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3 Reasons Why Startups Should Consider Launching in the Midwest

3 Reasons Why Startups Should Consider Launching in the Midwest

While the Midwest has long been known for farming and agriculture, it only takes a trip around the region today to discover hot tech startups like online-food ordering platform GrubHub, online-payment system Dwolla and farm-management software FarmLogs, residing in spots where factories and farmland once stood. These startups, along with many more, are expanding the Midwest’s reputation into an area for exceptional business, a growing tech culture and a cost-friendly lifestyle.

As you’re considering the best cities to jumpstart your organization there are several things to keep in mind that might persuade you to take a closer look at what some are calling the “Silicon Prairie”:

1. Rising job growth. With innovative companies popping up left and right, the Midwest has recently been recognized for its rising job growth and business prosperity. A quarterly report published in March by Midwest-based human-resources consulting firm Manpower ranked the top five states by job outlook for the second fiscal quarter of 2014. Surprisingly, California and New York weren’t listed. Instead, North Dakota topped this year’s list, followed by Alaska, Utah, Iowa and Wisconsin. (Three out of five isn’t bad for the Midwest.)

Additionally, US News recently released its “Best Jobs of 2014” list based on employment opportunity, salary, work-life balance and job security. Coming in at No. 1 were jobs in software development, and when it comes to the best locations to recruit software developers, Silicon Valley and New York City failed to make the list again. Instead, Sioux Falls, S.D., and Lincoln, Neb. ranked among the top 5 locations, according to a report by Wanted Analytics. More proof that the Midwest is gaining traction comes from Chicago’s Mayor Rahm Emanuel who said in a news conference on April 1 that because of 1871 — Chicago’s tech startup center for incubators — the city’s tech industry has grown to about 40,000 tech workers. Rahm continued to say that he wants to double that number to 80,000 in the next decade. Rahm was joined by representatives from 24 companies who committed to hiring more than 400 people in the next two years.

2. Gaining notice from venture capitalists as tech funding rises. Many investors are realizing the Midwest is an underpenetrated region for funding? In 2013, the Midwest generated about $1.1 billion of VC funding, according to the National Venture Capital Association, and Columbus, Ohio-based Drive Capital announced a $250 million fund to focus on Midwest investments. Additionally, prominent Silicon Valley-based VC firm, Andreessen Horowitz is known for its multiple investments in startups based in the Midwest like AgLocal, Belly, Dwolla and Groupon. Meanwhile, investors from Drive Capital, Chicago-based Arch Venture Partners and Pritzker Group Venture Capital, Milwaukee-based Capital Midwest Fund and Minneapolis-based Split Rock Partners are keeping funding close to home while searching for the next big thing in tech. And, it’s paying off: Chicago’s startup ecosystem isn’t showing signs of slowing down soon with over $1 billion in funding raised in 2013, a 169 percent increase over 2012.

 

3. Recruiting top talent around Midwestern lifestyle benefits. Savvy recruiters are seeing success by playing up the family-friendly nature of many Midwestern cities and highlighting the cost-effective and “lifestyle” benefits of living away from the coasts. Plus, with a significantly lower cost of living than Silicon Valley, a region that was recently recognized by the U.S. Census Bureau for the highest median rent among the nation’s largest cities, Midwest companies can leverage a “better bang for your buck” approach.

While Silicon Valley is known for their relaxed and more casual attitude and workplace environment, Midwest companies are playing into that lifestyle balance and offering the same type of benefits to recruit and keep talent — and at a fraction of the cost. For many Midwest startups, recruitment also means turning to resources closer to home such as the numerous Midwest universities whose fresh talent is just waiting to be tapped by local companies. It’s working too — the region is heating up in terms of talent. According to a recent hiring survey from Dice, the Midwest beat out Silicon Valley and New York City as the toughest region for recruiting technology professionals with five Midwest cities making the list including, St. Louis, Milwaukee, Wis., Little Rock, Ark., Chicago and Detroit.

As a best kept secret that won’t stay a secret for long, the Midwest is on its way to becoming a great economic driver in the technology ecosystem as entrepreneurs understand success can be achieved without being in Silicon Valley.

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