Want lower costs, a stronger community and a higher profile for your great idea? Quit flying over the newest startup hot spots.
At this year’s Global Entrepreneurship Summit, Google co-founder Sergey Brin cautioned entrepreneurs that starting a company in Silicon Valley may no longer be the best idea. The region’s cost makes building a “scrappy initial business that’s self-sustaining” difficult, if not impossible.
Instead, Brin and other business leaders are advising young entrepreneurs to flock elsewhere. While cities like New York and Miami are gaining popularity with startups, the most advantageous locations may actually be more centrally located.
Medium-sized cities throughout the Midwest are becoming go-to spots for young entrepreneurs looking to start businesses. Great ideas stand out more, and startup costs are typically lower in nearly every aspect, making the area a better bet for entrepreneurial success. But, how can entrepreneurs be sure their companies will see the success that others have found in the so-called Silicon Prairie?
Medium-sized cities stimulate entrepreneurship.
The Midwest’s lower cost of living means more affordable labor, office space and retail space. The ability to spend only one-third of what other cities average per square foot leaves more money to run your company during the early stages, when a business is most vulnerable and cash is king.
LockerDome, for example, an internet-based social media platform, expanded from a small company in St. Louis to its current multimillion-dollar expansion phase, which will reportedly create 300 new jobs. Other players in St. Louis’ influx of tech startups such as Hatchbuck, which was awarded best CRM software of 2015 and grew more than 200 percent between 2014 and 2015, have helped cement the Midwest’s reputation as a viable tech and startup hub.
For companies that ship to consumers, more manageable shipping costs translate to more competitive pricing. These lower costs also mean it’s possible to attract top talent while keeping costs down from Silicon Valley levels. The recent startup boom in Midwest cities such as St. Louis also encourages collaboration among young companies, which can lead to highly beneficial relationships.
Ensuring entrepreneurial success in the Midwest
Business atmosphere differs across regions, so building a startup there requires a different approach from starting a company elsewhere. Stick with these four basic steps for Midwestern startup success.
1. Embrace the community.
Network with other local entrepreneurs and find neighboring startups with unique strengths. Chances are that different startups possess different skills, which provides the perfect environment for collaboration. Start or find a community that hosts startup-geared monthly events, which can be instrumental in forming these key relationships.
My company, Metabolic Meals, has enjoyed a number of competitive advantages by being located in St. Louis. From the beginning, the community embraced the unique nature of a healthy meal delivery company and took pride in it’s being an exclusively St. Louis business, rather than a franchise.
The city’s support made it possible for us to expand and begin delivering meals nationwide, which brought even more pride to the community.
2. Stop waiting for the perfect time.
Successful entrepreneurs know there is no perfect time to act. Don’t be reckless and forget to create a strategy, but do have the courage to commit and persevere. Be willing to react and improve your plan along the way in order to move the business forward. The Midwest may not have as wide a variety of resources as Silicon Valley, but true entrepreneurs still see opportunity.
My company’s success would have been much more difficult to achieve in a bigger city. Developing a nutrition company in the middle of an agricultural hotbed provided easy access to high-quality meat and produce that allowed for a greater product. Rather than waiting to relocate to a city with a bigger potential clientele, my team recognized that it made more sense to build the company up with the resources around us.
3. Be wary of bad deals.
Early on, nothing stops a startup in its tracks faster than bad deals, from poorly structured leases, to low return on advertising, to inefficient hiring. Nobody possesses the ability to run a business without making a mistake, but every entrepreneur needs flexibility to prevent disastrous fumbles. Avoid committing to extensive leases, expensive advertising and hiring directors, until the business is well-defined and its needs are clear.
Luckily, the lower costs of the Midwest can provide a cushion for financial mistakes. More and more companies are starting up in centrally located cities, thanks to the fiscal opportunity a smaller home base provides. Some even believe the Midwest will soon house more startups than Silicon Valley.
4. Don’t try to be the next Facebook or Uber.
Self-awareness is as important as ambition, and the idea that any company will be worth $10 billion in three years is almost laughable. Unicorn startups like Uber are becoming even more rare as overall startup growth is in decline. But leading a startup outside of Silicon Valley increases the chances of financial success even without creating the next Airbnb.
While residents of San Francisco must make at least $238,855 to be in the top 10 percent of earners, the national average for the same ranking is $100,000 annually. But nothing’s wrong with making a solid living below that benchmark, and that’s much easier to achieve setting up shop in the Midwest. Starting a business is hard work, and to be successful, entrepreneurs need to be ready to settle in and put in some serious time.
Unlike the typical, larger startup cities where the atmospheres are often cutthroat, Midwest communities have more cooperative approaches. After all, when local companies grow successfully, their communities prosper, too. That shared success is what makes a future in the Midwest worth building.