By ANDREW MOORE
Reporter with Silicon Hills News

San Antonio New Tech held its fourth monthly meeting this week — showcasing four new San Antonio start-ups ready to show-and-tell. The ideas ranged from providing discount doctors and creating virtual business cards to creating an online bartering site that reduces the need for currency. And due to their start-up nature, many are still hiring.

BudgetDoc

“Imagine if you could tell what the price would be of going and visiting a doctor before you actually go visit,” said Gopinath Khandavalli, the presenter for Budgetdoc. “BudgetDoc is like Priceline for doctors.”
BudgetDoc wants to make affordable healthcare available to more people by creating a network of doctors willing to give discounts to patients that pay cash up front. The site was designed primarily for people that can only afford catastrophic care insurance – meaning low cost and very high deductible – and for those who are uninsured. People using the site can research a doctor, what services the doctor offers, how expensive they are, and what discounts the doctor gives for paying in cash. Coupons for the discounts will be on the webpage for customers to print at home. BudgetDoc makes it easy for customers to contact physicians if they have any questions not covered on the site. The site also allows patients to rate doctors and to evaluate them in side-by-side comparisons.
“No competitors are doing price transparency like we are,” said Khandavalli. “Nobody is working towards doctors who offer cash prices at the time of service.”
While Khandavalli acknowledges that patients will probably need additional services at additional costs after the initial check-up, he says the site will endeavor to list prices for all services a doctor provides. Khandavalli hopes that this will empower people who would otherwise not seek healthcare because of the large hidden costs associated with treatment. He also hopes it will help insured patients who cannot find inexpensive or timely healthcare in their healthcare provider’s network and seek services outside that network.
The BudgetDoc network already has around 30 providers — including a pathology lab — and all providers are vetted through information from the Texas Medical Board. BudgetDoc uses the information to insure that doctors have a license and insure that they have had the proper education and training credentials. The network includes both cash-only doctors and those that accept insurance and Medicare. Khandavalli says that doctors accepting insurance can still offer discounts as long as the discounts are restricted to cash-up-front services.
The BudgetDoc site already has around 350 unique visits a month and has been used by 800 patients. BudgetDoc is looking to hire a marketing manager that can do social media outreach as well as blogging and community events. If the site sees success in creating a large network that attracts many patients, it will pay for the increased workload by charging providers a small fee. The site will always be free for patients.

Contact Card

Contact Card is the brainchild of urologist Naveen Kella. It’s a virtual business card – or v-card — sharing app designed to simplify the process of exchanging business cards at conferences and big group events.
“When you do come back home from a conference, you have your suitcase – open it up and there’s like 30 cards in there,” said Kella. “When do you have time to organize all that?”
Contact Card allows the user to quickly create a virtual business card and then share that card through e-mail or a QR code. In a pinch customers can just take a picture of your card as well. The QR code functionality means the app will work even without phone reception or internet access. Contacts you meet can use any other QR reader to download the v-card as well. Kella says the app is ideal for professionals that “wear many hats” and don’t have business cards for all of their services.
Contact Card will also automatically organize v-cards it obtains from other users into a virtual rolodex. From there, the app lets you call or e-mail a contact just by taping on the number or address on their v-card. In the future, Kella hopes to incorporate a feature that organizes business cards based on the location a user received them.
Contact card launched on Nov. 15 and is currently available only for iPhones, iPads, and iPods which are using iOS 5.0 or later. The basic app is free but it will come with a premium card design pack for $1.99. Kella does not have any plans to adapt it for Android, though that may change depending on the app’s reception.

