Scale VC Reveals: The Hidden Advantages of Building B2B Tech in the Midwest

Columbia, Missouri might seem like an unlikely tech hub, but it’s produced some of Y Combinator’s most successful companies. In a recent episode of Category Visionaries, Brett Calhoun of Scale VC shared why the Midwest’s perceived limitations are actually powerful advantages for B2B tech founders.

The Talent Advantage

Recent tech industry shifts have created unprecedented opportunities for Midwest companies. “You have the biggest layoffs in tech over like a twelve month period ever,” Brett explains. “So a lot of those people that are laid off have gone out and started companies, or they’re joining companies.”

This talent dispersion has particularly benefited regions like Missouri, where “a lot of founders struggle to kind of find that technical founder to build product, and there’s a lot more of that now.” The key is creating an environment where this talent can thrive without the distractions of tech hub hype cycles.

The University Connection

Scale VC has found particular success partnering with local educational institutions. “We’ve got a great partnership with the University of Missouri and their endowment invested in us,” Brett notes. “Actually going to launch a student accelerator on campus over there and help support student.”

This connection to universities provides access to fresh talent and innovative ideas. “It’s generally primarily untapped,” Brett explains, pointing to successful alumni like Jack Dorsey from Missouri S&T and the founders of Equipment Share from the University of Missouri.

The Culture of Execution

Midwest companies often develop a different approach to growth than their coastal counterparts. “A lot of founders there just have a ton of humility and tend to fly under the radar and to move away from press,” Brett observes. This focus on substance over style has produced remarkable results.

The region has already produced multiple billion-dollar companies: “Two of the top 25 YC companies actually came out of Columbia, Missouri. So one being Zapier and the second being Equipment Share.” Other successes include “Carfax Beyond Meat, Veterans United Home Loans, so a handful of multi billion dollar companies.”

The Customer Proximity Advantage

Being away from tech hubs can actually help companies stay more focused on customer needs. As Brett notes, the most successful founders are “extremely paranoid about their customers and their product and trying to get that last like 1% correct.”

This customer obsession, combined with the humility that comes from building outside major tech hubs, creates a unique advantage. Companies can iterate and improve without the pressure of constant public scrutiny or the distraction of tech industry echo chambers.

The Capital Efficiency Play

The current market environment makes the Midwest advantage even more pronounced. With angel investors pulling back and valuations becoming more rational, companies that can operate efficiently have an edge. Lower operating costs in regions like Missouri allow companies to extend their runway and focus on sustainable growth.

Looking Ahead

The success of companies like Zapier and Equipment Share suggests that building in the Midwest might be more than just a cost-saving strategy – it could be a genuine competitive advantage. As Brett notes about the current market: “I think it’s one of the best times ever to be an early stage investor.”

For founders considering where to build their next B2B tech company, the message is clear: sometimes the best place to build isn’t where everyone else is building. The combination of talent availability, lower costs, and closer customer connections might make the Midwest the perfect location for your next venture.

The future of tech might be more distributed than we think, and the Midwest’s hidden advantages could make it a key player in shaping that future.