America’s Heartland: Where Innovation Is Taking Root

If Anheuser-Busch, the brewing company based in St. Louis that’s known for Budweisers and Clydesdales, held a hackathon, attendees would probably dream up the next big app for beer lovers, while overlooking the areas in real need of disruption, like water optimization.
That’s the thinking of Terry Howerton, CEO of the Chicago-based incubator TechNexus. Howerton joined Noah Lewis, managing director of GE Ventures, and Ting Gootee, Chief Investment Officer of Elevate Ventures at last month’s SXSW panel Reinventing America: Betting Big on the Heartland, which was moderated by Paul Noglows, executive producer of the Forbes Reinventing America Project. The conversation between investors making big bets on innovation in the Midwest was part of the Rise of the Rest road trip celebrating entrepreneurship across America.
Here, three important takeaways:
The Midwest is the next Silicon Valley.
The region has a higher density of Fortune 500 companies than anywhere else in the world, accounting for 19 percent of the country’s GDP, yet it receives just 5 percent of venture capital funding — making it a virtually untapped market that’s ripe for innovative thinking. “I really do believe we are going to solve the bigger problems – water, energy, healthcare, transportation. It’s not going to be about the next taxi app or the next Meet Up,” Noglows said.
The middle of the country isn’t lacking in entrepreneurial success stories.
For instance, ExactTarget, an email and mobile marketing technology company, was sold in 2013 to Salesforce for $2.5 billion. The panelists explained how co-founder and CEO Scott Dorsey, started ExactTarget in Indianapolis not only because that’s where he wanted to raise his kids, but also because employee loyalty was stronger there than in Silicon Valley, where the vast majority of his competitors were based.
But, there’s still big challenges preventing the Midwest from becoming an entrepreneurial hub.
The lack of direct flights, and venture capitalists being unwilling to deal with a layover or possible connection delay. To illustrate what a big deal this is, Noglows described how, at The Innovation Summit hosted by Forbes last year, the Indiana secretary of commerce got a standing ovation after announcing a new direct flight from San Francisco to Indianapolis.
 
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These Tech Companies Don’t Have a Lot of Female Employees. Now, They’re Doing Something About It

Since the 1990s, female representation in tech occupations has declined, according to the United States Census Bureau. Which is why some of the industry’s biggest names — Facebook, Pinterest and Box — have kicked off a pilot program to mentor women in tech.

WEST, or Women Entering and Staying in Tech, will tap women from the aforementioned companies to serve as one-on-one mentors for females — whether they’re currently interns starting their professional career or are in midlevel positions and are looking to grow or expand their employment opportunities, according to their website. The program will kickoff in early 2015 and is open to San Francisco Bay area women. It is not yet clear how many applicants WEST plans to accept.

“Mentorship can be incredibly influential in a woman’s career, and we’re excited to be tackling this challenge together,” Facebook says in a statement. “We believe that by working together and providing more direct support, advocacy, and space for community development, we can create an impactful, scalable, one-on-one mentorship program to help women build and grow meaningful careers in tech.”

Several companies, including Facebook and Pinterest, came under fire earlier this year after data released revealed many of the companies had very few women in the workplace. In fact, Facebook admitted that only 31 percent of its employes are female while Pinterest revealed that 40 percent of its workforce is female. Boil that statistic down to technical employees and a mere 15 percent of Facebook’s tech team are women and 21 percent of Pinterest’s tech are female.

That’s a far cry from Facebook COO Sheryl Sandberg’s message to empower women, but fortunately, her company along with a few others in the Silicon Valley are taking the first steps to correcting the problem.

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Why Is It Important for Parents to Loosen the Reins?

Have you ever sat on a bus and looked out the window only to realize that nothing looks familiar? The bus keeps moving, yet you have no idea where you’re at or where you’re going.
Now imagine this happening to your sixth grader. Would she freak out or calmly ask someone for help?
This scenario is all part of the Free-Range Kids Project, an initiative to help kids gain independence and confidence and just be kids again.
Lenore Skenazy is the mastermind behind the program who started it after noticing how little freedom kids have to explore their surroundings (even their own neighborhood) without parental supervision. After all, only 13 percent of children in the U.S. walk to school while another six percent of nine- to 13-year-olds play outside per week. These numbers are a stark contrast to the previous generation where many children enjoyed more freedom, especially considering that today’s crime rate is the lowest it’s been in 40 years.
So Skenazy wrote a book and blog and started a project called “Free Range Kid” to inspire parents to let their kids do things they wouldn’t normally do — think: walk to school, ride the subway alone or bike to the library.
A New York City public school sixth grade class was the first group to test out the theory with great success.  After that, Oak Knoll (a grammar school in Silicon Valley) wanted to give it a try. About a third of the 700 students’ parents agreed to the project. The results? Positive.
Interesting, however, is that it wasn’t just the kids who benefited from the experience. Parents were equally changed and loved what they saw in their kids. One mother named Gina let her son run grocery store errands by himself and was impressed by his expediency, efficiency and responsibility.
“This has really changed our lives!” she writes in her report to the school. “Almost all that we do now is an opportunity to be Free-Range. We did many ‘Projects.’ He baked brownies alone, he comes home now on his bike after school, and he is responsible for his swim bag.”
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How to Create the Next Silicon Valley

