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The Midwest Advantage: Lower Costs & Loyal Talent

August 20, 2025

The Midwest Advantage: Lower Costs, Loyal Talent, Less Competition

First-hand Experience
25+ years building companies in Louisville, Kentucky(Co-founded UnifyCX (6,000+ employees), Backupify (acquired by Datto), and 15+ portfolio companies)
When I co-founded UnifyCX in Louisville, Kentucky, people asked why we weren't in Silicon Valley. Today, with 6,000+ employees globally and operations across multiple continents, the answer is clear: the Midwest offers structural advantages that coastal hubs can't match. After two decades of building companies, investing through Scalable Ventures and Unbridled Ventures, and helping establish Louisville's innovation ecosystem through Nucleus and various accelerators, I've seen firsthand how the Midwest has become a secret weapon for smart founders. For more on my background building in this region, see my story. For founders considering where to build, this article complements our Startup Playbook with location-specific insights.
The Midwest Advantage
đź’°
Lower Costs
60% lower burn rate vs Bay Area
Office: $18-25/sqft
Engineers: $110-140K
🤝
Loyal Talent
3.2 yr avg tenure vs 1.8 yr
Lower turnover
Institutional knowledge
🎯
Less Competition
Focus on customers, not hype
Less talent poaching
Better deal terms
🏠
Quality of Life
Happier, more productive teams
Affordable housing
Short commutes

The Numbers Tell the Story

Cost Structure Reality

Let me share real numbers from our portfolio companies: Office Space:
  • Louisville: $18-25/sq ft
  • Chicago: $35-45/sq ft
  • San Francisco: $75-95/sq ft
  • New York: $80-120/sq ft
Engineering Salaries (Senior Full-Stack):
  • Louisville: $110K-140K
  • Indianapolis: $115K-145K
  • San Francisco: $180K-250K
  • New York: $170K-230K
When UnifyCX reached 1,000 employees, our burn rate was 60% lower than it would have been in the Bay Area. That capital efficiency meant we could weather downturns, invest in our people, and grow without constant fundraising pressure.

The Loyalty Dividend

Here's a metric VCs rarely discuss: employee tenure. Average Employee Tenure (from our data):
  • Midwest companies: 3.2 years
  • Bay Area companies: 1.8 years
  • New York companies: 2.1 years
At UnifyCX, we have employees who've been with us for 20+ years. That institutional knowledge and reduced recruiting costs compound into massive advantages. When you're not constantly replacing 40% of your team, you can actually build something.

The Talent Arbitrage

Hidden Technical Depth

The Midwest has more engineering talent than people realize:
  • University of Illinois (top 5 CS program)
  • Purdue (top 10 engineering)
  • Carnegie Mellon (Pittsburgh)
  • Notre Dame, Rose-Hulman, University of Louisville
Through our involvement with the University of Louisville's Speed School and various STEM programs, I've hired engineers who match any coastal talent but stay for years rather than months.

The Boomerang Effect

We're seeing a massive "boomerang" migration—Midwest natives who went coastal for their first jobs returning home to start families. These professionals bring:
  • Big Tech experience (Google, Meta, Amazon)
  • Network connections
  • Appreciation for quality of life
  • Realistic salary expectations
Three of our best Scalable Ventures hires are boomerang professionals who traded San Francisco apartments for Louisville houses and never looked back.

Work Ethic Without Entitlement

Midwest work culture values:
  • Showing up consistently
  • Solving problems without drama
  • Building for the long term
  • Measuring results, not perks
I've hired from both coasts and the Midwest. The entitlement gap is real. Midwest employees ask "How can I help?" while others ask "What's in it for me?"

The Competition Paradox

Less Noise, More Signal

In Silicon Valley, everyone's starting an AI company. In the Midwest, founders solve real problems for real customers. This focus creates advantages:
  • Less talent poaching
  • Fewer "shiny object" distractions
  • More collaborative ecosystem
  • Genuine product-market fit focus
When we built Backupify, being in Louisville meant we focused on customers while competitors focused on TechCrunch headlines.

The Venture Capital Sweet Spot

Midwest companies raising capital enjoy:
  • Less competition for deals
  • More reasonable valuations
  • Investors who appreciate capital efficiency
  • Strategic money over spray-and-pray
Through Unbridled Ventures, we're investing $100K-500K checks that go 3x further than coastal equivalents. A $500K seed round in Louisville equals a $1.5M round in San Francisco in terms of runway.

