In 2014, Jill Ford was working as an angel investor in San Francisco, when she heard about the city of Detroit going bankrupt. After doing some research on the city’s economic predicament, she decided to make a move to the Motor City to help entrepreneurs. She believed that working in Detroit would give her the opportunity to have both the monetary and social impact she wanted to have at this point in her career. But many of her Bay Area peers thought she was making a mistake leaving the area that’s home to the most venture capital in the U.S.
“I definitely knew a number of people in the Bay Area who thought, ‘why would anyone want to leave San Francisco?’ says Ford, now the head of innovation and entrepreneurship for the city of Detroit.
Last week, Ford was one of more than 100 investors, entrepreneurs, and startup leaders from across the country who gathered for the inaugural “Rise of the Rest” summit, to show that there is plenty of startup activity in places like Detroit. The event was organized by Revolution LLC, a venture capital firm led by AOL co-founder and former CEO Steve Case.
Case sees the summit as the kickoff event of the second phase of his and Revolution’s Rise of the Rest initiative, which began with a bus tour in 2014. Over the past three years, Case has traveled to 26 different cities, from Albuquerque, New Mexico, to Charleston, South Carolina, to visit with entrepreneurs, investors, and startup leaders. Now, he wants to take Rise of the Rest from a program that’s about “events celebrating entrepreneurship” to more of a cohesive network that can help so-called “rest” cities–those outside of San Francisco, New York, and Boston–rise together.
“People would say, “we appreciate you being here, but you get the benefit of visiting all these cities, and learning from all of these cities–and that would be helpful for us too,'” Case says.
Many second- and third-tier startup markets are tackling similar problems–a drought of capital, a lack of interest in or knowledge about startups among the community-at-large, and the nonexistence of a unified tech community. All are problems that only years of work will solve.
A 20-Year Project
Brad Feld, the Denver, Colorado-based venture capitalist and Managing Director of the Foundry Group, has said that entrepreneurs and the cities they live in should have a decades-long timeline–specifically, they should expect it to take 20 years to build the entrepreneurial ecosystem that they want.
Many of the entrepreneurs and ecosystem builders at Rise of the Rest who say they have been happy with the level of success they’ve achieved so far in their communities talked about how learning how to tap into your ecosystem’s existing strengths is key. Deepinder Singh, the founder of 75F–an internet-of-things startup for HVAC systems–spoke during a session on Capitol Hill about how his company’s location in Burnsville, Minnesota, proved to be a fertile one for his company. (75F was there as one of the winners of the “Rise of the Rest” pitch competition hosted by Case in each of the cities he visited.)
75F’s system allows offices to set different temperatures in each individual room of an office. Several Minnesota utility companies allow customers to apply for a program that gives them up to a 50 percent rebate on any systems they install that make their building more energy efficient–75F’s system included.
“Minnesota is really one of the biggest hubs for green technology, after California,” Singh says.
One of the biggest challenges for non-coastal cities is access to capital, a problem that isn’t easily solved simply by cooperation. Mark Hasebroock, another Rise of the Rest summit attendee and the founder of Omaha, Nebraska-based Dundee Venture Capital, began the process this year of of raising a $30 million fund, his firm’s third and largest one. Hasebroock says that it took him 910 meetings to get the more than 80 lending partners needed on board. He says that raising a fund can take longer in the risk-averse Midwest, because there are fewer people there who made their money through a tech startup than in San Francisco or New York, and who understand the benefits of investing in them.
“There’s a lot of educating involved, so it takes longer,” Hasebroock says. “There’s a lot of ‘what is venture capital?'”
Ultimately, the biggest boon to a startup community is a big exit–like Case’s Dulles, Virginia-based AOL going public in 1992, or Snapchat’s recent IPO in Los Angeles. An exit allows people from that company to reinvest their money into other startups in the community–but it’s a milestone reached only when the right entrepreneurs come along.
Helping the Rest Rise Together
While Case doesn’t hold any illusions that a stronger Rise of the Rest network will produce more big exits overnight, he does hope it will encourage ecosystem builders to compare notes on what’s worked and what hasn’t worked, so that fewer of their entrepreneurial initiatives fizzle out.
For example, Ford spoke at the Rise of the Rest summit about how she and her team came up with one of the city’s more popular programs, the Motor City Match. After she moved to Detroit, Ford discovered that one of the biggest pain points for entrepreneurs was figuring out which commercial buildings were vacant and who owned them, as many commercial building landlords lived outside of Detroit. So Motor City Match targets business owners at four different stages of the business building process–aspiring entrepreneurs can apply to receive a free business planning class, assistance in finding a space for their business, assistance in finding an architect to redesign the space, or to receive up to $100,000 if they have an office space ready to go.
“It really helped us shift up the pipeline in terms of business development,” Ford says.
Case also hopes to elevate Rise of the Rest’s platform with the recent addition of JD Vance, the author of Hillbilly Elegy, as an investing partner. Vance will be based in Columbus, Ohio, where he will scout out startup investment opportunities for Revolution, while also working on his own nonprofit that aims to help tackle Ohio’s opioid epidemic.
“Even if you’re talking about job creation just in the city of Columbus, it’s also good for the residents close by,” Vance says. ‘What happens upstream affects the region as a whole.”
While Case has been touting the Rise of the Rest for years, he sees now as the perfect moment to get more people on board. He said the 2016 election of Donald Trump served as a “wake-up call” for many in Silicon Valley that voters were severely frustrated with the unequal distribution of economic opportunity across the country.
“Now it’s about, ‘how do we turn that wake-up call into a sustained commitment to invest in these Rise of the Rest cities [that] could create the next breakout company?'” says Case.