There’s no ocean and no wineries nearby. Instead there’s corn and plenty of wide, open spaces with beautiful sunsets and affordable housing. It’s tech’s great migration to the Midwest, and it’s known as the Silicon Prairie.
It all began when two entrepreneurs, Mark Kvamme and Chris Olsen, left the firm Sequoia Capital and started their own venture capital fund designed specifically for the Midwest. This triggered interest in others leaving the Pacific coast for America’s heartland. In 2013, the duo set up shop in Columbus, Ohio, to start investing in local talent. They were overwhelmed by the ease of funding – raising a $250-million fund immediately, and another $300 million by 2016. Suddenly, the eyes and ears and bank accounts of many in the Silicon Valley were staring east toward the plains. “I’m a little over San Francisco,” was the watercooler talk from San Mateo to San Jose.
Kvamme had a plan, firmly believing that 90 percent of future tech would be created outside of Silicon Valley, where life had become very expensive. He noted some very positive facts about the Midwest. It’s home to 150 Fortune 500 companies and 60 percent of the United States’ manufacturing base. A quarter of all college computer science graduates call it home – yet the venture capital funding was low (only 15%). He realized the region was massively undervalued.
Outside the financial numbers, the Midwest has many advantages. The lower cost of living is key, allowing companies to pay lower salaries. This save on spending lets companies push harder and faster toward breakeven, reducing the failure of investments. High quality colleges such as Northwestern University, University of Wisconsin-Madison, and the University of Michigan offer graduates with the right skills. And, perhaps even most importantly, the region is ripe for growth, change and a boom.
The region’s cities are often called “18-hour cities” (a comparison to “24-hour cities” such as New York or San Francisco), with 1-2 million residents. In surveys, places like Kansas City, Des Moines, Indianapolis and Tulsa outpace their coastal counterpoints with higher scores on many factors and only a slightly lower score on progressive social and cultural venues. Many cities are seeing a strong renewal in the urban core, upping walkability and increasing the number of desirable restaurants, entertainment options and museums/galleries. Recent studies indicate most of these cities already have viable technology and at least one large college or university, two factors that put them in the starting gate for the tech race. Even the once-abandoned metropolis of Detroit is slowly returning, its decaying Art Deco buildings plucked from the wrecking ball by adventurous companies who see the beauty and potential in the space.
In many cases, Midwest start-ups are choosing to stay in the region rather than traditionally locating to a coast. Where an average one-bedroom apartment costs 60% more in San Francisco, salaries are only one-third lower in the Midwest – a win-win for companies and employees. Employees report they can live in triple the square footage for half the cost, and save tremendously on grocery and utility bills. Even the lower-cost office space offers significantly more room to breathe. The old school Rust Belt mentality of aging infrastructure and economic hard times is swiftly a thing of the past.
In fact, that Midwest mentality has been a key part of the appeal. The business style is more friendly – neighborly, in fact. Companies note that they are literally doing business next door to the customers they want to please. Feedback is immediate and real, and many report that the towns feel more like a big family than a busy, bustling everybody-for-themselves city.
The power players soon took note. AOL’s Steve Case recently launched a Midwest startup fund called Rise of the Rest that immediately garnered financial backing from Jeff Bezos. California transplants began to dot the landscape like bright red barns. Firms started to offer “Rust Belt safaris,” where venture capitalists can visit Midwestern cities like South Bend, Indiana, via luxury bus, to scout and Q&A around the city for investment opportunities. Amazon and Foxconn began to expand to the nation’s interior, paving the way for more and more interest.
By 2019, investment in Midwestern companies was at a record high of $4.5 billion. In cities like Omaha, Tulsa, Cincinnati and Indianapolis, tech companies are growing at an astounding rate, following the lead of Ohio’s “first tech unicorn,” CoverMyMeds (which sold for $1.1 billion, the biggest exit in the state’s history).
Silicon Prairie start-ups may focus mainly on healthcare, manufacturing, and, of course, agriculture – but there is a diverse range of new companies that include education, motorsports and bioengineering. Omaha’s WordPress platform Flywheel is a recent standout, as well as Wichita’s industrial supplier Nitride Solutions.
It’s clear the Silicon Prairie is an adventure all of its own. For those willing to trade avocados for corn, convertibles for tractors and the A’s for the Cardinals, the sky’s the limit. Tech has found a new home where the horizon stretches out for miles and miles.