Investing in a few key startups alone won’t save struggling American cities

Beyond Boston

Earlier this week, it was announced that Steve Case, AOL founder and chairman and CEO of Revolution LLC, would be bringing JD Vance into Revolution in a special role.

Vance, a principal at Mithril Capital Management, is best known as the author of Hillbilly Elegy, a highly-regarded account of life growing up in the Rust Belt.

The move to add Vance, who will reportedly “focus on the firm’s initiative to identify and back infant companies in cities far from the tech capital of Silicon Valley,” aligns with Case’s current thesis about where innovation can be found. Basically, Case believes that the non-traditional tech towns —Detroit, Cleveland, etc. — are where the most impactful next generation companies will be found; this is something he touches on in all his public appearances as well as in his book, The Third Wave.

Supporting non-traditional tech centers can have two outcomes. One, an investor could find the proverbial “diamond in the rough” startup that has less overhead and greater long-term potential — think Shinola in Detroit (image above) or Zappos in Las Vegas. Second, is the other, more meaningful impact that supporting startups in places like St. Louis, Austin, Milwaukee, and others, could have.

The reason Vance’s book has garnered so much attention has been the focus, after the election of Donald Trump, on how to support these struggling — and often ignored — working class communities across America. People like Steve Case and others believe investing in a few companies in these cities could turn around the downward spiral caused by the loss of manufacturing jobs.

Well that is all well in good in theory, the reality is a bit more nuanced.

If the focus is on building more startup-centric communities, investment in the top tier companies in these locales sounds like a positive shift, but from folks I’ve talked to who are working on projects to support entrepreneurship outside of New York, Boston, and Silicon Valley, that approach is a bit short-sighted. While finding — and supporting — a few winners in places like Baltimore and Cleveland could start a chain-reaction of innovation, the argument is that to create more employment and more opportunities in these developing clusters it takes a wider community of startups.

Which is why CIC St. Louis and whatever new initiatives MassChallenge is quietly undertaking could be better and more meaningful in the long run to helping solve the issues Case and Vance seem to be targeting.

Arguments have been made that it is not worthwhile to build a company outside of Silicon Valley (and New York/Boston to a lesser degree). This argument is built off the idea that only established tech and innovation clusters can be beneficial to founders and growing companies. Which is exactly why Tim Rowe’s CIC expansion and Scott Bailey’s stealthy work to grow MassChallenge’s programs in North America are so necessary. It will not be by the establishment of “pillar” companies alone that will make or break the next wave of growth in non-traditional innovation centers, but by the creation of thriving and supportive communities.

Beyond programs and investment, another opportunity rests with the initiative of a few individuals to bring what I’ll call “grassroots” innovation community building to non-traditional areas. A great example of this would be what the former leadership of Dyn, and, more specifically, what Jeremy Hitchcock and Grey Chynoweth are trying to do to support entrepreneurship in Manchester.

Closer to Boston, another example of this is Ben Pleat, a Harvard student and the founder of a community building startup Doorbell, wrote a long treatise about why he is working with Worcester to jointly test his company’s product and support innovation as that city tries to shift from its working class roots to a more innovation-fueled economy.

As Pleat puts it, “Worcester presents not only an exciting city expansion for our real estate technology startup based in Boston, but also an opportunity to work directly with some of the largest stakeholders in the city’s urban revitalization initiative, ranging from local business owners to energized political leaders looking to transform the Downtown landscape.”

The success of all these initiatives is vital to the continued growth of the US economy, especially in the Rust Belt and former manufacturing centers. However, there are two competing lines of reason on how to do that. There is the Steve Case model of investing in a few potential winners and hoping that there is a trickle down effect. Or, there is the community building and municipal partnership approach that the CIC, MassChallenge, and others are taking.

After observing both the CIC and MassChallenge‘s impact on Boston as well as the potential that individuals can have to make change on a city-wide scale, I’m not so sure if the “spray and pray” method favored by investors is the best way to impact change where it is most needed.

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Under-the-radar

This week, I reached out to Peter Boyce II, VC at General Catalyst and the co-founder of Rough Draft Ventures to find out who he thought wasn’t getting enough love.

The company he pointed me to is LogRocket, a “customer experience platform that helps companies build better online experiences for their users.”

Co-founded by recent MIT and Columbia graduates, LogRocket enables development teams to playback user sessions to identify any issues and bugs that are causing problems with applications.

“They’re testament to what talented young technical founders can build here in Boston as a solution for enterprises and SMBs,” Boyce said. “They are focused on product and helping more of their community go deeper in understanding how UX and software decisions influence impact their businesses.”

All the while, Boyce added, LogRocket is “Quietly learning and building.”

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What went down this week…

Bi-Coastal – Matt Brand is one of the top startup tech guys in Boston. After making his bones at Tabblo, the photo printing company founded by Antonio Rodriguez and acquired by HP, he has gone on to play an integral role in various other local startups. Most notably, he was the tech head (and often the lone leadership in Matt Lauzon’s absence) for Dunwello. Now, Brand has a new gig as the CTO of MoveWith, an active lifestyle application that is based in Boston and San Francisco.

  • According to Brand, MoveWith recently launched audio classes in addition to its in person classes in Boston and San Francisco. “Teachers love it because it allows them to spread their brand and skills far beyond their physical studios while still being able to offer in person classes and connect with their students,” Brand said. “And the rest of us get a way to workout how/when/where we want with great teachers from all over the place.”From what I gathered, Brand is really enjoying his new gig. “What I think is cool and different from a lot of the other players in the space,” he said, “is that we’re not just yoga or just meditation or just running.”