Why Chicago Doesn't Produce Innovative Startups: Midwest Mentality

http://www.pandodaily.com/2012/03/18/the-midwest-mentality/

by ezl • 14 years ago

30 57 14 years ago

mindcrime• 14 years ago

Interesting. I'm camping out in Chicago for the next few months doing some consulting for my $dayjob, and I'm hoping to learn more about the Chicago startup scene while I'm here. If the locals really do have that "pragmatic, Midwest mentality" it will be interesting to talk to them and see how their viewpoints contrast with those of us from North Carolina. I'm actually wondering if some of the investors here might not be more friendly to the kinds of things I'm interested in (enterprise software) than the investors back home.

At any rate, it's going to be fun meeting some Chicago based HN'ers and hanging out a bit.

there• 14 years ago

There is an hn-chicago mailing list, but it doesn't see any traffic. The last meetup that I know of around here was in December but it had a pretty decent turnout.

peg_leg• 14 years ago

I can sum it up in three words: Prarie Home Companion. Listen to that and you'll understand. Especially the part where Garrison has a fake phone conversation with his mom. We aren't raised to be innovators, we aren't raised to be on the edge. We're raised to do well in school, help our family, and just be good people. Can't say that about Zuckerberg. He dropped out of school. Not supposed to do that. Mom? Mom?....

dwrowe3• 14 years ago

As a Nebraskan, I resonated with this - big time. My first question is _always_: "How does it make money?", and I've shied away from ideas that had no clear money-making potential. It is likely the predominant 'agricultural' culture.

randomdata2• 14 years ago

> It is likely the predominant 'agricultural' culture.

Ironically, farming is kind of like a startup. You raise millions in capital to get started, and then you work for many years without making a cent in hopes that one year you'll finally hit it big.

With that said, I farm in Canada. Perhaps the subsidies you American farmers have access to changes the dynamics.

eurleif• 14 years ago

Pardon my ignorance, but how does a farmer hit it big?

dwrowe3• 14 years ago

There isn't a really strong comparison though. I think it would be quite rare for you to find a farmer that raised capital and just struck out on their own without knowing _exactly_ what they needed to do to reach profitability - nor would they pivot away from the act of farming. To try and apply the 'startup' concept talked about in the article, to farming would be something more along the lines of buying land and beginning to plow - then 'pivoting' and using the land to house private jets. Yes that is a strong example of pivoting, but I think that is the focus of the article (Wasn't the Reddit team originally working on mobile food ordering?).

Traditionally (this has certainly changed with corporate farms) farming has been strong family history and bootstrapping (likely via loans for land/equipment purchase) rather than investors.

fudged• 14 years ago

Counterpoint: http://37signals.com/

_mayo• 14 years ago

I'd say 37 Signals fits the point of his article. He's not saying that Midwestern startups can't succeed, but rather the mentality grows startups cautiously, with less investment capital and slower growth.

hapless• 14 years ago

37signals had an obvious business model and revenue stream on day one.

It's pretty much the perfect example of the difference the author is trying to draw: google and twitter were highly experimental ventures with no visible means of support in the early days. 37signals was explicitly a paying business.

cantastoria4• 14 years ago

I think pinning this on a "Midwest mentality" is really missing what is probably the biggest reason. _There is no tech industry in the Midwest_ If your starup fails there isn't another cool startup down the street you can work at instead (a la SF, NY, Boston, etc...) Startups here (I'm in Kansas) are real small businesses that either make money and allow you stay or fail and force to you move. You simply can't wait two years to figure out your business model or hope for a buy-out. It's just that simple.

angersock3• 14 years ago

There are lots of startups in Texas-- in Austin, in Houston, in Dallas. You're mistaken. And yes, we do have people fold up shop and move to other startups.

Sorry Kansas (your corner of it anyway) ain't workin' out for you.

cantastoria4• 14 years ago

I've never heard anyone refer to Texas as the Midwest.

And Kansas is working out for me just fine wise-ass...

jremsikjr• 14 years ago

I'll go ahead an disagree here from Madison, WI as well. In fact, there are no less than three cool startups within a block and a half (Murfie.com, ContextClothing.com, Asthmapolis.com) of our offices. There is plenty of opportunity to land if your startup suddenly goes away.

And that doesn't even take into account the option of working remotely.

cantastoria4• 14 years ago

But none of those companies are "twitter-like". They all have fairly low-risk and clear business models. The lede of the article is essentially why aren't there more businesses like Twitter starting in the Midwest. If a number of high-risk twitter-style startups descended on Madison tomorrow do you think it could absorb all the out of work employees when/if they got laid off?

mml4• 14 years ago

You are very wrong (at least about MSP)..

cantastoria4• 14 years ago

Thank you for your compelling and insightful argument.

christopherslee• 14 years ago

another way to phrase this is that not everyone drinks the silicon valley kool-aid that raising money equals success.

bdunbar• 14 years ago

It's down to the weather.

But this is not a bug, but a feature.

Team an Idea Man from the Valley up with an Ops guy from the Midwest and you'll have excellent software on infrastructure that won't melt.

And you'll always have good backups.

michaelochurch2• 14 years ago

VC. Or, lack thereof. What VC there is goes into older, more established companies and founders.

There isn't a lack of talent. Far from it, in my experience. (Actually, I think Minneapolis and Chicago would be great places to start a startup, on account of talent and COL. If the three worst things about a place are December, January, and February, you live in a great location.) Nor is there a mentality problem among the people who would be founders. It's a funding and access problem.

It's not just Chicago, of course. This funding problem is the reality pretty much everywhere and for everyone except extremely well-connected, upper-middle-class kids in California.

If I had the money, though, I'd drop a wad of cash on a Midwestern city like Madison or Minneapolis and try to build a Silicon Valley there-- not that there's anything wrong with the existing one, but just because I don't think it's healthy to have most of our innovation in one or two locations, and a place with low COL and high QOL might be a great place to start trying to do something new and different.

tomjen32• 14 years ago

Couldn't you dump the money on some place warm? Nobody is going to work in a garage in Minneapolis.

That might actually have something to do with California -- even if you are broke the weather is still quite good.

michaelochurch2• 14 years ago

The Minnesota winter is not as bad as it's made out to be. Yes, it's very cold, but you learn how to dress for it and you do stuff outside anyway-- such as an 8-mile hike I did in -10 F under 3 layers. Also, by this time of year it's 40-50 and you can do pretty much any three-season outdoor activity.

IMO most Northern European winters are worse than Minnesota's-- not nearly as cold, but longer (in Europe, it starts getting cold in October), darker, and much cloudier.

SMrF• 14 years ago

It's insulting to be lumped into a stereotype, so it's hard for me to not get defensive. Chicago is one of the greatest cities on the planet. The population is very diverse. It's why I moved here in the first place and why I just bought a house here. So it's pretty strange for me to hear someone say we're all "midwestern". But we're used to name calling in the Windy City, so I'll let it go.

Bottom line the startup ecosystem in Chicago doesn't have it's fair share of Webvans for one simple reason: people go where the money is and the money is in Silicon Valley. It's an accident of history that all the money is in Silicon Valley. "Midwestern culture" has nothing to do with it.

Or maybe everyone is starting up in Silicon Valley because of the weather, I think PG mentioned this once. Well to that I say it's 70 degrees and sunny in Chicago as I type this...in the middle of March. Maybe global warming will mean we get a few pets.com here in the midwest.

mml4• 14 years ago

As we say in Minneapolis, "The weather keeps the bums out", but we're usually talking about Chicagoans ;)

kemiller• 14 years ago

That actually sounds pretty great. The Silicon Valley Mentality is what it is because it advantages the venture capitalists and the small number of companies who "made it." I think for a lot of the rank and file, not to mention the 90% of entrepreneurs who don't make it, it is a net loss.

TDL2• 14 years ago

I've commented about this in the past. A Chicago angel investor friend of mine once made the comment that the local investment community was always looking to talk, but not willing to follow through. There is a conservatism here that allows people to hide behind the conventional; it's practical, ergo the right course of action.

I have friends and family who think I "lack experience" and "don't know about the world" because in the past 8 years I have been a trader, been involved w/ two start-ups, and went back to trading; all that effort for little (actually no) financial reward. What they can't grasp is all that is involved with the entrepreneurial enterprise. In the Chicago area, an entrepreneur is someone who buys a franchise or an existing small business (this is not a knock against those folks.)

That is why I'm moving to Austin (not the Valley, but not Chicago either.) I also want make clear: I love this town, but it's becoming like New York (a great place to live if you are rich and a great place to visit.)

fleitz• 14 years ago

This article might be something other than a massive troll if it actually included an objective framework for what constitutes 'innovation'. As it stands it's a tautology, it isn't even wrong.

mml4• 14 years ago

As a midwestern startup-y guy, with coastal exposure, and a number of friends and acquaintances who are trying to, and/or have landed vc, some of whom have moved to the coasts, some who have not: I think this article is more self-congratulatory bullshit from coastals who thing the sun shines out of their nether regions.

Some points:

1. It's _very_ hard to raise vc out here. We like it that way (at least I do). There, I said it. The pie in the sky bay area nonsense ideas just don't hold water here. Nor should they there, but they do. Twitter couldn't happen in the midwest, it shouldn't have happened anywhere else either.

2. Stealth mode. anything you do here is stealth mode. Probably forever.

3. LOTS of startups move from here to the coasts when they start to pick up.

4. As a midwestern startup, you need business presence on one or more coasts, so there are significant efficiencies to be gained by moving your entire operation there. Unfortunately, everyone else has the same idea, so rents are huge, and the giant money you have to pay the local talent just winds up in landlords' pockets in the end.

5. If you can do startup-y stuff from the midwest, for coastal clients, you will live like the king of france, in your giant, and incredibly cheap house.

6. Many people dislike California, and/or Californians.

7. If you can make it here, you can make it anywhere.

8. Many natives of the coasts have never even been to the midwest. Ever. The midwest is an enormous geographical area, full of enormously different people. To paint the midwest with a single brush is incredibly ignorant and patronizing.

9. Many midwestern families haven't lived on farms for hundreds of years. Just thought I'd mention it.

10. Working insane hours just means you're young. Kids do that in flyover country all the time, usually to make up for the crap quality of their code in volume.

</rant>

sgrove• 14 years ago

I actually couldn't tell if you were being satirical or not for a bit into your rant.

Up until #4 (and then #6, and a few others), everything seemed to me like shining examples of the midwestern attitudes. Surly, 'hardened', bitter, negative, and proud of it.

My cofounder is from the midwest, and I'm a 'coastal' native. Just an interesting observation.

wj3• 14 years ago

Any insight into the dislike of California and/or Californians? (I've noticed that too while visiting the Midwest.) Your eighth point about stereotyping of the Midwest seems to be what people are doing about California.

A slight replacement to your sentence "California is an enormous geographical area, full of enormously different people. To paint the midwest with a single brush is incredibly ignorant and patronizing." California is mostly agricultural land. It has some large cities on the coast. Los Angeles is one of the most diverse cities in the U.S. with wonderful cultural pockets all over the place (Koreatown, Chinatown, Little Ethopia, Little Tehran, Little Osaka, etc.)

Also, a lot of people's travel is predicated on a need to travel somewhere. If you don't have family in a place, or do a school trip there, or business trip when you're older, there is a good chance they won't vacation there.

saalweachter• 14 years ago

It's mainly sour grapes. California has ascended while the Midwest has declined.

On the farm front, there was a bit of a migration of second sons from the Midwest to California in the 50's, I believe. Some of those who left (abandoning their Midwest roots, traitors) became rich; some of those who stayed became poor. The poor cousins on the family homestead in Minnesota or Indiana look at the rich cousins on new farms in California and say, we wouldn't want to live there anyway.

Economically, in the last thirty years the Midwest has turned into the Rust Belt, while California has become Silicon Valley. More resentment builds.

On the wine front, the Ohio River Valley was once wine country, centered around Cincinnati, perched to rival the Rhine. Now it's all Napa, Napa, Napa.

But hey, at least in the Midwest you don't have to put up with _Californians_.

joezydeco• 14 years ago

My gut take (as a lifelong Chicagoan) is that Californians, after being there long enough, believe in the bullshit they're selling and tolerate it from others as well. Chicagoans tend to develop and groom BS filters throughout their lives and will either a) ignore it or b) call it out right away.

Perhaps this is why Californians can get away with the bluesky radical ideas and Chicagoans are more about "Okay, great. Now how are we gonna make money with it?"

mml4• 14 years ago

Also, I should point out, the VC who realizes there's a vast, fairly untapped pool of talent in the midwest, will make a killing.

