The Trouble With Starting Up in the Heartland
This is the second part of a series on the efforts to create a vibrant start-up scene in middle of the United States, far from Silicon Valley or the East Coast. Read the first part here, which explores the ecosystem of "Silicon Prairie." This piece examines the more subtle complications in fostering fast-growth small businesses in the heartland, a place more known for its humility than its bravado.
In his office in the Omaha Chamber of Commerce, Dusty Reynolds spends most of his days thinking about ways to get start-ups to launch in the region. The group has a lofty goal: Create at least one start-up per month over the next five years.
That task comes with significant challenges. Over the course of two days with Reynolds, whether it was during a formal interview or eating pulled pork at his favorite BBQ joint, whenever the topic of fostering start-ups in the Midwest comes up, the trajectory of our conversation tends to cycle back to the core conundrum of this movement: its eternal humility.
"A lot of it comes back to the agricultural roots around here," he says. "In the past, farmers were never viewed as anything really glamorous, and so they would never talk up getting a new truck or new tractor or anything like that. As a farmer, you would never talk about how much land you own. You just don't talk about yourself unless things are really, really bad," he says. "I think that's spilled over into the start-up community. You have some people doing some really great things, but they don't know that it's OK talk about themselves. It's very much the opposite of what you find on the coasts."
"There's a humility problem."
Silicon Prairie News, the organization that's put on Big Omaha since 2008, is working to solve this problem. By encouraging founders to speak to media and promote their success, the site is hoping to flush out the next generation of midwestern role models.
"I think it's hard for a start-up community to flourish unless people start telling their story earlier and more often," Reynolds says.
Tom Chapman, the vice president of business development of Nebraska Global and a mental warehouse of various Nebraska economic statistics, has seen this problem firsthand as an investor.
"There's a humility problem," he says. "I think we're bad at PR. That creates two problems. One, the entrepreneurs are not going to go out and toot their own horn. The second problem is that we don't have enough guys who want to have a billion-dollar company."
Back in the main room at Kaneko, the dairy processing plant-turned-art-and-event space where Big Omaha is being held, Eddie Huang, a restaurateur and T-shirt entrepreneur, saunters on stage wearing an Adidas track suit. Kanye West's "Can't Tell Me Nothing" plays in the background.
"People are embarrassed to get money and chase dreams," Huang said, "but it is about making money." His first slide reads: "It is about the money."
"I guarantee you a significant portion of the room was uncomfortable by that," Nick Bowden, MindMixer's CEO tells me later. "We're going to do $5 million revenue, but I would never talk about that locally."
"If we don't do it right, the talent is going to be flushed out of the area."
John Wirtz is the COO of Hudl, a 44-person software company he co-founded in 2006 with two college buddies. He graduated from the University of Nebraska-Lincoln, and earned an MBA from the Jeffrey S. Raikes School in Computer Science and Management. We meet up briefly over coffee during a break from the conference and I ask him if he's ever felt pressure to take his start-up to a coast.
"Sure, there's pressure to move," he says. "We're trying to hire and it's a challenge. But if the Midwest is not fostering these kinds of companies that can create these types of jobs, then it's a little scary to look at the 20-year horizon for cities like Des Moines, Lincoln, Omaha, Kansas city. We have the talent. If we don't do it right, the talent is going to be flushed out of the area. The economic impact of that would be really unfortunate and with no good reason other than we can't tell our story to people that you can start a company here."
Midwestern entrepreneurs--unlike some coastal founders--are confident that a Silicon Prairie can thrive.
"There's plenty of case studies here to show that it can happen, and if anyone thinks it can't, it's just because of a lack of information, so that's why I think Silicon Prairie News and those types of things are so important," Wirtz says.
"If people want to call us the 'flyover state,' then fine: Keep flying over."
On stage, Sahil Lavingia, a lanky 19-year-old Indian high school dropout, has just finished his speech, in which he announced that his company, Gumroad, has just raised $7 million. Lavingia lives in San Francisco.
"That level of confidence, as a Midwesterner, there's part of that says, 'What are you thinking?!'" Wirtz says. "It's just foreign to me. But part of me also thinks, like, 'That's exactly it. That's why people go out to the Valley!' That bravado is what we need more of here. But what's cool about Silicon Prairie is that we can be as robust, but we can do it in our own way."
I bring up the notion of the Midwest being composed of 'flyover states,' that pejorative term that nothing of note is really being produced here. He cringes a little when I say the words, and I get the sense I've struck a chord.
"We have competitors in New York, Seattle, and I love silently crushing them," he says quietly.
Hudl's software allows coaches to capture video and analyze player movements and set plays. Coaches can create highlight reels, organize clips by play, and create teaching guides annotated with text and sound. Nearly a dozen NFL teams use the software, and thousands of colleges and high schools around the country. In short, their software helps coaches and teams win.
"We are destroying our competitors. Part of me says I don't really care if the VCs on Sand Hill Road know us. We don't need their money. We're crushing it here. If people want to call us the flyover state, then fine, keep flying over and stay out of our way," Wirtz says. "But we'll start companies that will crush yours. It's a stealthy, high-impact area, and you better pay attention or else you’re going to get beat."