When you hear tech, you probably think Silicon Valley.
But this area of California shouldn’t be the only locale that comes to mind, as cities across the U.S. are striving to become next big tech scene.
To help, Next City, along with innovation economy experts, developed a list of strategies that can help create a thriving tech scene in any city. Here are a few of their requirements.
A success story
In order for companies to make the commitment to an area, they need to see the proof that it’s actually a thriving environment, so a city needs at least one big winner. For example, in Raleigh, N.C., the success of Linux purveyor Red Hat has encouraged the launching of other local businesses.
Good transportation
Beyond one stellar company, a city also needs to be able to easily access venture capital. Any trip to a potential investor should last no more than a day, necessitating fast transportation between cities. According to Next City, trains are especially good for tech entrepreneurs since it’s easy to work while traveling on them.
A school
A major tech hub also needs the backing of an institution, most commonly a university. (After all, a former dean of an engineering school in the 1950’s is credited with launching Silicon Valley.) New York City, for example, has the support of New York University, and former mayor Bloomberg’s Applied Sciences NYC is helping to encourage entrepreneurial ideas as well.
Engineers
Tech-centric cities need engineers…hordes of them. As Next City points out, computer software programs aren’t the same as having qualified, knowledgeable engineers on your team.
An informal leader
To fully create a thriving tech scene, there needs to be networking events, hackathons, meetups, demo nights and game jams. Someone needs to take the initiative to coordinate these events — and it shouldn’t be a company’s CEO or founder.
To see the additional attributes needed to build the next Silicon Valley, click here.
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The Guy Who Ran AOL Is Trying to Build New Silicon Valleys in the Heartland

Former CEO of AOL Steve Case is tired of investing in Silicon Valley’s batch of startups and is instead hitting the road in search of smart ideas located elsewhere in the U.S.
In an effort to reinvigorate American entrepreneurship, Case and his investment firm, Revolution, launched a four-day-long, 1,000-mile bus tour called Rise of the Rest Road Tour, searching for new startups. With recent stops through Detroit, Pittsburgh, Cincinnati and Nashville, Case was joined with appearances from Governors Rick Snyder and Bill Haslam as well as chairman and founder of Quicken Loans and Rock Ventures, Dan Gilbert, and United States Secretary of Commerce Penny Pritzker among others.
We wanted to shed spotlight on American entrepreneurship: the idea of getting on a bus, and driving through the heartland of America.  After all, the story of entrepreneurship is tied to the heartland.  60 years ago, Detroit was the Silicon Valley of today,” Case told Forbes. “Pittsburgh was the steel capital.  They were the main event. Now can they can re-emerge.  It’s fascinating to see communities like Pittsburgh where there’s a specialized focus on robotics, because of the local ties with Carnegie Mellon.”

Though Case is excited by the vast opportunities nationwide, the key to successful entrepreneurship in some of these cities relies on four principles:
Leadership support: Community leaders, lawmakers and business leaders who have already achieved success in their own ventures need to prop up the city and support efforts to build an entrepreneurial community.
Investment: While Silicon Valley boasts a variety of venture capital firms to support local companies, other cities across the country are lacking the capital to get started. More firms should use Revolution’s model and begin paying attention to startups outside the California region.
Foster talent: More and more urban areas are losing talent to technology companies located on the West Coast. Cities can provide incentives to encourage young innovators and entrepreneurs to return home and support the local economy.
Build a network: Case points to “network density” as a means of enhancing local entrepreneurship. Cities like Cincinnati partner with Proctor & Gamble (which is headquartered there), as well as Detroit’s General Electric as companies that provide local resources to foster entrepreneurship. Building those relationships and creating local networks is essential to creating a tech economy.
Case contends the rest of the country is indeed rising, but it’s up to us to support the revolution and help the heartland become a part of the American innovation story.
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From Convict to Coding: How One Man is Connecting America’s Inmates