Appfog

Appfog was founded by CEO Lucas Carlson. It’s a web hosting and platform-as-a-service provider that gives developers a platform to work with so they can create, launch, or improve their mobile app products without spending days on creating the necessary infrastructure. Appfog handles the internet hosting, the IT infrastructure, and any necessary maintenance for the developers — through cloud computing technology – to help them save time and cut costs. Senior Director of Customer Experience Chad Keck claims that Appfog can help a developer deploy an app in less than a day.
“Come to Appfog, pick your technology, choose your provider and region, launch your app and you’ll be home in time for dinner,” said Keck. “We want developers to stay focused on their core competency, which is developing their application, and not on running servers all day.”
Appfog allows developers to work with many different types of code including PHP, Node, Ruby, Python, Java, and .NET. There are also many different regions and mobile providers that you can choose from without getting tied down to a particular one. Appfog has agreements with these providers and gives you a choice of the one you want to use. Appfog also allows developers to switch between providers within minutes – an option Keck says is not available with other companies like Amazon. In fact, Keck says that many of Appfog’s customers come from Amazon because they need more flexibility and features.
Appfog caters mostly to individual developers but works with small and medium businesses as well. It is free for applications that can run within 2 GB of ram – such as a WordPress site or simple blog – and starts at $100 a month for 4 GB of ram. Today Appfog has over 80,000 users and Keck says that around 10 percent of those users are paying for 4 GB and above. Many of the paying customers are enterprises running Appfog: Private Edition, which can run inside corporate firewalls.
Appfog is currently hiring for sales and support positions.

Steven Quintanilla (Left) and the Kirpeep team photo by Andrew Moore

Kirpeep

Kirpeep is a bartering and exchange website where users can exchange goods and services with or without the use of money. CEO Steven Quintanilla created the site in the hopes of reducing societies dependency on currency and helping people get things that they need by using their time and talents.
“Kirpeep is an exchange engine working to empower people who provide value to the community by making it easy to exchange goods and services with and without money,” said Quintanilla. “You can barter, you can buy, you can sell.”
Quintanilla demonstrated how a user could barter a slightly used iPhone for a set of tire rims. He also showed how users could post things they want to sell, barter, or buy on their Kirpeep profiles and then re-post them on social media sites such as Facebook.
Kirpeep is not limited to just bartering goods. Any service or talent can be put up for trade against any other service, talent, or good for sale – as long as it’s not prohibited by Kirpeep’s very specific terms of service. A user could trade a session of calculus tutoring for a dance lesson or a set of DVDs if they wanted.
If users want to use money they can purchase kirpoints from PayPal which have a 1-to-1 ratio to dollars. Kirpoints can be used alone or in combination with other goods and services to negotiate a transaction. The only catch is that users must buy 25 kirpoints at a time and must cash out in 50 kirpoints increments – a decision made to make bartering more attractive than spending money.
Once two users agree to an exchange and complete it, each is given a confirmation code to be used when they are provided with the others good or service. Once the codes have been entered you can rate the other user and impact their reputation.
Kirpeep has received $25,000 from Geekdom to start their business. Their website, and concept, is still in beta and has only been up for a few weeks, so potential difficulties may still lie ahead for the website. The IRS, for instance, will require people to report the value of what they barter — but because Kirpeep sees the value of something as subjective and ever-changing there are no guidelines for users to follow when reporting. Quintanilla says Kirpeep is only viewed as “a connector” by law and reporting the value of transactions is the responsibility of users alone.
As Kirpeep develops, they hope to be able to create a “value graph” for communities to help classify what is valued locally by what people trade the most for. They can then suggest matches and make recommendations to users. According to Quintanilla, once the real value of goods and services are recognized in a community, members of the community can find a better way of getting what they need than by spending money.
“What Google did for search, we want to do for exchange,” says Quintanilla. “There are seven billion of us, it’s crazy that we cannot have the basic human essentials with the 7 billion people we have as resources.”
Kirpeep currently has 7 employees and 5 consultants. They are looking to hire more developers that have experience coding in Ruby.

