That's not to say Indianapolis was immune to the recession. The unemployment rate more than doubled to 9.1% between 2007 and 2010. The housing market was impacted by the drop in employment, though it wasn’t hit nearly as hard as many parts of the country.
Yet, for Indianapolis startups – many of which focus on enterprise and business software platforms that allow companies to do more with less – the recession opened doors that might have taken longer to pry open. “Most of the city's startups are focused on solving very real business problems,” says Kristian Andersen, president of strategic design firm KA+A. “As a result, even in a down market, many of these companies continued to have success acquiring new customers, attracting fresh capital and creating value.”
That was the case for Bluelock, which began offering on-demand and adjustable cloud computing services in 2006. In December 2008, the company says it got a call from Lehman Brothers, which had gone into bankruptcy a few months prior. “They essentially needed to form a new company to shut down the old company, and they needed to do it quickly and with many unknowns about how many employees they’d have or how much storage they’d need,” says co-founder John Qualls. During the recession, "people were looking for new ways to get what they wanted without spending a lot of money, and we had a solution,” he says.
At the same time, a handful of recent hometown success stories – Angie’s List, Aprimo and ExactTarget among them – have helped infuse the city with new capital and intellectual capital. “When you combine those various successes and look at the value created, there’s billions of dollars that gets recycled back in to early-stage efforts,” says Indy investor Mark Hill. In 2005, he and his wife sold their banking software firm to Experian and have since invested in dozens of Indiana startups via their family fund, Collina Ventures.
“Success breeds success, and it's easy to see the trend expanding to today's young local startups," says Dustin Sapp, a veteran entrepreneur and cofounder of TinderBox, an Indy provider of enterprise software for managing, tracking and automating business proposals.
There’s also a growing energy among entrepreneurs and would-be entrepreneurs. The local tech networking group, Verge, now has nearly 1,900 members who regularly attend its meet-ups and events, such as its Powder Keg conference last year. Established in 2011, the Speak Easy is a coworking space that describes itself as a Moose Lodge clubhouse for entrepreneurs, designers and geeks. Meanwhile, the Johnson Center for Entrepreneurship & Innovation at Indiana University is considered one of the best entrepreneurship programs in the country. Nearby Purdue University is one of the top engineering schools in the country.
“Pound-for-pound, Indy might be the best city in America to launch and grow a startup right now,” says Andersen, whose firm tracks Indianapolis startups and funding at IndyMade.
The low cost of living and doing business is a real plus, as is a pervasive “pay-it-forward ethos,” says Mickey Levitan, who after working at several large companies, including Apple, moved to Indianapolis in 2000 to eventually launch Courseload, a aggregator and distributor of digital textbooks and course materials. “People who have been successful entrepreneurs have a lot to offer and are very generous with their time.”
Of course, there are drawbacks to being in Indy, say some entrepreneurs. The state has done a great job encouraging angel investments by implementing programs like the Venture Capital Investment Tax Credit, says Sapp, but local later-stage funding options are few and far between. And with no direct flight to the Bay Area, doing business in Silicon Valley isn’t as easy as many would like.
The Orr Fellowship has been placing recent college graduates in high-growth Indiana companies for more than a decade and has nurtured an impressive network of fellows, many of whom have gone on to launch their own ventures.
Still, sometimes it’s tough for Indy companies to compete with their counterparts on either coast. “We end up losing a lot of the graduates from the fine institutions here because, when you’re young and single and Google is offering six figures, it sounds appealing,” says Levitan. “Where we win is with people who’ve been out in the work world and want to start a family or buy a house. Indianapolis suddenly looks very promising.”
Corrections & Amplifications: An earlier version of this story misspelled the name of Michael Coffey, who is working on a new venture, MYTM8, in Indianapolis.
Sarah Max is a freelance writer in Bend, Ore. She has covered business and personal finance for more than a decade for such publications as BusinessWeek, CNNMoney.com, Money and The Wall Street Journal. In 2009 Sarah got a first-hand look at the ups and downs of entrepreneurship when she helped launch 1859 Oregons Magazine, a quarterly magazine and website for which she is executive editor.