How the Midwest Is Becoming an Entrepreneurial Hotspot
The Huffington Post
By: John Dearborn
December 3, 2012
This fall, entrepreneurs and investors from all over the country gathered in downtown Cleveland for the National Association of Seed and Venture Funds (NASVF) annual conference. During a "fireside chat," AOL founder and Startup America Chair Steve Case touched on his belief that a "broader entrepreneurial ecosystem" with many hubs of innovation is possible. "Many years ago, you couldn't launch a startup in some areas, and now you can," he said. "Costs are down, and the ability to get talent is up."
The Midwest is working hard to make Case's vision a reality sooner rather than later. For example, a summit known as the Great Lakes Venture Fair directly followed the NASVF conference in Cleveland. This two-day event highlighted the region's expanding investment scene and its high potential young companies. Just a few weeks later, JumpStart presented an entrepreneur expo, which drew 117 startups and more than 1,000 people to an afternoon-long showcase of transformative technologies.
Imagine the Great Lakes (a region comprised of Ohio, Michigan, Illinois, Indiana, Minnesota and Wisconsin, among other states) mustering enough venture capitalists, deal flow and success stories to warrant such an event 10 -- or maybe even five -- years ago. In many cases, location is no longer a hindrance to the success of a startup. Why can a startup, well, start up anywhere now? Several key trends have emerged that explain why entrepreneurship is no longer solely the domain of the coasts.
Communities are developing their own homegrown resources
With its cheap rent and plentiful real estate, the Midwest is a good place to form an accelerator or an incubator. Cities such as Detroit (TechTown, Green Garage), Milwaukee (94labs, Northwest Side Community Development Corporation) and Minneapolis (Project Skyway, health care accelerator Inceptis LLC) are developing their own support organizations to help local startups flourish. In addition, regional websites (siliconprairienews.com and tech.mn, among others) are covering the innovations and technologies happening right in their own backyard -- an avenue of promotion that's helping spread the word about the Midwest's entrepreneurs.
There's a growing angel influence
There are myriad ways startups can get seed money, including crowdfunding and micro-loans. But in the Midwest, angel funds are another viable option for entrepreneurs in need of seed funding. In Ohio especially, angel funds continue to be a major force: Two of the biggest angel funds in the U.S. (as measured by member size), Ohio TechAngel Funds and North Coast Angel Fund, are located there. The success of these funds reflects well-educated investors taking risks as a group -- and succeeding as a group. In a lengthy article about angels, the Cincinnati Enquirer notes how Midwest angels "serve as mentors and help entrepreneurs avoid rookie mistakes."
Venture capitalists are entertaining deals that aren't on the coasts
As the quality of deals increases, the region becomes known as a place with valuable business commodities, which allows it to attract more outside investment. This theory isn't just aspirational, either: Between 2007 and 2011, 67 percent of the nearly $1 billion dollars raised by Greater Cleveland startups came from investors based outside of Ohio; in addition, Preqin named Athenian Venture Partners' 2003 AVP Ohio fund the top one of its vintage. Even if these firms don't invest right away, they're clearly seeing the value of the companies outside of Boston, New York and Silicon Valley. The Wisconsin State Journal recently reported that two California firms, New Enterprise Associates and Versant Ventures, are opening offices in Chicago and the Twin Cities, respectively.
Government is chipping in
By supporting entrepreneurship with their wallet, states can foster economic development (and, as a result, create jobs). Ohio in particular is harnessing strategic partnerships at the local and state level to jumpstart innovation. The $2.3 billion economic development initiative the Ohio Third Frontier "supports existing industries that are transforming themselves with new, globally competitive products and fostering the formation and attraction of new companies in emerging industry sectors" through grants and loans. Just to the north, the Michigan Strategic Fund has the power to approve grants and loans to a variety of economic development and/or entrepreneurial organizations, including the 21st Century Jobs fund, which is focused on the commercialization of innovative technologies.
Universities are playing bigger roles in the regional entrepreneurial ecosystem
In 2011, the Kauffman Foundation reported that 54 percent of Millennials (those ages 18-34) "were either planning to start a business or had already done so." They're finding support from more and more colleges, who are increasingly recognizing entrepreneurship as a viable career path: A separate Kauffman study counted 2,335 full-time undergraduate and graduate entrepreneurship programs. At the same time, schools are realizing they have to work to commercialize their technologies. Universities such as Ohio State, Wayne State University, University of Michigan and University of Minnesota have specialized resources dedicated to facilitating technology commercialization, while the Ohio Board of Regents' 2011 report addressed how the state can improve its commercialization efforts. One of Ohio's burgeoning commercialization success stories is JumpStart portfolio company ADAP Nanotech. The startup's main technology -- thermally conductive adhesive created from vertically aligned carbon nanotubes -- is modeled after the ultra-sticky hairs found on gecko feet. This startup grew out of research conducted at the University of Akron.
With all things working in the Midwest's favor to create high growth, high tech companies -- and jobs at said companies -- the biggest hurdle may prove to be developing and attracting the right talent. This isn't necessarily something intrinsic to the Great Lakes; after all, Silicon Valley's fights over talented employees are the stuff of legend, and the concern over a shortage of workers available to fill open jobs in the so-called STEM fields is widespread. But this is a manageable problem -- at least in the eyes of Steve Case, who encouraged talent-seekers to appeal to sentiment. "You have to create a sense of momentum and possibility," he told the NASVF audience. "Tell those that grew up here and have an affinity for Ohio that now is the time to come back."
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