Could Grand Rapids Become the Next Silicon Valley?

Could Grand Rapids Become the Next Silicon Valley?

Ask anyone about Grand Rapids, Michigan and they will most likely not tell you that it is considered be the Silicon Valley of the Midwest.  But could it be?  We certainly cannot call Steve Jobs, Bill Gates, or Elon Musk one of our own, but do not count Grand Rapids out as a future tech center of the Midwest.

Grand Rapids can boast Amway and Meijer as companies that have reached tremendous heights, but although they are huge and reputable companies,  they are hardly tech giants such as Apple, Tesla, or Facebook.

But could Grand Rapids be a hotspot for future entrepreneurial growth?  Maitlan Cramer seems to think so.  Cramer is principal at a recently launched firm called Grand Ventures, a venture capital company. Cramer grew up in Grand Rapids, but his time lately has been spent working in banking and technology in San Francisco and Denver.

Venture capital is the key to gaining traction in the technology hub arena.

According to a study by Martin Prosperity Institute, a Toronto-based organization, more than 80% of all venture capital investment is centered around only three major areas of the U.S. – Souther CA, Boston/New York/Washington D.C. corridor, and San Francisco.  West Michigan has mainly benefited in other industries, most notably health care and automotive.

Cultivating and nuturing a tech culture is more than infusing money into a few select startups, says Mike Morin, Start Garden CEO. He believes that before there is a plethora of technology businesses in the area, the community needs to believe and understand the need to build it.

“There has to be a culture of fostering entrepreneurism and risk-taking across all spectrums,” Morin said. “Once people start taking risks, the high tech and high-growht business will come, but it cannot be done overnight”. But only if Grand Rapids could foster just one innovative startup that helped get the ball rolling. Nathan Owen, CEO of Blue Medora, says that when organizations like Start Garden and Grand Angels started, there was very little tech activity in the Grand Rapids area, and they planted the seeds.

If a seed is successful, and results in an IPO and successful exit, the founders and employees involved can plant more seeds, much like Elon Musk did on his successful PayPal exit.

Musk created numerous startups after his PayPal windfal, and a large buyout for a company in Grand Rapids could also lead to many more startups. Case in point is Indianapolis, where Salesforce acquired ExactTarget for $2.5 billion in 2013.

“The way this typically works is success begets success,” Owen said.  “A couple good exits spawn another 10 companies, and couple of those do well and that’s how it gets going.”.
According to Cramer, the Midwest has seen its share of companies going public. Between 2008 and 2013,  52 companies have either gone public or been acquired for more than $1 billion.

According to Owen, there are many financial firms looking at the Midwest for untapped gems.

“There’s incredible competition on the coasts,” Owen said. The Midwest region of the U.S. is a prime location for technology talent.  In fact, were the Midwest states able to stand on their own, they would compromise the fifth-largest GDP in the world at $3.5 trillion according to 2013 GDP data.

The Midwestern United Sates graduates more computer science degrees than any other region. The problem according to Cramer is that young minds typically end up “chasing dollars”, choosing to move West and work for IBM or Facebook for upwards of $150K/year.  He thinks that is starting to change.

Midwest companies are a safer bet, Cramer believes but it is the coasts that are willing to take the risk. A report by the Kauffman Foundation found California residents start companies 50 percent more often than in the Midwest, but five-year survival rates are higher in the Midwest, with six of the top 10 survival rates located in the Midwest; California landed at 19th.

“You need individuals to make debt-defying risks to disrupt,” Cramer said.  That is one reason why Cramer believes that Silicon Valley have taken off.  People are more willing to take risk and “change the world” on the coast.

But Cramer believes that mindset can change, and may be already.  He points to companies such as Kellog and Meijer for recent innovative partnerships.

“Focusing on West Michigan, we need buy-in from Haworth, Steelcase, Bissell….all those teams are starting to invest in software companies,” Cramer said.

Many believe that the days of venture capital fueling one particular region of the U.S. are over.

Only time will tell whether Grand Rapids and West Michigan will become the next Silicon Valley.  But on thing is for sure – it’s Midwestern values, people, and culture will help sustain any company willing to take the risk and thrive in West Michigan.

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