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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.
Brackets contain world's first nanosig, highly magnified:[.]
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.
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.
Kalamazoo Promise Details - 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.
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.
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.
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.
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