Comparing Start-up Information Technology Companies:
The Midwest Vs. Silicon Valley

By Larry T. Eiler
Co-Founder and President, Eiler Communications

Entrepreneurs in the Midwest and Silicon Valley have different approaches to building a start-up technology based business. By highlighting the differences in the way high tech businesses develop and grow, we can learn something about how fast-growth companies are born and the factors that may stunt or accelerate their growth.

Silicon Valley is the pre-eminent center for the newly emerging, venture backed dot-com businesses, as it has been for 25 years in other areas of technology. Twenty years ago, high tech companies were engineering driven. In the past two or three years, the dot-coms have evolved to address rapidly developing consumer markets. Companies are going from inception to public in as few as 18 months. This shift is occurring in many of the other emerging centers: New York, Seattle, Austin and even Atlanta and Washington, DC. These regional centers are attracting a hot bed of entrepreneurial activity and are fueled by new venture capital firms and an increasing focus on the successful entrepreneurs.

As the following table illustrates, in a variety of key areas, the Midwest and Silicon Valley show significant differences. It is important that we understand these differences from the perspective of the Midwest where different cultures and goals exist.

Key Area	Silicon Valley	Midwest
Founders	Engineering and marketing/sales people form a team. Non-traditional brainstorming is the norm--sometimes off the wall. Sell the vision before product exists.	Engineering driven with focus on the perfect product before release 1.0. Few understand the customer and that in business "everything starts with a sale."
How Financed	Venture capital funding readily available for good ideas and solid management teams. Service providers sometimes request to be paid in stock options rather than cash, or a form of each. VCs seek companies with an immediate revenue stream. For now, there is not much worry about profits. Revenue is the driver.	Bootstrap finances -- borrowing from friends and relatives to start a venture and keep it going. Going back to the well for more funding from banks or other private sources. But bootstrapping is tough. As a Palo Alto VC recently noted in the San Jose Mercury News, "Bootstrapping an Internet company would be like manufacturing your own car to race in the Indy 500. No matter how good your idea, there are five others with similar ideas and they're probably venture-backed."
Role of PR and Marketing	Get a PR firm to develop the positioning and tell the story. PR is incorporated into the business model of new tech start ups. PR is often the only marketing investment made by a start up. New companies know they need PR and go out and	Marketing and PR not clearly understood nor heeded. The automotive PR aspect is understood but not high tech. A soft budget item and rarely consistently pursued. New companies are unaware of the power of PR and don't value the investment.
Business Model	Driven by revenue sources and adjust their focus to find revenue first and worry about profit much, much later. May have no direct revenue model at the start but keep searching for a growing revenue stream or lose funding.	Revenue is not the driver. A solid product, with all the bells and whistles, is. Often custom services, which are one-offs with no repeat sales, rather than product licenses are a large percent of profits.
Cost	Cost is realized from the start. Most large PR firms do not accept high tech clients for less that a minimum of $10,000 to $30,000 per month for their work. New firms willing to give start up stock to PR firms, or a combination of stock and cash. Investors and start up company managements all know that PR is imperative to their success.	People want to investigate what they will get for the dollars it will cost. Want to try a project before going forward with a program. Do not tap into industry analysts, and the national and local press to tell their story and build awareness for the company.
Operating Style	Open and free discussion of all issues whether or not they impinge on politics or relationships that may be harmed because of something that is said. Rapid and directed meetings that have a goal and get it accomplished within a stated time. A demanding tone so that they know that you know their business. Vendors must have the same fire in the belly that internal people do.	Unwilling to fail quickly and accept not invented here solutions. Less time urgency and more willing to follow the industry than lead it. Few managers who have gone through high growth runs or been involved in an IPO. People need to be convinced they need to do PR rather than wait for the press or others to come to them.
Differences	Very diverse in terms of technologies. Style of work is hard driving and people often complain about the lack of "balance" in their lives. Long drive times and way-long work hours negatively impact balance. Less worried about failure	Many technologies relate to the automotive business. Work style more laid back, get it right, don't go to market until it is right. Concern about releasing something without all the bells and whistles done.
Culture	An "attitude" of better than the rest. Driven to success and often out of balance with family or other life goals. Arrogance is a trait found often. Burn out is a big problem	Very practical and reason based. Not very risk oriented and most would rather have 100% of nothing than 10% of a stellar success. Poor partnering/ collaboration.
Track Record	Huge numbers of world class entrepreneurs who are constantly in the press. Many technology company success stories.	Lots of new technology developed but few big IT success stories. Some strong emerging successes. Very low profile for entrepreneurs who have been successful.

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