MarkPNeyer• 14 years ago

his point about the work ethic being a strong point rings for me. chris wanstrath is from cincinnati, ohio and pj hyett is from north dakota.

the midwest would be a great place to build startups, as long as you tailored them to the pragmatic mentality there.

for example, what i'd like to do if i get the money to become an angel investor is start something like an incubator there, but do it differently. instead of buying a small amount of equity in a team to work on their cool idea for a location-based mobile social realtime group deal game platform service API framework, i would pay people a decent salary (which is still significantly lower than a startup salary in silicon valley) to work on building niche services for particular established industries. as they worked, they would gain equity that would provide dividends. i would position this company primarily as an alternative to college - you'd get paid in both salary and equity to learn to program, instead of putting yourself tens of thousands of dollars in debt to study amortized analysis of fibonacci heaps - which is awesome but kind of impractical at the moment.

so instead of building a generalized web analytics platform and trying to compete in that large space, build a platform tailored to the construction industry, with feedback and metrics designed just for them. couple it with an ipad app for foremen and you have a product that will never be the next google, but can earn money from day one.

if you can develop a reputation for building lots of profitable companies that serve real needs (something else midwesterns are big on), you could attract a lot of funding from investors in the area (they do exist) who are more interested in serving human need than earning lots of money.

joedev• 14 years ago

So funny to hear "Chicago" and "the midwest" in the same sentence. Chicago is different enough from the Midwest that usually organizations serving both have both in their name to make it clear they serve and understand the differing needs and mentalities. Though Chicago and the midwest share the same geography, they do not, thank goodness; share the same mentality. I can say that as a proud Midwesterner.

dkrich• 14 years ago

It is hard to take this guy seriously while looking at that profile pic.

I find it kinda funny that he states that midwesterners focus on profit to the exclusion of innovation, and cites Twitter as an example of a company that couldn't have been create there. Yet Twitter is hardly what most would consider an innovative startup, and it actually gained most of its early traction in Austin, Texas, at SXSW. All this while ignoring companies like Apple, Intel, Cisco, and HP that really built what we consider the high-tech startup ecosystem of Silicon Valley that we think of today. Does he really believe that these companies weren't worried about making a profit?

I think it is kinda dumb to loop a company like Twitter, which is really not all that innovative at all with the companies that produce hardware and health care solutions. Most people pursuing startups could build the exact same web or smartphone app anywhere else. Chicago, Seattle, or Kansas City. Location is really an excuse. I know plenty of people who have moved to the Valley to pursue startups simply because "if you're serious about your startup, you have to be there." Or because they are hoping to find cofounders, or funding or some other thing they view as a prerequisite for success. The reality is that great innovators made SV, not the other way around. If people think they are going to go some place and morph into brilliant entrepreneurs because of their environment, they are misguided and probably going to be disappointed.

krsgoss2• 14 years ago

Clearly the author can make broad sweeping generalizations after having talked to a few people in a city of 9.8M.

The logic that 9 to 5, work, life, kids and profitability can't lead to anything "revolutionary" (whatever that may actually be) seems dubious.

Finally, assuming everyone there operates under a single "midwestern" mindset and philosophy also seems ignorant.

andrus• 14 years ago

No kidding.

Based on the author's earlier writing [1], he seems content spinning a clichéd narrative of Chicago, without furnishing any supporting evidence or challenging his preconceived notions.

[1] http://pandodaily.com/2012/03/16/enterprise-the-chicago-kiss...

dwrowe3• 14 years ago

I don't think that is the authors point. I think the point is that the _majority_ of startups you see on the coasts wouldn't _likely_ succeed or originate in places like Chicago, Omaha, Kansas City, Minneapolis because people are less open to risks of that nature. There are new businesses / startups in the Midwest but the majority worry about the business plan from the outset, rather than later. I didn't read the article as negative on the Midwest, rather, showing the differences in the areas.

krsgoss2• 14 years ago

Perhaps it was the journalistic tone that the author presents while relying on stereotypes and massive generalizations that makes it difficult to take seriously.

kristianc• 14 years ago

I was rather looking forward to why Groupon was such an exception to the rule ("more on that later")

Sadly, "more on that later" turned out to be Pandospeak for "That doesn't fit my argument, so I'm going to gloss over it."

wj3• 14 years ago

As somebody who has lived on the West Coast my whole life but has married into a very large family in St. Louis I've spent a lot of time there over the past five years. Anecdotal evidence disclaimer.

