Silicon Valley VCs tour the Midwest

I live in Oshkosh, WI. We had Steve Case come to Green Bay last year, but it seemed mostly pomp, and he only invested in a single business that was a sure thing anyway.

I've been developing animation software for 2 years, and am set on getting profitability without help, mostly because this is probably necessary anyway, but also because it'll send the message to other folks in town that they don't need an external 'go-ahead' to start a business that works.

I think part of the reason VC money isn't working as well in the valley, is that people are more obsessed with raising money than they are with making their business work.

There's a certain uncomfortable fatalism that comes when you take the mindset that no one is coming to save your business. Not now, not ever. It's the same feeling you get when you have a software bug, and you can't look up the answer on google, because you're so deep into your own territory, that the question wouldn't make sense to anyone else.

I welcome money, and I welcome interest, however, I think some people just need to steel themselves and launch without help.

Some people need money, and other people need to just do it. That goes for every area, but in the Midwest, sometimes we get this "we need to copy the big cities" mentality, and I want to stop that, since 99% of the time, no one is coming to the rescue, even if I'd like to see more companies coming in, and lowering that %.

Honestly, this story has been repeated multiple times in the New York Times and other publications.

When you see that happening，it reeks of PR. The fingerprints are there - someone wants you to think that Silicon Valley VC are acting differently.

Reading the article, more red flags. This is a whole lot of deliberate signaling and posturing. Smells like PR, walks like PR, flops around on the dock like freshly caught fake news PR.

So why would prominent Silicon Valley VC engage highly placed PR services who can plant their self serving fake news into the New York Times (if you believe the New York Times is above this, I have very bad news for you)?

Answer: Politics.

These Bay Area VCs want one thing: Special government privileges from desperate middle American cities. Like Jeff Bezos, they want cities to beg for their money. Tax cuts, tax breaks, free real estate, special privileges, pork, tax incentives.

These articles are becoming common because this is a campaign to influence local politicians in these states, prepare the groundwork for later stages in their campaign.

Just reading this, it stinks so highly of signaling, the fakeness of the quotes are so over the top. The quotes have this fake “oh gee, we are just these crazy VCs who never thought of middle America before, what is a milk shake? How do I milk a cow?” Quality to them they cannot possibly be real.

Who is going to pay for all the special privileges these VCs are going to get from state and local governments? Hint: Tax payers.

The real title of this article should be: “Silicon Valley VCs identify dumb yokels in middle America willing to subsidize their future bullshit.” That’s the truth.

SV relies on dense loci of talent in order to function, Chicago is really the only city that has this. The melting pot of ideas, poaching, engineering etc is a huge reason for its success.

While I understand SV is looking increasingly unattractive for cheap big bets, I don't think this will play out like these firms expect.

It's not about the money, it's about the culture that SV cultivated. And while parts of it are toxic, other parts of it are enormously successful and notoriously hard to replicate.

It also doesn't help that every state in the midwest has been slashing educational budgets and in some states has enacted almost a war on education. I think the attitude of "SV toxic culture" is ironic, after having grown up in the midwest and seen horrible racism, anti-intellecutalism, anti-free speech measures, and all others kinds of issues.

I remember Detroit when there weren't any VC's downtown and the startup scene was spread among the suburbs.

Dan Gilbert set the Madison building as ground zero for a startup neighborhood. He even wanted that stretch of Woodward Avenue, Detroit's main street, renamed there as Webward Avenue. He filled the Madison with startups that he funded. When they outgrew it they moved to other building he owned nearby.

Now that zone extends for ten or fifteen blocks, I know because I visit my friends down there regularly. One guys vision is all it took.

Paul Graham had this thesis that there was untapped potential by targeting young people. I've always believed that same principle could apply to the midwest. Where I grew up everyone wanted to be an entrepreneur. Not because it was hip, but because there were no good jobs (the town was built around a factory that closed down in the 80's).

The exceptional talent moved to the coasts, but what's left is still pretty persistent, and given that the trends of technology have been to lower the barriers to entry in startups, "exceptional talent" isn't required. In fact what the midwest has is a plentiful supply of ambitious, and persistent people... which arguably is more valuable.

Going through YC in 2014 and every single VC asked (and were perplexed) when we told them we were not moving our company to SF/ SV.

That strategy was effectively read as our team signaling we weren't "going for it".

It was joked about how we would have to do board meetings in SF because people wouldn't fly.

I wonder if times have changed or rents just finally got too expensive for the younger tier of VCs.

I’m in a weird situation in that I started my education and career on the West Coast, but ended up on the Midwest a decade later for personal reasons. I do have to say that the business culture differences are astounding. Obviously I’m generalizing, but Midwest business culture is incredibly risk averse and VC money tends to flow to niche high research fields that the investor either came from or understands really well (e.g. Biotech). I’ve started to see some small changes with some funds looking to invest in “general” startups, but the capital is astonishingly weak.

Honestly though, I’ve come to appreciate it (even though it can drive me batty - Midwest “nice” is a real thing and can be a severe hindrance to effective communication), as I think it forces a level of creativity and resiliency on me that I didn’t need in the West Coast. Finally the tech community out here is so small that people really genuinely seem to look out for one another and be genuinely interested in what other people are doing as you never know where the next job is going to come from.

