Why Startups Outside Tech Cities Aren’t Totally Farked

Architecture of Lexington

Most people are surprised to find out Fark is based in Kentucky.  Not because Fark is based in Kentucky per se, but that Fark isn’t based in New York, Los Angeles, or San Francisco. I thought this was strange at first, but I’ve come to realize recently that it’s a lot harder to run a startup in Kentucky than it would have been to do it elsewhere.  It’s not impossible, mind you, but after having done this for 12 years and having compared my experience with friends at other tech startups, they had an easier time of it.

Funding in Kentucky is scarce; angel investors are hard to find.  I did actually look for some investment money, but I couldn’t find anyone to throw $50,000 into Fark to cover startup costs. Anyone who tries taking that request to any outfit on Sand Hill Road will be laughed out of the building because the amount is too small.  Some friends of mine have been desperately trying to locate $250,000 to fund their Lexington, Ky.-based startup and are having no luck whatsoever.

It’s not impossible to find angel investors in Kentucky; there’s more money here than most people would think, especially in Central Kentucky. However, very little money is both accessible and focused on small startup tech companies.  Every month, Kentucky hands out a dozen or so grants and loans to existing mid-size manufacturing operations to create hundreds of new $10-an-hour jobs, but nothing useful is available for smaller operations like Fark.  We’re too small to qualify for tax incentives, too large from a revenue standpoint to qualify for startup grants, and the business loans available have somewhat onerous terms.  I ran a few of the Kentucky grant and economic development programs by a Bay Area friend experienced in raising capital, and his opinion was they were only useful as options of last resort.  He said that after he stopped laughing hysterically, by the way.

In Fark’s case, there’s an additional wrinkle.  I own 100 percent of Fark.  I don’t want to sell anyone a piece of any size.  I’ve had minority investors in previous companies; it’s absolutely not worth it if you can avoid it. People think they retain control as long as they have 51 percent of the ownership of their company, but in reality, even a 1 percent shareholder can drag you down on a particular issue until you cave.

It’s not that Kentucky doesn’t want tech startups. They really, really do. They say so all the time.  Constantly.  I’m just not sure what they think Step 2 is. It’s like that single friend we all have who wants to meet someone (anyone), but never talks to people and rarely leaves the house.

There are other drawbacks to being outside of a large financial center as well. Media coverage is somewhat hard to come by. Tech blogs and legacy media exist mainly in the larger cities. I’d probably get more tech blog coverage if I could hang out with them after hours. I could get on major news networks a lot more if I could just walk over to their offices.

Turns out that there is a lot to like about running a startup in central Kentucky.

Cost of living is extremely low, and office space is cheap and plentiful. Traffic is pretty mild; Lexington has one of the five fastest median commute times in the country: 19.3 minutes (people who work at home weren’t counted).  Energy costs are some of the lowest in the United States (yay coal).  Real estate is cheap, both residential and commercial. It’s not very difficult to find houses for sale around here for $66 per square foot; $150,000 for a 2,500-square-foot, four-bedroom home probably sounds amazing to people crammed in a NYC apartment.

Infrastructure is sufficient.  There’s enough Internet connectivity available to do pretty much whatever, including hosting a website locally that gets 60 million page views per month. There are three main airports to choose from; it’s a rare trip that I can’t find a nonstop flight to anywhere in the U.S.  Turns out it’s cheaper for me to fly to New York, San Francisco and Los Angeles as necessary than actually live there.

There are scads of qualified people in Kentucky as well.  There’s just enough tech industry in the state that qualified folks are abundant, most work at large companies and many of the folks I’ve talked to would like a crack at working at a startup.  A lot of them have been laid off recently, too.  Without even looking hard, I know 10 to 15 people in Lexington alone that I’d hire tomorrow if I could.  From talking to friends who run companies in Silicon Valley, it’s extremely difficult to find qualified people due to hiring competition from other companies.

I don’t figure I’ll move away from Kentucky anytime soon. I like it here, and it suits the way Fark works as a business. It wasn’t that long ago that running a tech-based business was impossible outside of major financial centers, but the Internet creates the opportunity. If I ever do another startup that takes on investors, I’ll argue all day long that the actual development arm be based in Kentucky. Or maybe I’ll just do it on my own again. Because at the end of the day, the major obstacle I had to overcome living in Kentucky was the learning curve. No one in the state had any idea how to grow, operate, and monetize a website the size of Fark. These days, there’s one guy who does know.

Drew Curtis is the founder and CEO of FARK.

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