Innovation

Why tech startups are thriving outside Silicon Valley

As Silicon Valley becomes increasingly expensive and saturated, entrepreneurs are looking to settle elsewhere. Here's how a couple of Midwest startups built successful companies in an unconventional spot.

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When Stacy Griggs moved back home to Louisville, KY, seven years ago, "there really wasn't a very vibrant tech scene in town," he said.

But over the last several years, things have changed. A handful of successful businesses in the region—from the app-developer Interapt to the IT management system Rivera Group—are forming a strong (if small) tech ecosystem in the area.

Griggs is now CEO of El Toro, a tech company that creates targeted digital advertising. Louisville, he said, has several key advantages over Silicon Valley when it comes to building a startup.

"In New York or in Silicon Valley," Griggs said, "you've got group-think. They're like, 'This company's doing this,' or 'This company's doing that,'" he said.

It happens naturally when you hire people with industry knowledge, he said. But Griggs sees an advantage in being a big fish in a small pond. "If you're the only one that does this, and you tell the team, 'We're going to change the world,' they'll believe you," said Griggs.

"People have heard 'We're going to change the world' so much from companies out in the Valley that didn't end up changing the world, that it becomes somewhat harder for them to believe," said Griggs.

"In Louisville," he said, "people don't hear that everyday."

If you want to make big money, said Griggs, work for a Fortune 500 company. "There, you're going to be working on code that really smart people wrote," he said. "But here, you're the really smart person writing code that other companies, big companies, are going to work on."

"If you're the kind of person who wants to invent things and change the world, come here," said Griggs. "Here, we're literally writing code that is our product."

Ankur Gopal, CEO of Interapt, is from Owensboro, Kentucky. "Like most Kentuckians," he said, "I believed that success meant getting out of Kentucky." Like Griggs, Gopal left Kentucky for a while—but, also like Griggs, Kentucky drew him back. At a time when his company was growing, Gopal had to decide whether to move to Silicon Valley. He returned to Kentucky, planning to stay six months. He ended up staying for good.

SEE: Launching a startup: A primer for new entrepreneurs (Tech Pro Research)

Gopal was surprised by the amount of work available. There were several important factors in the success of Interapt. Government support, he said, was key. So was the local corporate community and infrastructure. "You have to have broadband and high-speed internet," he said. "If you don't, it's a deal-breaker."

The challenges? Recruiting people to move to Kentucky. "We know once we get them here, they usually succeed, but it's hard," he said.

It was also tough to create a strategy for building the company, since there were so few similar models. "I tried to find some other companies that had a similar roadmap to us. It was really hard at that time," he said.

So Gopal came up with a new plan: Hire locally. "We basically said, 'If we just had really good people who automatically love being in Kentucky, that's a bonus.'"

In an effort to hire locally, Gopal has also created an intensive training program in Eastern Kentucky, which is paying 50 Kentuckians a living wage and preparing them for jobs at Interapt.

What makes Kentucky great for a startup?

"The quality of life is great. The earnings potential is huge," said Gopal. "The landscape for opportunity is limitless."

SEE: "Silicon Prairie," America's new entrepreneurial frontier (CBS News)

Griggs agreed. "People in places like Chicago, or San Francisco will say, "Can you build a cool tech company in Louisville?' My answer is always 'Yes.' Your cost of employees, your cost of real estate, your cost of insurance, your taxes are all double, if not triple, what they are in Louisville. So, why wouldn't you choose to cut your costs in half, cut your taxes in half?"

Silicon Valley, it's no secret, is becoming difficult for many young people to afford. Gopal sees a "quiet exodus" to places like Austin, which he said is an example of what will happen to cities that invest in a tech ecosystem. "People will move somewhere where there is nothing proven," he said.

"Kentucky it might be one of the best kept secrets in the country. We have very signature industries here that require a lot of really smart people to run, manage and build," said Gopal. "We just don't have the history of technology."

Eventually, Gopal would love to see more companies like Interapt "right down the street."

"I believe in competition," he said. "When we have demand, and we have a workforce, we have opportunity. Those are things that make an ecosystem."

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About Hope Reese

Hope Reese is a Staff Writer for TechRepublic. She covers the intersection of technology and society, examining the people and ideas that transform how we live today.

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