During a recent interview, I was asked if entrepreneurs in the Midwest are at a disadvantage compared to those in other areas because Midwesterners are more risk averse.
While I’m not unfamiliar with the notion, I found the question frustrating. Who’s to say that we are risk averse in the middle of the country? When did this become a commonly held assumption? Is there evidence to back this claim?
When asked whether the Midwest is risk averse with respect to startups, Midwest entrepreneur Shane Reiser replied, “Farming is the riskiest business in the history of America.” And while I don’t necessarily appreciate the stereotype, I understand the sentiment.
Is something like tech entrepreneurship more risky than other industries – farming included – that are more common in the Midwest? Sure, it may seem like tech entrepreneurship is intrinsically risky, but I’d argue that nothing is further from the truth.
The barriers to entry are comparatively low considering all you really need is a good idea, a computer, decent software and the know-how to execute. There’s no expensive equipment to buy, no specialized facilities needed. It’s also a simple game of numbers. There are a lot of tech startups out there; not all of them can be successful. As the number of failures grow, so too does the perception of risk.
Beyond farming, Midwesterners show no evidence of being risk averse. Data from the U.S. Small Business Administration indicate the proportion of small businesses in Midwestern states is on par with the proportion of small businesses on the coasts. In Missouri, 19 percent of businesses have 19 or fewer employees. This is equal to California. In Nebraska, 18 percent of businesses have 19 or fewer employees, whereas in Massachusetts, the number is 16 percent.
So are Midwesterners more risk averse? All signs point to no. The question of whether our risk aversion puts us at a disadvantage, then, is based on a fallacy.
It’s not a propensity for risk that we lack here in the Midwest, though, it’s support and resources. For example, California venture capital groups invest over 65 times more than their Missouri counterparts, according to Entrepreneur.com. Yet at the same time, California has only 18 times the number of Inc. 500 fastest-growing companies and a little over six times the population of Missouri.
In reality, there are amazing new technologies being created throughout the Midwest. There are bold and driven entrepreneurs leading the charge in bringing them to market.
I’ve had the pleasure of meeting some amazing people in my short time as an entrepreneur and facilitator in the heart of the Midwest. Some of them are putting it all on the line to follow their passions. Some of them are putting up huge amounts of money because they believe in the devotion behind good ideas. Some of them are providing what little resources and support they can to help entrepreneurs and startups in their own communities. Frankly, to call these inspiring and talented folks risk averse is an insult.
Based on the resources we have available versus our track record of success, we’re not risk averse, we’re scrappy.
Cody Stringer, who holds a doctorate in biological engineering from University of Missouri, is an entrepreneurial specialist with Mercy Research & Development in Springfield. He can be reached at email@example.com.