Why was the Midwest left behind as Silicon Valley surged?
By: Christian Keil
Tags: Startup, Entrepreneurship, Technology, Venture Capital, Silicon Valley

Tell me a little bit about yourselves: past, present, and future. Where are you from, and where are you headed?

Kyla:

I am from Kentucky, and I stayed there for university. That gave me an opportunity to explore a variety of ideas, and allowed me “safe” growth. Upon graduation, I wanted to leave Kentucky (which I had never really done) and moved to Los Angeles, CA for a career in asset management.

I am passionate about elevating the profile of the South — there’s a lot of work to be done. For now, I spend a lot of time thinking about how nature and business connect, how we can be better humans, and what building really means.

Lea:

I’m originally from Michigan , and I played sports for my whole life. To this day, I still feel like there is nothing more fun than being on a team, and that’s probably why I like startups so much.

In college, and mostly by accident, I came across an internship at a great DC-based startup. I had no idea what it was when I first joined — I literally remember reading the word SaaS for the first time and being like “huh, weird.” What resonated about the experience is that I got to hang out with a bunch of funny and cool young people trying to figure out how to bring something of value into the world. After that summer, I came back to school and saw all my friends in the Midwest applying to consulting jobs and I thought: wait, have you heard of startups? And no one really had. So I started writing about it.

Over time, what’s fascinated me is: What are the invisible generative forces begetting these new startups into existence? How do things grow on their own? How do industries create their own next innovations? And being from the Midwest and seeing factory carcasses everywhere, the next question is I ask is: how do they die? That’s what I’m trying to learn about in my writing.

What was your inspiration for Midwest Arbitrage?

Lea:

Right off the bat, I think we both felt that the narrative of innovation doesn’t often encompass the Michigan’s and Kentucky’s of the world, but it’d be a lot more interesting if it did. A long time ago, these places were hotbeds for what were basically 19th century startups. The vestiges of their moonshot ideas are everywhere around us, like the innovation of snow plowing or the discovery of tie-shut envelopes, and so forth. We both wanted to tell the stories of those places and things, to fit the stories of growth in Silicon Valley and the rest of America together.

This is useful because when you look at the long arc of innovation across industrial revolutions, you get a completely different picture than if you just look at growth and startups since the invention of the semiconductors. You get a sense of the role of different actors in the system, and a sense of how systems of growth tend to behave.

Kyla:

Totally agree with everything Lea said. Kentucky straddles the Southern / Midwest label, and I am incredibly devoted to elevating the story of the middle of the country, as is Lea! This was an awesome opportunity to think about VC deeply and how it can build and grow.

I was particularly struck by the chart showing the Top 100 YC Companies, and how more than 90 of them are from the Western US.

At which stage to you think Midwest companies are dropping out of the funnel? (Are Midwesterners just starting fewer startups? Are fewer getting funded? Are fewer becoming successful after being funded?)

Lea:

It isn’t just a supply side problem of capital availability. Potential companies are “dropping out” of the funnel at the very beginning: they just aren’t being founded. Young people in the Midwest aren’t really told that startups exist, they don’t know they have permission — much less incentive — to go explore a crazy idea and try to request millions of dollars from other folks to bring it to life… they maybe also don’t identify with the Harvard dropout founder trope. Whereas Silicon Valley has proliferated the learned audacity to go start a company.

I would like to rent a hundred billboards in metro Detroit that just say “YOU SHOULD START A SOFTWARE COMPANY.”

Kyla:

Yes to all of the above. Anecdotally, I had no idea VC was a thing. People told me I was crazy to leave KY for a job at a corporation in Los Angeles. Imagine if I told them I was moving for a startup that might not exist in a few years? People on the coasts tend to have a weird representation of Midwesterners and Southerners in their heads, which broadly translates into a disconnect in funding — the Coast is sort of it’s own breathing, living thing and thus, the Midwest gets pushed down a bit. I also think proximity is big — SF VC’s are more likely to invest in things close to them. It’s just how it is.