Techies reject coast for "Silicon Prairie"

[BG918]

Interesting article from CNN, highlights how Plains cities are attracting high tech workers from the coasts due to lower costs. I'm sure it is a small minority but still encouraging for these areas.

Techies reject coast for "Silicon Prairie"

Wichita, Kansas (CNN) -- At a table in Caffe Moderne, a coffee bar in downtown Wichita, sat a couple of young Kansans sipping coffee and working away on Macbook Pros. Terms like "content management systems" and "web integration" floated in the air as Clint Brauer taught a local about his business.

Thirteen years ago, Brauer couldn't wait to get out of the Sunflower State. "I just didn't see the opportunities in Kansas," he said. "I grew up in a small town outside of Wichita, went to Kansas State ... and so I moved to the West Coast to get into high tech."

Brauer traveled from the prairie to the Hollywood Hills and spent his 20s living the kind of life he'd fantasized about while growing up in the small town of Haven.

"It was a really exciting time. Life was about work." Brauer worked, made a career in consulting, and became the managing editor of Cyberread, an e-book company.

The coasts have always held a great deal of appeal for techies. Los Angeles and San Francisco, California, and New York and Washington are hubs for the young and cyber-savvy.

A generation of young workers flocked there at the turn of the millennium, drawn by job opportunities and the fast-paced lifestyle that the big cities provide. But the priorities of a 30-year-old can be dramatically different from those of a 20-something.

"I started realizing that while I loved what I did, I wanted more balance. My goal wasn't to become the CEO of a Fortune 500 company anymore but to have a better quality of life." A change was coming for Brauer, and fortunately the Web would provide.

"I'm OK that I don't have three different Cuban restaurants to choose from," he jokes. "Some folks couldn't deal with it, but I like going out to the country, going out to the lake, and enjoying the open skies."

Not surprisingly, salaries in the heartland's Silicon Prairie are generally lower than California's Silicon Valley or New York's Silicon Alley.

The average salary for software engineers in New York City is $97,370; in California, it's $109,000. In Kansas, the average salary for the job is $85,000, according to federal stats. But if you factor in the Midwest's dramatically lower cost of living, the possible benefits become clear.

"As high technology has become more interwoven with everything in our lives, there are bits and pieces of these industries in virtually every city," said Mark Vitner, an economist with Wachovia. "We're getting to the point now that the jobs are spreading out across the country from Silicon Valley and New York."

Midwestern tech is coming into its own. Jeff Slobotski produces an event called Big Omaha that includes more than 500 of the region's workers from Nebraska, Missouri, Kansas and Iowa. The annual event just took place in May.

"We've got a real healthy and growing community," said Slobotski, innovation director at the AIM Institute -- a nonprofit membership organization for IT leadership.

Recent jobs for developers, coders for backend structures, as well as traditional corporate IT jobs have been filled recently by workers from the coasts, he said.

Slobotski, who runs a blog called "Silicon Prairie News" said high-tech talent and ideas are thriving in the region many coastal residents snidely refer to as "flyover country." Some of the newer companies in Nebraska include Agile Sports/ Hudl in Lincoln, and Hayneedle.com and Rockdex in Omaha.

Biotech and green-tech industries are "still in the discovery stage," he said. "People are talking about how to grow that."

In Silicon Valley, longtime human resources executive Aryae Coopersmith of HR Forums has noticed a change in the past year.

"Now that the economy is waking up a little bit and there's more hiring, our members have shifted from few concerns about retaining employees to new concerns about retaining employees," said Coopersmith. The work-life balance in middle America could be more appealing, and there are benefits to being a bigger fish in a smaller pond.

A lot of the growth is spurred on by people like Brauer, who returned to Kansas with a decade of experience and a phone full of business contacts.

"I'd been sourcing people from all over the world for the last decade, so working for them didn't necessitate being in L.A."

The nature of the new economy and the technological advances of the past ten years meant that he could be based anywhere and work for clients worldwide.

"I remember one day sitting on a tractor at my parents' and needing to be on a conference call -- with clients in India. I turned down the motor, and since I had good cell service, I did it right there."

"Business is going fine, it can be done. It's a little bit more difficult to grow your business but your costs are so low [in Kansas], your personal burn rate is much lower," said Brauer. "I'm at peace out here."

http://www.cnn.com/2010/TECH/innovat...ex.html?hpt=C2

[Reverberation]

Thats very true. The only benefit of operating a tech firm in the Bay Area is the proximity to other tech firms and tech clients. As the cost of doing business and existing in those places goes up, coupled with firms looking for creative ways to avoid layoffs, companies split and move where their money goes further.

[Crawford]

Originally Posted by Reverberation

The only benefit of operating a tech firm in the Bay Area is the proximity to other tech firms and tech clients.

That's a pretty big benefit, though, no?

Otherwise, why not move all tech to Mongolia? Super-cheap, loose regulations and eager workforce.

