Techies Pitch Obama on Building Startups Outside the Valley

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It’s easy to make Jacob Hsu gush about the wonders of Baltimore. The former Silicon Valley executive moved to the Charm City in January 2017, to become CEO of Catalyte, a company that develops software using teams of non-traditional, algorithm-identified engineers. Once in Baltimore, Hsu was overwhelmed by the talent. He could work with city leaders and executives; he could recruit high-up federal employees—opportunities that would be impossible in the Bay Area.

And once he shook off his fanboy nerves, he was ready to tell President Barack Obama all about the many opportunities of Baltimore’s tech scene.

Hsu, along with a handful of entrepreneurs, had joined the former president in his Washington, DC, office this week to kick off the Rise of the Rest summit. Rise of the Rest aims to bring resources to people like Hsu, who are building technology companies in places outside of Silicon Valley that aren’t saturated with tech companies. AOL founder Steve Case started the group in 2014 as a kind of stunt-fund: Case road-tripped around the country, visiting cities like Omaha and Salt Lake City that don’t usually make the VC circuit, highlighting innovative local businesses and making investments through Revolution, his venture-capital firm. In Case’s mind, the tech industry, by concentrating its jobs and investment on the coasts, has handicapped the rest of the country.

Since Trump’s election in 2016, the group’s mission has become more urgent and its presence has expanded. JD Vance, whose autobiographical book, Hillbilly Elegy, tackled inequality, joined the firm last year, setting up an office in Columbus Ohio, and helping to raise a $150 million seed fund to invest in local companies. The summit, now in its second year, helps to connect entrepreneurs to each other and regional sources of money—big challenges in communities that don’t already have a thriving tech industry.

Meeting with Obama was a bonus. “He did a lot of things during his administration but he obviously recognizes there’s still more work to be done,” says Case.

Clearly. Tech companies, and the jobs they bring, are still clustered on the coasts. In part, it’s a funding problem. In 2016, 75 percent of VC dollars were invested in companies in three states—California, Massachusetts, and New York. Each week, Case says, California companies receive more venture funding than Wisconsin companies do in a year.

Despite Case’s efforts, these numbers haven’t moved much in the last five years. But numbers only tell part of the story, and the group feels optimistic that we’re entering a propitious time for would-be entrepreneurs from places other than Silicon Valley. Partially, that’s because of Trump. “A major reason he is president is there are a lot of people who got left behind by digitalization and globalization,” says Case. Now, politicians are paying attention to the kinds of policies that will help boost innovation, he says.

It’s also a matter of timing. The companies that Case first met with in 2014 are now four years further along and they’re scattered with success stories. Partpic, an Atlanta-based search engine for computer-replacement parts, was acquired by an Amazon subsidiary in 2016. But the incremental achievement is just as important—as companies develop, they become better able to spread their knowledge and dollars forward in their communities. The first year of the summit, Vance says, most companies were thinking about how they could get support. “Now, they have much more specific and ambitious goals about what they want out of their ecosystem.” Those businesses create a network effect, allowing these smaller hubs to get a little bit of the boost of more innovation-soaked places.

But Case also sees opportunity in the political angst that’s roiling Silicon Valley. As the backlash against powerful tech companies continues, maybe the idea of working with, or building, a business someplace else starts to look appealing. And business opportunities are building around technology that’s integrated into other fields—like health care, agriculture, and smart cities, the hubs of which are often located outside of San Francisco and New York. (Incidentally, this was also the topic of Case’s latest book.)

“Silicon Valley is the most competitive startup ecosystem in the world, and there’s no question that will continue,” says Case. “But there’s opportunities to see more of these companies in places like Provo, Utah.”

Rise of the Rest

  • The backlash against tech has not dulled the ardor of other US regions that aspire to be more like Silicon Valley.
  • On the bus with Steve Case as he pitches entrepreneurship and technology in “flyover country.”
  • The next blue-collar job is coding.

Read more: https://www.wired.com/story/techies-pitch-obama-on-building-startups-outside-the-valley/