As an entrepreneur that has started venture capital backed high-tech businesses in Boston and Michigan, and with a daughter and associates in California VC backed high-tech startups, I’ve observed some of the fundamental cultural differences between Michigan and coastal entrepreneurial communities. Differences that might explain why there are few high tech start-ups here, why ambitious Michigan kids head for the coasts after college and why VC investment in Michigan start-ups is a drop in the bucket compared to the coasts.
It takes a village to raise a successful start-up company of any consequence. It takes bright, high-energy, obsessively committed risk-taking entrepreneurs supported by employees willing to take career risks and work crazy hours to be part of something big and maybe make a small fortune on stock options.
It takes VC’s with deep pockets, a gambler mentality, business wisdom and connections, a power network, lawyers and accountants that understand high-risk ventures, support services to supply materials and services, sometimes in exchange for stock or future considerations.
It takes local, regional and state government that materially supports start-up businesses.
It also requires empathy and encouragement from family and friends to take the risks and work the hours that it takes to make the big idea successful.
Certainly, Michigan can point to risk-taking entrepreneurs that have made their big vision work, going back 100 years, but for the most part Midwest and Michigan conservative values produce conservative risk-taking in business ventures.
My experience is that most Michigan entrepreneurs and investors are much more interested in managed risk ventures with relatively conservative return on investment. Base hits, not home runs. Reliable two-for-one near-term returns, not 100:1 long-term fliers. Manufacturing contracts, real-estate development, not Web businesses.
In Boston and New York, 19th century entrepreneurs and bankers took big risks that bankrupted some and made fortunes for others, creating a legend and culture of high-risk, high-reward entrepreneurship and finance. Textile manufacturing, drug, machinery, shipping companies created legends, massive fortunes and a culture that encouraged boldness.
In the 19th century, the West Coast was populated by big risk-takers looking for gold and other opportunities. In Boston, the risk taking culture fostered the high-tech boom of the 1950’s to 1980’s. The semi-conductor business started in Boston, then expanded to and then moved to the west coast in the 1970’s where it exploded in the California entrepreneurial culture.
While the money and talent is probably here in Michigan to start an Intel, a Cisco or a Google, would their business plans get traction with Michigan investors, government and employees? Probably not.
Could that change? Possibly, but probably not soon.
I welcome your comments on whether you see the Michigan entrepreneurial culture becoming more supportive of big-idea ventures. I have some thoughts that I’ll put forth in my next blog.