VCs in the “Fly-Over Zone”: MIA

VCs in the “Fly-Over Zone”: MIA

Not too long ago, we learned that AOL’s co-founder Steve Case, out of an excess of civic zeal, has been scouring the countryside looking for his next big investment in places which venture capitalists by and large ignore.

Now we have an article from Sarah Feldman, with Statista, an organization that collects and sells statistical data to marketing and strategic planning professionals, decrying the lack of venture capital availability in a wide swath of the U.S. Economy, i.e., the Midwest. Here’s a link to that article: “Venture Capital Does Not Venture Into the Midwest” ). Here’s a chart that dramatically demonstrates that point:

But, as you can see from the chart, it’s not just the Midwest that suffers from this dearth of capital. If you add up the numbers for the areas other than the Coasts, the total for the rest of the country is a mere 13.6%. Only 13.6% of total venture capital dollars go to the vast middle, “heartland” of the country. The rest, more than 86%, goes to the Coasts.

While that’s far from news to those of us who work in the finance field in the middle of the country (often referred to by the elites on the Coasts as the “fly-over” zone), it’s an important thing of which aspiring inventors and entrepreneurs in those neglected areas need to take note; the simple message is that VCs neither like you nor respect you because they think you’re too stupid, too poorly-educated and have nothing to offer to them or the larger markets which they profess to serve. Just like the national mood, which is highly divided, so are the U.S. geographic regions: and what this means for the vast majority of the country is that adequate levels of venture capital funding are simply not available.

Here, for example, in my home state of Colorado (which has been trying desperately to separate itself from the rest of the “fly-over” zone by serving up “breads and circuses” like Denver Startup Week and their ilk to the populace here), you can see the devastation: its mirrored in the faces of those entrepreneurs who’ve invested hours, days, months and, yes, even years, chasing the few VC dollars available from local sources, only to come up empty-handed. In its aftermath, this chase for scarce VC dollars creates a culture of deprivation and causes entrepreneurs to direct their efforts, not toward activities which could, based on Colorado’s past, actually result in positive outcomes, but instead to a fruitless, pointless, hamster-race in the pursuit of what is un-pursuable, what simply does not exist.

But the truth is, it shouldn’t matter whether venture capital likes the Midwest or the West or any other neglected region of the country for that matter, or the people that inhabit those regions. And, the reason is quite simple: Main Street, not Wall Street or Silicon Valley, is where the American economy resides and has always resided. The reason that Wall Street and Silicon Valley exercise such power these days is that people in the “fly-over” zone aren’t expressing enough confidence in themselves and their neighbors. The reason that Wall Street and Silicon Valley have the dollars available to invest that they do is because Main Street sends its dollars to them.

Consistent with the national mood for enhanced inclusion and diversity in general, should be a recognition that this starts with the pocketbook. In this regard, we should be doing more to extend our investments and resources to those people who have good ideas and good business models, regardless of where they reside, and to do so even where those ideas and business models don’t promise the kind of “illusory” outsized returns promised (but rarely delivered) by venture capitalists and angel groups.

One way this is being done today is through the “umbrella” organization known as Archimedes’ Offspring™ (here’s their website: www.archimedeoffspring.com).