Big Business And The Midwest’s Hidden Startup Advantage
Client: Dundee Venture Capital
Silicon Valley, with its products, software, smarts, and change-the-world scale, has produced some of the most meaningful transformations of business and personal lives of the last two decades. The iPhone’s success has allowed ideas to spread faster than ever before, and the unrelenting power of social media, from which literal revolutions have been successfully launched, is clearer today than ever before.
A scroll through a list of today’s most highly valued startups showcases businesses that have created and captured value at never-before-seen speeds. Many companies were built on the success and power of a mobile device, and its equivalents, that has just celebrated its 10th birthday. Speed, scale and a winner-take-most ideology are part of the beauty of Silicon Valley.
I believe, however, that much of the technological change of the next two decades will be centered outside the Valley, in regions whose very nicknames make that claim heretical to many. The technological change of the next two decades will be centered in the Rust Belt and Flyover Country, between the two coasts. This region’s impact on our country is unmistakable – look no further than its unforeseen impact on the last presidential election. Peruse the Fortune 500 and see just how many of its companies are headquartered outside of New York, Boston and California. While characterizations like the Rust Belt and Flyover Country imply that the little to see here must be fading away, that could not be further from the truth.
Building a startup in these regions – which I’ll over-generalize as the Midwest for readability’s sake – has some clear advantages over either coast. The cost-of-living advantage is clear, but largely overblown; while capital efficiency is important to funds like ours, ultimately the most valuable startups are not competing on cost. The chief advantage of building a startup in the Midwest is something perhaps counterintuitive at first glance; much of the value destruction in the economy is happening here. We have no other choice but to invest in innovation.
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