JumpStart Inc.

The Myth of the Coasts

Posted on by Case Foundation

The ‘Myth of the Coasts’ is a guest blog post from Cathy Belk, President of JumpStart, Inc., and is the seventh blog post in the Case Foundation’s Myth of the Entrepreneur series. This series is intended to intentionally examine, and change, the stories our culture tells about entrepreneurship. For more information on the Case Foundation’s approach to the Myth series and Inclusive Entrepreneurship, please check out our introductory piece. We encourage you to join the conversation using #Ent4All on Twitter.

If I say the word “startup,” you probably think Silicon Valley, or maybe Boston or New York City. And that would be understandable, considering that, according to NVCA and MoneyTree PriceWaterhouseCooper Annual 2015 Report, roughly 77 percent of all venture capital investment last year went to either California, New York or New England.

But what these statistics don’t show, is that right now is also a great time to be a startup entrepreneur in the Midwest.

Here are just a few of the common myths about Midwestern entrepreneurship that are being debunked more and more every day. 

Myth One: The Midwest Doesn’t Have Great Talent

One of the founders of modern venture capitalism, the late David Morgenthaler, was fond of comparing entrepreneurship to a horse race consisting of the jockey (team), the horse (product) and the track (market). One myth I hear often is that the Midwest just doesn’t have the jockeys—entrepreneurs with a track record of success and failure, along with all the connections (investors, customers, board members, etc.) and experience that come with both.

But the fact is, we have plenty of great talent. In Cleveland we have successful entrepreneurs like Mark Woodka, Laura Bennett, Steven Lindseth and Charu Ramanathan as well as entrepreneur/investors like Doug Weintraub and Charles Stack, not to mention recent exits from companies like OrthoHelix, TOA Technologies and Explorys, whose cofounder and CEO Stephen McHale is also an active angel investor and entrepreneurial mentor in the community. And that’s just a few examples from one city.

Meanwhile, Midwestern universities are actively working to develop the kind of talent startups need, challenging their students to think more entrepreneurially and encouraging them to start their own businesses. In Northeast Ohio alone, all of the region’s 22 colleges and universities have collegiate entrepreneurship programs, many of which also include experiential learning components, such as Cleveland State University’s Startup Vikes program.

And let’s not forget the rise of Midwestern coding bootcamps such as The Software Guild, TechElevator and WeCanCodeIt; or the many talented young people—from entrepreneurs and web developers to the greatest basketball player in the world—who are boomeranging back to the Midwest and bringing their talents back with them. 

Myth Two: There’s No Capital For Entrepreneurs

Did you know that, according to the 2016 NVCA Yearbook, more than $2.2 billion in venture capital was invested in the Midwest in 2015, the highest amount since 2001? Capital is always a concern for entrepreneurs, but there is money available, and more and more investors are starting to see the potential of tapping into the region’s grossly underserved market.

In the meantime, local investors are stepping up to provide much of the early financial (and intellectual) capital to help local startups grow. In Ohio, 75 percent of the capital prior to Series B rounds comes from local (statewide) sources, and these investors are continuing to ramp up their activity.

Right now my organization, JumpStart, is in the process of investing $40 million dollars into Ohio entrepreneurs over the next three years through three separate venture capital funds. Ohio also has five organized angel groups, including two of the nation’s largest, North Coast Angel Fund and Ohio TechAngel Funds.

Myth Three: There’s No Diversity

Silicon Valley is a diverse place, and accounted for nearly 50 percent of U.S. venture dollars invested in 2015. And yet, less than ten percent of U.S. startups backed by venture capital are led by women, and only one percent are headed by African-Americans. In addition, nearly 90 percent of all venture capital professionals are still Caucasian men and only 7 percent of the partners in the top venture firms are women.

Meanwhile, some in the Midwest—a region often stereotyped as being homogenous—are seizing a valuable opportunity to be diverse and inclusive, building both fully inclusive organizations such as TechTown, as well as targeted programs such as PowerMoves, driving a more diverse pipeline of entrepreneurs and creating a major competitive advantage. At JumpStart, more than 30 percent of the companies we advise or invest in are owned or led by women or people of color, and we recently took this commitment even further by creating the Focus Fund—a $10 million venture capital fund supported by the Case Foundation that focuses exclusively on female founders and entrepreneurs of color.

Myth Four: The Lower Cost Of Living Isn’t That Important

Most people already know that the general costs to start or run a tech business in the Midwest are lower than they are on the coasts. This is especially true for real estate—both commercial and residential—where Silicon Valley prices aren’t just high, they are the highest in the entire nation (New York City is right behind). Consequently, average salaries are also much higher.

But to grasp the true entrepreneurial advantages that come along with lower cost of living, you have to think less about dollars and more about time—specifically, how much time you have to make your startup successful before your venture runs out of runway. An entry level programmer salary for a company with fewer than 25 associates in the software industry in the Valley is ~$71K, while in the Midwest the average is ~$58K. That differential (almost 25 percent) is almost three months of time.

