From Bezos to Walton, Big Investors Back Fund for ‘Flyover’ Startups
nytimes.com
nytimes.com
My theory is the following:
- Seed money is drying up (there's legitimate data to support this) because it's all being saturation in Series Alphabet companies that are all raising on legitimate growth or legitimate track records (but with zero growth and very good connections).
- The housing situation is atrocious, and the tech scene is getting older (read -> having kids).
- This means employees are saturating towards Google/FB/Apple/etc because that's the only thing you can afford to do in the bay area. When you can afford pay hundreds and thousands of developers $500k all-in packages because your yearly profits alone can sustain the whole of the bay area (looking at you Apple) then it's almost impossible to compete for talent in anything that isn't Google/FB/Apple/etc or a Series Alphabet with strong capital.
- The rest of the world has learned all of the failures and lessons of SV and caught up. And yes all of the "inbound content" you created was free consulting to the 5 man shop running out of Madison, WI who is now competing with 3 man Stanford drop-out of the mid 2000's.
My bet is on this fund and other similar funds, like the middle market PE funds in tech (PSG, KKR, GSV, etc), Indie.vc, Venture for America, etc. This is the next big horizon in money making tech investing, not the next Instagram...those days are over.
It's amazing how many tech companies no one here has heard of but are making very legitimate money and are based in very unconventional locations. Tampa Bay, Minneapolis, Charlotte (and the tech triangle), Knoxville, Orlando, Atlanta, Provo, Boise, St Louis, Denver...you name it. I think we're gonna see many more Bandwidth.com's, MailChimps, Kabbage's, Outcome Healths, etc in the very near future.
Do you disagree with that? And/or are you saying that there are many of those kinds of promising startups outside of Silicon Valley to justify these new investment funds?
My personal opinion is that there's just too much money chasing too few good companies. In other words, I think many startups, including ones that are worth a billion or more on paper today, will ultimately fail to generate the necessary returns for many VC investors and firms. And as a result, the access to money at all stages will constrain greatly, and sharply.
The SV venture capital firms need massive homeruns because of the investing approach they use and the types of companies they invest into. It's not the other way around. They specifically back companies with zero profit, often zero potential for near-term profit, zero ability to sustain themselves, that bleed red ink in exchange for hopefully extreme growth. These VC firms intentionally avoid investing into less rapid growth, self-sustaining, profitable businesses. It's a choice, not a required direction. They want to play it big, they want to be rock stars, they want to get massively rich, they want to find the next Google. They're gold or oil prospectors, looking for the big haul; my opinion is most of them find that game addicting just as any Wall Street rock star does.
Mark Cuban is fond of saying that his preferred investing time frame is forever. What he means is, he ideally wants to invest into companies that actually have a sustainable business model, generate profit, and can pay out profits. He's basically a giant angel investor or his own VC firm, and he's on record as strongly disliking the SV model. In general terms, he represents an alternative approach to Silicon Valley.
You can find investors like Cuban all over the US. His particular wealth scale isn't necessary at all for what he does as an investor. Finding wealthy angel investors in Pittsburgh, or Salt Lake City, or Dallas, or Atlanta, is not particularly difficult.
Venture capital often requires taking sizable stakes in companies by investing millions of dollars, in order to have a chance at producing the returns it's seeking.
After thinking about it more, this Rise of the Rest fund for the Midwest, to me, is more like Y Combinator (and likely a competitor to it), in that it's essentially a giant seed fund that will then bring in its big-name investors and business magnates to make VC-like investments in the most promising companies.
Instead of having a large network of former YC grads, it has a network of some of the most well-known investors and business magnates in the U.S.
With that said, Steve Case is quoted in the article saying, "First and foremost, our goal was to generate top returns.”
The issue with that in context of the geography of where they are looking is that yes, there will be talented tech workers out there and entrepreneurs (within the tech sphere) that they might stumble across. What could be more necessary in terms of stimulating economic growth is looking at non-tech entrepreneurs in this areas, or at least ones that are not some version of an internet company.