Quality of Life as Competitive Advantage

The Housing Equation

$500K Housing Budget Comparison:
  • Louisville: 4-bedroom house, great schools, 15-minute commute
  • San Francisco: 1-bedroom condo, 45-minute commute
  • New York: Studio apartment, 60-minute commute
Our employees own homes, have short commutes, and enjoy actual work-life balance. That translates to:
  • Higher productivity
  • Lower stress
  • Better retention
  • Stronger company culture

Family-Friendly Reality

The Midwest offers what money can't buy in coastal cities:
  • Excellent public schools without private school costs
  • Safe neighborhoods
  • Community involvement
  • Multi-generational proximity
When employees can afford good lives, they focus on building great companies rather than job-hopping for salary bumps.

The Infrastructure Advantage

Government That Actually Helps

Midwest states compete for businesses with:
  • Tax incentives that actually matter
  • Responsive economic development teams
  • Streamlined permitting
  • Investment in infrastructure
Kentucky's Cabinet for Economic Development helped UnifyCX access training grants, tax incentives, and expansion support that saved millions. Try getting that attention as a startup in California.

Logistics and Distribution

The Midwest's central location provides:
  • 1-day ground shipping to 50% of US population
  • Major logistics hubs (UPS in Louisville, FedEx in Memphis)
  • Lower shipping costs
  • Time zone advantages for national operations

The Cultural Moat

Authentic Relationships

Midwest business culture values:
  • Long-term relationships over transactions
  • Handshake deals that stick
  • Community reputation
  • Mutual support
Our first UnifyCX client came from a Louisville networking event. Fifteen years later, they're still a client. That relationship depth doesn't exist in transactional coastal markets.

The Ecosystem Effect

Through my work with:
  • Greater Louisville Inc's EnterpriseCorp
  • Nucleus Innovation Center
  • Various accelerators and mentorship programs
I've seen how Midwest cities build collaborative ecosystems where competitors help each other. This "rising tide lifts all boats" mentality creates sustainable growth.

The Challenges (Let's Be Honest)

What We're Still Building

The Midwest isn't perfect. Current gaps include:
  • Later-stage venture capital
  • Specialized technical talent (AI/ML experts)
  • Direct flights to all major cities
  • Coastal brand recognition
But these gaps are closing rapidly. Funds like Unbridled Ventures, Drive Capital, and Hyde Park Ventures are deploying serious capital. Universities are spinning out AI talent. Remote work has made location less relevant.

The Perception Problem

The biggest challenge remains perception. Despite our successes:
  • Media focuses on coastal companies
  • Talent assumes opportunities don't exist
  • Investors overlook the region
This perception gap creates opportunity for those who see reality.

The Playbook for Midwest Success

Location Strategy

  1. Choose your city wisely:
    • Columbus (fintech, insurance tech)
    • Pittsburgh (robotics, AI)
    • Louisville (logistics, healthcare)
    • Indianapolis (SaaS, marketing tech)
    • Chicago (everything, but more expensive)
  2. Leverage university partnerships:
    • Intern pipelines
    • Research collaborations
    • Faculty advisors
    • Student entrepreneurship
  3. Build government relationships early:
    • Economic development partnerships
    • Training grants
    • Tax incentives
    • Expansion support

Talent Strategy

  1. Target boomerang professionals
  2. Partner with universities aggressively
  3. Offer equity more generously (it's valued more here)
  4. Emphasize quality of life in recruiting
  5. Build remote-first culture to access coastal talent

Growth Strategy

  1. Bootstrap longer (lower costs enable this)
  2. Focus on profitability (Midwest investors value this)
  3. Build customer density regionally before expanding
  4. Leverage cost advantages for competitive pricing
  5. Maintain Midwest base while opening coastal sales offices

The Future is Distributed

Remote work has made the Midwest advantage even stronger. Now you can:
  • Hire coastal talent at Midwest prices
  • Access global markets from anywhere
  • Build distributed teams with Midwest headquarters
  • Combine regional advantages strategically
Our newest Scalable Ventures companies are "Midwest-headquartered, globally distributed"—incorporating in Delaware, headquartered in Louisville, with team members worldwide.

My Advice to Founders

If you're considering where to build your company, ask yourself:
  1. Do I need to raise $50M+ in the next two years?
  2. Is my customer base exclusively in Silicon Valley?
  3. Do I require specialized talent that only exists in one location?
If you answered "no" to these questions, the Midwest offers compelling advantages.

The Bottom Line

After building multiple companies and investing in dozens more, I'm more bullish on the Midwest than ever. The combination of:
  • Structural cost advantages
  • Loyal, talented workforce
  • Improving ecosystem
  • Quality of life
  • Remote work normalization
Creates an environment where companies can build sustainably, grow profitably, and compete globally. UnifyCX didn't succeed despite being in Louisville—it succeeded because of it. The same advantages that helped us grow to 6,000+ employees are available to any founder smart enough to look beyond the coasts. The Midwest isn't trying to be the next Silicon Valley. It's something better: a place where companies can build real businesses for real customers with real profits. In an era of unsustainable burn rates and growth-at-all-costs mentality, that's not just an advantage—it's the future.

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