4 Benefits and 2 Challenges to Running a Tech Startup in the Heartland The Midwest is very welcoming of startups, but a lot of VCs and talent are still located on the coasts.
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Traditionally known for a steady, measured approach to business growth, America's Heartland is becoming a scene for fast-paced startup innovation and consequently, a focus for investors. This setting provides numerous benefits for founders and startup teams as previous barriers to entry give way to momentum, and new founders face less friction in their endeavors.
When we were evaluating cities for tilr headquarters in 2015, we looked at a number of cities. As the list was carefully whittled down, it became clear tilr's home would be in the Midwest. In October of 2016, tilr opened its headquarters in Cincinnati, Ohio and we are incredibly happy with that choice.
Based on our experience, there are several benefits (and two notable challenges) to being a Midwest-based startup.
1. Proximity to customers
According to an op-ed by Chris Olsen, co-founder and general partner, Drive Capital, the Midwest market is the fifth largest economy in the world, offering more economic opportunity than Brazil, India or Russia. Furthermore, it is densely populated with Fortune 1000 companies. Per the Cincinnati Chamber of Commerce, there are more Fortune 500 companies in Greater Cincinnati, Northern Kentucky and Southeastern Indiana per capita than New York or L.A. This proximity to target customers makes it possible to quickly socialize a startup brand among key prospects and encourages a young sales team to make early contact.
In addition to this density, Midwest companies are often focused on innovation. Some companies, such as Procter & Gamble, have an intentional focus on innovation as part of their core strategy. Other Midwest companies, including those in the retail, manufacturing and automotive industries, are forced through competition to innovate, in order to survive. Startups will find potential Midwest clients open to learning about, buying and integrating new solutions. Tilr found this specifically beneficial during its beta release when the team was quickly able to secure agreements from five top enterprise organizations to pilot its technology.
2. Access to talent
The Midwest offers a diverse talent pool, from the newly educated to the experienced, and a multitude of relocated talent. Additionally, the Midwest is home to some of the best schools in the country including Carnegie Mellon, which is recognized around the world as a leader in computer science and robotics education. For tilr, schools like Miami University of Ohio and the University of Cincinnati have produced significantly better-prepared marketing interns and new graduate talent than any agency to date.
When looking for slightly more tenured talent, Midwest startups will benefit from the ever-present Midwest boomerang effect. It is common that Midwesterners settle close to home as they begin to have families and buy homes. Rising job growth trends and attractive costs of living entice talent of all ages to the Midwest, making it a true competitor to Silicon Valley.
3. Focus on startups
In Silicon Valley, startups are almost passé. In the Midwest, they are all the rage. I was recently in a meeting with a growth equity firm that mentioned that Midwest investments, specifically those in Cincinnati and Milwaukee, were currently very appealing to firms like theirs. Local governments in the Midwest are also working to remove barriers to entry for startups and ensure a supportive environment rich with incentives. For example, after tilr chose Cincinnati for its home the company was awarded a hiring incentive from the city designed to drive job creation.
Many Midwest business communities are also rallying to provide support to startups. In Cincinnati, an incredible support ecosystem has developed, with organizations like Cintrifuse, a startup catalyst, attracting vast resources and deep funding for local startup teams. Although Silicon Valley and New York City are already rich with startup resources, those resources are often hard to find and incredibly difficult to obtain. Like most things in the Midwest, founders will find resources approachable and easier to access.
Related: Utah, the Next Silicon Valley?
4. Heart of it all
At the end of the day, startups are about heart, and the name "the Heartland" accurately describes the Midwest. The Midwest is known for hardworking people. As workers' values evolve from a focus on tenure and stability to a focus on exploration and a sense of being part of something larger, Midwest values offer an appealing foundation for startups. Now, those living in the Midwest can attach themselves to something beyond a problem they're solving for their employer, and to the value of reinvigorating their region with unprecedented innovation and investment. This not only attracts people to the Midwest but also offers founders an amazing talent pool of dedicated team members that will work until the business is successful. Tilr has clearly benefited from Midwest values, employing 33 brilliantly talented people that run the business as if it were their own.
And since the Midwest offers the aforementioned cost-of-living and lifestyle benefits not present on either coast, early founders can maintain a different type of lifestyle than in San Francisco or New York, and can better support their families while growing their businesses. It seems there is correlation between founders with young families and an inclination to anchor a startup in the Midwest. Unlike Silicon Valley, where a young family can call into question a founder's ability to fully dedicate attention to the business, the ability to raise a well-balanced family and a quickly scaling startup is a badge of honor in the Midwest.
Even though the Midwest has been critical to our success, nothing is perfect. A couple things to consider on the con list include:
1. Lots of travel
The founding and executive team of a startup in the Midwest is going to have to travel a lot. Fundraising meetings will likely still happen on both the West Coast and in New York City. In addition to real budgetary considerations, this can be a distraction to a new business and a constant balancing act to decide who will travel and when.
As a practical tip, consider connecting with team members throughout the organization while traveling to keep all in the loop and allow them to experience what a founder's day is like.
2. Leftover stigma
Despite all the startup activity and investment, some still feel that the Midwest isn't as sexy as a Silicon Valley or New York City. This can make it difficult to recruit talent from places like the Valley, for example. Tilr has overcome this challenge, successfully hiring target candidates, especially those who visit Cincinnati and tilr headquarters, which has that vibrant energy only found in the intersection of innovation and scale. In fact, many talent transplants find themselves surprised by the culture, the culinary arts and nightlife hidden in cities throughout the Midwest.
The benefits, challenges and trends are clear: In the Midwest, startups are popping up faster than ever, investors are acknowledging their potential by infusing significant capital, and talent is fueling this Midwest startup movement by relocating from around the country. As we close out a legacy era of Silicon Valley startup domination, the world is focused on America's Heartland for the next generation of American technology innovation.
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