There are probably a lot of folks out there that have ideas for companies, ones that might be hyperlocal or regional, that could be good, sustainable businesses but won't grow like a unicorn. Their costs might not be so much personnel but capital expenditure. They might not be sexy investments. But, if the intent is stimulate economic opportunities in 'forgotten' areas, this is the more likely scenario than finding a superstar developer in a haystack.
I think many people across a lot of industries are primarily concerned with their compensation packages when evaluating jobs.
I understand why some people don't want to work for those companies or in those areas, or aren't motivated by money. But I think many others do, and the ones that are living it now are doing so by choice and for their own reasons.
Now let's say you want to house your family. You decide to buy a house. Well you only have $230,000 so you can't put 20% down on a home with an average price of a million won in San Mateo, so you put 10% down on this home ( random home in San Mateo.)[https://www.zillow.com/homedetails/1715-Borden-St-San-Mateo-... ]
It's a 3 bed 2 bath home with 1400 square feet.I'm also assuming you have two kids.(each get their own room)
So now we're at 230800 - $110,000 = 120,800
Now you have to pay the yearly mortgage which is 5606 x 12 =67272
120800-67272= 53,028 left over to live in.
Well don't you need a car to go to work? What about a car for the wife? Car insurance? You are looking at 1200-1500 a month, if you buy a newer car and have great credit with insurance.
(1300x12) - (53028)= 37,028
You see how quickly it goes.
So the thing is I'm not sure if you can put a down-payment on a house less than 20%. That will take off on the mortgage (save you an additional 12-15k) ( I also assumed an interest rate of 4.37% for the 30-year fixed and I believe if you put more down you get a better interest rate)
I know hard for some people to imagine, but alot of people have no savings , leave paycheck to paycheck
no problem
https://smartasset.com/taxes/california-tax-calculator#NIGzB...
Total income after federal and state taxes is $241,739.
What's the solution then? Have smaller companies move to the Midwest? Or radically cap salaries at 100k?
Compensation is how we provide for our families in this world. It's important. At least as important as the quality of schools and culture in an area, for example: two areas that lily-white flyovers are worse at. Note: I lived in the Midwest many years. The occasional urban area that defies the above is an exception, not the rule.
Note: I save the equivalent of a down payment on a nice home in the Midwest every year. Compensation is nice. In 5 years even if I have no growth I'll be able to move somewhere in the Midwest and buy a huge house even if my income halves. That security and peace of mind isn't available to folks happy to get paid less out of spite for the Valley.
I moved from LA to Santa Fe a year and a half ago and started a company. Was able to buy a 3 bedroom house, big yard, nice neighborhood, walking distance to restaurants, brewpubs, and a grocery store for ~$1500/month, and got a couple roommates which puts our monthly cost at $400. That's a lot of runway.
There is a lot of underutilized talent here since there aren't a lot of traditional jobs, and we have two national labs within an hour of us (Los Alamos and Sandia) that feed in a steady supply of engineers and scientists.
All of this has created a startup scene both here and in Albuquerque an hour away filled with companies doing really interesting things, none of which are trying to build the next great way to deliver more ads to people. And being able to get outside the city in 20 minutes to go hiking, skiing, etc. is pretty amazing after working through LA commutes.
There are things I miss about LA (the ocean!), but there are just so many advantages to having a startup here that now I couldn't see it any other way.
A modest Silicon Valley salary was typically well received since their cost of living was usually much lower.
Excellent article on the issue: https://www.theatlantic.com/business/archive/2017/10/midwest...
Simpler explanation would be that specialties with the luxury of centralizing (ex: investment banking, tech, advertising, certain types of law, etc.) typically do--for all of the obvious reasons.
edit: And I did not write this as a celebration of her loss or political flamebait. I wrote it to point out that there is a gaping blind spot in the coastal worldview, which has already had severe real-life consequences.
Most of the big places are going after IQ more than anything else. Know plenty of local students and interns who went on to take lucrative jobs at big companies with either a state diploma, or no college at all.
I don't believe it is coincidental that so many of the founders in this space are college drop-outs.
[1] http://freakonomics.com/podcast/secrets-german-economy-steal...
Not happy about it, and perhaps if we exercised a little sanity like the Europeans, we could reverse the trend. I'm not holding my breath.
2. Is it capitalism that leads to centralization, or the lack of it? I suppose it's how you define the term -- is it a passive accumulation of capital (like money that just sits in a bank), or is it the active use of money to attempt innovation and generate more wealth?
In the latter case, I'd hope to imagine a cycle of continuous disruption and redistribution of capital that prevents centralization.
3. Are monopolies inherently bad? Or is it simply the lack of interoperability (i.e. lack of choices / cost of switching is too high for a consumer)?
4. Reverse the trend. What do you suggest then -- a break-up of tech monopolies? Or maybe forget all about the coasts, and try to emulate the German economy in the Midwest?
#3) Unregulated monopolies, certainly bad, not as much from a consumer perspective as from one of raw power. I don't really care if I don't have the latest shiniest gadget for the best price. I do care that Bill Gates probably has more say on how my kids are educated than I do.
Regulated monopolies are another story. Like the power company, they're subject to far more rules and due process than the tech giants. Google can shut down a paying customer with impunity. Power company has to honor a process even for customers that are late on their bill. I like that aspect, but then there's the regulatory capture, so... Even under Obama, who is supposed to be the "liberal" guy, we had the "Holder Doctrine" of let's not enforce the law too hard if it costs US megacorps any money. This will probably have to get worse before it gets better.
#4) I have no silver bullets. I was just disappointed that the top comment dismissed an entire region as a victim of its own foolishness, making little mention of all the other externalities, of which there are many.
Thanks for hearing me out. Do you have any silver bullets?
I am not even talking banking sector here. Just in general.
We have the coastal areas of high education, high income, and high costs that mostly end in a wash if you exclude the prestige of it all. Prices so high that people who do ordinary jobs can't even afford the place.
We also have an incredible number of rural areas mired in meth and joblessness. The elites say "Invest more in education!" Where's the money when the tax base is jobless? Where are the students when the scholars packed their bags for greener pastures long ago? Where are the jobs when it only takes a few smart people to automate something for the entire world? I've been to factories where they only need two to satisfy the entirety of world demand, and there are only a handful of people there, and the second factory is just for redundancy...
This is what "growth and innovation" have given us. Two unattractive monocultures.
I like western europe better. To each his own.
edit: If I were more awake, this probably could have been condensed into: Why speed up entropy?
Very few european companies become global players which you have to to survive. You have no choice.
-Quality of life for employees - there are plenty of economically stable regions across the midwest where you can get a 4 bedroom house in a great neighborhood for $200,000.
-Political stability for the investor class. The tech industry effectively has 6 votes in the Senate right now, and they've realized what a vulnerability that is.
A) current technology has drastically reduced the headcount required to get the important things done
B) we papering over that with make-work. defense is mostly make-work for engineers/managers/clerks/tradesmen. farming is propped up with direct and indirect subsidies. US healthcare and higher ed are packed to the gills with admin staff. cranking out more professionals is just going to put more stress on the make-work systems.
C) Fueling growth to bridge the gap between supply and demand is an ecological time-bomb.
No, the actual dominant elites don't; as they are behind the “starve the beast” movement that seeks to dismantle public services including education.
> Where's the money when the tax base is jobless?
The people actually saying “invest more in education” tend also to support greater federal funding of that function, especially for economically disadvantaged areas, and also to support shifting the federal tax burden more toward capital holders and/or profitable corporations, rather than the working class, so joblessness in the local economy of certain regions for which increased educational investment is sought isn't really a barrier to their preferred policy.
Of course, they also tend to support other targeted shorter-payoff-window programs to support local economic development as well, also with out-of-region funding.
Left wing ones lament that we haven't spent more on education. Right wing ones lament that people aren't taking advantage of the opportunities that have already been afforded.
From my own perspective (automation, and this could be my thought-bubble?), we have a situation where we need fewer and fewer people to do most of the important things. Due to that leverage, these positions are relatively few, and demand a very high level of knowledge, intelligence, and responsibility. If the world only needs a full-time staff of 30 to do X, training 30,000 to do it is just wasted time and effort.
The buzz currently seems to be around UBI to address this. Maybe the right way, maybe not. I have no crystal ball on that one.
So many people pin their hopes on "growth", but is that what we really need? We are already devouring the earth just to keep people busy cranking out and devouring BS. Watch the cartoons with your kids one day. Behold all of the neon goo and plastic junk being pushed on them. Then watch FOX with the parents. Advertised medicines to fix health problems they earned at the advertised restaurants and leisure activities. Advertised financial products and scams to maintain enough revenue to afford the rest of it.
So, as a prescription for making better-rounded individuals, education is fantastic. As a prescription for fixing "flyover country", I don't buy it.
http://000fff.org/why-is-europe-failing-to-create-more-unico...
edit: Just read it. Always refreshing to talk to someone who doesn't have all of the answers!
Only thing I would add is to look at the glass as half-full. Western Europe's political systems seem to be in better shape than our own, their safety nets more generous, their public debt generally lower, and their inclination to start wars greatly reduced. If we have to sacrifice a few unicorns for that, seems like a fair trade to me.
I grew up in Denmark and is used to the Scandinavian way of thinking all I am saying is that it has it's own issues and one of them is growth despite a few places.
In the hierarchical center model, the balance between economies and diseconomies of agglomeration lead to a pattern where smaller centers linked to the big center emerge; then these centers become large in their own right and growth goes on recursively. This is usually more clearly seen in cities (look up on Google Maps with the satellite photo layer: Berlin, London, Tokyo, Sao Paulo....) but some nations like Germany will apear to have this pattern too.
In the other model spatial growth is constrained on the one side by a coast or something like that, and has a vast, gradually developing frontier on the other hand. Brazil has one coast only and is like this. Rio de Janeiro is a major city next to a coast and is like this, Sao Paulo is the singular major city further inland and is the opposite of this (a cobweb).
The US has two coasts. And for reasons, the west coast started developing on its own, not as a tributary to the east coast. Flyover country could have grown in the cobweb hierarchical centers fashion, but what's the undeniable capital of the Midwest? Not to mention farm belts etc. and an agrarian economy propped up by subsidies, etc.
Civilization has typically been tied to the water. We have a Chicago-New Orleans-St. Louis triangle. My guess would be that the interstate highway system and container shipping have severely diminished its importance.
Not wrong though, eh?
I made bets on the outcome, but did not collect figuring that it would be ill-gotten gain and bad karma. If our city people had to hang out with their in-laws in Appalachia for a month every year, they would have seen it just as clearly.
It's the difference between being Facebook with 45% net income profit margins, and being a manufacturer in Ohio with 4% net income margins. If you're Facebook, you're drowning in opportunity and cash. Growth does that for you, in many cases it begets further easy growth. The manufacturer's scenario is rock and a hard place stagnation, and if they slip up even a bit, it's bankruptcy.
In 77 years, Arkansas has added one million people. They might add 20k to 30k per year in a good year.
West Virginia hasn't grown its population 84 years.
Mississippi has added one million people in a hundred years.
Ohio, Michigan, Pennsylvania have barely grown their populations in half a century.
Some of this is down to their mistakes, some of it is shit luck of getting slammed by very large macro economic forces, huge technology changes (whereas earlier technology changes had blessed those locations).
These states are perpetually trapped in a scenario where they can't afford to make the moves to attract sustained growth, and they can't grow because they can't afford to make those expensive moves. It's stagnation hell. The only likely way out, is a major technology inflection point, and being sure to catch the wave.
edit: Another way to put it is that Mississippi has doubled in population in 100 years - roughly 1.5 million to 3 million
And who knows - maybe if top talent can be enticed back to these places then the trends you describe above might start to reverse.
(Seriously. Not everyone wants to do the big city thing.)
The article doesn’t support your statement either. It’s basically a comparison of funding at Midwestern public schools versus expensive coastal private schools. E.g. they compare the endowments of midwestern publics to Harvard, etc., while leaving out U Chicago and Northwestern. Your last point is also wrong. Out of the handful of 5 states that spent more on universities in 2017 than 2008, 3 are in the Midwest. Most states cut funding, with no noticible pattern of the Midwest cutting more than the costs. MN cut about the same as MA and CT, IA and MO cut about the same as NJ.
