Entrepreneurs, Engineers, Move to the Midwest

Posted: Apr 27, 2012 12:01 AM

Last night I stopped by the “Chicago Booth Tech Event”. It was at the Gleacher Center downtown. There were probably 100 people there. One of HPA’s portfolio companies, Power2Switch was on the panel. Normally when I go to tech events, I know quite a few of the people there. At this one, I knew very few, which is a great sign. Interest and momentum is building.

To use market parlance, if you “buy” Chicago now, you are buying low. One of these days it will be lock limit bid. You will have to buy out of the money calls at a high price to get in.

Midwesterners laugh and have a bit of a chip on their shoulder because we are living in fly over country. There are no dramatic canyons or oceans here. No wine country. The weather can be “challenging” at times. But, when you look at the Valley a lot of it was built by engineers from a little school in the central part of Illinois.

Can we build something sustainable here? As they say in the parts of the midwest that eat lutefisk, “you betcha”.

First, if you are an kid graduating from a midwestern school, why would you move to a coast? I know what it’s like to graduate. If you are like I was, you have zero money. You can’t wait for your first paycheck.

Move to the coasts it will cost you bucks to get there. They tax you more, so your check won’t contain as much dough. Illinois is in horrible financial shape and it’s not changing anytime soon. But is it any worse off than California or New York? Don’t think so.

Is there money for your venture here? Yes. We have VC’s, and angel groups. But, if you know someone who knows the right people you can have access to more concentrated capital in Chicago than anywhere else in the world.

Here are some other tidbits that might cause you to think the midwest is the place to be.

1. The big kahunas in California are hiring all the talent. Facebook, Google etc are buying all the engineers at higher prices. The whole country is starved for talent, so the complaint about “no talent” rings hollow. As a matter of fact, given real estate prices, taxes and costs of living, along with the higher price of talent, it takes more working capital to run your business on the coasts than it does in the midwest. That means you have to raise less to get going, and less to keep going.

I know, every start up just loves to be out on the road pitching to investors and raising capital. Not.

2. It might be awesome to be in tech central. The Valley is amazing for that. It’s built up some terrific economies of scale with regard to that which can’t be duplicated physically anywhere in short order. But, there is always virtual…..

2a. Someone has to actually go out and sell your product. The midwest is extremely deep when it comes to marketing. There is a lot of core Fortune 1000 marketing DNA in the midwest. That’s talent that brings in cash flow.

3. Yes, we have pro sports, culture and all that. Plus, somewhere there is a bar that supports your home college team no matter where you are from. If you are used to saying Y’all, there are plenty of SEC bars. Fuhgettaboutit. We have bars that support Big East teams too.

If you follow the ancient history of the midwest, it was founded and built by a bunch of entrepreneurs. The canal they dug from Chicago to the Illinois River made the midwest. The next great innovation was the warehouse receipt. Grain and wood became fungible. Wagon trails became railroads which became Midway and then O’Hare and now huge internet pipes. You can write history here today.

That entrepreneurial genetic code still exists here today. It’s manifested itself in different forms over the years. But the core of that code is beginning to stretch out from it’s slumber. Don’t miss it.