#227. An American Heartland RenaissancePosted on
We always look forward to the most recent posting of Rich Karlgaard’s blog, Digital Rules. Rich is the publisher of Forbes, and has been a staunch proponent of both entrepreneurship and small town America. One of his recent blogs, An American Heartland Renaissance, particularly caught our attention and we wanted to share it, in part, with you.
Four economic factors, I think, favor a revival of heartland entrepreneurship.
1. Today’s economic muddle, which resembles the 1970s, is a classic breeding ground for entrepreneurship. The greatest decade of the 20th century for start-ups was indeed the miserable 1970s: FedEx, Southwest, Microsoft, Apple, Genentech, Oracle and Charles Schwab were started then. How so? In tough economic periods, young talent migrates away from financial engineering jobs and toward start-ups.
Famous example: Bill Gates graduated from high school with an SAT score of 1590 out of 1600. His math score was a perfect 800. Very smart, competitive and so comfortable with risk that he played for big poker stakes in college–that was Bill Gates. In 1975, Gates upped the ante. He quit his Harvard undergraduate education and chucked all that investment to start Microsoft with Paul Allen.
Imagine if someone of Gates’ math skills and burning need to win (nay, vanquish his foes) had entered the workforce in, say, 2004. Surely, an investment bank would have drafted that person and installed them in a $150,000 job with a million dollar bonus potential. But now in 2009, such Gatesian talents again look outside of Wall Street for stimulating and potentially remunerative jobs. Start-ups once again beckon.
2. Heartland towns like Crookston, MN (pop 7,727) and nearby population hub Grand Forks are relatively cheap places in which to live. That, even in this downturn, is not the case in Silicon Valley, Seattle or Shanghai. An entrepreneur can get started on little capital in Crookston or Grand Forks and keep his/her costs low if the thing takes off.
Say the city skeptics: Isn’t one hopelessly out of the loop in boonyack towns like Grand Forks? Hold on, slick! The times are a-changin’.
3. Heartland towns are way more connected than they used to be. Grand Forks, for example, is home to the University of North Dakota, which has a Center for Innovation-ranked eighth best undergraduate program in the country. An American urban coast dweller looks at Grand Forks and sees the sticks. An Indian or Irishman sees opportunity. It all happens virtually too. Broadband is the great lever between the sticks and cities.
4. Risk capital is now figuring out how to invest in heartland start-ups, and thus entrepreneurs feel they have license to try ventures that could work–or might fail. Before the arrival of angel capital networks such as Rain Source Funds, small-town entrepreneurs typically borrowed capital from friends and family. If the start-up went bust, the entrepreneur often felt so ashamed that he left town rather than face the town’s scorn. Angel capital puts some healthy psychological distance between the entrepreneur and the funds. At the same time, the entrepreneur feels less isolated thanks to expert advice provided by the angel network.
The last 90 years have been tough on America’s heartland and rural communities. But that could change with new networks of knowledge, innovation and capital meeting the older values of work ethic, trust and modestly priced living standards. We could see a renaissance in heartland entrepreneurship.
We agree wholeheartedly with Rich. Over the past five years of speaking to nearly 400 communities all over the United States, I have seen a marked resurgence of entrepreneurism. I believe we will look back at this time and marvel at the new start-ups that came alive during the recession of 2008-2009.
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