Does Tech Need Silicon Valley? Startup founders throughout the Midwest are doing something new. Staying.

A couple of years ago, Megan Glover was on a coffee date with a friend when the conversation turned to the water crisis in Flint. Glover found herself nodding along. Like a lot of residents of Indianapolis, she was familiar with the topic — Indiana abuts Michigan, and for weeks, it seemed, local media had reported on little else. And yet, as Glover confessed to her friend, a fellow entrepreneur named Chris Baggott, she hadn’t gotten around to testing her own water supply. “I’m not sure where to start,” she said.

“Hey!” Baggott exclaimed. “I think you just stumbled on your next business.” That evening, Glover opened her laptop and searched water-testing services. Plenty of results came back, although most of the kits were either prohibitively expensive (up to $1,500 each) or required a high degree of scientific skill to operate. An idea began to cement in Glover’s mind: Her kit would be cheap and bare-bones — a beaker inside a box. It would be shipped to a consumer’s house with a return label inside. Users would fill up a beaker and drop the box back into the mail. An outside laboratory would do the actual testing, and the results would be emailed back to the consumer via in-house, proprietary software. By the summer of 2016, Glover had a name for her project — 120WaterAudit — and $130,000 in seed money, part of it provided by Baggott, who signed on as co-founder, and part of it pulled from Glover’s own savings. “When I say ‘bootstrapped,’ I mean ‘bootstrapped,’ ” Glover recalled. “Still, this was a company that I thought could be both profitable and have a real social impact, and I was determined to make it work.” If Glover had been based in Silicon Valley — or if she had relocated to California, like so many entrepreneurs before her — her path forward would have been all but preordained: a seat at an incubator with connections to big venture capital firms, the angel investment that would pay for a few part-time programmers, the multiple VC-backed financing rounds. Finally, if she were lucky, an acquisition by Google or another tech giant — the kind of lucrative exit startup founders like to dream about. But she was hesitant to move. She’d grown up in Northern Indiana and studied communications at DePauw University. She and her husband, a commercial real estate developer, had built a life for themselves and their two kids near the capital city. Glover was also inspired by a book she’d started reading that spring. The book was called The Third Wave; the author was Steve Case, a co-founder of America Online. As Case saw it, the internet had evolved in three distinct stages. Case himself helped inaugurate the first wave of basic connectivity. In the second wave, companies had shifted from “building the internet to building on top of the internet,” with search engines and apps. Now, in the third wave, digital “disruptors” would conquer industries like energy, government services, and health care. Crucially, Case theorized, many of the disruptors would not live in Silicon Valley. Instead, they’d be based in manufacturing hubs like Pittsburgh or Columbus, Ohio, where startup scenes were already springing to life. If the second wave had been dominated by young app developers — “entrepreneurial carpetbaggers,” Case called them — then the third wave would be dominated by 30-somethings in flyover country. Glover, who is 36, recognized herself in Case’s book. And she recognized her city. When she’d arrived in Indianapolis in 2005, the place was best known as the site of the headquarters of the pharmaceutical company Eli Lilly. The few startups, such as the marketing software company Aprimo or Angie’s List, where Glover worked for a while, tended to be disconnected from one another. But in the mid-2000s, the state had started offering more incentives to entrepreneurs, and existing businesses like Lilly had invested in some of the startups. In late 2013, Larry Ellison’s company, Oracle, acquired Com­pendium, a local cloud-based content-marketing provider; a year prior, San Francisco–based Salesforce had bought another software company, ExactTarget, for $2.5 billion. Cash cascaded over the city as residents like Chris Baggott, who was a co-founder of ExactTarget, began to invest heavily in other Indianapolis startups. “Chris and others, they really doubled down,” Glover said. “It got to the point where it wasn’t uncommon for two separate software co-founders to be in on the same deal, mostly because people really want to see the ecosystem in Indianapolis crush it.” A crop of co-working facilities and incubators and accelerators sprang up downtown and in nearby cities like Fishers, the site of the warehouse-size Launch Fishers, which offered space for 500 entrepreneurs. Real estate was cheap. Founders could sink more of their cash into development. And in contrast to the frequently cutthroat nature of Silicon Valley, the emerging scene in Indianapolis was, for the most part, mutually supportive, infused with Midwestern politeness. “In the end, I didn’t deliberate long,” Glover remembered. She officially launched 120WaterAudit from a desk in the offices of another downtown Indy startup; in early 2017, she moved to the back room of a co-working space nearer to her home, in the northern suburb of Zionsville. “It came down to this: There weren’t a lot of compelling reasons to leave for a place like Silicon Valley,” she said. “And there were a ton of reasons to stay — family, a solid community, potential. So I stayed.”

Steve Case likes to remind people that Silicon Valley wasn’t always the epicenter of tech culture. In his book and in speeches, he’ll point out that AOL was originally headquartered near Washington, D.C., and Sprint, in Kansas. But after Google went public in 2004, with a valuation of $27 billion, an army of entrepreneurs and developers headed west in an attempt to duplicate — or, just as often, piggyback on — Google’s success. Many did: In the past decade and a half, 136 U.S. software startups have reached a valuation of $1 billion or higher, according to Atomico, an investment firm. Eighty of those companies were founded in the Bay Area.