Some of Silicon Valley’s best ideas come about through unusual circumstances. (Case in point: Facebook, which has its origins as a classmate ratings site.) But perhaps one of the more profound examples of this comes from Frederick Hutson, who cooked up his winning concept while behind bars.
Hutson always had a proclivity for business, launching anything from a window-tinting concept out of high school to opening a cell phone store. But his misstep came in 2007 at the age of 24, when he decided to help a friend create a more streamlined plan for marijuana distribution from Mexico to Florida through his mail service business. Though he received an honorable discharge from the Air Force and had no previous criminal record, Hutson was sentenced to 51 months in prison.
It was during his time as an inmate that Hutson came up with the idea for Fotopigeon, an online platform that lets friends and families of inmates upload photos to send through the postal service for 50 cents per print. As Hutson explained to the New York Times, prison officials often refuse anything from third party companies like Snapfish or Shutterfly “because they don’t like anything that doesn’t come in a plain white envelope.”

The concept seemed simple, but Hutson believed something as basic as helping inmates feel more connected to the outside world was a chance to reduce recidivism.

“Isolation is the worst thing for an inmate,” Hutson said. “It makes it hard for him to rebuild his life when he gets out.”

As an insider, Hutson knew that the average prisoner had just $300 a year to spend on goods at the prison commissary and for phone calls. (Families of inmates spend an additional $600 annually on their loved one.) Hutson believed that if he could market to prisoners directly and get 10 percent of their family and friends to send 10 photos a month (plus provide inexpensive phone calls), he could bring in $22 million in revenue within three years.

This insider knowledge proved to be a huge asset.

“I thought my record would prevent people from doing business with us, but it was just the opposite,” Hutson said. “I had domain expertise.”

While honing his concept at NewME, a San Francisco-based accelerator that focuses on underrepresented demographics in the tech world, Hutson and his investors realized that the platform could provide much more to the untapped market of 2.3 million inmates across the country. And so Pigeonly was born. 

Pigeonly now operates as an online data platform that not only offers photo-sharing services through Fotopigeon, but also cheap phone calls for inmates through its telecommunications arm, Telepigeon. How does it do it? The company partnered up with Internet phone-service providers to give inmates local access numbers that can be used to make long-distance calls — reducing rates from 23 centers per minute to 6 cents.

But perhaps even more important than its two main services, Pigeonly has centralized the more than 35 million pieces of data on inmates that are dispersed in the fractured public records system across more than 3,000 prison institutions, according to the company site. While inmates are frequently shuffled around in the system, addresses are often lost or never updated. Customers can use the platform as a directory to look up an inmate by name, regardless of address.

Pigeonly has also opened up its application programming interface (API), which allows developers to use the data to build more products directed toward the unusual consumer market and their networks. As Hutson points out, incarceration impacts more than just the inmate, affecting a prisoner’s network of seven to 10 people on average. Communication with friends and family is proven to reduce recidivism, according to Hutson, and part of his goal of Pigeonly is to better understand who is affected by prison.

By opening up the difficult-to-reach market, he just might find out.

MORE: New York Enlists Venture Capitalists To Help Keep People Out of Prison

This Venture Capital Firm Bets on College Students

In this country, we used to talk about ballooning credit-card debt. Now the bigger money worry? Student-loan debt.
As more students graduate with a crippling amount of it (the total amount of student loan debt now tops $1.2 trillion, according to the Consumer Financial Protection Bureau), Silicon Valley is rethinking the way in which we ask people to pay for college.
As it currently stands, borrowers carry all of the risk while the government lender is only responsible to make up for unpaid balances through taxpayers around two decades later. Private lenders are only responsible for paying a collection agency to chase the unpaid balance and schools receive tuition regardless, all the while a borrower could go into default and ruin their credit for the rest of their lives. And for low-income students, this risk is even greater.
Instead of placing the entire burden on students, financial executives at venture capital firm 13th Avenue Funding believe that education loans should be perceived as equity, placing bets on a student’s potential achievements and earnings.
Two years ago, the New York-based firm offered four students at Santa Barbara’s two-year Allan Hancock College $15,000 for tuition to become a part of a “cohort” before transferring to a four-year institution to earn their bachelor’s degree. The students leave college without the possibility of defaulting and are expected to pay a small percentage of their salary each month if they make more than $18,000 a year post-grad. If they should surpass an annual income of $25,000, they’re required to pay back five percent of their income for the next 15 years.
Granted, borrowers do run the risk of paying back more than they received — but the money is used to cover other members of the cohort who are unable to repay the loan. And any additional remittances are used to fund new scholarships for future cohorts.

