Why Start Up In Saint Louis?

Traditionally, St. Louis has made its fortune on the rivers. It’s easy to see why. Sitting at the confluence of the two largest rivers in North America, during the height of the river trade, St. Louis attracted immigrants from all over, new businesses and even a shady scheme or two.

However, as America has moved to over the road trucking and air cargo, the leverage that St. Louis’ location afforded the city began to wane. Since then, the city has used a more diversified basket of features to entice investors and businesses to grow our local economy.

The fate of every city is intricately wrapped up in its geography. The unique geographic features of cities like the shipping ports of New York and New Orléans, the prairie isolation of Omaha and the central location of Chicago have always been the major driver of the regional economies.

One unique example is the San Francisco bay area — particularly the J shaped strip of towns we collectively call ‘Silicon Valley.’ The area is interesting because their geographic advantages seem more social than geologic.

It is a beautiful place. That much at least is unambiguously attributed to its location. However, the major economic draw is the result of a series of fortunate accidents including government military spending, well-financed and widely available higher education, openness to immigration and cultural diversity and other features that have entangled into a feedback loop that results in the Valley being where America goes to invent stuff.

It is a real advantage. The silicon valley is where the money is. The money is there because the entrepreneurs are there. They are there because of the great schools, weather and, of course, the money. There’s also The Network. Though Steve Jobs’ famous license plate-less Mercedes is no longer parking in their handicap spots, the cafés, bars and noodle shops up and down the valley are full of people chatting, dreaming, lying and scheming. Everywhere you look another young entrepreneur is hustling his way down the block while another emails her lawyer another stack of impenetrable documents.

Things are happening in the valley because people have come there to make things happen.

Are things happening in St. Louis?

Have you been down to Cherokee street? If not, you owe yourself a taco so go down and take a walk around. You will see little businesses growing up between the Taquerias and check cashing joints. There are startups bootstrapping their way up above art galleries and at tables in communist bakeries.

There aren’t any big VC offices. You won’t find investment bankers or opportunistic MBAs. There’s a few Rockstar Programmers, but they’re actually programmers in rock bands. You’ll find new sites like StartLouis.com and hacker spaces like the Arch Reactor. There are creative people tooling around in their custom and inexplicably illegal food trucks.

Music, community, cheap rent, World Series winning baseball teams, smart people, cool hangouts – Saint Louis has a lot to offer. It’s also, for a lot of innovators and creators, home.

It used to be, when a young man needed to find his fortune, that he would pack up his belongings and hit the road. Opportunity was limited and hard to find. As we entered the industrial age, cities exploded into sprawling, soot covered opportunity engines. Economic opportunities increase in tight correlation with individual’s opportunity to interact with each other. As the number of nodes in the network increase, the value of the network to each node grows exponentially. On the flip side, the value of each node is correlated with how many connections it has to other nodes, either through many weak direct connections or a few strong connections to other highly connected nodes. It really is all about who you know and, by extension, who they know.

The tightly connected cities stretched out and connected with each other in stages including trains, telegraphs, telephones and highways. Finally, in an unprecedented whirlwind of copper cables, fiber optics and finally persistent personal wireless strands that connect us to each other in pools of actionable market data.

That tightly wound network of investors, institutions and entrepreneurs in the Silicon Valley is likely to experience something like what St. Louis went through when the man-made networks of first the Railroad and then the highway system suddenly devalued the river network.

Those were networks with more nodes and edges than the relatively sparse river ports. That added value is clear when you see how quickly rail and road replaced the riverboat.

The ad hoc networks that are springing up across the internet are challenging the old gatekeepers. Instead of supplicating on Sand Hill road, you can run a Kickstarter campaign or use lean methods to bootstrap your idea into an MVP on South Grand or Delmar or Cherokee Street. Being funded is still a big advantage. You can bully and buy your way into viability if you’re funded and the right combination of ruthless and lucky. But in a pinch you can be scrappy and clever make up for whole choirs of Angel investors.

I don’t want to downplay the significant advantages the Silicon Valley can confer on a hot startup. You can build companies in the Valley in a time-frame and scale that would be hard to replicate elsewhere. However, you can build a company in St. Louis on a scale and time-frame that would be unthinkable out west.

Everyone is preaching the gospel of metrics, experimentation and optimizing your way to profitability. Have you noticed that all the big funded companies are experimenting on the same things? Some of the experiments are about validating the hobby-horse of a particular investor and others are CYA experiments in doing whatever is on the home page of TechCrunch today.

When you’re operating at an outlandish scale with other people’s money you have a limited range of experimentation you can get away with. Everyone will get behind seeing if you can pretend to be Groupon for a while and moving the needle a couple of points one way or the other with a different colored button is a productive use of your time when your visitor logs look like pro football attendance records.

What you can’t do is experiment with the premise of capitalism itself. You can’t just paste together a pastiche of open source software without a marketing plan. You can’t trade beer for code. Well, you can… we just have better beer.

We’re living in a world where is often takes a disaster like a tornado, earthquake or hurricane to remind us of how much where we are affects who we are. When I was a kid we heard rumors that kids in California wore fashions we wouldn’t be aware of for a couple of years. We dreamed of growing up and running off to New York to be in the center of it all.

Now there isn’t a center. We’ve agreed to search not sort. The traditional way of making a fortune was to secure exclusive control of a node or two of a large system. Industrialization and electronic communications allowed for control of more and more nodes, and even entire systems. The early trusts were the natural end of that progression.