They are anti net neutrality, anti efforts to combat climate change, and anti marijuana, but pro spending on police and pro asset forfeiture. Also, their legislators have had problems with teaching evolution and/or have wanted to introduce religion into public schools.
It's really an urban vs rural/suburban divide though, but enough to paint basically the states that vote Republican as backwards, because almost every time there a political issue coming up, they seem to be on the opposite side of where most young professionals, especially in science related fields are.
This isn't an overstatement either. I know these people. Their opinions are what someone told them to think. Almost completely void of logic. Fox news said some shit, so it must be true! This sounds exaggerated. It isn't.
Some guy was running for office and totally did the "Jesus, show me the way" campaign. Crosses on his election signs, the whole nine yards. He was neck in neck with the incumbent (who was well liked, I might add) just based on this crap. Until he got arrested for nearly beating a guy to death. Not very Jesus of him, is it?
As have I, and the sentiment is a silly caricature.
People vote against things that would clearly help them, because that's what everyone at church is doing.
Can you list some of these things?
As far as I can tell, the progressive legislative agenda has done nil to help anyone in the flyover country. Obamacare is a disaster, factories have been shuttered because they can't compete in a globalized economy (neither the left or right are at fault here), and progressive cultural values do not align with the moral and ethical stances of these people.
Not to mention, they are continually mocked, condescended too, and made fun of by coastal elites.
This isn't an overstatement either. I know these people.
I know them too, and you've painted a caricature.
Their opinions are what someone told them to think. Almost completely void of logic. Fox news said some shit, so it must be true! This sounds exaggerated. It isn't.
Oh, like almost every mainstream liberal that I know? CNN, ABC or MSNBC told them some shit, so it must be true.
Some guy was running for office and totally did the "Jesus, show me the way" campaign. Crosses on his election signs, the whole nine yards. He was neck in neck with the incumbent (who was well liked, I might add) just based on this crap. Until he got arrested for nearly beating a guy to death. Not very Jesus of him, is it?
So some crazy guy ran for office and lost. What's your point?
This is literally the only thing in your whole list that is "anti-intellectual". Everything else just stems from a different set of values than your own.
How has the midwest show themselves to be anti net neutrality? How have they shown themselves to be anti marijuana? Illinois and Michigan are in talks of legalizing it, and already have very light penalties on having it in small amounts. Subsidizing stadiums for sport? St Louis just lost the Rams to LA for refusing to build a stadium.
I think you need to stop painting anyone that has voted Republican in the past decade as a political enemy. Most of those issues you stated don't even seem that partisan.
To the anti-intellectual point, I would argue that while rural voters in Michigan might be somewhat anti-intellectual, they clearly get drowned out by the pro-intellectuals in the urban areas. Take a look at a county-by-county breakdown of voting sometime -- the entire state is red except for 4 or 5 counties, but the state often elects democrats to statewide office.
[0]http://www.businessinsider.com/richest-public-universities-i...
I also wouldn't claim Pittsburgh is anti-intellectual considering the startup scene and the universities in the area. The suburbs around Pittsburgh are a bit of a different story.
(Michigan State alone has larger enrollment than UMich and then there are quite a few more public universities and then also community colleges)
I grew up in Minnesota, so to me "Midwest" is Iowa, Wisconsin, Minnesota, the Dakotas, maybe Michigan and Illinois.
But the anti-intellectualism streak is really in the Rust Belt, like Ohio, Pennsylvania, Indiana, West Virginia, and sure, parts of Wisconsin, Illinois, Missouri, and Michigan.
The apparent contradiction of anti-intellectualism and high educational attainment is due to broad brush strokes in our definition of "Midwest." Minnesota especially doesn't fit into that mold.
Moral of the story: you guys need to get off the coasts once in a while.
In Illinois, the University of Illinois at Urbana-Champaign has been hit hard by funding shortfalls as well. This has been going on for years now since the state government cannot get its act together. The university is still great, but you have to wonder at what point the cuts will take their toll. A rising star professor may not want to stay at an institution that always needs to worry about funding and whether or not they need to furlough employees. At some point, the best researchers and teachers leave and go elsewhere.
