In his book, The Third Wave: An Entrepreneur’s Vision of the Future, AOL co-founder Steve Case makes two big predictions. First, he says startups will increasingly take on challenges in healthcare, education, energy, and transportation that Silicon Valley overlooked in the past. And, second, that those startups won’t all come from San Francisco. The third wave will see a “rise of the rest,” Case writes, slowing the startup-creation dominance of the coasts in recent years. The Bay Area alone currently accounts for about 40% of U.S. venture capital investment.
A new report looks at how “Middle America” can close the funding gap and identifies ways lots of places are already innovative, if only the coasts would care to look. The “culture scanning” approach from Sparks & Honey, a New York marketing agency, identifies cases of innovation in the heartland, spies ways Middle America startups may be different from those in Silicon Valley, and lays out how the rest of the country might emulate Silicon Valley without becoming Silicon Valley.
According to Chris Olsen, a venture capitalist who swapped Silicon Valley for Columbus, Ohio, the switch away from the coasts is already happening. In a few years, the Midwest will have more startups than California, he wrote in a piece for VentureBeat last year. “Every time we go to the coasts, we hear the same old reasons why the Midwest won’t work for startups,” he said. “I have yet to see anyone validate these claims with data. In fact, every piece of information we find confirms the contrary.” He argues the reasons for Silicon Valley’s dominance are partly that everyone keeps repeating them: that it’s the only place to find and retain talent, the only place to “scale,” the only place to find investment, the only place to find people who understand your technology.
This observation is echoed in a survey that Sparks & Honey did for the report. When asked to name the most innovative region in the country, 47% of Americans said the West Coast, 25% said the Northeast, and only 10% selected the Midwest. “When I think of innovation I think of science. The South and Midwest parts of America are notorious for science-denial, so they’re right out [of the running],” wrote one New York respondent, showing how cultural bias may affect our sense of innovation hotspots. “Only 16.4% of respondents believed people on the coasts viewed the middle of the country positively,” the report says.
Sparks & Honey pinpoints some tech success stories from Middle America: how Chattanooga, Tennessee, has invested heavily in publicly-owned fiber optic broadband to attract companies like OpenTable; how Montana incentivized telemedicine by instituting a parity law that reimburses health providers at the same rate as in-person services; how Columbus won a $50 million federal grant to create an autonomous transport system that will link up under-served poorer neighborhoods with downtown; how Cleveland has created a series of worker-owned businesses serving hospitals and universities, thus keeping wealth within the local community.
Olsen and Sparks & Honey argue that innovation in the Midwest and Middle America tends to be more humble, human-sized, and equitable. “This [innovation] is opposed to the stereotypical idea of Silicon Valley with its winner-takes-all mentality. What we see in Columbus, Cleveland and Minneapolis is a holistic approach to making cities work for everyone, for all income levels,” says report coauthor Barbara Herman.
“With all the controversy coming out of Silicon Valley about workplace practices, there is really a benefit to having strong values,” adds Emily Viola, a cultural strategist at Sparks & Honey. “That doesn’t have to be family values or Christian values, but it might be a commitment to the community and having strong work ethics and loyalty. These allow companies to innovate and stick around for a long time.”
The report says less fashionable towns and cities can attract startups by offering “values over valuations,” cheaper operating space, speaking the non-partisan language of progress, selling themselves as test markets for new products and services, and by supporting collective wellbeing, as opposed to the harshness of living somewhere like Manhattan or Palo Alto.
“In Silicon Valley, there is a value in being the rockstar entrepreneur but that’s not the same value that drives innovation in other parts of the country where people are looking to innovate in a more incremental way rather than necessarily creating the next big thing,” Viola says.