Disclosure: Geekdom is a sponsor of Silicon Hills News

University of Texas cheerleaders turned out to celebrate a group of student entrepreneurs at 1 Semester Startup Demo Day Thursday night.
“We want our entrepreneurs to be as supported and celebrated as our athletes,” said Bob Metcalfe, a 1SS professor, co-inventor of Ethernet, founder of 3Com and the Cockrell School’s Murchison Fellow of Free Enterprise.
That’s why, in part, 1 Semester Startup has changed its name to Longhorn Startup Lab. They’ve also added Longhorn Startup Seminar for students and Longhorn Startup Studio for faculty, Metcalfe said.
Metcalfe teaches the class for undergraduate students interested in entrepreneurship, along with Joshua Baer, co-founder of Capital Factory, serial entrepreneur and professor of computer science and Johnny Butler of the IC2 Institute and professor in the McCombs School of Business.
The program is about mentors, inspiring speakers and course credit, Baer said.
So far, the class has graduated more than 35 startups in three semesters.
At Demo Day, 11 student-run startups pitched their companies to more than 300 people.
The companies included Beehive, Book512, Caysun, Clay.io, CrowdRx, Hoot.me, Lynx Labs, Predictable Data, Servuss, StillOpen and Team Pi.
Lucas Holt, a senior in engineering at UT, has taken the 1SS course for two semesters. Last semester, his group launched BeDJ, an app that let people change the music at a café, but it didn’t take off.
“People just weren’t grasping the concept of this new type of jukebox,” Holt said.
That’s when the five engineers behind BeDJ decided to pivot and turn the company into a marketplace for DJs called Book512. They even found the DJ for the reception event at Demo Day.
“We’re trying to create more gigs for them,” Holt said. “If we can make it cheap enough and simple enough for people they’ll use it.”
Book512 takes a small percentage of each transaction booked. The site has already booked several gigs and generated cash, Holt said.
“One thing that 1 Semester Startup has done for us – our team we’re all engineers – is it taught us that if you’re going to make a product and a startup company, you really need to do the research first,” Holt said.
Damon Clinkscales, a software engineer who has served as a 1SS mentor in the past, liked Clay.io, a platform for HTML game development and Team.Pi, an algorithmic trading and crowdfunding site. He also liked Lynx Labs, which developed a handheld 3-D camera that captures 3-D models of an environment.
Lynx Labs grew organically from a research lab in the electrical engineering department at UT into a commercial company, said Chris Slaughter, its CEO. The company received some initial funding from the National Science Foundation and the Defense Advanced Research Projects Agency, known as DARPA.
“1SS has provided us a cocoon by which we can grow this technology and develop this company,” Slaughter said.
The company just received notification that it has been recommended for a Phase 1 Small Business Innovation Research grant for $150,000. In addition, the five-member team at Lynx is seeking $350,000 in seed stage funding. And in January, they plan to launch a Kickstarter campaign to raise awareness about their product, Slaughter said.
The class has provided valuable connections and advice to Lynx Labs, Slaughter said.
“Josh Baer and Bob Metcalfe aren’t just figure heads,” he said. “They sit down and help us. They’ve been so valuable.”
Lynx Labs shows what’s possible with spinning technology developed at UT into startups, said Kyle Cox, director of wireless and IT at the Austin Technology Incubator and a 1SS mentor. Lynx Labs also helps ignite Austin’s hardware industry, he said. The city’s startups have traditionally been focused on enterprise software, he said.
“They’ve also done a lot of really hard work at assessing multiple marketplaces,” Cox said. They’re focusing on entertainment and architecture marketplaces, he said.
“Longhorn Startup Labs is just a fantastic farm system for the UT and the Austin startup communities,” said Rudy Garza, founder of G-51 Capital Management.
Several of the companies spun out of the program will go on to become viable companies and those entrepreneurs will come back and help the next generation, he said.
“They don’t just have one semester to be successful,” Garza said. “They have a continuum of time to pivot into a commercial company.”
Some of the companies that pitched at the Demo Day will get funded, Garza said.
“The exciting thing is in Austin we have a more developed investment ecosystem,” Garza said. That includes angels, investors, micro-VCs like G-51 and big VCs like Austin Ventures, he said.
“You’re going to see companies get funded and UT’s investment go up,” he said. “We hope to build a better Silicon Valley here in Austin.”

Rony Kahan and his wife spent more than a week hiking from base camp at Mount Everest to Kathmandu without a guide.
The couple didn’t follow a path. Instead, they used a compass and found their own way.
That journey is analogous to the one that Kahan and his co-founder Paul Forster took creating Austin-based Indeed.com, which has become the most popular job site in the world.
“You have to make your own path,” Kahan told more than 300 people attending 1 Semester Startup’s Demo Day at the University of Texas Thursday night. To illustrate his point, he showed a picture of the couple hugging at Mount Everest at the start of their hike.
Kahan kicked off the event as the keynote speaker. He recounted his entrepreneurial journeys and lessons learned from building two companies in Austin. Recruit Co., a Japanese-based provider of human resources and recruitment services, bought Indeed.com in September. Although the terms were not disclosed, the New York Times, an early investor, reported its gain from the sale at more than $100 million. In his introduction of Kahan, Joshua Baer, 1 Semester Startup professor and serial entrepreneur, said news reports puts the sale price at $1 billion.
Indeed.com, founded in November of 2004, has more than 600 employees, including 175 in Austin. It has been profitable since 2007. Its website gets more than 80 million unique visitors every month.

