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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 work for a big tech company from a small city in Wisconsin. It is great. For the company, office space is cheap, internet access is cheap, energy is cheap, salaries are less than in big cities and employees are still happy. As an employee, I'm happy since I don't have traffic nightmares getting to work and home (I have a whole 5 minute commute), the cost of living is low (I live in a remodeled 3 bedroom home that is worth $120K) and in a small office (200 people) you can know everyone by name. It is a win-win deal for a tech company to locate outside the major tech areas.
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.
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My wife & I left silicon valley about 5 years ago at the tail-end of the dot-com bust. I had a GREAT time there, aside from the worthless options and 80-hour work weeks. We thought it was time to start a family, and wanted a bigger, less-expensive house, no traffic, slower quality of life. We were willing to trade a premium salary for it.
WHAT A HUGE MISTAKE.
Turns out that when you're in a smaller town, you have NO OTHER employment options. What happens if you don't like your little tech company? uh, you're screwed. In Silicon Valley you always had a network three deep that could get you a fun, interesting job in a little bit. You had options. A backup plan. In smaller towns you're running without a safety net. If you leave the relocated tech-company, you've got the small-town mindset and businesses. I see plenty of craigslist ads that read, "must have 5 years networking experience, cisco preferred. Be able to build and administer our 50-person network. References required. $10/hr, contract only." I'm seriously NOT kidding.
I wish I could completely rewind my experience and still be in silicon valley. Higher rents, more traffic, silly housing prices and all.
Bugs Bunny is behind this! Albuquerque and Walla-walla must be next!
You psycho mods better mark this too
The economy is moving online. Soon, it won't matter anymore where you live and who you work with.
And I'm not talking about the scams such as "make $100K working from home". I mean real, legitimate, value-added work (like programming), that you do wherever you want, whenever you want, as long as you deliver a good product.
Problem is, and all jokes about single engineers aside, that means the spouse has to find something viable in that location as well. Some professions are pretty portable, others aren't. But it's not just about where you can lure a single person.
Plus, if you lose your job, suddenly you're in Toledo where there's not that many other companies. At least in the Bay Area, you know you have multiple options to switch to should you want to. Without having to sell your house which no one wants or needs to buy. (Admittedly this is a chicken-and-egg problem; if enough companies move to Toledo or wherever, this goes away.)
Check out How to Be Silicon valley (http://www.paulgraham.com/siliconvalley.html).
Based on the description of the right environment, we're not talking Kalamazoo or Toledo by
a long shot. Besides, didn't people try this crap en-mass before the dot.com bust?
*** Sigs are a stupid waste of bandwidth.
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.
I wouldn't move from Pittsburgh to anywhere in California for any amount of money.
Without cons and sin.
Kalamazoo is not that far a drive at all to decent summer sand beaches. With plenty of friendly, curvy bouncy corn fed girls hanging around.
(*)(*)
Pittsburgh has old rusty factories and mills you can go hang out in the parking lots at after you sweep the broken beer bottle glass out of the way. And be sure to wear your body armor. ;)
Kalamazoo does have a bunch of old pharmaceutical buildings left over from when Pfizer bought up Pharmacia for the patents and moved on after firing most employees a few years ago. The skilled technicians are simply repurposing and starting other biotech ventures
Turns out that when you're in a smaller town, you have NO OTHER employment options. What happens if you don't like your little tech company? uh, you're screwed.
It depends on the size of community you're in.
I would think sticking with places (giving US examples) like Atlanta, Chicago, Philadelphia, Portland, Seattle, Boston, etc., would help people avoid some of the headaches of Silicon Valley, but still give you decent options.
I'm sure somewhere like Erie, PA is nice place (pop. 103,650), but your options techie choices will be limited. Stick with 600,000 and up, and you'll probably have a decent amount of variety:
http://en.wikipedia.org/wiki/List_of_United_States_cities_by_population
I'm curious to know if there are any statistics or studies on population and technological need. Presumably the more mid-sized (200+ employees) there are in an area, the more need there is for IT professionals.
Another incentive...If your kid goes to school in Kalamazoo he/she will get free tuition to any university in Michigan. The amount is dependent on how many years they have attended K-12 in Kalamazoo.
I've been saying this was true for the last 25 years. Evansville, Indiana (Southern Tip, second-or-third largest city) has everything NYC has to make a business run, MINUS:
-Crime
-High Taxes
-High spot on terrorist lists
-Noise
-Crappy Schools
-Crowding
There's just no reason for most companies to go. Rail lines, telecommunications, all the things a _business_ needs to live, they have it. Few businesses need Les-Mis, prostitution, murder rates like crazy...
Did you know before Rudy the murder rate in NYC was 3,000/year? THREE TIMES the loss of life in Iraq, per year. Maybe we should pull out of NYC? :)
Under Rudy it dropped to like 600. Still a lot, but so much better.
--- For a good time mail uce@ftc.gov
Use this one.http://news.bbc.co.uk/2/hi/uk_news/scotland/edinburgh_and_east/7725221.stm Microsoft has a new headquarters in Edinburgh Ireland.
The truth shall set you free!
What happens if you don't like your little tech company? uh, you're screwed. In Silicon Valley you always had a network three deep that could get you a fun, interesting job in a little bit. ... In smaller towns you're running without a safety net. If you leave the relocated tech-company, you've got the small-town mindset and businesses.
To create a hi-tech center you need to create the whole structure. You can't just attract a single hi-tech company for the cheap labor, for the reasons given above. You need job mobility - which means both a LOT of companies (along with other infrastructure such as universities) and (most importantly) the ability for the workers to move out and start their own new operation. That last is the key to CREATING, EXPANDING, and MAINTAINING the rich mix of companies and further opportunities.
