days nationwide is that Silicon Valley is becoming a sort of new Hollywood for tech workers. It’s where the money is; it’s where “the dream” happens.
“People want to be Mark Zuckerberg like they used to want to be Michael Jordan,” Kromer says. “So it’s like some people don’t even care passionately about the project that they’re working on; they just want to be famous. It’s like, this is the best way to be famous nowadays, to have a hot startup.”
And that attitude—all too common in the Bay Area, Kromer admits—is a problem for some founders.
“I’ve been doing this for twenty years in both Texas and California,” says John Price, CEO of Austin, Texas–based consumer products search engine, Vast.com, and former executive with legendary Austin enterprise software firm Trilogy. “So I’ve been living the comparison.”
Price graduated from the University of Texas at Austin (UT) in 1982 and immediately moved to the Bay Area to start his career in electrical engineering. His first experience with entre-preneurship came at Neuron Data, an artificial intelligence firm that he cofounded with a group of French scientists. He joined Trilogy in 1992 alongside “a bunch of Stanford kids,” where he spent more than a decade managing sales and business development. At its peak, Trilogy employed some 1,200 people and generated more than $250 million in annual revenue. Its training program for new employees—Trilogy University—was the subject of a 2001 feature in the Harvard Business Review, and its recruitment program, which managed to attract more than 1,000 high-level engineering grads from MIT, Stanford, Caltech, and other top programs to Austin, landed it in a 1998 issue of Rolling Stone under the headline “Wooing the Geeks.” The company effectively imploded after the dot-com crash and went through multiple rounds of layoffs before emerging as a shell of its former self.
But, in the mid to late nineties, Trilogy was the big time; a multimillion-dollar software success story, even though it was running into problems in the Bay Area.
As Price told Forbes in 2012 about those early years, “We already could see the signs of how difficult it was going to be to build a startup in the Silicon Valley where the competition for talent [was so fierce].” So he and the company’s founders decided to move the bulk of the Trilogy operation from California to Austin, Texas, to take advantage of the state’s business-friendly regulatory environment and its rich talent base, courtesy of UT. It was a radical move at the time—tech in Austin was all but unheard of at that point—but in hindsight, the relocation plan looks amazingly prescient.
Now, the Texas capital has a reputation as a tech-friendly small city, complete with plentiful office space, diverse housing options, and plenty of after-work entertainment. (Austin’s official motto is the “Live Music Capital of the World,” and more than 100 local venues host live acts every night of the week.) The cost of living is reasonable, the tax structure is extremely pro–business, and the city’s well-known “laid-back cool factor,” courtesy of events like the annual Austin City Limits music festival and the South by Southwest music/film/interactive conference held every March, make it easy to recruit from out of town. To hear the locals talk about it, everyone wants to move to Austin. It’s what the Bay Area’s tech scene would look like if it was purely urban, Price says, rather than stuck out in the San Jose suburbs. (“The lights go out at nine o’clock in Silicon Valley,” he says with a laugh.)
“So here in Austin we skipped the Silicon Valley stage and now we’re just like San Francisco. Austin has tipped as an urban city. Five years ago downtown was where you partied, not where you lived. Now there are condos, lofts, literally people are moving out of the suburbs and moving downtown. It just tipped. And there are all these techies hanging around downtown and running startups.”
Price is not alone in this realization.
Jay Gierak and Nathan Labenz learned that there is tech life outside of California in 2012 when they relocated Stik, their social-based recommendation app, from San Francisco to their hometown of Detroit, Michigan.
“It was really an easy decision for us to make,” Gierak says from the company’s new office near the Detroit Lions’ home at Ford Field. “The fact is, it kind of sucks to be in Silicon Valley if you’re not well funded. It’s difficult to retain talent in that environment, and it can be really difficult to stand out from the crowd. It’s the best place in the world to be if you have $50 million in the bank, but for the rest of us it can be really tough.”
Detroit, it turned out, was the answer for them. The area is home to a surprising community of engineering and scientific talent, thanks to the thousands of workers who moved to the area over the years to work in the auto industry, and the University of Michigan and Michigan State University are nearby for more software-specific workers. The cost of living is shockingly low, so founders don’t need to pay their developers as much as they would in the Bay Area, and given the lack of overall competition in the area, staffing a startup is generally an easy prospect in Michigan. The tech community isn’t as deep as other cities, but local entrepreneurs say there is enough talent to go around and poaching generally is not a problem.
Stik operates out of the Madison building, a venture-backed coworking space located a few blocks from the Detroit River in the center of downtown, where the founders and their employees can work surrounded by more than a dozen like-minded tech companies. Urban, loftlike living is available right around the corner.
“We found that we could attract and retain better talent here than we could in Silicon Valley,” Gierak says, citing the nearby research universities and the low cost of living in what is, believe it or not, becoming a pretty nice place to live.
It is also an opportunity to be a part of something bigger than just the next hot app or the next Facebook clone.
“Downtown Detroit is developing something special around its burgeoning tech community, and we want to be part of it,” Labenz said in a statement at the time of the move. “We are excited to collaborate with other Detroit-based companies that are making a positive impact, and we are eager to grow our business with some of the best tech talent in the country.”
The fact is, bright ideas are not geographically limited, and innovation is happening every day in cities all over the country and around the world. What’s more, it is now cheaper than ever to start a technology company, thanks to plug-and-play platforms like Amazon Web Services that all but eliminate the need for expensive hardware and infrastructure. It’s becoming less risky, too, as more and more founders are following the popular lean startup model that encourages quick deployments, bare-bones testing, and “failing quickly” when an idea doesn’t find a profitable market.
The primary hurdle at this point is coming up with a good idea and finding a way to monetize it. And Silicon Valley doesn’t have a monopoly on that.
“People’s perceptions of places like the Valley are colored by the notion that they have some sort of advantage,” explains Thom Ruhe, vice president of entrepreneurship at the Ewing Marion Kauffman Foundation in Kansas City, Missouri. The Kauffman Foundation is a nonprofit dedicated to advancing entre-preneurship, among other things, and is a strong supporter of coast-to-coast startup ecosystems. “What they really have going for them [in the Bay Area] is population density, so startup [founders] feel that they have to go there to be successful. It’s like an actor going to LA to be successful. But there’s no rule that ideas are limited to the coasts. It’s not about having the ideas; it’s about having the support system around to take the ideation phase to a commercial operation.”
That’s where startup ecosystems outside of the Bay Area typically fall short. They may have access to great minds