Rony Kahan speaking at 1 Semester Startup at UT

Mass Relevance held an open house and gave tours of its new downtown office at 800 Brazos St. in Austin.
The company took a 12,000 square foot space and transformed it into a cool high-tech office.
Sam Decker, CEO of Mass Relevance, shared this video on Twitter. It shows the company’s open design for its offices and its kitchen and lounge space with video game consoles and ping pong table.
Mass Relevance has created a social media platform that allows content publishers to create new revenue streams around curated and integrated experiences on TV, the Web, mobile and large screen displays. Its clients include NBC Sports, NFL Football, Cisco, Samsung, and Pepsi and media companies like CNN, Boston Global, New York Times and Washington Post. Sports teams using the platform include the New York Giants, San Francisco Giants and the Boston Celtics.
Back in August, Technology Reporter Lori Hawkins of the Austin American Statesman wrote this story on Mass Relevance’s move downtown. Apparently, it’s part of a trend of high-tech startups moving downtown.

By EHREN FOSS
Special Contributor to Silicon Hills News

What’s the whole story?

The purpose of the rest of this post isn’t to tell the whole story of HelpAttack! We hope, however, to pass along the most valuable wisdom we have accrued.
Sarah Vela came up with the idea that became HelpAttack! during Austin’s “Movember” fundraiser of 2009. Austin’s team had a lot of social media people on it, and Sarah’s feed became noisy with fundraising asks. Why can’t we just give each time we Tweet about other stuff?
Sarah knew David and David knew Ehren and we all got together to talk about the idea, at that point called “Change4Change.” In April of 2010 we paid some lawyers and became a Delaware C Corp. We developed an early version late that spring and early summer, and launched our “Beta” on August 23rd.
The core of the idea – giving each time you send a Tweet, no matter what the Tweet is about – soon grew into a broader concept: Micro donations driven by all kinds of online activity: Facebook posts, blog posts, comments, photo and video uploads, petition signatures, and so on.

Individual Supporters

At first, we focused on building an app that individuals could use to support a cause of their choice. Our goal was to become a place where people could express their good natures online, like a Change.org, Care2, or Jumo but focused on social media. We created “coins” which were like Foursquare badges – rewards for making different kinds of pledges.
A cursory look around the internet reveals a graveyard of companies who tried to build their own social networks and own user bases from scratch. At this point we were also seeing signs that while people want to be good and believe they are good, they usually need more of a push to actually do something good. Sharing a photo (think Instagram) doesn’t cost anything. Donating does, and the psychology of people while they are giving is very complex.

Nonprofits

Our next major release, in early February of 2011, included a Facebook integration (for a second pledge type), and a dashboard for nonprofits to log in, access donor data, and monitor their fundraising efforts.
Shortly afterward, American Red Cross and Best Friends Animal Society gave it a go. To date, they were the most successful nonprofits on our platform.

Restructuring

In May of 2011, Sarah and David left the company but stayed on as valuable and active advisers. In August of that year, Vanessa Swesnik joined to kick butt at business development.

Celebrity Ambassadors

Celebrities have large online audiences. The larger the celebrity, the more people after them to post a link or give a shoutout. On the other hand, many celebrities have strong ambassador relationships with nonprofits, and the PR/talent management industry is well versed in the concept.
We learned a few things. One, IMDB Pro, LinkedIn, and a little creative Googling makes it easy to get the right phone number with about 15 minutes of work. Two, these people are professionals.
Remember the Miley Cyrus campaign we blogged about? We called the nonprofit, and learned that the chairman of their board of directors is also the chairman of the Screen Actor’s Guild. Furthermore, while it was now obvious how they were able to get nearly 100 celebrities onboard, they explained that the participating marquee celebrities would not allow the fundraising totals to be shown, as that could be construed as a stand-in for popularity. Celebrities don’t want to appear less popular in any context.
In another case, we reached a PR firm who was interested, but asked that we reconfigure our platform to allow people to give when their client sent out a specific type of Tweet. For example, every time Liza Minelli tweets a photo of herself, her fans would give $1.
We weren’t able to totally win over the staff of any celebrities. We got close a few times.