Lots of states have excellent universities, trained personnel, low taxes, fine social and recreational opportunities, etc. But they're missing a key element that led to the creation of Silicon Valley in Califonia: A little piece of Intellectual Property law.
In California there is a state law that overrides employment law for a "pressing state interest". You'll find it quoted on one of the appendix pages of any California knowledge-worker employment contract: If the employee makes an invention that is not in the company's current or expected immediate future business line, and does so without using company facilities and materials, it belongs to the EMPLOYEE. He can move across the street, rent a garage, bing in a few of his buddies, and found a new startup to develop it.
This "budding off" mechanism, like yeast, is what created Silicon Valley's rich culture of diverse companies and employment opportunities.
If any other state wants to replicate the success of Silicon Valley, rather than providing a site for a US-internal equivalent of third-world offshoreing for a hi-tech firm, the FIRST thing they need to do is clone this bit of employment law.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Actually, it's quite interesting to see how - in terms of infrastructure - smaller cities compare to the big ones. Two years ago, I lived in a city (my hometown) of about 85,000 in BC, Canada. Internet access was generally quite fast, especially with cable providers, etc for residential. Around when I was leaving, the city in conjunction with various local businesses had been in the process of laying fiber in all areas.
After that I moved to Toronto, Ontario (population over 2,500,000). Internet and telecommunications infrastructure sucked there. Bell seems to have little motivation to upgrade lines, meaning DSL outside of certain major downtown areas could not reliably offer high speeds, either for businesses or residences. Not only that, but Bell's throttling of third-party connections was a nightmare, not just for home-user torrents, but for SSL-tunnelled connections to/from my workplace when telecommuting.
Rogers was the local cableco provided and I'd heard of similar issues with them: poor service, bad cabling, and weird issues due to throttling. I know of at least one business that bounced between Bell, Rogers, and a third-party (DSL, so unbeknownst to them still going through Bell) provider trying to get reliable connectivity.
Local tech shops had more deals and cool small items. Things like monitors or PC's/laptops weren't much of a deal though, and customer service STANK. Got a new LCD with dead pixels out of the box, and a fairly major local retailer (yes, I'm looking at you Canada Computers) refused to exchanged it. I know for a fact my local shop in the previous city would have done so.
Now I'm in back in a smaller city/town of around populatimainon 30,000. No long commutes to work. Internet via cable is fast. There's a local wifi provider who gets rather impressive speeds to all sorts of weird areas around town, and they're continuously improving service. Rent and property costs are a lot lower.
I was just musing whether it would be possible to setup a datacentre downtown. There are quite a number of buildings with space that might fit a small DC as long as the power requirements were met, though I've yet to investigate what the local providers offer for large commercial trunks.
Big cities are overrated. When I moved to Toronto I expected to find myself able to do all sorts of things, but the reality was with the longer commutes, extra work hours, and almost universally crappy service. Here, people tend to be more honest (in a smaller city you can't get away with as much without it becoming known eventually), and the quality of life is better. There may not be a huge glass-covered shopping multiplex within 10 minutes drive, but for that sort of thing a bigger city is still within driving range, and really the local stores aren't that bad except when it comes to stuff like furniture etc, and my iPhone only gets 2G service (until next year).
Screw big cities.Businesses should invest in local communities at smaller locations. Power and rent are cheaper here. Connectivity seems in many cases better. There will be likely be less location-related expenses, and I've found that there are still plenty of tech-savvy citizens available to work there, and even a good share of front-line grunts for phone support etc.
Yes, for a lot of them it seems it's not so much about physical locations are monetary ones.
The fact is that a lot of the offshore locations are finding that they get shafted just as easily (or worse) by companies pinching pennies, and then companies execs themselves often find it harder to keep a thumb on operations that are half a world away.
I'm not sure that the companies who worm through tax laws and others by setting up off-base tax havens are the types you'd want around right now anyhow, as they seem to be even more likely than the local scummy corps to screw Joe taxpayer and anyone else not on the board of directors or investors.
Cheapier taxes, lower crime, lower travel & traffic. Wow, who knew...
What next, off-shoring?
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. "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.
I was part of a company in San Diego that was acquired by a group in Overland Park Kansas. They had a habit making offers to move to Kansas with no relocation package. You can take a tax break. State of Kansas or state of unemployment deals. After 3 to 6 months of cross training the immigrants from California were laid off. Repeat with the remaining body count. I turned down several of these deals, it was an attractive deal, but unemployment 10 minutes from the beach is better than unemployment in the middle of Jesus County. I wound up doing some fast and dirty consulting work after my layoff which turned into a nice little group with some of my comrades from the original team. Seems the new company won't do any custom work, every customer has to use the same package build. We can't build on their code, but we can customize around the data and extend functionality.
When I was a kid, the tourism folks used to distribute bumper stickers that simply said "ESCAPE TO WISCONSIN". It was common to see people who had done some splicing to spell the (much more accurate) message "ESCAPE WISCONSIN"
I guess at some point they got sick of people making fun of their slogan so they started a new sticker campaign with the motto "Wisconsin: you're among friends". Of course, every teenager with a razor blade shortened this to "sin: you're among friends"
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.
We suffer more in our imagination than in reality. - Seneca
So Anywhere there is a modicum of common sense and then added to that tax benefits, decent staff and perhaps investors with savvy has to be a good place to be. I imagine though tax breaks help but there must be a delay between implementing these and reaping the rewards by attracting all the above.
I grew up near Kalamazoo, and can attest that it's a great place to raise a family. I would have considered working there if they only had more tech jobs. I'm pleased to see their name in the running on Slashdot and WSJ. Michigan is much more than Detroit.
Though I used it because it is the way blogger Duncan "Atrios" Black refers to banks that have been taken over in the current "liquidity crisis."
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