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Jordan Lampe, Dwolla director of communications, and Caitlin Jones, worked in the company’s office in Des Moines. Tech enthusiasts point to the Midwest’s strengths: lower costs and a strong work ethic.

Mark Kegans, New York Times

Tech new frontier: Silicon Prairie

  • Article by: JOHN ELIGON
  • New York Times
  • November 21, 2012 - 5:09 PM

 

DES MOINES - As Ben Milne feverishly sought money for the mobile-payment company he began developing here in his hometown three years ago, investors responded with rejections by the dozens.

Eventually, he coaxed $1 million from a pair of local investors. His app, Dwolla, has since attracted more than 100,000 users, and now moves $30 million to $50 million worth of transactions a month.

So when he decided to seek a second round of financing last year, Milne, 29, a college dropout, had an easier sell. This time investors courted him. This year, he said that Dwolla had drawn another $5 million in capital from investors on both coasts, including Ashton Kutcher and a firm with Twitter and Foursquare in its portfolio.

From Iowa to Omaha to Kansas City -- a region known more for its barns than its bandwidth -- a start-up tech scene is burgeoning. Dozens of new ventures are laying roots each year, investors are committing hundreds of millions of dollars to them, and state governments are teaming up with private organizations to promote the growing tech community. They are calling it -- what else? -- the Silicon Prairie.

Although a relatively small share of the country's angel investment deals -- 5.7 percent -- are done in the Great Plains, the region was just one of two (the other is the Southwest) that increased its share of them from the first half of 2011 to the first half of this year, said a report commissioned by the Angel Resource Institute, Silicon Valley Bank and CB Insights. About 15 to 20 startups, most of them tech-related, are now established each year in eastern Nebraska, a more than threefold increase from five years ago, the Omaha Chamber of Commerce said. Today, there is more than $300 million in organized venture capital available in the state, as well as tax credits for investors; six years ago there was virtually none, according to the chamber.

'A newer potential'

About a dozen startups have flocked to a single neighborhood in Kansas City, Kan., alone after Google Fiber installed its first ultrafast Internet connection there last week. And over the past seven months, about 60 startups have presented their ideas in Kansas City at weekly forums organized by Nate Olson, an analyst with the Ewing Marion Kauffman Foundation. In Iowa, Startup City Des Moines, an incubator financed with $700,000 in public and private money, including a quarter-million dollars from the state, received applications from 160 startups over the past two years. It has accepted nine so far.

"Traditionally, you'd say, 'Hey, if I want the safe lifestyle, I'll stay here and I'll do what generations before have done,'" said Jeff Slobotski, an Omaha native who four years ago started Silicon Prairie News, a website covering the region's tech scene. Now, he said, "there is a newer potential in terms of what can take place here and not having to hop on the first plane out of here."

Still, entrepreneurs insist that they are not striving to replicate Silicon Valley or other well-known tech hubs. "We're creating different types of startups using local ingredients," said Christian Renaud, a principal at an information technology startup incubator here.

Among the companies that have started in the region over the past few years is Ag Local, a firm that created an online marketplace for trading meat; EyeVerify, which uses technology to verify people's identities through their eyes; and Tikly, which created a platform for bands to sell concert tickets. But there also are many startups outside the information technology realm, focusing on fields like biotechnology, advanced manufacturing and medical devices.

Work like 'on the farm'

The Silicon Prairie still lags in national recognition as a startup hub, however. Capital remains relatively sparse, and software engineers are in shorter supply than on the coasts. Tech enthusiasts are hoping to change that by pointing to other strengths: lower costs and a workforce focused more on building strong companies than moving on to the next big thing, they say.

"In Nebraska and the Midwest in general, because the work ethic is so strong, you will find people that will work like they worked on the farm," said Gordon Whitten, the chairman of VoterTide, an Omaha-based startup that analyzes social media trends for campaigns, media companies and others.

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