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Once the industrial base of the US, the Midwest has struggled in the high-tech era to capture the talent-driven growth enjoyed by coastal cities like Boston and San Francisco, but the region’s fortunes are changing fast. In the past year or so, a burgeoning Midwestern tech scene has begun attracting more attention from venture capitalists and Silicon Valley giants, with many local startups and big-company expansions focusing on the middle-skill roles for which the tech sector’s demand is insatiable, but that are still in short supply nationwide. These “mid-tech” or “new-collar” jobs are described as a 21st century analog to the factory jobs of the past—and as such, a promising path to revival for the industrial Midwest.
High-tech industries including major international firms have been making some big bets in the region: The Indian IT services and business process outsourcing giant Infosys is planning a sprawling campus near Indianapolis, which aims to create 3,000 new jobs within five years, while the Taiwanese multinational Foxconn Technology Group made a deal with the Wisconsin state government last year to build a display panel factory there, which will see the company invest as much as $10 billion and hire as many as 13,000 people. Several midwestern cities are on the list of finalists in the competition to host Amazon’s second headquarters, though Detroit, for example, didn’t make the cut, partly due to a lack of readily available talent.
Yet “mid-tech” companies and regional outposts of tech giants are just one side of the Midwest’s high-tech renaissance. Over the weekend, VentureBeat reporter Anna Hensel took a look at the growing community of AI and machine learning startups in the heartland:
“The real benefit of artificial intelligence is the application to traditional problems and products that the world needs, and the really successful companies have that domain knowledge that they can understand how to apply this technology,” [Chris Olsen, a partner at Columbus, Ohio VC firm Drive Capital,] told VentureBeat in a phone interview. “We see more of those domain experts in these industries [with] massive chunks of GDP that exist here in the Midwest.”
Pared, an on-demand hiring platform for restaurant workers, has raised a $10 million financing round led by CRV, TechCrunch reported last week. The platform aims to help restaurants fill last-minute staff shortages, particularly in back-of-house roles like line cooks and dishwashers, but could conceivably be used for waitstaff and other front-of-house positions as well:
Restaurants go to the app and say they are looking for what the app calls a ‘Pro’ in whatever role they need, and are able to book the employee right away for the slot they have in their schedule. It might come at a slight premium over the typical hire, but restaurants are already willing to pay overtime in order to cover those gaps and keep things moving smoothly, [co-founder Dave] Lu said.
For employees, it’s a pretty similar experience — they see a job posted on the app, with a time slot, and they make themselves available for an hourly wage. The second benefit, Lu said, is that they can start to slowly make a name for themselves if they are able to prove out their skills and move up the ranks at any of those restaurants. The culinary community is a small one, he said, and it offers a lot of room to start building up a reputation as an exceptional chef or just finally get a first shot at a sauté position in the kitchen after working at the back of the house. That, too, might be part of the appeal of jumping on a service like Pared rather than just driving for Uber.
Pared is part of a growing ecosystem of platforms offering an “Uberized” approach to hiring hourly workers in various roles. By catering exclusively to restaurants and promising to help chefs build their personal brands, Pared is looking to build its own reputation as a reliable place to find quality kitchen talent on short notice.
These new platforms are emerging in retail and food service to address these industries’ unique staffing and scheduling challenges: Customer traffic is variable, but employees’ availability may not be. To address this mismatch, technological solutions are being built to help connect businesses in need of shift workers on short notice with employees willing to take those shifts, on the employees’ terms. For instance, Legion, another startup that raised $10.5 million in first-round funding last year, is using big data to better predict customer traffic and schedule the right amount of staff in advance.
A recent study by the Boston Consulting Group and MassChallenge, a global network of startup accelerators, takes a close look at how startups founded by woman compare to those founded by men, both in terms of how much venture capital financing they receive and how well those investments pay off. Looking at five years of investment and revenue data from the startups MassChallenge has worked with, the study found that those founded by women consistently attracted less investment, even though they actually tend to generate more revenue:
Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs. Despite this disparity, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000. In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.
The findings are statistically significant, and we ruled out factors that could have affected investment amounts, such as education levels of the entrepreneurs and the quality of their pitches. … The results, although disappointing, are not surprising. According to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital (VC) deals, and those companies have garnered only about 2% of all capital invested.
This gender bias may be costly to venture capitalists as well as entrepreneurs: The study calculated that VCs could have made $85 million more over five years had they invested equally in the startups founded by women and by men.
