Startups are increasingly looking to the Midwest as a place to plant their roots. Here's why the Silicon Prairie could be the next startups settlement.
As rent continues to rise and competition for talent heats up, more startups are looking to plant their flag outside of the major tech hubs in the US.
Areas such as the Research Triangle in North Carolina are seeing an influx in new companies. However, it is the American Midwest, dubbed the "Silicon Prairie," that might be next in line as an innovation capital in the country.
According to a recent list, the top three fastest growing states for tech jobs are Minnesota, Utah and Nebraska. That means these states beat out New York, California, and Washington for those spots. So, why are so many tech startups flocking to the Midwest?
"For starters, it's definitely lower rent," said Kerri Jankelow, Midwest region manager for Hired. "Cost of living makes it easier for them to get a business off the ground."
That low cost of living is also why so many big tech companies are building offices in the area, said John Staup, divisional director of enterprise talent generation at West Corporation. Not only is the rent cheaper, but the salaries are as well.
For example, Staup said, companies could hire someone in Omaha, Nebraska or Des Moines, Iowa for $60,000 or $75,000 and it would afford them a comfortable life. Conversely, in Silicon Valley they're going to be paying around $125,000 for the same talent, he said. For him, it comes down to educating the potential employees on how far their dollar goes in the Midwest.
"You don't need to be hypnotized by the dollar sign," Staup said.
The potential employees themselves are also a draw to the area for some companies.
When asked why he chose the Midwest for his company, Verisae's executive vice president of field operations, Bob Tuttle, said the main attraction was a "stable, highly educated, motivated employee base." For example, he cited that Minnesota students often lead the country in ACT scores. In fact, 2015 marks the 10th year in a row that they've done so.
In addition to the education and hard skills needed to compete in tech, there are also soft skills and cultural features that make the employees a good fit—the oft-mentioned Midwest "practicality" and work ethic.
"The Midwest, Silicon Prairie, believes in an honest day's pay," Staup said. "The opportunity for advancement, we understand, needs to be worked for—not just given to us."
Being that the area is not well-known as a tech hub, there isn't as much competition for local talent. Still, it is difficult to lure talent from other cities, Jankelow said.
Outside of the employees themselves, there's a great variety of companies in the area. Major companies like UnitedHealth Group, U.S. Bankcorp, and Target are investing in tech alongside new startups making for a more interconnected tech scene in the area.
Additionally, as the Midwest is a crossroads for transit, many different industries make their way through the area, exposing local startups to a plethora of best practices, ideas, and innovation, Staup said.
"From studies we've seen, the Midwest is on track to see more companies funded this year than any time in the last five years," Jankelow said.
The Silicon Prairie is not without its challenges, though. There are tax benefits for companies in the region, but there's less access to capital and a lower tolerance for failure, Jankelow said. Less precedent for huge exits means there isn't as much swinging for the fences either.
It's unclear whether there is long term staying power for the tech scene in the Silicon Prairie, or if it is a merely a response to local tax incentives and program. The one thing that's for sure is America needs some alternatives to the major coastal cities to maintain the pace of innovation that's become the standard among startups.