Building the Alternative Silicon Valley

Lately there have been many blog posts about how cities should/shouldn’t go about trying to build the next Silicon Valley and if the idea is even plausible. Josh Whiton brings up a great point that that the birth of Silicon Valley is something that won’t be replicated because Silicon Valley was the epicenter of one of the largest technological advances in history. I completely agree, there will never be another carbon copy of Silicon Valley and that is ok. The mainstream adoption of the internet is one that won’t be replicated ever again in history, but that isn’t to say that the epicenter for innovation won’t shift in years to come. As internet adoption continues to rise and costs continue to go down for starting a company and building new products, I believe we will see new epicenters of innovation. I am not looking past the fact that Silicon Valley dwarfs any other cities in terms of investment and exits. A massively disproportionate amount of large exits and investment come out of Silicon Valley, which is the allure of the valley, but I think that there is still room to innovate on the model of investment and support that comes out of the valley.

What is interesting to me is that a lot of the discussion surrounding how to build the next Silicon Valley comes from within the valley itself. I feel like it’s almost as if the thought leaders from the valley, as brilliant as they are, are trying to tell the little guys what’s best for them. What works in the valley isn’t going to work for a long time in most communities since the valley essentially has a 20–25 year head start in capital, mentorship, and reinvestment in the startup community.

The concept of an innovation cluster has been discussed about peripherals that communities can focus on and be known for. We see clusters forming when taking a look at New York (finance and fashion) and Los Angeles (entertainment). I would even begin to argue that we see smaller cities beginning to emerge as loose clusters as well, like Minneapolis for medical devices. There is room for communities to own new and innovative spaces, like cryptocurrency, but it won’t happen the same way that Silicon Valley emerged.

It’s time for “secondary city” entrepreneurs to define what their future looks like.

Adrian Holovaty has a great post about why Chicago shouldn’t try to be like Silicon Valley and should instead focus on the attributes it has going for it. He describes Chicago’s positive attribute as a “bootstrappers paradise” and I’m sure that other cities around the country have other attributes that aren’t being leveraged to their full potential. What’s great about this idea is that entrepreneurs can innovate and disrupt a model that has now been successful for 20+ years. Capital requirements continue to shrink for launching a company and the valley is getting prohibitively expensive. Instead of thinking “how can we be like Silicon Valley?” let’s begin to think “how can we get the same results as Silicon Valley?” I don’t have the roadmap, but I do know that there are some core issues that need to be addressed in most communities outside of the valley.

The disconnect with major Fortune 500′s in growing startup communities

I am from Minneapolis and in my community alone there are 18 Fortune 500 companies. These companies are in a wide range of industries and could be great sources of mentorship and even be potential customers for new startups. At the very least, there should be some people who are doing well enough to give back to a budding entrepreneur community. The reality is that there is a massive disconnect between these large companies and the startup community. They may sponsor an event or two, but they aren’t ingrained into the community like large companies out in Silicon Valley are. I think that this is largely attributed to the fact that many fortune 500′s are legacy companies that have been around for at least 30+ years. They don’t feel the connection to the entrepreneur community like large companies in the valley because they have been around for so long.

Where are all the people who have done well at fortune 500′s reinvesting into the community? In Silicon Valley it is very common for people to become angel investors after a company that they have started or worked for has an exit. In communities where exits aren’t as prevalent there is a chicken and the egg problem. Without exits, there’s no investors. With no investors, there’s a lack of startups. We need a few people to step up and begin to invest in startups in the community. I don’t think that it would take that many people, or even that much money, to come from fortune 500′s to really kickstart a community. I think most entrepreneurs would even be open to an incubator sponsored by a fortune 500. You’re already seeing these types of incubators in industries like fintech where Wells Fargo has opened their own accelerator.

Investing in small companies isn’t just good for the entrepreneur, it can be a great source of innovation for larger companies as well. This could be either by acquisition or by being a customer of innovative companies. Large companies should be looking to invest within their community because it gives them first crack at the next big thing. Google Ventures is a great example of how a company can keep their eye on innovative companies that are potential acquisition targets down the road.

The disconnect in the community

Having an active core group of entrepreneurs is crucial for any community that wants to nurture startups. There are normally a core contingent of people that make up a small startup community, but outside of this core group most startups seem to be relatively unknown. I am always hearing of a company that I had no idea existed because either they weren’t coming to the typical tech events or were engaged in a community that I wasn’t apart of. Maybe a company is based in the suburbs or maybe the founder doesn’t have time for meetups. Either way, there are a bunch of chance connections that aren’t happening by having fragmented communities. It is especially hurtful when your community is particularly small.

To solve this, there needs to be a “startup hub” of each growing city. Chicago has done amazing things with 1871, a co-working spot where everything from Techstars to startup service providers are based. It has largely become the hub of startup activity in Chicago and is the spot that most entrepreneurs stop when traveling through the city. A hub creates a web of support for founders who need that extra help from the more experienced. Entrepreneurship is a lonely road and having other founders to vent problems to can be extremely therapeutic and get entrepreneurs through the tough times.

Hubs also facilitate the chance connections you need in the community to help it grow. Startups benefit from having multiple founders from different industries to bounce ideas off of and to learn from. There are often potential partnerships or synergies outside of one’s core business focus. Without the hub to bring everyone together, there are often missed opportunities for startups to get feedback or even be a customer from a fellow company. I believe that the Startup Venture Loft in Minneapolis is a giant step forward to have a center place where startups can begin, grow, and learn from one another. I’m sure that in other cities around the World we will see co working spots like this act as the catalyst for emerging startup communities.

Conclusion

All of the aforementioned issues can be addressed with the right people who are motivated enough to make a change in their community. We are currently in a startup boom and it is the perfect time for smaller cities to take advantage of the interest in entrepreneurship and foster a community to support people wanting to start a company. Every city is going to have slightly different issues to overcome the hurdles of being outside of a financial hub, but I think that innovation can be greatest in times when resources (money) are scarce. There just needs to be that counter balance that when a scrappy startup begins to get traction, they will then have the ability to find the capital to grow their company.


Originally published on my blog at austingrandt.com

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