“It’s pooled venture capital,” said Casey Jennings, chief operating officer for 13th Avenue. “It’s sharing risk.”

The 2012 experiment, which is the first of its kind in the United States, was backed by four of the VC firm’s founders as well as two board members. The firm put together enough money to support a second cohort of seven students last year and hopes the model will be successful enough to continue.

While the idea is unique, it’s actually similar to that of investing in any small tech startup in Silicon Valley. You run the risk of failing — more often than not — but the chance of success can be worth it. The challenge therein lies with convincing higher education professionals to take the gamble on the concept of “income sharing” agreements.

“It’s really painful,” Jennings said. He continues to meet with college administrators to make them the “investors,” but has found no school wants to be the first to take a chance. “We talked to a bunch of colleges. They’re like, ‘It’s interesting, but come back when you get another college.’ “

If the 2012 experiment succeeds, it shows that students — especially those with low-incomes — can be an untapped market for investments. When it comes to funding those low-income students, Jennings added, “the payback for getting that group to go to college is unfathomable.”

After all, having a more diverse group of college graduates is something that you can’t put a price tag on.

MORE: Ask the Experts: How Can We Keep From Drowning in College Debt?

This Woman Proves You Don’t Have to Be A Hoodie-Wearing Male to Make It in Today’s Tech World

When Angela Benton, CEO of Black Web Media, looked around Silicon Valley, she didn’t see many faces like her own. Statistics support her observation: A survey of 150 Silicon Valley companies by the law firm Fenwick & West found that almost half of them had no female executives.
Benton would look around at the tech companies she was working for and think, “Wow, I am the only African American and the only woman in my department. It just can’t be only me!” she told Myeisha Essex of the Chicago Defender. Seeing the lack of diversity drove this 32-year-old African-American coder and entrepreneur to start Black Web 2.0 and the NewMe Accelerator.
Through Black Web 2.0, a website Benton launched along with Markus Robinson in 2007, she keeps others informed about African-Americans involved in technology and new media companies, with the goal of making people interested in these fields feel less alone. NewMe, an accelerator founded in 2011, helps women and minority entrepreneurs find the mentorship and capital needed to start new businesses. So far, NewMe has helped raise $12.9 million for the start-ups it works with.
“There are great entrepreneurs who don’t necessarily look like the Mark Zuckerbergs of the world,” Benton told Essex. “I don’t think the [tech world] is behind necessarily, I think they are working on patterns. So if everyone who is successful looks like Mark Zuckerberg, they are going to continue to fund and support more things that are like that. What a lot of people think, especially when they think about entrepreneurship, it’s very risky. When you start to talk about investors and capital, people are investing in things that are most likely to succeed. So when they are doing that they are taking notes from other things that have been successful. So it’s really like this self-perpetuating problem, at least until we really break through.”
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How the America of Tomorrow Will Look

