Starting a Company? Why Silicon Valley Is Not Your Friend

Silicon Valley and New York City may become the lion's share of VC attention, but tech startup ecosystems are developing in urban centers across the country, particularly the Midwest and South.

Venture for America, for instance, has a two-twelvemonth fellowship program that places recent grads in a network of startups spanning 18 cities nationwide, including Baltimore, Cleveland, Detroit, Kansas Metropolis, Pittsburgh, St. Louis, and New Orleans.

"These cities are losing population while the rest of the state grows, but have nascent entrepreneurial ecosystems," Venture for America CEO Amy Nelson said at the Techonomy conference this week. "We place [grads] with a startup in i of these cities, they spend two years apprenticing to an entrepreneur, and at the cease of that many continue to be leaders in those companies. Twenty percent decide to starting time their ain businesses."

David Lee represents educatee financing arrangement MPower USA and tech corporation ARSC Federal. MPower works with investors and universities to aid students finance their educations, and then works to hook them up with jobs. The organization focuses on areas dealing with a loss of industry, Lee said, like cities in one case built around coal, tobacco, or cloth manufacturing.

For these cities to develop tech ecosystems that last, Lee said companies and startups, universities, and governments need to focus on preventing encephalon bleed: talented entrepreneurs and technologists who leave home and never come back.

"Information technology's not about disarming one company to motility a factory," said Lee. "It's about taking the immense talent that comes out of this innovation and cultivating the university outposts, the incubators, and putting ideas and uppercase together in a great locale that can actually thrive."

But as Datto CEO Austin McChord explained, setting upward shop in smaller Rust Chugalug cities as well carries major economical benefits for startups. Datto is a Connecticut-based data backup and disaster recovery software startup for small to midsize businesses (SMBs). Equally the company was growing and looking to aggrandize, it decided to open up an office in Rochester, New York.

"It'southward amazing how much further your dollar goes," said McChord. "You lot want a square pes of part infinite? It's incredible what you tin get in some of these other regions compared to large cities."

From right: Austin McChord, David Lee, Amy Nelson

McChord also talked about the ease of working with the local government compared to that of a big city, where getting something like a construction permit to renovate an function is a lot tougher.

"A lot of these cities have also been through a few cycles and accept people working in government who are actually trying. Rochester is doing everything in its ability to be business organization-friendly," he said. "If you're thinking about where to go to start a business and disrupt an industry, y'all're starting with a huge leg up in one of these 2nd- and 3rd-tier markets, where you lot've got the whole city behind you right out of the gate."

Nelson pointed to alternative venture upper-case letter firms also, like Rise of the Residual, Drive Capital, and Mercury Fund, which invest specifically in startups outside of New York and Silicon Valley. Collectively, there are hundreds of millions in venture uppercase dollars focused on these markets, she said.

These cities tin can as well develop specialized niches. New Orleans has a burgeoning edtech sector. Pittsburgh is spearheading AI development. Detroit is focused on mobility. Nelson also talked almost how nearby cities can piece of work together on a broader scale to create a more cohesive regional economy.

"Birmingham, Alabama, Nashville, and Atlanta are all only a few hours drive away from i another," said Nelson. "Cities in these markets need to work together to create a regional economy that also has proximity to research universities and medical institutions and works with big companies to create an ecosystem allowing talent to flourish and new entrants in other markets."

A lot of factors demand to come together in these cities to make for a lasting ecosystem, but for startups the decision is simpler. Ultimately, McChord said choosing one of these cities over a major tech hub could be a deciding factor in whether a tech startup with limited resource succeeds.

"It's amazing the different attitude people take when you move outside Silicon Valley or Boston or New York. If nosotros had moved to 1 of those tech hubs, I think it's unlikely our business would accept succeeded."

About Rob Marvin

Rob Marvin is PCMag's Acquaintance Features Editor. He writes features, news, and trend stories on all style of emerging technologies. Beats include: startups, concern and venture capital, blockchain and cryptocurrencies, AI, augmented and virtual reality, IoT and automation, legal cannabis tech, social media, streaming, security, mobile commerce, Thousand&A, and amusement. Rob was previously Assistant Editor and Associate Editor in PCMag's Business department. Prior to that, he served as an editor at SD Times. He graduated from Syracuse University's S.I. Newhouse School of Public Communications. You can likewise find his business organization and tech coverage on Entrepreneur and Fox Business. Rob is as well an unabashed nerd who does occasional entertainment writing for …

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