Cause Marketers

Like celebs, companies have specific goals and hangups when it comes to social media and supporting nonprofits. Retail firms are tough: they want you to buy their stuff, so they are unlikely to push a campaign where the first priority is direct donations to the nonprofit. Other industries have other challenges: regulatory compliance, privacy concerns, and so on.
In the cases where we were able to make a serious pitch for a cause marketing campaign, it was sunk by too many cooks in the kitchen! Having a national nonprofit, and a national brand, and both of their teams of lawyers, together with a PR firm and us… didn’t make much progress.

Nonprofits Again

Ok, so if celebrity ambassadors and cause marketers… back to nonprofits! We spent the rest of our run attempting to convince nonprofits to run social media fundraising campaigns. We used IRS and other data to identify those who would be likely to have a large online community already. We had some success with PETA, Heifer International, World Food Programme, UNICEF USA, and a few others. Several smaller nonprofits surprised us and ran very successful campaigns (for their size).
Still, the amount of effort required to do the convincing, help craft messaging, talk through the results, convince them to continue the campaign, and so on far outweighed the 4% of donations we were getting back. We did a couple custom apps or consulting engagements for organizations to fund a snazzy redesign in the summer of 2012. Success did not follow.
Vanessa, Holly and I were worn out and tired of not having a sustainable business. We talked with David and Sarah and decided to call it quits in early September of this year.

Other Topics

Legally Transacting Tax Deductible Donations

We didn’t know anything about this topic when we started. It took a long time, and a lot of networking and effort, to find a few people who actually knew the rules.
If you are transacting tax deductible donations on behalf of a nonprofit, there are generally two approaches.
One, you can register as a professional solicitor in each state that requires it. This costs around $10,000 in legal fees, more if you have someone do it for you. The professional solicitor structure was created for people who reel in big fish at galas (and get paid for it) and also for some telemarketers who participate – directly or indirectly – in fundraising.
Two, you can set up a donor advised fund. A donor puts money in the fund, and then the fund is required to distribute the money to nonprofits in accordance with the donors wishes. This is most common with trusts or other structures where the donor doesn’t want to deal with as many of the details, but has a lot of money.
Both of those routes were annoying and expensive from a legal perspective, so we looked for a partner who would transact the funds for us and we found Network for Good. At the time, they were the only such entity in the US, and they were also expensive.
We didn’t know it at the time, but it turns out that nobody really knows how the laws apply to third party online fundraisers like HelpAttack! No case has been brought forward far enough in the internet age. Attorneys General are paying attention, and keeping their eye on various parties, but they aren’t aggressively pursuing startups like ours.
So, did we have to pay all the extra money? Probably not. We’re not advocating that anyone skirt the rules. The point is that knowledge is incredibly potent. If we knew we could get the Excel files of every single nonprofit in the US, for free, from an IRS webpage, that would have helped (you can). If FirstGiving had entered the market sooner, that would have helped too. We could have gotten through our first 18 months spending $10k less and generating more revenue than we did.

Our Competitors

There still aren’t very many companies out there doing similar things. Rt2Give (TwitPay) gave up at least a year ago. Snoball continues (thanks to some nice fundraising rounds in lieu of actual growth) and their model is the closest to HelpAttack! Pledge4Good, Rainmaker App, Charity Swear Jar, Pledgie… there are always a spectrum of new companies and new models out there. Kickstarter-style sites, and team fundraising sites, meanwhile, have done very well in the past few years. So…

Does Social Media Fundraising Work?

