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TECHNOLOGY

Confessions from a Silicon Prairie Start-up Founder

You're far from VCs and surrounded by people who don't like risks. Then again, the potential to be a big fish in a small pond is huge.

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Launching a tech start-up outside the VC-obsessed Silicon Valley and New York City comes with a catch-22. On the one hand, in quieter places it’s easier to focus on building an actual business and frankly, not everyone wants to move to the coasts. Yet lesser-known locales can be risk averse and less tolerant of failure, even though with missteps come learning and improvement.

Michael Noble knows this dilemma well.

While originally from Minnesota, Noble spent six years in New York where he was part of the group that launched LimeWire, one of the first peer-to-peer file sharing networks. Before that he was VP of business development for wireless networking company Xanboo, which was acquired by AT&T in 2010.

Now he’s back in the land of 10,000 lakes launching Nitch, a B2B social platform that brings businesses and vendors from various vertical markets—or Nitches—together.

Once it’s fully built out, businesses will be able to collaborate with industry peers, manage vendors in a single location (called Vendor Pods), find new vendors, and buy new products and services. Vendors can get listed in Nitch’s walled search engine, create promotions to target any Nitch, sell products or software, and find new bidding opportunities.

While any business can join Nitch for free, Noble plans to make money through the platform a few different ways: by charging transaction fees when a business buys something from a vendor partner, via advertising targeted for each vertical market, and through search similar to the way that Google AdWords works -- but better because it’s focused on B2B, he says.

Noble was recently one of five entrepreneurs to go through the state’s first tech accelerator called Project Skyway, a three-month program that offers founders mentoring and $6,000 per founder in seed funding. That the Twin Cities even has such a thing is one indicator it’s not as unlikely a place to start a tech company as some might believe.

In fact, Noble says the Minnesota Angel Tax Credit has been used up already for 2011—a sign that Midwestern angel investors are alive and kicking.

But obviously, it’s a very different place from New York or Silicon Valley.

For starters, the culture in the Midwest can be less risk tolerant. But he says that actually makes sense when you consider that the Twin Cities, in particular, has more Fortune 500 companies per capita than any other state. And it’s the Best Buys, Targets, and General Mills that are providing comfortable and stable jobs to many people, who in general, tend to start their families sooner than those on the coasts.

“There’s a reason that a lot of start-ups are a couple of single guys in a garage. They don’t have the kids and the family and a lot of the responsibilities that come with that, such as a necessary paycheck,” he says. In fact, he’s of that crew himself, albeit in better digs. He set up shop in a hip coworking space in the historic trading floor of the historic Minneapolis Grain Exchange.

He says the financing climate is much different as well and tends to be more focused on med tech. “Our business model [is] readily acceptable in the Silicon Valley and people get it. Here, it’s definitely more of a culture of understanding how to sell a widget or a device,” he says.

He also sees a knowledge gap in his part of the world in terms of cutting-edge software and how those businesses work and what they need to grow and thrive.

So you have to wonder why he chose to build his business in Minneapolis.

For one thing, technically, he’s not just in Minnesota; he outsourced software development to engineers in India. “You could be anywhere to do that,” he says.

In fact, Noble says location isn’t the most important thing. “Good ideas will always work and get funded. I just think they’ll happen more slowly in places outside of the Valley,” he says.

But if you're going to make it in the Midwest, he says, it’s more about persistence. “You could make an argument that companies coming out of here might be stronger because we’re doing more with less. We’re not raising $10 million in a Series A round based upon a simple prototype that we built—it’s just not happening," says Noble, who has bootstrapped funds from friends and family. "We don’t have the connections for that. But doing more with less at the end of the day can be more valuable. We own more of our companies that we might have built more slowly.”

Plus, there's another advantage to putting some distance between your start-up and the Valley. “I like being part of an up-and-coming community versus fighting every other tech wannabe in the Valley -- it’s the bigger fish in a smaller pond theory.”

“If we can be successful, we can be a catalyst for the rest of Minneapolis in the way Medtronic became a catalyst for heart-related start-ups here. Groupon fueled a ton of new growth in Chicago in much the same way,” he says.

For the moment, he’s still hedging his bets. “We’re here for now. Whether or not we will be a year down the road, I’m not sure.”

 

Last updated: Dec 5, 2011

CHRISTINA DESMARAIS is an Inc.com contributor who writes about the tech startup community, covering innovative ideas, news, and trends. Have a tip? Email her at christinadesmarais (at) live (dot) com.
@salubriousdish




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