For startups located outside of Silicon Valley and New York City, raising venture capital isn't always easy. The two coastal ecosystems eat up the majority of VC dollars flowing into the startup market--with Silicon Valley companies raising over $40 billion in 2019, according to data and research firm PitchBook, and New York City-based companies raising over $16 billion.

However, small businesses headquartered elsewhere can still beat out their coastal counterparts for investors' funds--they just have to work a little harder. That was the message coming out of Twin Cities Startup Week this October. Held throughout Minneapolis and St. Paul--where companies have raised over $347 million in VC funding this year--the week-long event celebrated local startups, connected entrepreneurs, and hosted a pitch competition.

It also offered a panel of speakers from early-stage venture capital firms to discuss the ways that companies based in smaller cities can attract out-of-state VC money. Speakers included Ryan Broshar, the founder of Minneapolis- and Boulder-based Matchstick Ventures; Zann Ali, a senior associate of New York City-based 2048 Ventures; and Michael Proman, the managing director of San Francisco-based Scrum Ventures. 

Here are four key takeaways they shared with Inc.   

1. Master your local market

Founders who are in the beginning stages of fundraising should first focus on getting money from local sources rather than big-name VC firms, according to 2048 Ventures' Ali. "Dollars are dollars," he said." Why not get that capital from your backyard?"

What's more, larger coastal funds will use regional funds as filters when deciding whether to invest in a company or not, Matchstick Ventures' Broshar said. "Having the local support gives you an advantage and helps you be seen as a leader in the community."  

When you're ready to seek VC funding from out-of-state vendors, Ali advised that you first meet with local experts. These include community connectors as well as other entrepreneurs who have successfully raised outside money.

"Download the brains of other people in the same ecosystem," Ali said. "Some of these people have likely interfaced with venture capitalists on the coasts and beyond." 

2. Make your location a bonus

Founders in smaller cities can't have "the victim mentality," Broshar said. Entrepreneurs in areas outside of the coastal hubs must help build a positive message about the community and share it with anyone who will listen. What's more, the narrative needs to be thoughtful and collaborative, and to say more than your town is "the Silicon Valley of whatever we are known for." 

One of the ways founders can do this, the panelists agreed, is by showing potential investors where their money will go. In cities like San Francisco, investments will heavily fund high salaries for employees, whereas companies in smaller cities can use that money to hire more people or invest in a larger office space, Scrum Ventures' Proman added. "Being in a city where you can scale easily and where the cost of living doesn't outpace the scale of investment is an advantage," he said.  

Founders should also tout the things that make their city special, like talent pipelines from local colleges or access to the outdoors, Broshar said. "Being able to articulate your city's competitive advantage is a really important part of the strategy." 

3. Think big

When dealing with companies in smaller cities, some investors will want to see that their founders have experience outside of their communities. "Minnesota has a comfortable market, low cost of living, and good quality of life in comparison to other places," Proman said. "But that doesn't necessarily breed disruption. Because of that, you have to get out of your comfort zone." 

Proman looks for companies that have been able to diversify their revenue streams across different regions or ones that have plans for scaling operations out of the state. Meanwhile, Broshar prefers to invest in companies that demonstrate their interest in scaling globally: These founders have been taking notes on how they can create the best startup in the world, not just in their market. They know who their competitors are, what those companies are doing differently, and how much funding they've raised.

4. Spend time on the coasts 

Entrepreneurs who want to land VC funding from coastal sources should also get to know those environments and build personal relationships with venture capitalists in those cities. "Those relationships aren't built on the phone," Broshar said. 

Second, to get a better perspective of what it takes to compete with the companies that are winning VC money from the coasts, Broshar advised founders to immerse themselves in the cultures of those cities. "You have to get a taste of that," he said. "Then, bring it back and replicate it where you are."