Chicago, Detroit, Baltimore, etc. Most of the failing inner cities with bad schools and high crime rates have been run by democrats for decades. If anything, it is the far left that should realize that their policies to do not work long term.
So have the successful, thriving cities.
Are you really citing SF, New York, and Los Angeles as success stories. Those areas have some of the highest rates of homelessness in the US. In addition to the run away costs of living in those cities, they are certainly not models for success. Those examples don't help your argument...
The focus of my post was that it seems clear that economics is what forced those cities to crash. Look at Rust Belt cities (Milwaukee, Cleveland, Baltimore, Detroit, Buffalo, Gary) and you will find significant population decline and high crime rates. Trying to make it a political discussion brings in personal bias.
Economic policies from politicians influence economics. If policies are bad for business, jobs will leave, crime will rise and populations will decline. Economics don't happen in a vacuum. Most if not all of those declining cities have been consistently run by democrats
And so have most of the growing, thriving cities. Individual cities have very little say in global economic shifts. We are seeing this same story play out in Republican-controlled rural areas.
First some jobs leave (outsource or automation), then laborforce participation declines, next we see drug use increase, which makes more people unemployable, as a result employers leave the area and more jobs are lost. Then you go back to step 1 and re-run.
Trying to cast everything in a partisan light may be blinding you to the similarities.
includes - https://www.thoughtco.com/rust-belt-industrial-heartland-of-...
doesn't include - https://en.wikipedia.org/wiki/Rust_Belt
The Atlantic article reflected concerns about Midwest research spending. Since the Midwest has states that are both Democrat dominated and Republican dominated in politics, I'm not sure you can actually draw any partisan conclusions from that article.
(There is a political divide on research spending opinion per surveys [3], but even here, most Republicans either support increased scientific research spending, or keeping it at the same levels.)
[1] https://www.usnews.com/education/best-high-schools/articles/... [2] https://www.ed.gov/labor-management-collaboration/conference... [3] http://www.people-press.org/2017/04/24/how-republicans-and-d...
These investors are seeking returns. For the past 6 decades, a tiny area of the country provided great returns. The compacted nature of the “Valley” helped concentrate resources and grow companies.
But at some point there is less incremental benefit to stuffing one more tech startup into SF than there is looking “afield” to further reaches of the country.
This is a fantastic sign for people like me who live in lowly (but lovable) Columbia SC. For too long, the investment pool has been a drip, even while the talent pool grows.
Good job investors. We can’t wait to see you. And if I may, please don’t imply that you’re doing this for any reason other than maximized returns. We’re all adults here.
This group of people suggests to me that they're realizing that having so much of our economy concentrated in a few states is a political vulnerability that can be easily exploited by a demagogue.
With the amount of money sloshing around it is becoming increasing difficult to find places to generate alpha on investments. While people can be like Softbank and bet money on a unicorn becoming a super-unicorn but the risk reward is skewed.
Then there is this:
> In other words, if they discover a nascent but promising e-commerce company in Allentown, Pa., they will not only invest in it, but they might also help it establish a relationship with one of the fund’s investors — Mr. Bezos, for example — who might invest even more.
The other problem is that venture money wants "lottery tickets" rather than "sustainable businesses". This is a real problem because there are lots of businesses that cannot access startup capital because they don't have a "10x" story. Causing a large funding increase for "sustainable businesses" would employ far more people than generating one or two new unicorns.
Lots of companies follow the Israeli model: sales and money raising in SV, engineering elsewhere.
Tableau is a billion-dollar business in Provo, Utah, and is not the only big winner there.
Dyn built a half billion dollar business in Manchester, NH.
Nothing can compete with San Francisco—three of the biggest five tech co's are HQ'd there. But there's really very little keeping entrepreneurs from building a billion-dollar business anywhere, provided there's a decent university nearby.
It is MUCH, MUCH, MUCH harder to get funding, but if you can bootstrap, the world is your oyster.
However, we aren't seeing the same happen with UIUC and the state of illinois or University of Michigan with detroit.