The researchers went one step further and spoke to founders, mentors, and investors to understand the origins of the gender gap in VC funding. Consistent with various other research showing that women are more likely to be challenged, questioned, and criticized in the workplace than men, they found that women founders and their presentations receive more pushback from investors than their male peers. Men are also more likely to talk back to investors when their claims are scrutinized, and to make bold, blue-sky projections in their pitches:
A group of more than 400 tech entrepreneurs and CEOs have formed a coalition called Founders for Change to press for greater diversity and inclusion in the venture capital industry. The group includes the chief executives of major startups like Dropbox, Lyft, and Airbnb, as well as public companies like Stitch Fix, and represents a reversal of the traditional founder-VC relationship, Pui-Wing Tam reports for the New York Times:
On Tuesday, in a statement underlining the importance of diversity in the tech industry, the tech executives said the racial and gender makeup of a venture capital firm would be “an important consideration” when they were raising money …
The entrepreneurs’ public statement is unusual. In Silicon Valley’s start-up ecosystem, founders and investors have generally maintained a delicate power equilibrium. Venture capitalists strive to get into the hottest start-ups, aiming for a big payoff when those companies go public or are sold. Entrepreneurs, in turn, take money and guidance from the investors to help their start-ups grow and flourish.
While coastal cities like San Francisco, Seattle, and now Boston have gotten a lot of attention for their explosive growth driven by the tech industry, a different kind of tech job is emerging in the manufacturing powerhouses of the Midwest that were once the heart of industry in the US and the key to the country’s unprecedented prosperity. Quartz’s Michael J. Coren defines these “mid-tech” jobs, which are springing up in Midwest cities such as Columbus, Indianapolis, Detroit, and St. Louis, as “skilled tech work that doesn’t require a college degree: just intense, focused training on the job or in vocational programs like those of blue-collar trades of the industrial past.”
Also known as “middle skill” jobs, these opportunities are popping up as a result of the massive expansion of high-tech products and services and savvy companies taking advantage of labor and office costs much lower than in their coastal outposts. Coren points to several examples of mid-tech development in the region, including a program set up in Kentucky by software firm Interapt that trains coal miners and workers with “technical aptitude” to become software developers, and Ai-Media, a company contracted to caption Facebook’s live streams that opened up an operation in Youngstown, Ohio last year.
“The modern factory job is a mid-tech job,” Patrick McKenna, a San Francisco-based entrepreneur and venture capitalist who helped broker the Ai-Media deal, told Coren.
The Midwest’s startups have also gained attention from venture capitalists, particularly after acquisitions like McKesson’s recent purchase of the Ohio-based company CoverMyMeds for a $1.1 billion. Overall, 2017 was a banner year for the region’s startups, with 37 Midwest-based startup companies exiting for a total value of $5.1 billion, according to VentureBeat.
2017 has been a year of reckoning when it comes to sexual harassment in the workplace. From the tech sector to politics, media, and entertainment, many powerful men have been exposed as serial sexual harassers, with records of misconduct sometimes years or decades long, and lost their jobs, were cut by sponsors, or had their projects canceled. In the business world, senior leaders and HR departments have been concerned with how this awakening may affect their organizations, but many business leaders are afraid to look into the issue because they don’t know what they might find. Are people in the company afraid to report harassment? Has anyone been committing misconduct and getting away with it?
While companies struggle with these challenges, several startups are developing technologies to make it safer and easier for employees to report experiences of sexual harassment, as well as for employers to respond to these reports.
Montreal-based startup Botler.ai is launching a chatbot to help employees in the US or Canada determine whether they have experienced sexual harassment. Khari Johnson of Venture Beat reports that the bot uses natural language processing based on a data set of over 300,000 court cases to determine if harassment has occurred and if there may be cause for legal action. If the user determines that he or she would like to report the incident to HR or law enforcement, the bot is also able to write up an incident report. This is a particularly helpful feature for victims as one major acknowledged barrier to sexual harassment reporting is the trauma of having to retell their story (and relive the incident) over and over again.
STOPit is an app that allows employees to anonymously report a wide variety of transgressions, from harassment to bullying, unethical business practices, and more. They can also provide video and photo evidence and begin a dialogue with “report managers” within the organization to either provide additional evidence or to chat further.
The social media management platform Buffer is best known for its commitment to radical transparency, with all its bumps when it comes to delivering bad news like layoffs. So in a recent blog post about their experiment with “learning sabbaticals,” Buffer’s Hailley Griffis is forthcoming about the hard financial reasons why the startup is focusing on employee development rather than expanding its staff:
We did a round of fundraising in 2014 that was completely transparent and now we’re focused on having a healthy bank balance and have chosen to operate primarily based on cash flow and profitability rather than fundraising. As a result, we haven’t been hiring a ton at Buffer, and we don’t have plans to do large amounts of hiring in the near future either. This means our primary focus when it comes to our team is helping them learn and develop so that we can all keep moving Buffer forward even as the company and product needs evolve.
In other words, Buffer needs to expand its skill set without expanding its headcount, which means maximizing the potential of the people it already has. Learning sabbaticals, Griffis explains, “have a Buffer teammate spend roughly three months learning and developing a new skill or ability so they can adapt within Buffer to our changing needs”: