7 ms·

How Early Exit Disease Stunts the Growth of Midwest Startup Communities

58 points by mtviewdave 11y ago

strebler 11y ago
Perhaps if the investors in these Midwest startups enabled founders to take some funds off the table from a round, it could help to alleviate this problem. If founders have all the stress of low salary + not much savings + lots of work to do + maybe starting a family, of course a $10M exit starts to look good. But if they're achieving good results, why not give the founders a small taste of the billion dollar carrot?
- tfe 11y ago
  The article actually suggests this near the end, and discusses some reasons it doesn't happen currently.
Jun8 11y ago
Here's a Chicago Tribune story about Chicago's startup drain that was on the front page recently: http://www.chicagotribune.com/news/globalcity/ct-global-city-talent-drain-met-20151023-story.html http://www.chicagotribune.com/news/globalcity/ct-global-city... It seems the most important issue is the chicken-and-egg problem: Chicago doesn't have a large magnate company with lots of b/millionaire founders that then fund the ecosystem. Groupon was once thought to be just that company but hasn't turned out good. The other problem seems to be plain and simple: being in the middle of nowhere doesn't help. From the article: "The University of Illinois at Urbana-Champaign turns out more engineering graduates than any U.S. school except the Georgia Institute of Technology, yet no tech scene has grown around it — or 140 miles north in Chicago. Fewer than half of these engineers remain in the state while 10 to 15 percent have gone to California in each of the past five years" For a young person, there are many more opportunities to do sports (mountain biking, hiking, skiing, kayaking) in other places. As a final point: Chicago, long the city of broad shoulders, is not famous for its counterculture, like Seattle or Portland is, so loses that chance for attracting people, too.
- toomuchtodo 11y ago
  The only reason I'm still in the Chicago suburbs is because I work for a startup remotely.
- klunger 11y ago
  Yes yes yes. I am from the Chicago burbs and a UIUC engineering alum ('09). Even though I would have preferred to move back to Chicagoland, there were simply not any relevant/compelling jobs in that area, or really anywhere else in the state. Around graduation, I got offers in several different states and inevitably moved. Most of my classmates - at least the ones who decided to continue with engineering after graduation - did the same. ps - Chicago might not be famous for counter-culture, but it has amazing live comedy and various other fun cultural trends. It is a generally nice place to live and I would have preferred to move back after graduation, if there had been any good work for me there.
  - rhino369 11y ago
    I think there is a real opportunity for companies to exploit the talent that is generated from Chicago and nearby universities. Chicago doesn't just have Illinois, but UW Madison, Purdue, UMich, Northwestern, etc. The Midwest is churning out tons of qualified engineers. And the cost and quality of life is dollar for dollar the best in America. Also the engineering culture is more geared to industrial and mature technology companies and less to software. There are ton of engineers doing jobs that are vital but HN would probably consider boring. That might explain why there is less entrepreneurship. Engineers have work experience in and are exposed to industries that don't easily lend themselves to entrepreneurship.
- trentmb 11y ago
  A related /r/UIUC thread: https://www.reddit.com/r/UIUC/comments/3qh5ja/dean_cangellaris_responds_to_trib_article_tech/cwffe3g https://www.reddit.com/r/UIUC/comments/3qh5ja/dean_cangellar...
- x0x0 11y ago
  Also, the work is bad. I recently took a look chicago's craigslist. One machine learning job. For a company in Berkeley. The majority of java jobs were in CA [1]; of those remaining, perhaps one looked interesting. Rails has a similar story [2]. Indeed has a bit more stuff but the pickings are slim; lots of the jobs for eg rails are attempts at relos elsewhere. Of the jobs actually in Chicago, a common refrain is senior and/or 3-5 years of experience. Experience which seems hard to get in Chicago, so instead of getting people to stay, they need them to move back. [1] http://chicago.craigslist.org/search/jjj?query=java http://chicago.craigslist.org/search/jjj?query=java [2] http://chicago.craigslist.org/search/jjj?query=ruby+on+rails http://chicago.craigslist.org/search/jjj?query=ruby+on+rails [3] https://angel.co/salaries https://angel.co/salaries
p4wnc6 11y ago
I live in the Midwest and would happily consider living here long-term in order to work at jobs like these, except that the jobs are generally terrible. They don't pay well, even by lower-cost-of-living Midwest standards. Yet they do all of the same nonsense that companies do in larger urban areas: open-plan office layouts (even when private working space out here is much cheaper than the already cost-effective prices you'd pay for it in a city), Agile/Scrum crap, various over emphasized alcohol-based social functions, ping pong tables, etc. Why would a talented person stay around here for that? Most of us who like it out here like it because it's different than Silicon Valley or New York, and it suits our preference better. You're not going to win with the talented people in the Midwest if you just try to make it feel like Silicon Valley Jr. -- you have to be different, with a whole different ethos that's a bit more about the style of life here. Many people choose to live in the Midwest because they like having more personal space, they want to raise a family, they value frugality and consider cost-of-living carefully, they might possibly actually want to own property some day, and/or they just may not personally derive much value from urban amenities. But I've never seen start-ups or tech businesses here aim at providing a kind of working life that affords these values. It's all still the same "work hard play hard" bullshit as if by making yet another app or something-as-a-service, we're going to become masters of the fucking universe or something. That stuff is already stupid even in the urban tech hubs. It just comes off even dumber when you're farther away from the tech hubs. At any rate, I question the article's claim that there's a talent problem in the Midwest. The problem isn't that there are no talented people. The problem is that companies are not providing the opportunity for a lifestyle that matches up with the values of someone who would prefer to live in the Midwest. If I have to work a million hours, put up with aggressive deadline culture, deal with Agile/Scrum "sprint cycle" idiocy, and feign social interest in rock climbing while I code or joining the same people I've been working with for 10 straight hours at a bar for 2 more hours of trite conversation where I'll be judged by how much overt social signalling my alcoholic beverage of choice emits, then fuck it. I'm just going to move to a big city and demand a big city wage and career opportunities. On the other hand, if you can give me what the big city folks can't, like say a private office where I can actually get work done and feel productive instead of listening to the person at the desk next to me chew potato chips, or you can provide me with a work environment where 40 hours is exactly all that's expected, and also is exactly what is rewarded (i.e. you encourage workers to have a substantial life outside of work), and I don't feel like you're just doing a bunch of stuff like whisky night and ping pong to try to affiliate with the cool kids in SV, then we could talk.
shanemhansen 11y ago
I know multiple amazing developers in the midwest. They work remotely for bay area companies.
deleted 11y ago
[deleted]
deleted 11y ago
[deleted]
phkahler 11y ago
YC used to do one batch in CA and one out east each year. I see they've moved both summer and winter to the west coast now. Was it that hard to get established in two places that even they couldn't do it?
- nostrademons 11y ago
  It was because Paul and Jessica were having a kid, and it's disruptive to a child (not to mention quite a hassle) to shuttle between two coasts every 6 months. Palo Alto won out as the nice neighborhood to raise a family in. When YC discontinued the Boston SFP, it was still largely run by the original founders and didn't have many (any?) additional partners.
timrpeterson 11y ago
This also explains why nobody in the Midwest values academia, value isn't imminent unlike hauling around rocks.
- tjr 11y ago
  What is your threshold for valuing academia?
- grillvogel 11y ago
  what are you talking about
  - timrpeterson 11y ago
    People in Midwest, I lived there from aged 0-22, value tangible things with present day value.
- will_pseudonym 11y ago
  Here's some fantastic examples of my home state, Kansas, "valuing" academia:' [Kansas school funding cuts mean summer comes uncomfortably early: Governor Sam Brownback’s $51m budget cut affects at least eight districts and thousands of students as he ‘experiments’ with reducing income tax](http://www.theguardian.com/us-news/2015/may/05/kansas-education-funding-early-summer-sam-brownback http://www.theguardian.com/us-news/2015/may/05/kansas-educat...) [Budget cuts would cost largest Kansas school districts $67M](http://fox4kc.com/2015/06/09/budget-cuts-would-cost-largest-kansas-school-districts-67m/ http://fox4kc.com/2015/06/09/budget-cuts-would-cost-largest-...) It has been a shameful year for Kansas, and with teachers all up my family line, my heart goes out to all those families and teachers who are affected by these cuts, let alone the long reaching impacts to those students who have had their education cut short, literally.
applecore 11y ago
The simple explanation for this phenomenon: bad founders tend to sell early (if they succeed at all).
twoquestions 11y ago
I think Midwesterners are just too conservative for a startup scene to take root here. Venture capital, computers in general even are too new of ideas to depend on. We're used to industries springing up around us, then running away to China or California, so investing in a 10-year plan when the next market crash could destroy the industry utterly seems kind of stupid. Besides, as the article said, $10M is more than enough to look down on your neighbors for the rest of your life, what more benefit could $10B give you?
- jerf 11y ago
  Well, conservative's a hard call. It's not so conservative that startups or new businesses are impossible, and it's not like everyone you encounter socially will look befuddled at you if you claim to be working for yourself. It's still the US here, and not some culture completely unfamiliar with the entire concept of working for yourself. It's just that if you ask anyone around here "Would you like $5 million now, or a chance at an unknown percentage of somewhere between $5 billion and $0 in 10 years?", even the entrepreneurial types are going to take that first one most of the time. Interesting thought: $5million is totally "f you" money around here in the Midwest; that's retire instantly for a fairly nice lifestyle, plus a quite healthy buffer. In Silicon Valley, that's still nothing to sneeze at, but it'll certainly seem like a lot less; a lot more people for your monkey brain to see around you that are still richer, a lot of single houses that can soak up that entire fortune and more, etc. You could retire instantly, but you'll have a lot more pulling you away. I wonder if that has any influence in the results? And of course there's also the fact that anyone who won't settle for anything less than the % at billions above will move to Silicon Valley. There's a lot of places in the world where you can make a successful startup, sometimes HN even has articles pointing that out, but there's not very many places you can get the rocket-powered VC capital to either grow a unicorn horn or die trying.
slyall 11y ago
Exactly echos complaints about the New Zealand startup scene. The catch phrase here is "The three B" meaning Boat, Bach (holiday house) and BWM. Lots of founders sell out for just $10-$30 million which sets them up nicely but often means the startup/product gets buried inside a big company and jobs move overseas
metalliqaz 11y ago
When I read articles like this, all I can think about is Pretty Woman. When the main character laments, "What do we do? We don't make anything." And the response, "We make money." I don't care for the culture of start-sell-repeat.
karmicthreat 11y ago
This hits close to home. I am a software developer in Grand Rapids, Mi and we have a so so burgeoning startup scene here. We have a couple incubators here but they are not particularly great and their money is expensive with few useful benefits. We have a decent concentration of software developers in town. Cheap office space and ok rents make boot strapping a bit easier. But like everywhere else we don't have nearly enough software developers here on the founders need to start scaling. I can think of a number of companies in town that are having problems due to a lack of devs. But at least we have large tech meetup scene that likes to share.

58 points by mtviewdave 11y ago

Perhaps if the investors in these Midwest startups enabled founders to take some funds off the table from a round, it could help to alleviate this problem. If founders have all the stress of low salary + not much savings + lots of work to do + maybe starting a family, of course a $10M exit starts to look good. But if they're achieving good results, why not give the founders a small taste of the billion dollar carrot?

tfe 11y ago
The article actually suggests this near the end, and discusses some reasons it doesn't happen currently.

Jun8 11y ago

Here's a Chicago Tribune story about Chicago's startup drain that was on the front page recently: http://www.chicagotribune.com/news/globalcity/ct-global-city-talent-drain-met-20151023-story.html http://www.chicagotribune.com/news/globalcity/ct-global-city... It seems the most important issue is the chicken-and-egg problem: Chicago doesn't have a large magnate company with lots of b/millionaire founders that then fund the ecosystem. Groupon was once thought to be just that company but hasn't turned out good. The other problem seems to be plain and simple: being in the middle of nowhere doesn't help. From the article: "The University of Illinois at Urbana-Champaign turns out more engineering graduates than any U.S. school except the Georgia Institute of Technology, yet no tech scene has grown around it — or 140 miles north in Chicago. Fewer than half of these engineers remain in the state while 10 to 15 percent have gone to California in each of the past five years" For a young person, there are many more opportunities to do sports (mountain biking, hiking, skiing, kayaking) in other places. As a final point: Chicago, long the city of broad shoulders, is not famous for its counterculture, like Seattle or Portland is, so loses that chance for attracting people, too.

