- Long-time observers of the tech industry know that disruptive companies emerge from crises.
- Some of the most prominent players in tech today, including Uber, Airbnb, and Square, were built in San Francisco during the last financial crisis.
- The age-old adage of necessity being the mother of invention becomes a reality when times get tough.
- Today’s entrepreneurs who face slowing markets and uncertain futures feel the necessity and invent ways to produce more with less.
A Forbe news source says that the Next Uber Is Being Built In The Heartland Right Now.
Uber created a convenient and cheaper alternative
Companies can thrive in recessionary times because, often, they provide a new, more affordable way of doing something. Uber created a convenient and cheaper alternative to hailing a taxi. Airbnb built a new, more affordable way to rent a hotel room. And Square cut down credit card fees on businesses so they could retain more profits from each swipe. Recessions put a newfound pressure on capital, and that pressure creates newfound opportunities for innovation.
As expected, the current economic downturn and market turmoil is creating an explosion of entrepreneurial activity–and not just in the San Francisco Bay Area, but across the country. The question isn’t if the next “big thing” being built, but where. By most indications, the answer is just as likely in the Heartland as in Silicon Valley.
New business formation explosion
According to data from the U.S. Census, Americans set an all-time record of new business applications in 2021–specifically ones that were likely to employ others. But the surge doesn’t stop there. New data shows that business creation has been plateauing at a much higher level than pre-pandemic, with over 5 million businesses created in the US last year. On average, that’s almost 14,000 companies popping up every day in 2022!
Pairing the record number of new businesses with the spreading out of technology workers across the country opens up the real possibility that many of these new businesses are being started by experienced entrepreneurs. These uniquely connected entrepreneurs not only bring their experience but their trust network to their new ventures in new locations.
Entrepreneurs with long runway and new mindset
As companies like Meta, Amazon, Google, and Microsoft lay off thousands of workers, their highly skilled alums are flooding the market. Although Ex-Googlers weren’t happy with the “cold” way they were notified of layoffs, they may have been pleasantly surprised by their severance packages. For example, Google is paying 16 weeks of severance, plus 2022 bonuses, giving aspiring entrepreneurs runway to pursue business ideas and take risks.
With less urgency to find new work right away and several years of remote work experience to draw from, these Big Tech alumni are carefully evaluating their next steps. As remote flexibility, shorter workweeks, and a better quality of life take priority, many tech workers are joining smaller companies, freelancing, and starting their own businesses.
Similar to how capital constraints helped propel startups like Square to thrive during the last recession, the current pressure of constraints may also help cities like Columbus succeed by attracting and retaining more of these big tech alumni. For example, the Ohio State graduates who moved to Silicon Valley to start their career in tech can now return home to Columbus to start their company (with a year’s worth of living expenses).
Experienced tech talent bring a unique advantage through their work and education based trust networks that opens up access to venture capital and partnership opportunities vital to tech startup success.
Venture capital invests beyond Silicon Valley
Venture capital is a leading indicator of what entrepreneurs are working on and where they are working. For several decades, Silicon Valley has monopolized the venture flows with investors declaring that they would only invest in companies they can drive to for boarding meetings. However, the Zoomification of meetings and competitive forces have up-ended this assertion and the landscape has changed.
Silicon Valley’s share of venture capital dropped below 20% in 2021. And according to Crunchbase, the rebalancing continued in 2022 with a 40% drop in venture in California, New York and Massachusetts. The beneficiaries of these shifts can be seen in the increased traction in emerging venture destinations, especially in Texas, Florida, and North Carolina.
Eyes on the horizon for the next big thing
This trend isn’t limited to just startups. Investors are also on the move and, in some cases, out of physical places altogether. One of Silicon Valley’s most prominent venture firms, Andreessen Horowitz, announced the location of its new headquarters to “the cloud.” As Ben Horowitz explains, This is a very good thing for the country and the world. As my partner, Marc, wrote in his 2011 article, “Software Is Eating the World,” every important new company is likely to have a world-class software team at its core. Concentrating all of those companies into one or two geographies cuts off great opportunities from anyone who can contribute, but cannot easily move. Remote work is opening up many new locations for entrepreneurs and technology workers. We embrace that by changing our own operating model.
This expansion beyond the traditional tech hubs signals a shift in the innovation economy, and combined with an increasingly remote workforce, it opens up the real possibility that the next Uber, Airbnb or Square is just as likely being built today in one of the new tech cities around the country – in places like Austin, Atlanta, and Columbus – as in Silicon Valley.
As the economy settles into its new phase, all eyes are on the horizon for the next “big thing.” This time, those eyes will have to look in every direction.
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Source: Forbes
