Why it’s so hard to build the next Silicon Valley

[Note: This item comes from friend Mike Cheponis. DLH]

Why it’s so hard to build the next Silicon Valley
Google brought its high-speed Internet to Kansas City, but it didn’t turn the city into a tech paradise
By Sarah McBride
Feb 28 2017

San Francisco: When Brandon Schatz learned in December 2012 that Kansas City, Kansas had become the first city in the nation to get Google Fiber, a superfast Internet service, he started making plans to move his nascent sports photography business there. The day after Christmas, he drove the 165 miles from his home in Springfield, Missouri, to check it out. By 1 February, he had settled into his new house. By 4 February, he was connected to the network.

That was exactly what officials had wanted. When the area (first Kansas City, Kansas, with Kansas City, Missouri added weeks later) won a challenge to be the first to get Google Fiber, local boosters celebrated, hoping to kick-start an economic renaissance: attracting entrepreneurs, cultivating emerging business districts, and becoming known as a major start-up hub.

Four years later, Schatz’s company Sportsphotos.com, which takes photos of amateur sporting events around the country, is growing slowly. He’s taking full advantage of the speedy Internet, uploading hundreds of high-resolution photos in minutes from races and other matches. But the business isn’t yet where he wants it to be, and for now Schatz’s main source of income is web development work and renting out rooms in his home on Airbnb. On a recent Sunday, Schatz sat in his home, where he also operates his company, pecking away at a desktop, surrounded by pizza boxes. “I thought we would be huge already,” he said.

Schatz’s disappointment is a tale of misplaced expectations, by both entrepreneurs and city leaders. (The challenges that he and other start-up founders face is the subject of the latest episode of the Decrypted podcast; subscribe here on iTunes.) In 2011 the cities’ two mayors called Fiber’s then-future deployment “a once-in-a-lifetime opportunity,” and a way to “spark economic development.” And for Google, which since significantly has pared down support for the project, it was a case of placing too much faith in the ability of its own technology to change lives.

“Why is Kansas City really not taking off, especially with this asset like Google Fiber?”- Jeff Pinketron of the Mid America Regional Council

It’s also been hard for the Kansas City area to become the boom town that leaders dreamed of. Some entrepreneurs, like Schatz, were drawn to the city because of the fiber, and some launched businesses. A “start-up village” sprang up. But few of the companies really took off, and some frustrated founders ended up decamping to San Francisco, where there was a larger talent pool and greater access to capital. Even the best of intentions and super-speedy Internet isn’t enough to create a new Silicon Valley.

Every year after Alphabet Inc.’s Google’s first fiber connections lit up in late 2012, greater Kansas City’s GDP growth has fallen well short of the national average. In 2015, it was just 1.5%, compared to 2.6% for the nation as a whole. Metro regional numbers aren’t yet available for all of 2016, although based on state numbers through the third quarter, both Kansas and Missouri seem to be beating the national average.

“We’re scratching our heads a little bit,” said Jeff Pinkerton of the Mid America Regional Council, a non-profit that conducts economic research for greater Kansas City. “Why is Kansas City really not taking off, especially with this asset like Google Fiber?”

Google came to town in 2011. At Wyandotte High School auditorium, on the Kansas side, blue, red, yellow and green spotlights shone on a parade of dignitaries who addressed the audience. Google founder Sergey Brin spoke on a pre-recorded video. After the announcement about fiber going into Kansas City, a Google vice-president invited the crowd to a barbecue-laden celebration.

Kansas City beat out more than 1,000 other cities for the debut Google fiber project, which aimed to compete against the telecommunications and cable giants that have dominated the market for Internet access. Some analysts believed the ultimate goal was to encourage those competitors to improve their own services and thus the Internet experience overall, which would bolster the environment for Alphabet’s most lucrative business: online search.

Mayors of both cities announced a team of civic leaders to figure out how best to leverage fiber, in entrepreneurship as well as other areas such as education. The group released a plan in 2012 that made recommendations ranging from nurturing technology districts to supporting tax credits for small technology businesses to creating mentor networks.


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