Seems to me that China, Russia, and Europe are focused on "rolling their own" so to speak--especially after the Snowden leaks. China has already made a lot of progress on that front. India will probably join the party if the visa/offshoring pipeline dries up.
If the big 4/5/6 finally end up with some viable international competition, I don't think minting more tech startups is a particularly good long-term plan.
Another problem with investing in "flyover" states is that you are spreading your investment across many states and cities, individually any one of them lack the capital and talent concentration to compete with coastal cities. A much better strategy is probably to focus the entire investment portfolio in Chicago or Detroit.
Finally, when you scale your startup to 10s of billions, you will need to attract immigrant talent. Which is much easier to do in the coasts.
Now that the traditional startup hotspots are over saturated with investors, those who can't set the best terms for themselves in those areas are finally realizing they can likely get better terms in places that aren't currently competing as heavily for VC money.
The cost of living is lower here (the Midwest) and outside the coasts in general. It's easier to bootstrap. There's plenty of successful startups that started in the Midwest, they're just not the Big 3.
>individually any one of them lack the capital and talent concentration to compete with coastal cities. A much better strategy is probably to focus the entire investment portfolio in Chicago or Detroit
And create another SV situation where all of the talent is squeezed into one small geographic area (granted, with less insane building regulations than SV), in an age where we can effectively work from anywhere in the world that we want to? Hard pass.
>Finally, when you scale your startup to 10s of billions, you will need to attract immigrant talent. Which is much easier to do in the coasts.
I'm not convinced that we actually lack Americans capable of doing the jobs we need to do. Immigration has been increasing in the past 10 years or so in the Midwest though, despite still lagging behind the coasts, for whatever that's worth.
How about weapons based start-ups?
There are a fair few micro-armories that do firearm based products out of TX. Investors would be mindful to watch out for them. Remember that gun with the gyrometers that would turn you into a sniper? Or the 3-D printed guns? Or the 'smart' guns? You may/not be making the world a better place, but you will change it.
Property would be the new stock; hostile takeovers would be fights over the city-government board.
Investors would profit when they managed to increase the value of the properties they own. So they start building better public schools, improve the local infrastructure, make the downtown a bit more appealing, etc. -- Hell, why not build a community college, an actual communal one where anyone can freely attend, and have that as the new "church"?
Of course there's the issue with gentrification -- which I'm not sure is avoidable given the influx of capital -- but if equal access to these new resources is guaranteed, an investment in cities may perhaps produce compound interest not only for the investors but also for the residents long term.
Thoughts?
Additionally, some less 'saleable' improvements end up being included as concessions in negotiation with the local municipal authority to get the development plan approved.
Public transit financing in greenfield areas works similarly.
Somewhat tangentially, I also feel like the following ideas would help spread the Silicon Valley fortunes across the US better:
1.) Mainstream the idea of prefab housing built in flyover states/cities and transported to the coasts by truck/rail. It seems incredibly promising. Construction workers can work in a comfortable climate controlled indoor environment, work regular hours at a steady pace, no fighting traffic, live in cost appropriate areas. Basically car/airplane building techniques/uniformity applied to houses with built-in limits on how far it can be outsourced to foreign companies (at some point transportation costs start to outweigh outsourcing advantages).
Modular developer working with Google with housing built in East Bay/Sacramento: Factory_OS at Mare Island https://vimeo.com/228412494
Utah based builder: http://www.guerdonmodularbuildings.com/modular-now-marriotts... with a building in San Jose: http://www.palisadebuilders.com/projects/domain/
2.) FAANG and WeWork should invest in always on, life-size, fiber-to-fiber Telepresence like video conferencing systems that connect dedicated hallways/open office/meeting spaces Silicon Valley to their corresponding spaces in remote offices instead of attempting to do Google Fiber residential installs to a handful of lucky chosen people. Always on means meetings start immediately without fumbling with the meeting configuration UI. Surreptitious hallway meetings can occur. This would actually work really well for offices in the same Pacific Timezone (i.e. Fresno, Gilroy, Bakersfield, Reno, Las Vegas).
Here's an example connection between MIT and Stanford. http://tech.mit.edu/V131/N31/wormhole.html