I think there isn't so much a fear of failure as much as a fear of risk. I think people doing the startups aren't afraid of failure. It is their friends, families, and community that might not view taking a risk as an intelligent move. When I was discussing the side company that I was trying to start I was immediately dismissed by a few people. I think their mindset might still be in the brick and mortar style of business. Some people might take that negatively while others embrace it as a challenge. I'll show them!

One other thing that I've noticed is that there is a certain energy in some cities that I haven't found in St. Louis. There is electricity in San Francisco, Portland, Los Angeles, New York, and London that isn't there. One that feels to me that maybe the person sitting at the table next to you in the coffee shop might be a great connection. That you're always one chance meeting away from a great opportunity.

I'm not sure if Chicago is like this but many people in St. Louis (well into their 30s) still form opinions based on what high school you went to. In fact it often the first question out of their mouths after introductions. With my background I find that custom weird if not unhealthy.

Also, it does seem to me that people as a whole do get married earlier there than on the West Coast. At least among the people that I have met. Having a family and doing a startup is tough (particularly if it is on the side of a 9-5 job) but people make it work.

TDL2• 14 years ago

I have heard about the high school thing from others from St. Louis (or people who have lived there.) I believe that is unique to St. Louis. In Chicago, we do ask what high school somebody went to, but more often than not it results in a good nature ribbing than anything else (kind of like the South side vs North side, all in good fun.)

bookshlf2• 14 years ago

Yes, "what high school did you go to?" seems to be the basis of a socio-economic pheremone around St. Louis.

Budweiser and watching Cardinals games in the summer, and that's not a stereotype.

PaulAnunda• 14 years ago

it's just noise guys. the writers will keep writing, and the builders will keep building.

rooshdi• 14 years ago

tldr; stereotypes are stereotypes.

samirageb• 14 years ago

As a Chicagoan trying to build a social network, I can say that this article hits a little too close to home; our ecosystem is completely dysfunctional. Go to a start-up event, and you'll see mostly service providers and FTEs that aren't willing to get engaged in anything new unless there's an income attached to it. Talk to investors, and they're mostly looking for traditional income streams or cashflowing properties. Any tech talent is either still in college (not terribly useful), or happily employed at corporations and NOT looking to change their disposition. It's been an ongoing struggle.

I worked in Santa Clara for 1.5 years and I love the Nor-cal energy, and while I there are plenty of pluses to Chicago (and the Midwest) in general, I must agree that a Twitter or FB would probably never have been successful here. For any Midwesterners reading this that disagree, I would ask if they've ever tried to rally Midwest resources around a project that isn't creating revenue within 90 days of launch.

Btw, if your an HNer in Chicago, or a tech/design resource interested in chatting let me know :)

bookshlf2• 14 years ago

Reach out, happy to network.

vannevar• 14 years ago

I suspect Silicon Valley industry has shaped Silicon Valley culture more than the other way around. After all, much of California was settled by displaced midwesterners during the Dust Bowl. Silicon Valley (does anyone there even touch silicon anymore?) became the tech capital in much the same way that Detroit became the auto capital: historical accident. Once tech became established there, it became a virtuous cycle as employees of successful startups cashed out and became the founders and investors for the next generation. Now there's a mature network of venture capital, skilled workers and emergent tech culture that would be difficult for any other city to catch up to.

Harkins• 14 years ago

Can we make it part of the midwest mentality to discourage linkbait overgeneralizations?

ajdecon• 14 years ago

Having lived in the Midwest most of my life, a lot of the talk about the culture does ring true. At least enough to make me smile. But I'm not sure the problem of a startup ecosystem that won't take off is because of that culture, because it's not unique to the Midwest...

Serious question: is there any region that regularly produces "tech first, business model second" startups apart from Silicon Valley? New York, maybe? (Though you get "Why New York Sucks" posts too.) If this particular brand of lightning has only struck once or twice, the question isn't "why does everywhere else suck?" but "what kind of bizarre conditions made Silicon Valley happen in the first place?"

I suspect that this is a strongly path-dependent phenomenon: part culture and attitude, but part historical accident. If so, it's going to be very difficult to duplicate.

Edit: typo

xiaoma• 14 years ago

Chicago isn't mid-west. It's east, if anything.

Why Chicago Doesn't Produce Innovative Startups: Midwest Mentality

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