High-Tech Start-Ups Put Down Roots In New Soil

ThousandStars writes "The Wall Street Journal says that 'High-tech start-ups are increasingly setting up shop in places previously not known for attracting high-tech firms. A number of cities, such as Kalamazoo, Mich., and Toledo, Ohio, are offering grant money and tax breaks to high-tech start-ups, just as the usual venture-capital hot spots, such as Silicon Valley and Boston, continue to see a pullback in venture lending.""

I saw it happen in the early 90's

[localroger]

A manufacturer we represent whose business center and plant was in rural Minnesota bought a competitor whose business was located in San Francisco. They decided who they wanted from the eated company and offered them jobs. Most of the SFicans were appalled at the idea of moving to the great frozen flyover wasteland, but the eater company paid for all of them to come visit for a couple of weeks. In that time they learned that they could own acres of land with three thousand square foot homes for what they had been paying for a walk-up condo, that they could commute in minutes and leave their doors unlocked without worry, and nearly all of them ended up moving to Minnesota. And most of them are still there today, even though their company eventually got eated by a European company and you now hear a lot of British accents around the place.

Re:I saw it happen in the early 90's

[Tiro]

Reminiscent of Wells Fargo, the bold SF bank that got eated by the very cautious Minnesota-based Norwest Corporation in 1998. Regarding your story, this is a fundamental aspect of capitalism: the dislocation of production from established areas to lower cost areas. That can mean Ohio to China, or San Francisco to Ohio. It is rather interesting to me that places like Gary, IN* don't rejuvenate on their own. There is definitely some cultural preference to other places, which is why there is more to the story than pure economic cost/infrastructure advantage. * Interesting that much new growth in the US Midwest comes from Mexican immigrants, for whom there is less bias against these 'boring' towns.

Re:I'm with Paul Graham on this: it won't work.

[OrangeTide]

I've heard so many of these stories about how XXX will be the new place for tech. I don't see any reason to start believing it now. If you want to relocate away from Silicon Valley or one of the other tech areas of the US, you might as well relocate to India or east Asia or somewhere that is even cheaper than Kalamazoo.

Look At Pittsburgh, Though

[maz2331]

It's only become one of the top places in medicine on the planet. That's pretty good for an old steel town.

It is possible to build out the educational and corporate infrastructure in a "cheaper" place.

Re:Look At Pittsburgh, Though

[zaffir]

No, the University of Michigan is 2-3 hours away in Ann Arbor. And people who like Ann Arbor will stay in/near Ann Arbor. People who don't like Ann Arbor sure as hell won't like Kalamazoo. The cost of living is not that much more in AA (unless you want to live on main street, and even then we're not talking Bay-area housing prices) and it's a much nicer city.

FYI, Kalamazoo has Western Michigan University.

Re:Its definitely the exception, and a rare one

[fuzzyfuzzyfungus]

Sounds like you've just identified a major perk for companies that move out into the sticks...

Sooner or later, they'll just start paying in scrip, redeemable at the company store, and it'll be the good old days all over again.

Re:I saw it happen in the early 90's

[timeOday]

I don't know what Obama policies you are referring to, unless it is closing offshore tax loopholes. Personally I am fine with that one; if they think they can operate better by physically relocating to Bermuda, let them try.

Show me a business that never loses a customer or employee to the competition, and I will show you a business that charges customers too little and pays employees too much. State giveaways to business are the same. I'd rather live in a state that grows slower but is financially better off because only the companies with a reasonable business case to be there (other than govt handouts) are there. Hosting a business requires investment in infrastructure, from water pipes to police stations. Don't roll out the welcome mat for companies that just want a free ride.

Re:Kalamazoo Promise

[SunFireSpaz]

Kalamazoo Promise Details [kalamazoopromise.com] - no need to worry about college tuition raising faster than your 401K or inflation. And the poster above saying that 38K is enough for a family should have added that it is also enough to send the kids to college with the Promise.

Re:Kalamazoo Promise

[jshackney]

When I moved back to Michigan two years ago I seriously considered moving to Kalamazoo for the reason you state. However, it's not a strong enough reason to go there. There has to be work. And my industry is only seeing cuts, cuts, and more cuts. In fact, Pfizer canceled their shuttle about six months after I moved here. Duncan aviation has axed much of their productivity in Battle Creek, charter operators are struggling. The college (last I heard anyway) had laid off some flight instructors. It would be nice to see some solid tech. companies move in, but that is only a good start. Not a permanent fix. Michigan has a tenacious problem with no long-term solution.

Will Silicon Valley survive?

[Animats]

Silicon Valley is definitely in decline. The current recession is hurting, but that's not the real problem. Part of the problem is that manufacturing moved out. Venture capital isn't doing well. Venture funds as a group are losing money, and have been for several years now. There was one tech IPO in 2008 before the crash.

Worse, there's an idea shortage. Here's a list of companies looking for venture funding this month. [launchsiliconvalley.org] "Short dial codes" "Timeshare lead generation". "People powered search" (yes, that again). Yawn. There's nothing in the pipe that looks like a big win even if it succeeds.

Re:I saw it happen in the early 90's

[bladesjester]

Just about any town in rural America. PA, MN, OH, NY all have these towns where you can just walk into anyone's house without a problem.

I can't speak for PA, MN, or NY, but I grew up in small rural towns in Ohio. I can assure you that people certainly *did* lock their doors and that crime, while not *insanely* rampant, was far from rare. I am, however, told that people were less likely to lock their doors when my father was a kid.

I knew a number of people whose homes were broken into while I was growing up and the thefts have only gotten worse in the last year or two as crime rates have risen due to the poor economy.

Add to this the fact that there is a prevailing sentiment in a lot of the smaller rural communities here that the entire world should be Christian (and they are willing to trample the civil rights of others to that end), that anyone less conservative than W is causing the ruin of this country, that all Muslims are evil and want to destroy America (I kid you not. Actual comments from the local paper), and, frankly, that if you're not a white, "God fearing", good ol' boy that you should just get out.

Sadly, I'm not kidding and I'm not exaggerating. I will readily admit that there are many good people in this area, but there are also a very large number of people who display the behaviors and prejudices that I have listed above (as well as more than a few others). It's enough to give you a headache purely from trying to not scream in frustration.

Don't try to idolize the small towns as bastions of everything good in the country, because it's just not true.

I'd go to Detroit. Seriously.

[Qbertino]

People seem to forget that Shockley went to death valley because there was absolutely nothing there and you could get all the basics dirt cheap. The nutcases that started the silicon revolution did that in barns and garages and of those in the cheapest they could find. The shockley five went to start Intel in the neighbourhood and thus Silicon Valley was born.

If I where building a startup in the US today, I'd seriously consider Detroit. You can buy houses for 500$ right now in Detroit and infrastructure is just good enough to live. You could spent years there on the most minimal VC and since Detroit is so super-boring now the team actually would have a personal interest in concentrating on the thing their building.

Revolutions very often start in extremely unspectacular places, where the artists and crazies move in because they have other things to worry about than finding the best way to rake in cash. It's only a few decades later that these places become the hippest areas on the planet. Notting Hill in London, Schanzenviertel and Hafenstraße in Hamburg, etc. etc. - all the same story.