Screw the Valley A Coast-to-Coast Tour of America’s New Tech Startup Culture: New York, Boulder, Austin, Raleigh, Detroit, Las Vegas, Kansas City By:Timothy Sprinkle BenBella Books Dallas, TX Table of Contents - Introduction - 1: Startup America - 2: Detroit - 3: New York City - 4: Las Vegas - 5: Austin - 6: Kansas City - 7: Raleigh - 8: Boulder - Epilogue / Acknowledgements - Bibliography Introduction "Entrepreneurs embody the promise of America. The idea that if you have a good idea and are willing to work hard and see it through, you can succeed in this country. And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs." – President Barack Obama, January 2011 Shortly before his scheduled State of the Union address in February 2011, President Barack Obama, then-Treasury Secretary Timothy Geithner and a group of leaders from private industry set off on a road trip through the hard-hit upper Midwest – the so-called “rust belt.” The trip was part of the kick-off for the administration’s then-new small business development program, the Startup America Initiative. The idea was to focus attention on high-growth, high-potential startup companies in areas like information technology, clean energy, and software by publicizing a series of new Small Business Administration-backed loans that were being offered to startup founders to help get their companies off of the ground. It was an auspicious way to kick off this new initiative, but the White House had a lot on the line at the time. With the wounds from the 2008-09 recession still raw, job growth and economic development were critical issues for the administration heading into an election year, and the Obama team was prepared to go all in on the promise of America’s entrepreneurs. “This mission to promote entrepreneurship is a core component of President Obama’s national innovation strategy for achieving sustainable growth and quality jobs,” the White House wrote on its blog at the time. “Not only do startups bring a wealth of transformative innovations to market, they also play a critical role in job creation across the United States. Those entrepreneurs who are intent on growing their businesses create the lion’s share of these new jobs, in every part of the country and in every industry. Moreover, it is entrepreneurs in clean energy, medicine, advanced manufacturing, information technology, and other fields who will build the new industries of the 21st century, and solve some of our toughest global challenges.” Northeast Ohio was a particularly effective place to kick off this new push. The manufacturing sector has been a key part of the Cleveland area economy for generations -- thanks to local companies like Procter and Gamble, Sherwin-Williams, National Cash Register, Hoover and others – and was particularly hard hit by the downturn, leaving millions of Americans out of work, both throughout the Midwest and nationwide. What’s worse, these former manufacturing workers often found themselves under-skilled and unable to compete in the new, technology-based economy. The numbers don’t lie. According to the Bureau of Labor Statistics, there were nearly 15 million people working in manufacturing in the United States as of 2003. By 2013, that number had tumbled to less than 12 million. Clearly, manufacturing centers like those in Ohio needed new jobs in new industries, and fast. High-growth tech startups were viewed then, as now, as a large part of the solution to this shortfall. “Because the new businesses created by entrepreneurs are responsible for most of the new jobs in our country, helping them succeed is essential to helping our economy grow,” Obama said in 2012, when announcing November as National Entrepreneurship Month. “That is why my Administration has fought tirelessly to invest in entrepreneurs and small businesses so they can do what they do best -- take risks, develop new ideas, grow businesses, and create new jobs.” The effort was far-reaching. In addition to launching the Startup America Initiative, since 2010 the Obama administration has signed into law 18 tax cuts for small businesses, partnered with private industry to launch the Startup America Partnership which made more than $1 billion worth of business services available to the nation’s entrepreneurs, worked with federal agencies to streamline the public-private partnership process for new businesses, and launched an online portal called BusinessUSA to better enable all businesses to leverage the federal resources they need. “As long as America's daring entrepreneurs are taking risks and putting themselves behind new ideas and innovations, the Federal Government will serve as a partner to support their endeavors and catalyze their success,” Obama said. “This month, and during Global Entrepreneurship Week, let us renew the spirit of innovation that has fueled more than two centuries of American progress and promises to drive us in the years to come.” AOL founder Steve Case, a key private industry supporter of this whole, “startups are our future” effort and the first chairman of the Startup America Partnership, agrees, citing the fact that the U.S. economy has been forged in large part by entrepreneurs throughout history, from the nation’s earliest days as a global power to the recovery from the Great Depression that took place in the 1940s and 1950s. "Our nation once again looks to these creative risk-takers to unleash the next wave of American innovation,” Case said when he was appointed, “and I am pleased that President Obama has made supporting and celebrating entrepreneurs a major priority of his economic strategy." It’s about innovation, it’s about investment, it’s about jobs. The fact is, the 2008 recession did more to kick-start the entrepreneurial revolution than anything, forcing people to think about work in new ways and open their minds to the opportunity of heading out on their own. And it’s not the first time this has happened. “America’s greatest companies, after all, have rarely conformed to the rules of economic or political crises,” wrote the Ewing Marion Kauffman Foundation in its 2012 report, “The Startup Uprising,” on the state of U.S. entrepreneurship. “General Electric was founded by Thomas Edison in 1890, toward the end of an economic boom and shortly before the Panic of 1893 plunged America into a profound four-year depression. Hewlett-Packard was established on the eve of the Second World War. Microsoft sprang to life in 1975, in the midst of a recession and oil crisis, and Google grew up in the wreckage of the post-dot-com era. Apple and Starbucks were once scrappy little companies trying to make payroll, and they have survived booms and busts. Great startups adhere to the schedules and ambitions of their founders rather than the vagaries of government debt, inflation targets, and employment data.“ But the 2011 Startup America road show, like the effort behind it, highlighted another employment trend that was just emerging at that point: Tech startups as a national option for both entrepreneurs and workers. Although the Bay Area remains the most important and most vibrant American technology center, innovation is no longer relegated to Silicon Valley. Cities large and small across the country are starting to get in on the act. Cleveland, for example, wasn’t just the site of America’s manufacturing collapse and the staggering job loss that accompanied it, it was also home to a number of small, two- and three- person tech startups when President Obama came to town. This slice of the local economy was just getting started when the president visited, but has since blossomed into a legitimate part of the local economy. According to a report released in July 2013 by Cleveland State University, small tech businesses like these were contributing some $200 million to the Cleveland economy annually by 2012, with the 127 startups surveyed for the report generating about 1,650 new jobs in northeast Ohio and 2,100 jobs statewide. "These are all startups and they are having an impact," Ziona Austrian, a co-author of the report, told the Cleveland Plain Dealer. "We all have to remember, startups take time. Many of them are high-tech companies and they are growing." The numbers are still small, to be sure, especially when compared to the millions of manufacturing jobs that have been lost. But it’s a start. And that’s really what this book is all about. Silicon Valley remains a vital force in the U.S. economy and will likely hold onto its place as the center of the tech world for the foreseeable future. But entrepreneurship, tech entrepreneurship most of all, is blossoming in cities and towns from coast to coast. In the last several years, technology has emerged as a major player in the New York City economy, helped reshape the long-term outlook for Detroit, changed how the core of downtown Las Vegas views its prospects, and taken root everywhere from college towns to small cities to the off-the-beaten-path regions that many overlook. And the entrepreneurs in these new tech hubs are starting to get some well-deserved attention. “America’s always been a nation of doers,” President Obama said back in 2011. “We build things, we take risks, and we believe that if you have a good idea and are willing to work hard enough you can turn that idea into a successful business. Today, entrepreneurs are everywhere. In labs and garages all across America, they’re working on new sources of clean energy, cures for life threatening diseases, and innovations that will transform the ways we see the world.