Why entrepreneurs are starting their tech ventures in the fly-over states
Words by Daniel White
Photos by Daniel White, Red Lab Technologies and Fruitful Designs
Many entrepreneurs have followed the traditional notion of packing their bags and heading west to the country’s tech capital: Silicon Valley, California. For others, the competition and expensive price tag on the coastlines led them to start their business ventures in the heartland, where they can pay a lot less in rent. This latter trend is quickly taking form as new tech companies are popping up all over the Midwest.
More established Midwestern cities like Chicago are home to largely developed companies such as Groupon and GrubHub because of the available resources and the size of the market. However, more and more cities in the Midwest are becoming hubs for tech startups because of lower costs and a less hectic type of lifestyle. There are also hundreds of colleges and universities in the Midwest that award thousands of aspiring entrepreneurs with a degree and the tools they need to start their own business venture.
Greg Jass and Doug Drees, founders of Red Lab Technologies, are providing new ways for companies to market themselves on several different digital platforms. Red Lab’s team of digital marketing leaders have over 25 years of experience working with local businesses to national brands implementing the most effective digital marketing methods in the industry. What kept Jass and Drees in the Midwest was their love for the Midwest work ethic, which helped them start their business in the heart of Cedar Falls, Iowa.
“The Midwest work ethic isn’t something you get around the world. There’s an accountability standard in the Midwest that you grow up learning a little differently than you do on the coast,” Jass said with pride.
The explosion of social media and the digital world has also been a big reason why entrepreneurs start or keep their companies in the Midwest. Without the help of the internet or social networking, many tech companies would be stuck if they tried to market their businesses in the Midwest, because the majority of the U.S. population lives along the coastlines. But now that digital marketing is available almost everywhere, tech companies aren’t forced to start their ventures in bigger cities.
One of the smartest things for any startup to do is find ways to make their dollar stretch as much as possible. Entrepreneurs can do this by living in cities with cheaper rent and lower overall startup costs, which can include research and development costs, costs of goods sold, and other expenses. Some of the more sentimental reasons entrepreneurs start their businesses in the Midwest can include being close to family, or simply avoiding the fast-paced lifestyle in coastal cities.
For digital marketing companies like Fruitful Design, advertising and website design on different media platforms has become more readily available with the commercialization of the internet. As the digital world progresses, more and more entrepreneurs will have the digital tools they need to start their own business venture. Ben Lueders, art director and co-founder of Fruitful Design, has based his marketing firm in Omaha, Nebraska. Their five-person team is driven to help their city’s local businesses through creative and interactive digital marketing.
Other than driving business in their local community, Lueders and his wife Meg wanted to keep their business in Omaha because it made sense financially — and because it’s Raj Lulla’s hometown. The financial burden of expensive rent against the stiffer competition just didn’t make sense for them. “In terms of the average small business or any tech startup, barrier to entry is lower in the Midwest in order to become viable and sustainable,” Lueders said. If the entrepreneur has fewer stresses to worry about, the path to success becomes much clearer.
Except for some occasions, a legitimate business needs to find starting capital for a multitude of reasons, especially tech startups. Within the last half decade, the Midwest has seen major increases in the amount of investor dollars going out to startups in need. According to business.com, the number of VC, or venture capital, firms in Ohio has seen a five-fold increase within the last five years. Michigan has seen a 97 percent increase in tech funding since previous years — giving out over $200 million to tech startups in the state.
Eric Engelmann is the executive director for Newboco, a site designed to support and encourage people from Iowa with big ideas. Part of the company is designed to give smaller businesses access to the capital they need from local investors in Iowa. The end goal of the Iowa Service Accelerator program is to bring more startups to Iowa, and in turn, reinvigorate the entrepreneurial spirit throughout the state.
“In the end, we want to make sure Iowa is a competitive environment for tech companies,” said Engelmann. The number of investments given to tech companies is only increasing, but Engelmann made it clear that there is still a lot more progress to be made. In efforts to expedite this process, Newboco is a sponsor for Iowa’s biggest entrepreneurial festival, Entrefest, which provides tools for anyone looking to start a business of their own.
The increase in tech startups around the Midwest is neither good nor bad for the Silicon Valleys and New York Cities of America. These tech capitals will continue to exist, because the market — and investors — won’t be going anywhere in the near future. In a broader view, the entrepreneurial spirit in the country is coming back, which is helping to create jobs in regions with higher unemployment.
Every startup has a different journey. Now, young entrepreneurs from the Midwest know that it can all begin right from their hometown.