Tech Start-Ups Find a Home on the Prairie

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The New York Times
Thursday, November 22, 2012

Tech Start-Ups Find a Home on the Prairie

By JOHN ELIGON

DES MOINES — As Ben Milne sought money for the mobile-payment company he began developing here three years ago, investors responded with rejections by the dozens.

Eventually, he coaxed $1 million from a pair of local investors. His app, Dwolla, has since attracted more than 100,000 users, and now moves $30 million to $50 million in transactions a month.

So when he decided to seek a second round of financing last year, Mr. Milne, a 29-year-old college dropout, had an easier sell. This time investors courted him. This year, he announced that Dwolla had drawn $5 million more in capital from investors on both coasts, including Ashton Kutcher and a firm with Twitter and Foursquare in its portfolio.

From Des Moines to Omaha to Kansas City — a region known more for its barns than its bandwidth — a start-up tech scene is burgeoning. Dozens of new ventures are laying roots each year, investors are committing hundreds of millions of dollars to them, and state governments are teaming up with private organizations to promote the growing tech community. They are calling it — what else? — the Silicon Prairie.

Although a relatively small share of the country’s “angel investment” deals — 5.7 percent — are done in the Great Plains, the region was just one of two (the other is the Southwest) that increased its share of them from the first half of 2011 to the first half of this year, according to a report commissioned by the Angel Resource Institute, Silicon Valley Bank and CB Insights.

Fifteen to 20 start-ups, most of them tech-related, are now established each year in eastern Nebraska, a more than threefold increase from five years ago, according to the Omaha Chamber of Commerce. Today, there is more than $300 million in organized venture capital available in the state, as well as tax credits for investors; six years ago there was virtually none, according to the chamber.

Google Fiber’s first ultrafast Internet connection drew about a dozen start-ups to a neighborhood in Kansas City, Kan. And over the past seven months, about 60 start-ups have presented their ideas in Kansas City at weekly forums organized by Nate Olson, an analyst with the Ewing Marion Kauffman Foundation. In Iowa, Startup City Des Moines, an incubator financed with $700,000 in public and private money, including a quarter-million dollars from the state, received applications from 160 start-ups over the past two years. It has accepted 9 so far.

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