toomuchtodo 11y ago
The only reason I'm still in the Chicago suburbs is because I work for a startup remotely.
klunger 11y ago
Yes yes yes. I am from the Chicago burbs and a UIUC engineering alum ('09). Even though I would have preferred to move back to Chicagoland, there were simply not any relevant/compelling jobs in that area, or really anywhere else in the state. Around graduation, I got offers in several different states and inevitably moved. Most of my classmates - at least the ones who decided to continue with engineering after graduation - did the same. ps - Chicago might not be famous for counter-culture, but it has amazing live comedy and various other fun cultural trends. It is a generally nice place to live and I would have preferred to move back after graduation, if there had been any good work for me there.
- rhino369 11y ago
  I think there is a real opportunity for companies to exploit the talent that is generated from Chicago and nearby universities. Chicago doesn't just have Illinois, but UW Madison, Purdue, UMich, Northwestern, etc. The Midwest is churning out tons of qualified engineers. And the cost and quality of life is dollar for dollar the best in America. Also the engineering culture is more geared to industrial and mature technology companies and less to software. There are ton of engineers doing jobs that are vital but HN would probably consider boring. That might explain why there is less entrepreneurship. Engineers have work experience in and are exposed to industries that don't easily lend themselves to entrepreneurship.
trentmb 11y ago
A related /r/UIUC thread: https://www.reddit.com/r/UIUC/comments/3qh5ja/dean_cangellaris_responds_to_trib_article_tech/cwffe3g https://www.reddit.com/r/UIUC/comments/3qh5ja/dean_cangellar...
x0x0 11y ago
Also, the work is bad. I recently took a look chicago's craigslist. One machine learning job. For a company in Berkeley. The majority of java jobs were in CA [1]; of those remaining, perhaps one looked interesting. Rails has a similar story [2]. Indeed has a bit more stuff but the pickings are slim; lots of the jobs for eg rails are attempts at relos elsewhere. Of the jobs actually in Chicago, a common refrain is senior and/or 3-5 years of experience. Experience which seems hard to get in Chicago, so instead of getting people to stay, they need them to move back. [1] http://chicago.craigslist.org/search/jjj?query=java http://chicago.craigslist.org/search/jjj?query=java [2] http://chicago.craigslist.org/search/jjj?query=ruby+on+rails http://chicago.craigslist.org/search/jjj?query=ruby+on+rails [3] https://angel.co/salaries https://angel.co/salaries

p4wnc6 11y ago

I live in the Midwest and would happily consider living here long-term in order to work at jobs like these, except that the jobs are generally terrible. They don't pay well, even by lower-cost-of-living Midwest standards. Yet they do all of the same nonsense that companies do in larger urban areas: open-plan office layouts (even when private working space out here is much cheaper than the already cost-effective prices you'd pay for it in a city), Agile/Scrum crap, various over emphasized alcohol-based social functions, ping pong tables, etc. Why would a talented person stay around here for that? Most of us who like it out here like it because it's different than Silicon Valley or New York, and it suits our preference better. You're not going to win with the talented people in the Midwest if you just try to make it feel like Silicon Valley Jr. -- you have to be different, with a whole different ethos that's a bit more about the style of life here. Many people choose to live in the Midwest because they like having more personal space, they want to raise a family, they value frugality and consider cost-of-living carefully, they might possibly actually want to own property some day, and/or they just may not personally derive much value from urban amenities. But I've never seen start-ups or tech businesses here aim at providing a kind of working life that affords these values. It's all still the same "work hard play hard" bullshit as if by making yet another app or something-as-a-service, we're going to become masters of the fucking universe or something. That stuff is already stupid even in the urban tech hubs. It just comes off even dumber when you're farther away from the tech hubs. At any rate, I question the article's claim that there's a talent problem in the Midwest. The problem isn't that there are no talented people. The problem is that companies are not providing the opportunity for a lifestyle that matches up with the values of someone who would prefer to live in the Midwest. If I have to work a million hours, put up with aggressive deadline culture, deal with Agile/Scrum "sprint cycle" idiocy, and feign social interest in rock climbing while I code or joining the same people I've been working with for 10 straight hours at a bar for 2 more hours of trite conversation where I'll be judged by how much overt social signalling my alcoholic beverage of choice emits, then fuck it. I'm just going to move to a big city and demand a big city wage and career opportunities. On the other hand, if you can give me what the big city folks can't, like say a private office where I can actually get work done and feel productive instead of listening to the person at the desk next to me chew potato chips, or you can provide me with a work environment where 40 hours is exactly all that's expected, and also is exactly what is rewarded (i.e. you encourage workers to have a substantial life outside of work), and I don't feel like you're just doing a bunch of stuff like whisky night and ping pong to try to affiliate with the cool kids in SV, then we could talk.

shanemhansen 11y ago

I know multiple amazing developers in the midwest. They work remotely for bay area companies.

deleted 11y ago

[deleted]

deleted 11y ago

[deleted]

phkahler 11y ago

YC used to do one batch in CA and one out east each year. I see they've moved both summer and winter to the west coast now. Was it that hard to get established in two places that even they couldn't do it?