This is the $100B question. If you’re reading this you probably already know that Americans donate around $300B per year, but that amount has been flat for the last decade. Online giving has been growing hand-over-fist, but still represents only around 10-15% of the total. Meanwhile, direct mail and fundraising from other channels have likely declined by the same margin. If nonprofits are going to grow overall, and gain more resources to fight the world’s ills, online fundraising has to grow faster. Social networks and social media seem like the most obvious place for that to occur.
Some entrepreneurs confide privately that “nonprofits don’t know what they are doing.” In some cases, with regards to online fundraising, that is absolutely true. There are some organizations out there that will be a lot smaller in 10 years for this reason.
But that’s cynical. What’s really going on is that nonprofits don’t seem to have TIME for anything new. Small nonprofits are stretched extremely thin. Even if the executive director “gets” the internet and social media, how much time can they spend? Can they afford any of the tools that help save time? Can they afford ads to help boost their community growth? Medium and large nonprofits suffer from other maladies: The most common is that the communications team may do a fabulous job managing the website, blog, and social media, but the fundraising department is in another silo. The communications team is driven by engagement: likes, comments, stories, interactions, and community growth. We observed that this environment does not make it easy to create, establish, and sustain a recurring fundraising program within an online community. That’s a whole new ball of wax and although large nonprofits have more resources and staff, they still don’t have enough bandwidth.
Another factor is that after a few years of record growth and constant buzz, financial realities have hit Facebook and other networks, and many nonprofits are disillusioned at their inability to efficiently reach the communities they worked so hard to build.
I still believe social media fundraising absolutely can work. For most who try, it doesn’t, because:
The numbers don’t work out: Not enough people see or spread enough posts to generate enough clicks for the conversion rate to favor viral growth. You either need to start with a very large audience or sacrifice the fundraising potency of a message for viral potency. The solution to this problem is to nurture partners with larger communities and to craft a set of messaging that will spread AND get clicked on.
They only try once. Almost never will a single Facebook post bring in a significant amount of money (natural disasters perhaps the notable exception)
Social media and fundraising practices at most nonprofits are not integrated. Sometimes these teams don’t even talk.
Perhaps we would have been successful if we executed our plans better, or perhaps we would have been successful with different plans, or the same plans in a different order. Who knows. A few people said we were more of a feature than a business, and that may have been true.
What do you think? Good luck to all those working to crack this very tough nut!

About Ehren Foss: “Co-Founder and CEO: has a decade of diverse technical experience with web programming, database administration, and many of the open source tools that help make the web an amazing place to work. He is the founder of Prelude Interactive, a web development firm. Before that he worked at Alchemy Systems an Austin, TX company specializing in professional development and training systems. Ehren is a graduate of the Massachusetts Institute of Technology.”

Editor’s note: This post first was first attributed incorrectly to David J. Neff, co-founder of HelpAttack. It appeared on HelpAttack!’s website and is reprinted here with Neff’s permission. The Austin-based startup shut down in October.

By PAUL O’BRIEN
Special Contributor to Silicon Hills News

Having spent a couple years now in Austin, and the previous 12 in Silicon Valley, a frequent topic of discussion over drinks or dinner is the question of how entrepreneurship works. Not “Startups” per se, at least not in the context that we think of them when reading about all the innovation on TechCrunch; rather, mere entrepreneurship and the fact that people are wired to work for themselves.
It’s really an intriguing topic when you consider entrepreneurship where you live. As a country, we’re excited by the hype machine that fuels entrepreneurship in California but generally speaking, the economy there is NOT entrepreneurial. It’s simply too expensive. Other than the funded ventures served by the exceptional amount of capital available to the brilliant innovators there, people generally don’t work for themselves, at least not compared to the ambitious entrepreneurs of a place like Austin; who I’d bet, are not unlike the individuals creating opportunity in your city.
There are countless comparisons of one city to another; one economy to another. People love to posit and debate what makes one community thrive while another fails or why a city churns out billion dollar ventures while another rarely crosses that threshold. My thoughts here are along the same lines but I’ve come to a conclusion of late that I think is unique and worth considering.
If we distill down all of the variables driving an economy, we can conclude that there are only two types of entrepreneurial markets in the U.S.: High Cost vs. Low Cost.