Do you think technology is improving our world? Or are you more of a Luddite and believe that we’d be better off without technological advancements?
Almost two-thirds of Americans believe tech innovation will result in a better future, while one-third think people’s lives will get worse, according to a recent survey from the Pew Research Center.
Regardless, the rapid pace at which Silicon Valley is driving change is a force to be reckoned with. Technology has brought about a seismic shift in everything from transportation and real estate to the broadcast industry and dating. To illustrate where we’re headed, the New York Times asked some of the tech world’s biggest luminaries about what we can expect, and how often we’ll see drone-filled skies or Google Glass users on the street.
The lineup: Marc Andreessen, a venture capitalist and inventor of the first widely-used internet browser Mosaic; Ev Williams, the founder and chief executive of Medium.com and co-founder of Twitter; Susan Wojcicki, head of YouTube; Sebastian Thrun, co-founder and chief executive of Udacity, an inventor of driverless cars and a founder of Google X; Reid Hoffman, a venture capitalist and co-founder of LinkedIn; Clara Shih, founder and chief executive of Hearsay Social; and Peter Thiel, an investor and co-founder of PayPal.
Here’s a glimpse at what they had to say:
It’s hard to imagine a time when cell phones were obsolete, but it took less than a decade to make them commonplace. Therefore, Andreessen thinks we can expect the same for everything from drones to remote education in the not-so-distant future. “Hundreds or thousands of drones flying to and fro for all kinds of reasons,” he said. “Getting a top-end college education without going to a physical campus. Cars driven by computers instead of humans.”
MORECould Technology Provide Solutions to Global Poverty?
Williams agrees the subtext of any major tech advancement will be convenience. “Phones and computers will automatically do anything tedious that doesn’t require brainpower, like signing up for a web site or app. The march of technology is the incessant march of convenience,” he said.
Implantable chips are not just a Hollywood depiction of what our future holds. Both Shih and Thrun believe that implantable devices will be a mainstay in our lives. “Implantable chips that monitor the number of steps we take, hours we sleep, all of our vital signs, blood chemistry and beyond,” Shih said. “The chip data will be used to adjust our medications, offer suggestions to change our behavior and automatically send an ambulance — self-driving, of course.”
Tech innovation has reshaped the way we eat, how we travel and how we interact with one another. As for which industries the tech world plans to tackle, Williams points to higher education while Hoffman believes the banking industry is on the horizon. “Consumer banking. Tech will unbundle banking for loans, payments, asset management and so on,” Hoffman said. Shih adds that the auto industry — whether it’s driverless cars, auto parts or auto insurance — will be a major focus for Silicon Valley as well.
As for novelties, we laugh at the mention of a Sony Walkman, but it seems the iPod will soon follow suit. Hoffman thinks we’ll also say goodbye to the computer mouse and city cars (“The computer mouse will soon be replaced. Think touch, swipe, rich hand gestures.”), while Thrun simply points to keys.
Though not tech related, Thiel contends playing with the pigskin will be a pastime we leave behind. “Football. We realize it is very harmful for you, but we haven’t yet reached the tipping point where it becomes broadly unacceptable to condone,” he said.
Of course, predicting the future is a tricky game. We’ve managed to survive the Mayan doomsday prediction of December 21, 2012, and we’re certainly not jetting around in flying cars. But if the major advancements made over the last decade are any indication, we’re headed for an interesting ride.
Check out the full Times infograph here.

These Billionaire GOP Donors Support the Idea of a $12 Minimum Wage. Will the Party Follow?

Could common political ground between Democrats and Republicans be on the horizon? It looks like some influential conservative donors are shifting their ideology ever so slightly to increasing the minimum wage — a legislative issue that Democrats are pushing for as we near the midterm elections. In January, wealthy Silicon Valley executive and conservative donor Ron Unz put forth a California ballot measure that would raise the minimum wage to $10 an hour in 2015 and $12 in 2016. His perspective was this: raising the minimum wage would put more money in the average Americans’ pockets, which in turn would make them less reliant on government aid. Now Peter Thiel, the billionaire co-founder of PayPal and GOP donor, is weighing in on Unz’s plan, saying, “I actually think that it’s a very out of the box idea — but it’s something one should consider seriously.” Thiel, who has donated millions of dollars to GOP causes over the year, including $1 million to the anti-tax group Club for Growth and nearly $4 million to the Endorse Liberty PAC in support of presidential candidate Ron Paul in 2012, agrees with Unz’s assumptions that a higher minimum wage could reduce people’s dependency on welfare. “Given how low the minimum wage is — and how generous the welfare benefits are — you have a marginal tax rate that’s on the order of 100 percent, and people are actually trapped in this sort of welfare state,” he said.
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The idea of a minimum wage increase has been a hot topic of late. President Barack Obama called on Congress to work together to increase the minimum wage to $9 an hour by 2015 in his State of the Union address, saying that the move would raise the income of millions of working families. “It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets,” he said. The current federal minimum wage of $7.25 — which is used in about 30 states that don’t mandate their own — translates to a $15,000 annual salary, which the President noted is well below a living wage in many areas of the country.
Recently, House Democrats filed a “discharge petition” in an attempt to dislodge their bill that increases the minimum wage to $10.10 an hour, which would move the vote to the floor. While it seems unlikely that the petition will get the required votes, some Republican lawmakers have said that they are open to discussion on the issue. Others stick to their opposition, citing a bipartisan Congressional Budget Office report that says that raising the minimum wage would cost the economy 500,000 jobs. Democrats, on the other hand, cite another aspect of the same report — that raising the minimum wage would lift 900,000 people out of poverty. OK, so maybe legislators aren’t finding their common ground quite yet. But if there’s one certainty in politics it’s that politicians follow the money. If major conservative donors continue to push for a minimum wage increase, we might hear some GOP lawmakers singing a different tune.
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