Everyone knows good ideas can come from anywhere, but when it comes to new businesses, few have been willing to put their dollars where their mouths are. The Rise of the Rest fund, established by AOL co-founder Steve Case and author J.D. Vance, is a great start, and will hopefully entice more venture capitalists to invest in Middle America. But it is going to take more than money to unleash the true entrepreneurial potential long ignored there.
If we really want to transform economies in Cleveland, Detroit, Louisville, Ky., and Kansas City, Mo., we need to lure back home natives who have experienced the rush of growing companies from zero to $10 million to $100 million and beyond.
I know those are eye-popping numbers, but there are thousands of people in Silicon Valley and places like Chicago, New York, and Boston who have done it. We need their experience to make that happen in Mid-America.
Allow me to use LeBron James, the superstar forward of the Cleveland Cavaliers, to make my point. I suspect many of you remember his infamous declaration from 2010: I’m going to take my talents to South Beach.
But, what we should really pay attention to is his example of how you transform a striving, but ultimately unsuccessful, enterprise into a powerhouse. Simply put, James had to leave Cleveland to learn how to make the Cavaliers a champion.
A native of Akron, Ohio, James was the NBA’s number one pick, going to the lowly Cavaliers in 2003, right out of high school. In 2007, he took them to the NBA Finals, only to lose in a four-game sweep to the San Antonio Spurs in, perhaps, the least competitive NBA Finals ever. The Cavs went from the basement to the penthouse, but they couldn’t unlock the door.
Three years later, as a free agent, he announced that he was leaving Cleveland to go to the Miami Heat, a franchise led by legendary coach Pat Riley and already the winner of an NBA title with Shaquille O’Neal and Dwyane Wade.
The Heat went on to four straight NBA Finals, winning titles in 2012 and 2013. James then shocked the sports world again and announced in 2014 that he was returning home, intent on using his experience in Miami to build the Cavaliers into a premier franchise. They won the NBA title in 2016.
I take you through that history to say it is alright for people to go away and experience the hyper-growth that leads to superior confidence and competency. Having never gone to college, James likened his Miami experience to going to the College of Winning.
And it worked, for him and for the Cavaliers organization.
This experience is similar to what so many native Midwesterners have gotten after moving to Silicon Valley. They have experienced that pressure cooker of growing mega companies. They have learned how to win. And bringing that mindset back home, almost as much as capital, is what it will take to put the Midwest on solid footing as a destination where innovation is nurtured, funded, and can blossom.
It won’t be easy, but here are some ways we can accomplish this:
- Funding: Cities and states should create funds that partner with private industry to start businesses, similar to the Ohio Third Frontier program, which provides expertise, mentorship, capital, and talent to help create thriving companies and well-paying jobs. About $175 million in public and private funds have been invested in 330 Ohio companies, creating 3,000 new jobs and attracting another $1.3 billion in follow on equity since 2006. These type of partnerships can transform our economies.
- Alumni networks: Universities and corporations should communicate with their alumni about opportunities for entrepreneurs, developers, marketers, and product managers in the region, and open up their databases to others—accelerators, startups, investors, and recruiters—in the region who might be able to attract those people back.
- Recruiters: States should negotiate preferable rates with leading executive recruiters to offer their services to venture-backed startups in the state, possibly in return for some nominal equity in the company. And in the event that the startup is not ultimately successful, those recruited under the program could be offered “severance” packages that seed their next startup if they stay.
- Incentives: Our Economic Development departments are very good at putting together attractive packages to lure in big companies to town. They should do the same for executives. Governments might consider a type of executive-in-residence program where they underwrite the salary of a top executive for a year at a local venture firm while that person scouted for a permanent company to join or created a company. The added bonus is the venture firm they worked for that year would be expected to make a nominal investment in any new company created.
We have to think outside of the box to bring back talent to our communities with the experience to move our economies forward with lightning speed.
LeBron James is the ultimate boomerang. His experience in Miami transformed a moribund Cleveland team. The same can happen in business. We can do it with the support of government, academia, and business. Perceptions will change, performance will grow, and championships will flow.
Tim Schigel is the founding partner of Refinery Ventures, an early-stage venture capital investment firm based in Cincinnati, Ohio.