In 2010, Case was tapped to co-chair a working group on American entrepreneurship for then-President Barack Obama’s Department of Commerce. Part of the gig was looking into ways to create tech jobs. “That’s when I really had my eyes opened,” Case told me recently. Poring over the available data, Case discovered that plenty of Midwestern and Southwestern cities were leveraging tax incentives to stanch local brain drain, and a few, such as Pittsburgh and Indianapolis, were cultivating their own robust startup scenes. The talent wasn’t all on the coasts. Nor, for that matter, were the jobs. Metro areas like Detroit and Atlanta were adding jobs in tech services and software at surprisingly steady rates. But the requisite venture capital, that ultimate driver of any startup economy, was missing. The vast majority — 80 percent — of VC investment goes to the coasts, Case pointed out, referring to a report from the Martin Prosperity Institute in Toronto. The other states have to fight for the scraps. “It was pretty clear there was a problem here and an opportunity.” Working through his investment fund, Revolution, Case embarked on a four-city bus tour he called Rise of the Rest. At each stop — in Detroit, Pittsburgh, Cincinnati, and Nashville — he organized a pitch competition; the winners took home $100K. In distributing the money, Case and a panel of local judges tended to gravitate toward projects that disrupted local industries in intriguing ways — in other words, third-wave startups. In Nashville, the winner of the competition was a digital-instrument startup called Artiphon. In Pittsburgh, a Rust Belt city once wholly dominated by coal and steel, it was SolePower, a maker of “smart boots” that self-charge with every step. “If you really want to make these cities rise fast,” Case told me, “I think you do it partly by encouraging the residents to completely reimagine the fields they’ve grown up around.” As Case saw it, there was value in telling the story of communities that had been historically overlooked by investors — in drawing attention to them and “making them magnets for capital.” Because he was Steve Case, media followed: In 2016, when the tour expanded to five cities, including Raleigh-Durham, North Carolina, there were reporters waiting outside the bus. The more Case traveled, the more encouraged he became. Yes, Silicon Valley was likely to remain the capital of tech culture for years to come. As he put it, “the rise of the rest doesn’t mean the fall of Silicon Valley.” Gradually, he believed, a national balancing would occur, with talent and cash being dispersed more evenly among the cities between the coasts. Startup founders would increasingly take advantage of the fact that they no longer needed to leave their hometown — as Case, a native Hawaiian, had done — to achieve their goals. “Out west, there’s a depth of talent, and there’s a mercenary culture where people jump around from startup to startup,” Case said. “In Rise cities, it’s harder to scale, but once you get there, it’s easier to build and sustain a real community.” Last fall, Rise of the Rest hosted its first pitch competition in downtown Indianapolis at The Union 525, a co-working space not far from Lucas Oil Stadium. Among the finalists was 120WaterAudit. Megan Glover submitted her application without expectation — her company was a little over a year old. Still, it was growing fast. Several months earlier, she’d signed a $300,000 contract with the city of Pittsburgh to test the water supply at schools. The proceeds from the contract had gone into hiring developers to create an in-house software suite. Similar deals followed: with the state of Indiana, with the city of Loveland in Colorado. The orders were coming in faster than she could keep up with. She was running into the same issue that Case had observed in other cities. It had been easy enough to scrounge up seed money and desk space in Indianapolis, but the venture capital she’d need to bring her company to scale was much harder to find locally. Tickets for the pitch competition had sold out well in advance, and The Union 525 was packed. Glover had heard of most of the other finalists. Many were marketing software startups of one type or another. She went close to last, using a four-minute pitch to highlight the social good her product could do and the ways in which 120WaterAudit could change what had long been a manual, time-consuming process. Case was immediately taken by the pitch. “You travel around enough, and you see a lot of similar ideas,” he told me. “This was something that we hadn’t seen before, and it had regional appeal: It was directed at other nearby Midwestern cities, like Flint.” That evening, he presented Glover with a check for $100,000.

Shortly after the last presidential election, Steve Case had drinks with the venture capitalist J.D. Vance at Riggsby, a bar off Dupont Circle in downtown Washington, D.C. Case lives in the capital; Vance, the author of the bestselling Hillbilly Elegy, about the poor, white communities of the Midwest, was in town for an appearance on one of the Sunday talk shows. “I said to J.D., ‘Look, I loved your book. I was inspired by your book,’ ” Case remembered. “ ‘But I was also troubled that it brought up all these problems without offering any real solutions.’ J.D. turns to me and goes, ‘Well, that’s interesting because I’m actually thinking of leaving Silicon Valley and moving back home to Ohio.’ ” For months, Case had been batting around the idea of raising cash for the logical next step in his Rise initiative — a massive seed fund for early-stage startups outside of Boston, New York, or California. Vance, then at Peter Thiel’s Mithril Capital Management, would be a natural fit for such a project. Vance had Midwestern roots and VC experience; at Mithril, he’d led investments in non–Silicon Valley companies like the New Hampshire–based biomedical device maker Avitide and the Kansas software startup C2FO. “Basically,” Vance said, “I’d already bought into this idea that there was something to be found where other people weren’t looking. But building a big fund isn’t something you do overnight. It took us some time to plan.” Vance and Case started by reaching out to friends they thought might be interested in participating. “We deliberately wanted individuals and not institutions,” Case told me, “and, specifically, we wanted the kind of individuals who would send a signal with their participation.” Early backers included Amazon’s Jeff Bezos; former New York mayor Michael Bloomberg; Eric Schmidt of Alphabet, Google’s parent company; Howard Schultz of Starbucks; and John Doerr, the chairman of Kleiner Perkins Caufield & Byers, one of the most influential venture capital groups in the world. “It got to the point,” Case said, “that the requests were coming to us rather than the other way around. There was excitement and people saying, ‘Hey, can you bring us along?’ ”

Last December, the Rise of the Rest Fund officially launched, with $150 million in cash. A few months after that, Case identified the recipients of the first seed round. Two were software startups headquartered in Ohio. One was an outdoor-apparel company from Utah. And one was an Indianapolis cloud-computing platform. The size of the investments has varied, but generally hovers in the range of $100,000 to close to $1 million. Not an insignificant chunk of capital, but not enough to drive even a relatively small startup in the long term. So in recent months, Case, Vance, and a third partner, Mary Grove, a former Google executive, have been busy cultivating a network of local investors in the hope of amplifying the effects of the fund’s investments. This winter, 80 members of that network convened for a two-day summit in the Watergate Hotel. They were joined by roughly 30 representatives from accelerators and consultancies headquartered in cities the Rise of the Rest tour had visited. A handful of entrepreneurs were on hand, too, including Megan Glover, of 120WaterAudit, who the previous day had been one of three Rise winners to spend a couple of hours at the offices of former President Barack Obama, giving short presentations on their startups. Outside one of the hotel’s conference rooms, a small crowd milled around a 20-foot-wide map of emerging startup scenes throughout the country; comic-book-style speech bubbles testified to the potential of certain locales. In Raleigh-Durham, one bubble explained, there’d been a 47 percent year-over-year increase in seed and series A funding for local startups. In Dallas, a group called the Texas Entrepreneurship Center calculated that its members had made a $130 million impact on the city’s economy. Nearby were sets of headphones for people to listen to what amounted to pretaped testimonials for tech hubs in Hawaii and Utah. In the hallways, the discussion was often of Amazon and which city it would choose as its new headquarters (Indianapolis is on the shortlist). The optimistic mood was mirrored on the summit’s main stage. In a TED talk–ish introduction, Case reminded the audience that “America itself was a startup” and recalled the days when major technology companies — from IBM to AOL — had sprouted up far from Silicon Valley. Later, a handful of attendees were invited to tell their own stories. The CEO of a Columbus trade organization discussed the recent $1 billion acquisition of CoverMyMeds, a pharmaceutical software startup, and the chief innovation officer for the state of Colorado said that venture investment in Denver had recently hit $514 million. “We continue to hustle. But we do so with a deeply Western heart. We are a magnet for the humbly brilliant,” he roared into the mic. But as Case and Vance acknowledged to me, not every Rise city had risen at the same pace. There were setbacks and stumbles, too, and working through them was part of the reason the summit had been organized. During a coffee break, Brandon Clark, a founder of StartupAZ, an accelerator based in Phoenix, explained, “We’re a state with 115,000 millionaires. On paper, that’s a lot of potential investors, right? But I’d guess we’ve only had 300 to 400 who’ve done any angel investing. That doesn’t mean that these folks don’t like making money.” Phoenix, he said, needed to continue to “build the narrative that putting cash into real estate isn’t the only game in town.” Case acknowledged that the investment culture of Silicon Valley is unique. It “encourages fearlessness,” he said, “and that’s something to be admired.” It can also be difficult to replicate elsewhere. That same afternoon, John Murdock of the Nashville Entrepreneur Center, a Tennessee nonprofit, took the stage. Murdock is in his early 30s; he grew up around Nashville and had watched as the city, in recent years, filled with enough investment cash — and enough incubators and accelerators — to make it feel like a genuine tech hub. But beginning in 2016, he’d noticed a troubling trend. The number of new startups was declining. “The biggest issue,” he later told me in the summit’s green room, “is that back in 2013 or 2014, you had a major spike in early-stage investments, with people saying, ‘I can make money, and I can give back to Nashville.’ ” There was only so much capital to go around, and a lot of it was still tied up in the early startups, at least until the companies folded or were sold. When new investors do emerge, Murdock said, “they want to see the results of the initial investments before they act.” Murdock believed a similar slowdown could eventually occur in other burgeoning tech scenes. “All these cities,” he said, “we’re going to grow. But we’ll grow in waves.”