[Reverberation]

Originally Posted by Crawford

That's a pretty big benefit, though, no?

Otherwise, why not move all tech to Mongolia? Super-cheap, loose regulations and eager workforce.

Not if those clients are moving staff and infrastructure elsewhere. Usually, the last things to be relocated are executives, high level account execs, and certain administration. I'm not saying that the Bay Area won't be the center of the tech world for years to come - just that the companies HQ'd there will be doing their growing elsewhere.

It's harder to grow a company where there is a high cost of living. So companies add new staff elsewhere. If you can save on rent and pay someone $10,000 per year less for a higher standard of living in Wichita and only need to fly them to SF once or twice a year, you come out way ahead.

The best analogy I can come up with is a fat man in a speedo. The growth just spreads out where it isn't constricted.

[10023]

Originally Posted by Reverberation

Thats very true. The only benefit of operating a tech firm in the Bay Area is the proximity to other tech firms and tech clients.

And venture capital firms.

And it is hard to overstate how supremely important these three benefits are.

[pesto]

A couple of quick observations, for what their worth:

The VC's go where the techies are, not vice-versa. The money is not critical; the people who can advise you what to do with the money are critical. Once the techie at the VC signs off, London, Frankfurt, NY investors follow. Of course, the best techie advisors soon have their own money or firms.

Big companies: Senior people remain in SV (weather and amenities). Production has long-since moved abroad. Some of the largest SV companies have less than 15 percent of their total workforces in SV.

Rule of thumb: first 10 hires are in SV; next 100 in India; when you get acquired, the 100 in India are retained; the 10 in SV are fired and start something new.

[Gordo]

Originally Posted by pesto

A couple of quick observations, for what their worth:

The VC's go where the techies are, not vice-versa. The money is not critical; the people who can advise you what to do with the money are critical. Once the techie at the VC signs off, London, Frankfurt, NY investors follow. Of course, the best techie advisors soon have their own money or firms.

Really? Love to see some more info on this. Most of the VC firms that I'm familiar with require a presence within X mile radius of where they are (typically Palo Alto or SF, with some of the larger ones having outposts in NY, Seattle, or Boston). They want to be able to check in whenever needed without boarding a plane.

Big companies: Senior people remain in SV (weather and amenities). Production has long-since moved abroad. Some of the largest SV companies have less than 15 percent of their total workforces in SV.

I'd be curious to know who you're talking about here - and I assume that you're only talking about company employees and not full-time on-site vendors, of which the average big company in SV has thousands and thousands, where most of their locations outside of SV will have relatively few vendors. It's not uncommon for a marketing group at one of the large software companies (MS, Oracle, etc) to have two or three employees and five to ten on-site vendors (that often have a higher income than the employees, mind you). Dev groups aren't much different, though it's typically more like two to three employees, five to ten on-site vendors, and an off-site dev team of 20-30 (which can spread around the world from India to Ireland to Austin).

Rule of thumb: first 10 hires are in SV; next 100 in India; when you get acquired, the 100 in India are retained; the 10 in SV are fired and start something new.

I wouldn't say it's quite this dramatic, but your point is basically correct. That's why there are a lot of serial-entrepreneurs in SV, and why nearly all new tech companies are created here or immediately moved here after the first round of funding (to be close to other contacts that will help you create your next gig). There's simply no reason at all for most tech companies to consider moving employees or operations to the midwest - that area has none of the advantages of SV, yet isn't nearly as cheap as other places around the globe. If they're moving jobs/operations out of the Bay Area, it's most often out of the country.

[fflint]

First, the article gives no numbers and provides no sense of scale. How many "techies" are moving to Nebraska and Kansas from "the coasts?" Half a percent? One percent? Maybe there really is a huge flood of thousands of techies into the Plains, but nothing in this article supports such a conclusion. We get personal anecdote from a Plains native, and then some supposition from an HR rep who says 'people want a more balanced life,' and--hey!--the Plains just might offer them that. Nailed it! Not.

Second, as others have noted, VC is paramount to tech startups. Contra Reverberation, you can't worry about employees or clients if you're not in business in the first place.

Third, VC absolutely does NOT chase suitors. Pesto is full of it. Aspiring tech startups go hat in hand to VC firms on Sand Hill Road in Palo Alto. Unsurprisingly, a huge percentage of VC flows into Silicon Valley as a result. Firms don't start up or HQ themselves in Silicon Valley because they like the weather or location, they do it because they think it's their best shot at success.

[llamaorama]

It's harder to grow a company where there is a high cost of living. So companies add new staff elsewhere. If you can save on rent and pay someone $10,000 per year less for a higher standard of living in Wichita and only need to fly them to SF once or twice a year, you come out way ahead.

Not that I disagree with this premise(though I have more respect for the educated opinions of other forumers stating real world evidence to the contrary), but Wichita, KS? Never would have guessed.

You know how articles can be. Wichita might be great and I haven't been there so who knows.