nostrademons 11y ago
It was because Paul and Jessica were having a kid, and it's disruptive to a child (not to mention quite a hassle) to shuttle between two coasts every 6 months. Palo Alto won out as the nice neighborhood to raise a family in. When YC discontinued the Boston SFP, it was still largely run by the original founders and didn't have many (any?) additional partners.

timrpeterson 11y ago

This also explains why nobody in the Midwest values academia, value isn't imminent unlike hauling around rocks.

tjr 11y ago
What is your threshold for valuing academia?
grillvogel 11y ago
what are you talking about
- timrpeterson 11y ago
  People in Midwest, I lived there from aged 0-22, value tangible things with present day value.
will_pseudonym 11y ago
Here's some fantastic examples of my home state, Kansas, "valuing" academia:' [Kansas school funding cuts mean summer comes uncomfortably early: Governor Sam Brownback’s $51m budget cut affects at least eight districts and thousands of students as he ‘experiments’ with reducing income tax](http://www.theguardian.com/us-news/2015/may/05/kansas-education-funding-early-summer-sam-brownback http://www.theguardian.com/us-news/2015/may/05/kansas-educat...) [Budget cuts would cost largest Kansas school districts $67M](http://fox4kc.com/2015/06/09/budget-cuts-would-cost-largest-kansas-school-districts-67m/ http://fox4kc.com/2015/06/09/budget-cuts-would-cost-largest-...) It has been a shameful year for Kansas, and with teachers all up my family line, my heart goes out to all those families and teachers who are affected by these cuts, let alone the long reaching impacts to those students who have had their education cut short, literally.

applecore 11y ago

The simple explanation for this phenomenon: bad founders tend to sell early (if they succeed at all).

twoquestions 11y ago

I think Midwesterners are just too conservative for a startup scene to take root here. Venture capital, computers in general even are too new of ideas to depend on. We're used to industries springing up around us, then running away to China or California, so investing in a 10-year plan when the next market crash could destroy the industry utterly seems kind of stupid. Besides, as the article said, $10M is more than enough to look down on your neighbors for the rest of your life, what more benefit could $10B give you?

jerf 11y ago
Well, conservative's a hard call. It's not so conservative that startups or new businesses are impossible, and it's not like everyone you encounter socially will look befuddled at you if you claim to be working for yourself. It's still the US here, and not some culture completely unfamiliar with the entire concept of working for yourself. It's just that if you ask anyone around here "Would you like $5 million now, or a chance at an unknown percentage of somewhere between $5 billion and $0 in 10 years?", even the entrepreneurial types are going to take that first one most of the time. Interesting thought: $5million is totally "f you" money around here in the Midwest; that's retire instantly for a fairly nice lifestyle, plus a quite healthy buffer. In Silicon Valley, that's still nothing to sneeze at, but it'll certainly seem like a lot less; a lot more people for your monkey brain to see around you that are still richer, a lot of single houses that can soak up that entire fortune and more, etc. You could retire instantly, but you'll have a lot more pulling you away. I wonder if that has any influence in the results? And of course there's also the fact that anyone who won't settle for anything less than the % at billions above will move to Silicon Valley. There's a lot of places in the world where you can make a successful startup, sometimes HN even has articles pointing that out, but there's not very many places you can get the rocket-powered VC capital to either grow a unicorn horn or die trying.

slyall 11y ago

Exactly echos complaints about the New Zealand startup scene. The catch phrase here is "The three B" meaning Boat, Bach (holiday house) and BWM. Lots of founders sell out for just $10-$30 million which sets them up nicely but often means the startup/product gets buried inside a big company and jobs move overseas

metalliqaz 11y ago

When I read articles like this, all I can think about is Pretty Woman. When the main character laments, "What do we do? We don't make anything." And the response, "We make money." I don't care for the culture of start-sell-repeat.

karmicthreat 11y ago

This hits close to home. I am a software developer in Grand Rapids, Mi and we have a so so burgeoning startup scene here. We have a couple incubators here but they are not particularly great and their money is expensive with few useful benefits. We have a decent concentration of software developers in town. Cheap office space and ok rents make boot strapping a bit easier. But like everywhere else we don't have nearly enough software developers here on the founders need to start scaling. I can think of a number of companies in town that are having problems due to a lack of devs. But at least we have large tech meetup scene that likes to share.