Somehow I feel like NYTimes writers have mastered the art of "it-almost-sounds-sincere-but-nothing-like-skewering-with-an-undercurrent-of-sarcasm". The whole recounting of the "trappings of hipsterdom", the mentions of the vegan donuts and coal-infused kombucha, the portraying of VCs on a "safari". Granted, not so sure if the target is the hipster-posh VCs or the local yokels, but for this article I could appreciate a more straightforward style.

How many of this “Silicon Valley comes to Midwest” article do we need ? It’s all feel good, but numbers don’t support it. And this PR move has been happening for 3-4 years at least. Just other day DoorDash raised $535mn and it is based in Palo Alto. SV startups continue to raise giant sums, grow businesses at global scale, and make their investors money.

> The trip, which took place on a luxury bus outfitted with a supply of vegan doughnuts and coal-infused kombucha, was known as the "Comeback Cities Tour."

I live in Detroit. It’s a city that has been pushed to the edge of oblivion... and then into oblivion for several decades. It's fantastic that thers investment, but at the same time, stuff like this feels so incredibly patronizing. "It's nicer than San Francisco!" Yes, there are, in fact, nice buildings outside of San Francisco, even in Detroit.

Midwestern cities don't exist solely to make money, and I'm rather disturbed that they're seen more and more as nothing but investment vehicles. Detroit is 80% black. We didn’t even have working street lights until a few years ago (shout out to the Public Lighting Authority). I just look at San Francisco and the entire Bay Area, and I think to myself: "we don't want that here". Detroit isn't just cheap rent and exposed brick. It's grit and soul and pain and culture and 300+ years of history. I'm sure these investors got a lovely tour. Did they talk about the 1967 riots? Did they show them northwest Detroit, where entire city blocks are basically becoming urban prairie? Did they talk to the regular folks living and working in the city for generations? They’re lovely people, and they live here too. They're as much a part of Detroit as the Madison Building or New Center or Dan Gilbert or the rotting houses or the rich history.

> When you invest in a San Francisco start-up, “you’re basically paying landlords, Twilio, and Amazon Web Services,” said Ms. Bannister of Founders Fund, referring to the companies that provide start-ups with messaging services and data hosting.

There must be a few other companies missing from this list..

Silicon Valley success is Midwestern success. I would wager that the majority of engineering talent working in the Bay Area was born and raised in the Midwest.

I love how they make it sound like the Midwest is another country, like they visited Mumbai or something.

"When you invest in a San Francisco start-up, “you’re basically paying landlords, Twilio, and Amazon Web Services,” said Ms. Bannister of Founders Fund"

Only the first part "landlord" it's affected by location.

There seems to be no evidence that startups are significantly growing anywhere outside of the already well-known tech cities. And the main reason is because most of the talent that really wants to work in cutting-edge tech takes the initiative and relocates there to be with all the other people that really want to work in tech (barring some people who are taking care of sick or aging relatives, etc.) I'm not saying another city couldn't eventually displace SV, but it would require a huge shift in network effects.

Also, the cost of living argument is mostly nonsense. For large tech companies, even with spending $6,000 a month on an apartment, you still have a lot more left over after California taxes than the best tech employers in the Midwest or Southeast. When your total comp is 3x what you would make in an "affordable" city, does it really matter that rent is 1/3 of your income?

Every time I read an article about VCs it is either about chasing trends or something bad. I guess this is what separates mature investors from corporate executives.

At IETF Dallas 2015, I spoke to some people who had been west coast, now located there. They all said the primary driver for them was cost-of-living. Same salary could translate to a huge disposable income result, relocating. For the companies (this was mainly Datacenter and comms people) the RTT to east and west coast about equalizes. So, you can either have two DCs, one for each major population center, or you can have a bigger investment somewhere in the middle.

Relocation expense against first year hire costs is pretty big. If you could shed $20k+ of excess cost to make somebody work for you, and get east-vs-west quality to a median line, and get reasonable land rent for DC and offices, wouldn't you talk to your CFO and board about it?

"...a city with more intellectual diversity"

I'm stunned the NYT printed this. In fact, I'm surprised the NYT printed a lot of the article.

I owe them another look.

I think its great VCs are expanding their worldview. I think there are definitely good investment opps outside of SV. I think its a stretch to say SV is over. Yes living expenses and salaries are crazy but there is a success network here that is reinforcing. In order for SV to be over it would take a new annoited tech hub, like we saw SF do recently. Many companies and jobs moved up from SV to SF. Saying there are now 100 smaller tech hubs in the Midwest South etc does nothing to combat SVs network effect. It is still the densest (albeit most costly). So much of the new talent and entrepreneurs will naturally flock there to maximize their chance of success.

>When you invest in a San Francisco start-up, “you’re basically paying landlords, Twilio, and Amazon Web Services,” said Ms. Bannister of Founders Fund, referring to the companies that provide start-ups with messaging services and data hosting.

This is the most absurd realization. Literally 50% of your startup's funds will be sent directly to landlords if you locate in the bay area.

Is there really a lot going on in South Bend? Detroit I can believe, but some of those other cities made me think "there are other mid-west cities that would have been much better choices!"

Midwest, in this case, seems to equal Ohio and Michigan?

Not so thinly veiled Zillow product placement article.

I guess now that they have used up all the social capital in SF, they need to broaden their horizons and look for more people to make their slaves. I wonder what terms they’ll offer to some naive kid in Ohio? They could probably get away with a lot more and do exponentially more damage than what they have done here.