As you can see, it’s a very good time to be an entrepreneur in the Midwest. But no matter where you call home, don’t let these kinds of myths keep you from chasing your goals. Focus on whatever key competitive advantages your location offers, and remember that success is mostly determined by hard work and strong business fundamentals—not geography.

The Myth of the Entrepreneur

Posted on by Case Foundation

Entrepreneurship is the bedrock of our country’s economy. In the US, fast-growing, innovation-driven startups represent only two to three percent of all businesses, but they create almost all of the revenue growth in our economy. According to the Bureau of Labor Statistics, over a recent three-year period 34 percent of all private sector jobs were created by 80,000 high-growth businesses. Beyond the creation of jobs and wealth, entrepreneurship serves perhaps an even more essential function to Americans—it embodies our shared belief in limitless individual opportunity. Our Chairman, Steve Case, often reminds us that America itself represents one of the greatest startup ventures ever. Deeply ingrained in America’s startup business proposition was the belief that any individual—no matter their race, religion, gender, sexual orientation, economic background or geographic location—could bring their entrepreneurial talents to building the kinds of strong and diverse businesses and communities we need to keep our nation prosperous.

Yet today the American dream that any individual has the power to change his or her own trajectory, and in doing so be a part of driving our nation’s entrepreneurship and innovation legacy forward, is fading. The vast majority of today’s celebrated startups continue to be founded and funded by white, well-educated, well-networked males. Women are at the helm of 30 percent of all businesses in the US, and these businesses are leading the way in terms of hiring and growth. However, startups with women CEOs still receive only three percent of venture capital funding. Minority-owned businesses are growing at a faster clip than non-minority owned businesses, but are receiving an even smaller fraction of investments.

Why is that? It’s not that high-potential, high-performance companies founded by women and entrepreneurs of color don’t exist—check out the amazing talent featured at the first ever White House Demo Day this summer. It’s not that performance data isn’t on their side—women-founded ventures are outperforming their male counterparts and companies with diverse executive teams (gender and race) are more likely to have higher financial returns. It might be that unconscious bias permeates—bosses tend to hire people that look like they do, think like they do and come from similar experiences that they do. Investors tend to do the same. Sadly, it might be that men are perceived as “more persuasive” pitchers. Whatever the reasons, it can’t be that leaving half the team on the sidelines is a winning game plan.

In an effort to level the playing field and leverage the maximum potential of America’s entrepreneurial talent, earlier this year the Case Foundation launched a new effort to catalyze a movement around Inclusive Entrepreneurship. We have been inspired by the data that suggest diversifying our entrepreneurial ecosystem is good for business and good for the world. We have been inspired by early pioneers like Forward Cities, PowerMoves and JumpStart, Inc., who have been leading the way in engaging, networking and financing diverse entrepreneurs in their communities. And we have been exceedingly curious about the extent to which the American culture and mythology surrounding entrepreneurship, perpetuated by the media, may be impeding the success of women and entrepreneurs of color.

Unbundling The Myth of the Entrepreneur

Today, when you look at the most highly celebrated entrepreneurs—or look at how entrepreneurs are depicted in pop culture—it’s not exactly a picture of diversity. And typically the story of the entrepreneur casts main characters that appear to be singularly heroic, toiling away in garages and labs until, suddenly, a Eureka Moment! Culture begets behavior, and behavior creates outcomes. So if we want to change outcomes by expanding access to entrepreneurship, we must start with what informs our culture of entrepreneurship: We must very intentionally examine, and change, the stories we tell.

In conjunction with National Entrepreneurship Month and Global Entrepreneurship Week, we are doing our small part to start changing the narrative by launching a new blog series called The Myth of the Entrepreneur. Through this series we will take a critical look at the common stories told in startup culture. We want to distinguish between what stories should be embraced and what stories are holding us back. And to suggest it’s time to reboot and re-focus the narrative on entrepreneurship, and create a message of inspiration and aspiration grounded in inclusivity. The next era of entrepreneurship is about leveling the playing field, expanding participation and scaling the networks of social, financial and inspirational capital that provide the foundation for successful startups and scalable business. The new paradigm of entrepreneurship will replace the myth of isolated geniuses with teams of diverse problem-solvers working hard and collectively to build and scale businesses that make life better for all, not just more convenient for an elite few.

If we can debunk these long-standing and highly influential myths, perhaps we can, together, put a new “face” on today’s entrepreneur. We hope you will join us on this journey—offer up your thoughts, inspiration and new era entrepreneurs you admire on twitter using the hashtag #Ent4All. Check back here next week to learn the truth about one of the most infamous myths of entrepreneurship today—The Myth of Isolation.

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