[Metro Matt]

Great news for Kansas, but Texas (Dallas specifically) has been dubbed "Silicone Prairie" for some time now. Austin is referred to as the "Silicone Hills" because of Dell & all of those other high tech companies with headquarters in the Hill Country.

Texas Instruments, a Dallas based company has been around since 1947.

[Policy Wonk]

One of the largest reasons high-tech flourished in California is dull and legalistic,

California doesn't enforce non-compete agreements, so if you think your boss is a moron you can round up some fellow conspirators around the office, empty your desks in the middle of the night and start your own company the next day.

Many high tech startups came from a bunch of guys telling their boss to drop dead and carrying on with their efforts on their own.

[tablemtn]

There have always been tech companies operating in "non-traditional" areas. I have an edition of National Geographic from the early 1980's with an article citing a professor at Case Western who started his own robotics company in suburban Cleveland.

I did some research into what happened with that firm. It was a convoluted story, but basically, after the professor died, the intellectual property was bought up by a Chicago-based medical devices company, and part of that was spun off then resold to Sanofi-Aventis, and beyond that, it's not clear.

[mongoXZ]

Silicon Prairie, Silicon Hills, Silicon forest, Silicon Island, Silicon Alley, Silicon Lake. Silicon This, Silicon That.
So many Valley wannabes it's laughable. There will never be a duplicate.

Hey we attracted a few techies to our city! Let's call ourselves Silicon insert lame geographical reference here!

[cabasse]

Originally Posted by Metro Matt

Great news for Kansas, but Texas (Dallas specifically) has been dubbed "Silicone Prairie" for some time now. Austin is referred to as the "Silicone Hills" because of Dell & all of those other high tech companies with headquarters in the Hill Country.

Texas Instruments, a Dallas based company has been around since 1947.

I thought Houston was known as "silicone hills" since that's where breast implants were first proposed

thank you very much

[pesto]

Gordo: I can't use names but the 15 percent is clearly a fact. Check 10k's for location of employees for the 10 largest SV companies. Btw, typically overseas employees will be understated because the use of "contractors" is much more common in India and a number of other countries; but the numbers are still clearly heavily weighted outside SV and the US.

VC's: Typically, investments don't come primarily from the VC's own money. They provide advisory services somewhat ananlogous to investment banks. The money will come from large individuals or more commonly limited partnerships formed by the VC's or who are using the VC's as their "lead". Once the VC's commits to say, 10M, of their money, then 50M of London, Frankfurt (or for that matter, St. Louis and Phoenix) money follows in.

Of course, deals come in lots of different pattern and typicall with multiple layers of investors, some winner and some losers. That's the beauty of the real world.

[pesto]

Policy WonK an interesting point. While this is certainly true, I never thought of it as being material enough to affect where people would start companies. But you could be right.

On an unrelated point, lately an awful lot of "Silicon Valley" money is going to Texas start-ups. And Texas has some of the major players in the VC industry in any event.

[mongoXZ]

^^ Care to provide a link to prove that?

Here's a link that says otherwise. VC deals by Region 2010 Q1

[Chase Unperson]

Agree with Fflint. They found one guy who returned to his home state after living his "dream" life in LA for a decade. Big whoop.

[fflint]

Originally Posted by pesto

lately an awful lot of "Silicon Valley" money is going to Texas start-ups.

Source?

The PriceWaterhouseCoopers link mongoXZ provided above shows Silicon Valley getting 32.33% of all VC tracked in the first quarter of this year, and Texas--the whole state--getting only 2.75%.

[Gordo]

Originally Posted by pesto

Gordo: I can't use names but the 15 percent is clearly a fact. Check 10k's for location of employees for the 10 largest SV companies. Btw, typically overseas employees will be understated because the use of "contractors" is much more common in India and a number of other countries; but the numbers are still clearly heavily weighted outside SV and the US.

Clearly a fact? Well, ok then. I suppose we just take your word for it? I'm pretty aware of how things work in India - one of the primary services that some of my employees offer is contracting with numerous firms in India, Ireland, Israel, Ukraine, Russia, and Kazakhstan (among others) to provide services for some of the "10 largest SV companies." In my experience, use of contractors is at least as common in the US as it is in India (or anywhere else), because of various legal/cultural reasons.

VC's: Typically, investments don't come primarily from the VC's own money. They provide advisory services somewhat ananlogous to investment banks. The money will come from large individuals or more commonly limited partnerships formed by the VC's or who are using the VC's as their "lead". Once the VC's commits to say, 10M, of their money, then 50M of London, Frankfurt (or for that matter, St. Louis and Phoenix) money follows in.

Sure. That doesn't negate the fact that many VCs require companies that they invest in or recommend to be within a certain distance of their home office. As a "lead", they have a reputation to maintain if they want to continue to be a "lead", and having access to the companies that they've invested in or recommended is often very important. Again, I'm speaking from personal experience here.