The High Cost Startup Economy

High cost markets are flush with experience, new talent, and ideas BUT require greater investment in business simply to get started. As a result, the “ideas” which receive investment are already fleshed out by experience, ambition, collaboration, and a network of peer professionals BECAUSE no one can afford to start a business without being so capable and taking an idea to market worth investment. This gives such markets (think San Francisco, Los Angeles, and New York) a tremendous advantage and the opportunity to go for big risks; you see this in the billion dollar valuations of Silicon Valley, the dominance of the entertainment industry through LA, and the center of commerce in New York.
Of course, I’m generalizing.

The Low Cost Startup Economy

Lost cost markets are also flush with experience, talent, and ideas but it takes virtually nothing to get started. Consider the expensive cities on the coast vs. middle America – It costs $185 per hour to get a Ruby on Rails developer in San Francisco. What requires $750k in capital investment there takes only $250k elsewhere. As a result, a few things happen:
Startups from those big cities get a lot of attention; much of it for no reason other than how big they seem. After all, a $750k investment is newsworthy! Isn’t it? No one bats an eye at the same exact startup in another city raising only $250k. What a pittance!

PR = traction

The flaw in that happening is that PR = traction; for good ideas and bad. Capital buys time and resources and in our increasingly outsourced economy, even though it costs more to hire talent in those expensive cities, $750k applied to some overseas developers goes a LONG way further than $250k. Time = opportunity.

Time = opportunity

Entrepreneurs in middle America try to replicate from the coasts… let’s do it like they did… without appreciating everything that goes into making those economies work – A great idea, some money, and we’re set! The problem is that other factors are easily overlooked: experience, ambition, collaboration, and a network of peer professionals, PLUS the PR impact of being in those high costs markets. Inexpensive markets can’t replicate what happens in those expensive cities so why are we trying? Rather, learn from their examples as what works there, in those market dynamics, won’t work the same way elsewhere.

What’s an idea worth?

Are “ideas” new? Are ideas worth anything? How does your city feel about big ideas? Expensive cities seem to fully embrace the perspective that there is no new idea and that it’s about execution. After all, ideas in high cost markets really aren’t even ideas by the time we hear about them, they’ve been vetted, tested, and in development by experienced individuals. They work that way because of that first, and the next, considerations but important to evaluate is that in that, no one is testing an idea; everyone, all the investment, development, advisors, investors, and entrepreneurs, are focused on executing, scaling, and growing. What’s happening where you live? Are people validating ideas or scaling businesses?
Perhaps most important, in low cost markets, entrepreneurs with ideas can easily, and therefore all to often, try to go it alone. If not alone, with few others, from the sense of independence that smaller towns and middle America seems to encourage. Silicon Valley, for example, isn’t an entrepreneurial environment – it’s a startup environment. There is a BIG difference. Entrepreneurs have a bit of the lone wolf in them whereas startups are never sole proprietorships. Entrepreneurs can’t and shouldn’t do it all themselves. There is NO reason to Learn and Discover (my 3rd point) how to scale when the rest of the country already knows so much about your industry, marketing channels, segments, etc. High cost markets put more emphasis on Agile principles for the very reason that they must leverage one another because it’s too expensive to do anything but get the dang thing out and get some proof – and then iterate, iterate, iterate. The high cost of a market forces people to appreciate that time and resources are valuable and though expensive, I don’t have the time to discover something with which I’m unfamiliar – I’m going to focus on what I know well and collaborate with others who can contribute what I need.
So ask yourself and please share with me, how much of this rings true about where you live. Don’t consider the access to talent, experience, education, or even capital that drives your economy; simply consider the cost of doing business where you live. How much of that cost determines how your economy works and drives how entrepreneurship might excel with your support.
The mere cost of markets creates different cultures and expectations and rather than learning from one another we try to emulate things. Expensive markets try to attract and retain the talent from inexpensive markets while inexpensive markets try to replicate how expensive markets work. It’s a failed approach which in and of itself needs innovation if we’re to foster entrepreneurship in the United States.

About the author: Paul O’Brien “has held many formal roles, from VP of Marketing for Zvents and Outright, to managing interactive marketing for HP and designing online advertising for Yahoo! He is most proud of having been featured in the Michael Miller book, Online Marketing Heroes, as one of the 25 leading online marketers as well as appearing in Internet Retailer, KGO Radio, Webmaster Radio, and DM News.”

Editor’s Note: This post originally appeared on Paul O’Brien’s SEOBrien website. It is reprinted here with his permission.