5 rural cities that rode the startup wave to fame

From coast to coast, country to country, a common theme has emerged in the past decade; people are challenging traditional corporate models and jumping on the startup wave to start their own companies. What has resulted is the creation of hundreds of thousands of new companies across the world. Some call it “entrepreneurial enlightenment.” Others call it “startup fever.” Whatever it is, it’s not slowing down and it’s changing the world.

While the “startup wave” has grown in leaps and bounds in the past decade, many of the newcomers are following in the footsteps of earlier successes that laid the groundwork. In the late 90’s and early 2000’s, the stories of these successful companies laid a crucial precedent for the startup activity seen today.

Here’s five companies that paved the way for a startup community to form on their own turf.

1. Des Moines, Iowa: Dwolla dwolla

In Des Moines, Iowa, population 207,510, a good idea and a friendship between two guys turned into a startup that now moves hundreds of millions of dollars a year. Dwolla is a payment platform that utilizes the Internet to move money without interchange fees. It was founded by Ben Milne (CEO) and Shane Neuerburg (CTO), and initially worked with a few small banks and retailers in Iowa. They went national in 2010 with $1.31 million in funding. By 2011, they had grown from two to 15 employees and had 20,000 users, and processed $1 million in a week for the first time.

While reporters and fans asked, ‘they’re doing this from Iowa?’ the startup reeled in investments high profile names such as venture capital firm Andreessen Horowtiz and actor Ashton Kutcher. Last year they announced a collaboration with US Treasury in a project to move to digital payments.

For the city of Des Moines, Dwolla brought media attention and a techie vibe. In a story originally published in the The Des Moines Register and picked up by USA Today, the reporter highlights the “burden of starting a tech revolution” that Ben Milne may have felt.

“His PR machine opened doors,” said Mike Colwell of the incubator Business Innovation Zone of Central Iowa, one of the first people in Des Moines to meet Milne in September 2009.

Ben Milne presenting at Startup Weekend Fargo in 2013

Ben Milne presenting at Startup Weekend Fargo in 2013

Since Dwolla launched in 2010, Des Moines quickly became identified as a tech hub in what is known as the “Silicon Prairie.” Currently on AngelList there are 86 startups in Des Moines, all of which sprung up in the wake of Dwolla’s growth. Forty of those are tech startups that range everywhere from a Google Maps application for drone monitoring to digital church bulletin creation.

Other tech hub players have emerged as well; a venture capital firm was established, angel investors formed partnerships, and the city began to take notice by providing business accelerator programs.

2. Kelowna, British Columbia, Canada: Club Penguin

clubpenguinIn 2005, three fathers in Kelowna, British Columbia wanting to create a friendly, ad-free online game for their kids thought up an interactive world of penguins — and Club Penguin was born. When it launched for beta testing, Club Penguin started with 15,000 users. By March they reached 1.4 million—and then nearly doubled by September, when they hit 2.6 million. By the time Club Penguin was two years old, it had reached 3.9 million users.

When they were purchased by Disney in 2007, Club Penguin had 12 million accounts, of which 700,000 were paid subscribers, and were generating $40 million in annual revenue.

The impact of the company’s success on Kelowna, as with the other stories like this one, can be seen in the development of a startup community following these footsteps. An accelerator called Accelerate Okanagan has developed to support tech startups in the area; they claim to have created 440 jobs, helped just as many entrepreneurs, secured $21.8 million in funding, and hosted 626 events.

Last year, Kelowna was the meeting spot for the top 15 Canadian startups at the 7th annual metabridge conference.

3. Lincoln, Nebraska: Hudl 

Hudl

Hudl is a sports video editing software company, which in less than a decade has grown from a three-person startup to nearly 300 employees and $30 million a year in sales. It’s a product of Agile Sports Technologies, Inc., founded by David Graff, Brian Kaiser and John Wirtz in 2006.

Lincoln Nebraska, population 268,738, was better known as the home of the University of Nebraska -Lincoln “Huskers” than it was a tech center. But now with the growth of Hudl, the city is making waves. Hudl’s new headquarters is “the biggest building to be built downtown in years,” according to the Lincoln Journal Star. The company not only provides jobs for recent grads from the local university, but also now is drawing employees to from all across America.

