Startups Ditching Silicon Valley for Silicon Prairie?

A growing number of venture capitalists are flocking to the Midwest as the region becomes a rival of Silicon Valley as the startup capital.  Drive Capital Founding Partner Mark Kvamme weighs in on the factors driving entrepreneurs and venture capitalists to the region.

One key factor according to Kvamme is the prohibitive costs of Silicon Valley.

“Well, I mean, if you think about it, a big chunk of startups are started by folks in their garage and they have no money and it’s very, very difficult to begin in a company.  And, it’s all about money, I mean, when I grew up in Silicon Valley you could buy a house for $50,000.  You know, I bought my first house I bought in Mountain View, California for $140,000, today that house is $1.5 million,” Kvamme continued,  “And so, I think the cost of living is so high in the Valley people are now looking at what the other opportunities are.”

Technology has also made it easier for startups to be near the consumer rather than restricted to where the technology experts are.

“Simultaneously, in the past, you had to be near the technologists, you had to be, that’s where all the technologists were.  With cloud computing and the fact that we’re carrying you know, mini computers, everything is on your phone, you need to be close to the customer, not close to the technologist,” Kvamme told the FOX Business Network’s Maria Bartiromo.

When asked if the Midwest is where the customers are, Kvamme responded, “Absolutely, 150 of the Fortune 500 are in the Midwest.  You know, why Columbus, Ohio, [where Kvamme is based]?  If you drive your car one day from Columbus, Ohio, you hit 60% of the nation’s population.  So it’s a center for a big chunk of the GDP of the U.S.”

According to Kvamme, technology education is a key draw to the region as well.

“The number one computer science school in America is where?  Pittsburgh, Pennsylvania, it’s Carnegie Mellon, you know.  And so you see a lot of innovation happening around the schools.  25% of the nation’s computer scientists come from the Midwest.”

On whether a tech boom in the Midwest could take the place of jobs that were lost due to the demise of manufacturing, Kvamme said:

“I really, truly believe that you are going to see a big growth in the Midwest and I think manufacturing is coming back as well because of automation.  You look at what Amazon (NASDAQ:AMZN) is doing,” Kvamme continued, “Amazon just invested $2 billion in Columbus, Ohio.  They’re building big distribution centers, big data centers there because they need to be in the center of where all the activity is.”