Why Tech in The Midwest Attracts Capital

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Indianapolis is no longer simply a racing and manufacturing hub. The tech scene in Indy, and across the Midwest, has exploded over the past decade, with no sign of stopping. Last year alone, Indiana's tech industry contributed $14.1 billion to the economy. What's driving the growth and making Indianapolis stand out among coastal cities for venture capital investment, talent and more? A few key points below:

Capital Efficiency

When looking at building a business, operational costs are substantially lower in the Midwest.  Commercial rents are typically 50% less in the Midwest, salaries for some of the most competitive roles are often 30% to 40% less, state and local taxes are 40% to 50% less and the list goes on.  Companies that are formed in the Midwest can be much more capital efficient.  This means $1 million, $10 million or $100 million invested in the Midwest can last longer or help a company accelerate faster depending on the strategy.  Regardless how you slice it, a dollar invested in the Midwest goes substantially farther than a dollar invested on either coast.

Quality of life

San Francisco was ranked as the No. 1 most expensive city to live by Inc. magazine, requiring more than $123,000 salary to live comfortably (many would rightfully argue that living ‘comfortably’ on that amount is laughable in San Francisco). Indianapolis, for example, comes in with a 47 percent lower cost of living, requiring just over $63,000 to live comfortably. This plays a huge role as an entrepreneur or employee decides where to locate when you’re looking at the cost of housing, commuting, where to raise your kids, and other living and recreational costs.   Admittedly, it’s hard to compete with many of the amenities in some of the coastal cities, but try attending an NFL or NBA game, a major concert attraction, a world class museum, getting a reservation at a renowned restaurant in Indianapolis versus doing the same in a city like San Francisco.  All of the above are easier, less expensive and much less stressful to accomplish in Indianapolis by a wide margin. 

Loyalty and culture

Entrepreneurs across the globe will tell you that employee loyalty is essential to business growth, employee retention and overall productivity.  Talking to other entrepreneurs and C-level executives hiring on the coast, I’m hearing more and more that employees in the Bay area are company jumping more frequently and rapidly than in the past because everyone is always looking for a better comp and option package.  Top talents in the Midwest are more likely to invest in a company and culture, and stay with companies for a longer period of time. The work ethic and culture in the Midwest is also differentiated, as it tends to be supportive, collaborative and trusting with a high degree of integrity.

Big Opportunities, Fewer Candidates

Degree from Harvard, top of your class, entrepreneur and “tech genius?” Well, if you’re in the Bay area…join the club. It doesn’t mean you’re not respected in your field, it just means the competition is fierce. And while the competition in the Midwest is strong, the sheer volume is not comparative to coastal cities. Working as a tech leader in the Midwest often presents leaders with more opportunities than they may find elsewhere. You’re not fighting with as many candidates to land high-caliber opportunities.

From being in the top 10 cities for women to work, to one of the fastest-growing tech hubs in the nation, Indiana has a lot to offer business owners. From our loyal and fair business approach, to our attractive cost of living, and excellent education system, our state is a national tech player with only growth in our future.

David Kerr is managing director at Allos Ventures, an investor in early-stage technology companies.

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