In 2013, according to Inc. Magazine, Hudl was the 149th fastest growing private company in the United States, and the fastest-growing private company in Nebraska. Last year, Hudl grew to 275 employees across four offices and took on their first round of institutional funding with $72.5 million from Accel Partners.

Hudl was one of the early pioneers of what has now turned Lincoln into an active tech hub. An article by CBS News that came out last year, focused on Hudl as they wrote about “‘Silicon Prairie’: America’s new entrepreneurial frontier.'”

“Today, Lincoln is becoming a mini Palo Alto, home to more than 100 software startups,” CBS reports. “And once-abandoned buildings now house coworking spaces and incubators.”

Hudl offices in Lincoln, NE

Hudl offices in Lincoln, NE

4. Fargo, North Dakota: Great Plains Software

GP Logo Old CLRFor Emerging Prairie readers, this is a story you may know well. Great Plains Software, a financial and business management application developed in Fargo by two Concordia students, came under the leadership of Doug Burgum in 1993. As software grew and the product began to take off, a big dog also gaining traction took notice – Microsoft. In 2001, Microsoft bought Great Plains Software for $1.1 billion dollars. Fargo is now home to the third largest Microsoft campus in the world, which regularly attracts hundreds of employees from out of state.

What has it done for Fargo? The success of Great Plains serves now as a legendary tale that has left a trail in the years to follow for the city. Former Microsoft employees left to build their own startups, some which have seen great success — Intelligent InSites, for example — and others that are in early growth, such as Sky Blue Technology. In a Forbes article titled “Microsoft is Plain Crazy,” reporter Rich Karlgaard attributes much of Fargo’s growth in the past decade to Burgum and the success of Great Plains.

“Fargo is hot. Doug Burgum bears much of the responsibility for this,” he said. “Burgum proved that tech entrepreneurism could happen on a world scale in Fargo.”

In addition, the success prompted Doug Burgum to continue building the tech sector in Fargo. Arthur Ventures, a venture capital firm he co-founded, is based in Fargo. Other startup activity can be seen in the opening of a coworking space, entrepreneurship programs and accelerator programs from local universities such as NDSU, and recently, potential plans for a code school.

5. Ashburn, Virginia: AOL

aolAs testified by global investor Paul Singh during his time in Fargo, his hometown of Ashburn, Virginia was drastically changed by a little company known as America Online. What Singh described as a “pretty poor” town, population 43,511, suddenly began to transform with an influx of jobs and money.

America Online, now known as AOL, started out as a dial-up service for millions of Americans and has since evolved into a mass media company (now owned by Verizon). As dial-up was taken over by broadband, the company has since turned into a mass media corporation, and was purchased by Verizon last year. In 2013, their annual revenue was $2.3 billion.

Although the company has since moved their headquarters to New York City, their footprint has left an impact. Ashburn is now home to many high-tech businesses including a major office for Verizon Business and home to government contractor Telos.

Just this year, the city took another step towards building the startup ecosystem with the opening of Brickyard, a coworking space for entrepreneurs spearheaded by Singh. Brickyard joins a startup foundation being nurtured in Ashburn and the surrounding Loudon County, which includes two incubators–the Mason Enterprise Center and AOL Fishbowl Labs– as well as a Makerspace where startups can make models and prototypes.

Brickyard

_ _ _

All five of these stories are just a few examples of something happening across America — the startup fever. They illustrate how building a company successfully in your hometown can change the trajectory of that city.

Paul Singh sees this as a good thing. What he has observed is that growth in the tech sector means growth for local economies, more jobs, more people, and in some cases, more respect on a national and international scale.

“I think every city in America today has an ‘AOL,’” Singh said. “Big companies really can be built anywhere. All it takes is one founder to change that.”

 

Read more about what makes a tech hub here:

Ingredients for building a tech hub

Paul Singh’s very honest tips for Midwest tech hubs

Marisa Jackels

Marisa Jackels

, Business