We’re reaching what, optimistically, is the peak of our current cycle. The computer’s ability to exploit information for monetary gain has reached a point where winners and losers are decided by CPU cycles and, literally, the speed of light.

Having value created virtually on a network that doesn’t respond to scarcity like its real world proxies has been an interesting experiment and it has led to some outlandish results like credit default swaps being sold for more than the GDP of the planet.

On a happier note, one of the things created in the wake of our sudden and ubiquitous interconnection is the opportunity to use information in novel ways from anywhere. When the internet first left the academic and military cloisters it was born in, we experienced a sudden burst of innovation that almost outran itself. As the network’s physical infrastructure has caught up to demand, we’ve seen a more rationed growth in innovation. Somewhere in the last few years we reached a tipping point. Mobile networks have expanded to reach of the network to a saturation level unimaginable just a decade ago.

Do you remember Jott? As I barely remember it, it was a service that allowed you to store notes and ideas and todo lists in a personal space on their website. It was attractive then because it allowed you to connect to the world wide network in that “last mile” when you weren’t physically in front of a connected computer. The smart phone rendered Jott irrelevant instantly. Instead of running a custom line that last mile, the mobile networks brought the internet itself to your pocket.

That network saturation level is a seismic event in human history. The network is expanding at a rate closely approximating the growth of information itself. According to some interpretations of network theory, the value of the network is growing exponentially to that rate. That’s a pretentious undergraduate way of saying that it is getting easier and easier to capture the value created on that network.

As that happens, it becomes easier to take advantage of the resources available in St. Louis. A couple of decades ago, creating a tech startup in Saint Louis was so arduous as to be nearly impossible. As evidence I present a list of notable tech startups from St. Louis in that time period. (I don’t have a list, I’m sure there are some. But that’s my point.)

Back then you didn’t have access to the information, equipment and money that a silicon valley company had. You also didn’t have a deep network of fellow entrepreneurs. Even if there were a sufficient number of peers, finding each other and coordinating meetings was a challenge unto itself.

Now, we can connect with each other instantly by location and interest. We can read streams of each others thoughts before ever meeting! Now we can download open source software that does all the stuff you needed money and employees for in the past. Now we have free information and tutorials that will teach you skills that the best universities could not teach you at any price. You can ask questions of experts and receive instant answers. You can build something cool and people can share it with a twitch. Before you know it people from all over the world are cloning your repo, or signing up for your MVP or reading your rambling blog posts.

The value of any one of those things is incalculable. The best way to estimate their value is to use them.

  • Start connecting with people who know how to make things
  • Develop a habit of sharing what’s on your mind online
  • Make plans and schemes at Cartel or Mokabe‘s or Kaldi‘s.
  • Celebrate a release with some Ted Drewes.
  • If someone whines about moving to the valley, ask them how the Giants did this year. Cough cough.

St. Louis is a great place to start a business because it’s our home. We live in a unique time in which, for better or worse, we’ve been asked to release the alpha version of the Human Network Operating System. For some reason, most of it is being written in Javascript and PHP.

St. Louis is a great place to start a business because it’s full of people who think it’s ok to be creative. We let our children play on a rusted out airplane attached to the side of an old  shoe factory. In a city famous for its brick buildings and centered on the regal architecture of the courthouse we installed a 630 foot stainless steel arch. Have you had a pork steak? I’m just saying we’re willing to try new things.

Our state sobriquet is the “Show Me State.” It’s essentially an ode to data driven innovation. It’s not hard to convince a Missourian of the value of market validation.

At the same time, there is another essential character trait that helps drive innovators in this region. It’s a default openness to just rolling with it. Think about our regional specialties. Gooey Butter cake was invented, the legend goes, when a baker reversed the proportions of sugar and flour in a standard yellow cake recipe. Instead of throwing out the gooey and gloppy failure, she just rolled with it. Gooey is now a feature not a bug. Problem solved.

Not convinced? What other weird stuff do we eat here? Toasted Ravioli? A chef accidentally dropped an order of ravioli in a deep fryer and just rolled with it. It’s fine, just dip it in the sauce.

Monsanto was trying to make a serum to create an army of super soldiers but spilled the secret formula on some weeds that shriveled up. The army of super soldiers drowned during a float trip on the Meramec river  but Roundup makes billions. Rolled with it.

The economy is in transition. It will be a bumpy ride in many places. Having a tendency to tenacity and curiosity is a great combo now. St. Louis was largely insulated from the fallout of the housing crisis. Driving around the city now you will see new businesses growing in the rugged remains of old industries. You’ll see big buildings that don’t seem to be used for anything but inside are humming thousands and thousands of servers taking advantage of our location and Washington University’s historic role near the backbone of the internet. You will see creative businesses like the Cherokee Photobooth and Upcycle Exchange are exploring entire new business models.

Sucking the marrow out of dying power structures is a perfectly rational strategy as the perfectly rational sociopaths on Wall Street are all too eager to prove. Creating the future is a much riskier strategy but never has it been more accessible and more rewarding. St. Louis is a great place to try to build the future.

Also, we have frozen custard.

Photo Credits: CC licensed photos from http://www.flickr.com/photos/paparutzi/ and http://www.flickr.com/photos/dherholz and http://www.flickr.com/photos/janet/

Lance Cameron Kidwell

5 November 2011

Posted in Culture

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