Outsourced to Kansas


My latest, Escape from Silicon Valley, is out now, but I wanted to bring to attention to some states that are becoming hot beds of innovation, as broadband spreads through the heartland and what I like to call, “the boonies.” In a recent story, Miracle In the Midwest, Forbes magazine talked about the biotech start-up activity in Madison, Wisconsin. The state of Indiana has jumped on the tech/broadband bandwagon, and having some success.

When I was in Detroit recently, I met with officials from the city who have been pushing wiring Metro Detroit area so that they can attract more new businesses that complement their core competency. There was talk about grid computing, design shops, and other tiny start-ups, all thirsty for broadband. Detroit is one of the most wired places in the country – third infact. The trend of creating new tech-related opportunities is highlighted by two basic facts: most states are trying to promote their core competency. Detroit wants to make auto-industry as the axis of its innovation, while states like Indiana are pursuing agri-and-bio technology opportunities. Ohio is focused on polymers.

“Economic development works best when it’s enhancing, not trying to create something out of vapor,”Diane Swonk, chief economist for Bank One in Chicago told the Chief Executive magazine. “The Midwest will never be Silicon Valley, and to accept that is the first thing. And we really wouldn’t want to be, because you don’t want to have to ride the peaks and troughs of information technology.”

The other thing I noticed was the help the start-ups were getting from local state funds and angel investors. Overland Park-based Kozoru Inc., which landed $3 million funding mostly from angels, and they are actually in my story. Another start-up which is featured in my story, Zoto, got its funding from the state of Oklahoma and an angel investor, whose primary business is oil! Indiana’s 21st Century Research & Technology Fund has poured $75 million into high-tech, biotech and advanced manufacturing startups. This would be a good way to reverse the migration of promising start-ups to the coasts. “Several of the big state schools are near the top in terms of the amount of research they do that drives inventions, but they also have the biggest discrepancies in where the economic benefits of their output end up going,” Jim Adox, partner in EDF Ventures, an Ann Arbor, Mich.-based venture-capital firm that mainly seeds Midwestern technology companies told the Chief Executive magazine.

Technology industry is obsessed with the notion of Silicon Valley, because many believe the best and brightest in close proximity inspire new ideas, and great products. That might be true, but it also inspires copycats, and dot-com style manias. In the past, some of the biggest tech names were started outside of Silicon Valley. Bill Gates and Paul Allen were looking to find a permanent home for Microsoft, they settled on a remote little city called Redmond, Washington. Dell Computer is based in Round Rock, a tiny Texas town you would have hard time finding on the map. “We have shown that our start-up model of being based outside Silicon Valley and in small connected cities works,” says Kozoru’s Flowers. “Instead of outsourcing to India or China, we outsourced to Kansas.” Broadband lets you do that. Pity, our politicians don’t think that way. (I would look forward to your comments and thoughts after you have had a chance to read the article.)

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