Why are Startup Hubs Even a Thing Anymore?

Why are Startup Hubs Even a Thing Anymore?

It’s simple: bright ideas are not geographically limited and innovation is happening every day all over the country and around the world.

What’s more, it is now cheaper than ever to start a technology company now than it used to be, thanks to plug-and-play platforms like Amazon Web Services that all but eliminate the need for expensive hardware and infrastructure. It’s becoming less risky, too, as more and more founders are following the popular lean startup model that encourages quick deployments, bare-bones testing and “failing quickly” when an idea doesn’t find a profitable market.

The primary hurdle at this point is coming up with a good idea and finding a way to monetize it. And Silicon Valley doesn’t have a monopoly on that.

“People’s perceptions of places like the Valley are colored by the notion that they have some sort of advantage,” explains Thom Ruhe, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation in Kansas City, Mo. The Kauffman Foundation is a nonprofit dedicated to advancing entrepreneurship, among other things, and is a strong supporter of coast-to-coast startup ecosystems. “What they really have going for them (in the Bay Area) is population density, so startups feel that they have to go there to be successful. It’s like an actor going to LA to be successful. But there’s no real that ideas are limited to the coasts. It’s not about having the ideas, it’s about having the support system around that to take the ideation phase to commercial operation.”

That’s where startup ecosystems outside of the Bay Area typically fall short. They may have access to great minds and all sorts of new ideas, but without a true support network in place – including engineers to build the product, MBAs to sell it, and venture capitalists to fund it all – it can be difficult for new entrepreneurs to get too far beyond the “thinking about it” phase and create a viable business. These are significant limitations, and the solutions aren’t yet obvious.

“In places like here in Kansas City, for example, it’s the polite Midwest,” Ruhe says. “And part of that culture is holding us back. It’s very nuanced but it’s hugely significant. If you’re in Menlo Park and you bump into someone at a party the first thing they’ll probably ask is what you do. Out there, if you’ve worked at four different companies in three years that doesn’t matter, they don’t care. Your identity is what you do. I’m a CFO, or I’m an engineer. Come to Kansas City, Omaha, Minneapolis, and take the same scenario, but the question isn’t ‘what do you do’ it’s ‘who do you work for?’ Your identity here is around who you create value for. It’s a slight difference but the implications for our economy are significant.”

It’s a mindset, he explains. In some areas, you have workers saying ‘I can function in various companies and organizations,’ in others, it’s more along the lines of ‘I’m a cog in a wheel.’ “That’s not where job growth is happening in this economy; it’s not helping us.”

The good news, according to Ruhe, is that these attitudes are now changing as Silicon Valley-type support networks have begun slowing spreading across the country, as VCs, angel networks, and other investors expand their search for the next big thing in tech. The Bay Area startup ecosystem is a very crowded place, after all, and smart investors know that good ideas, and low valuations, are easier to find in out-of-the-way places like Miami, Portland and Raleigh, among others. For them, it’s a way to get in on the next big thing before it enters the mainstream.

“I think that with the increased social awareness and by educating people about the importance of entrepreneurship, the climate for startups nationwide is getting better,” Ruhe says. “In Kansas City, we have things like Silicon Prairie News that’s starting to increase awareness, and more and more community building is happening around this. At the risk of sounding cliché, it doesn’t take a village but it takes a region to do this. You need a continuum; you need people with ideas and vision, and you then need to have the activists, the change agents who might not be creating the ideas but have the gumption to act on them and do something about it.”

In short, there are ways to do business in these new hubs that aren’t possible in Northern California. Not necessarily better, not necessarily more effective, but different.

As a result, there are now ways to stand out from the crowd and make a splash in technology without swimming in the same Bay Area pool as thousands of other entrepreneurs. And, the fact is, in this data driven age, startups don’t really need to be in the Valley anymore. With a high-speed line, talent can be effectively anywhere.?

Some of these regions are also becoming known for specific technologies. Orange County, Calif. has an emerging reputation for ophthalmology startups, for example, while Minneapolis-St. Paul is known for its medical device companies. Raleigh has a strong base of biotech startups, while New York City has zeroed in on technologies to support financial services companies. As with any economic development effort, this is about leveraging established local industries and building on a city’s past successes.

This kind of “clustering” is good news for everyone involved, explains NVCA president Mark Heesen. VCs who are interested in investing in medical device startups, for example, know that eastern Minnesota is a good place to look for opportunities due to the cluster of device startups there. And it has a snowball effect. Money gets invested into the Twin Cities ecosystem, supporting the companies that are there and leading to the development of more similarly-minded firms nearby. These startups, in turn, attract even more outside investment, and the cycle continues. For developers, salespeople, and the other employees of these startups, local competition like this is a good thing; there’s always another place to send your resume if your current shop goes belly up. Another characteristic of a healthy ecosystem.

Still, Heesen says, even the best-known startup hubs face an uphill battle.

“It’s difficult to see another version of Silicon Valley springing up in the next 30-40 years. Israel has tried to replicate it, China has tried to replicate it, even Russia has been trying to replicate it, but it’s a very difficult thing to do. The colleges in the Valley were an integral part, but we also saw several incredibly successful companies take off and, most importantly, stay in the area. Everything else grew from there. It was a perfect storm that we probably won’t see again in our lifetimes.”

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James L.

Senior Director of Media Strategy & Planning at Walgreens | ex. Walmart Inc, Sears, Omnicom, Publicis, and a few start ups :)

1 年

I mean people still need to meet in person right?

There are successful startups in every state these days. The 2-hour rule for VCs which said that VCs wouldn't travel more than 2 hours to visit a PoCo is also changing as is the amount of venture in various cities around the country. One thing that I do notice different between SV vs. ROW is a confidence/arrogance. A midwest founder is often describing a foreseeable 2 year future whereas a SV founder would usually talk about an unforseeable limitless future. This is a generalization, but spend an afternoon overhearing new founders at Coupa Cafe in Palo Alto and tell me I am wrong...

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