Traverse City, Michigan, a coastal community of just over 15,000 people on the shores of Lake Michigan, isn’t most people’s idea of a tech hub. Andy Cole, co-founder and executive director of 20Fathoms, a local nonprofit tech business incubator, described his hometown as a well-kept secret, a remote community and popular summer travel destination on the tip of the pinkie of Michigan’s mitt.
“It’s a wonderful, beautiful place, but it’s not really on the way to anything,” Cole says.
Like many who grew up in this more rural corner of the country, Cole left after high school, and until recently, his career hadn’t brought him back. When he returned in 2016 after spending time in the Boston area, he wasn’t sure what he’d find in the way of opportunity. He didn’t expect to encounter a growing community of tech startups, including entrepreneurs, multiple drone companies, and a local meetup group, TCNewTech, that had more than 1,000 members.
The momentum and energy he saw inspired him to help launch 20Fathoms, inside a second-floor office on Front Street overlooking the bay, in July. Soon, this local tech hub will become part of a nationwide experiment in building the rural tech economy.
“There’s so much talent under the rocks in this community,” he says, “and nobody was trying to overturn the rocks and see what was there.”
The digital economy, and the promise of succeeding anywhere
20Fathoms is one of nine small-town tech centers across the nation chosen for the Rural Innovation Initiative, a project of the Center on Rural Innovation (CORI), founded by Matt Dunne, a former head of community affairs for Google, and funded with a seed grant from LinkedIn cofounder Reid Hofmann. During his time with Google, Dunne worked remotely from Vermont, and his new initiative embodies CORI’s belief that smart tech investment can not only showcase small towns with economic momentum, but help reverse the fortunes of rural America.
“We’re trying to take advantage of the long-time promise of the internet that it shouldn’t matter where you live, that you should be able to succeed in the digital economy from anywhere,” says Dunne.
The romantic vision of telecommuting and digital technology—log in and operate from anywhere—has ceded ground to the harsh reality that opportunity, funding, and jobs tend to concentrate in select superstar cities, draining talent and jobs from rural areas.
The Rural Innovation Initiative believes the current state of concentrated wealth has created an opportunity. By building a series of outposts geared for remote workers, all located in the downtowns of rural cities, the program can create small pockets of density and collaboration, as well as a cheaper labor pool of skilled tech workers. That, Dunne hopes, creates a catalyst for jobs and startups and highlights the advantages of communities with lower costs of living, which have traditionally lagged behind in today’s tech economy.
It’s the flipside of the rural brain drain, creating reasons for individuals to bring their talent, skills, connections, and capital to smaller towns.
The Rural Innovation Initiative will provide technical assistance to nine communities—Cape Girardeau, Missouri; Emporia, Kansas; Grinnell, Iowa; Independence, Oregon; Pine Bluff, Arkansas; Pittsburg, Kansas; Red Wing, Minnesota; Wilson, North Carolina; and Traverse City—establishing innovation hubs during the beginning of 2019.
To qualify, each location needed high-speed broadband, as well as potential for further development—including partnerships with a college or university, a nonprofit partner—and a location in an Opportunity Zone. If each city can raise $500,000 by the end of March, it will qualify to apply for a grant from the U.S. Economic Development Agency that can provide up to $750,000 in additional funding.
The challenges of remote working and rural development
This twin focus on rural development and remote work comes as the country’s approach to spending professional time outside of the office evolves. At the same time, larger economic shifts—globalization, new technology, the prevalence of coworking, and increased mobility described as the Open Talent economy—have led to a higher number of freelancers. Today, a greater share of Americans spend significant time working outside their offices.
According to a recent Gallup poll, 43 percent of full-time employees spent part of their time working remotely in 2016, a 4 percent increase since 2012. And since 2007, there’s been a 115 percent increase in the number of remote jobs being offered, across all job types and businesses, from mom-and-pops to Fortune 500 companies, says Mika Cross, director of the national nonprofit 1 Million for Work Flexibility.
Though the concepts of coworking and telecommuting entered the lexicon in 1973, thanks to Jack Nilles, a former NASA engineer, they’ve never seemed to reach their potential. Despite the easy availability of tools like Slack and videoconferencing, not everyone can be a full-time digital nomad hopping between rural retreats, or take the lessons of efficiency guru Tim Ferriss’s The 4-Hour Workweek to heart. The creative class, for the most part, has never been more concentrated in big cities.
Since it’s unlikely that any headquarters or large tech campuses will move out of major metro areas, encouraging a select number of employees to go remote seems more realistic.
Cross says the CORI model could have a real impact, as it builds on concepts she’s already seeing partners use, like tapping remote workers to prevent brain drain and keep people from leaving rural areas.
“Part of the equation is helping to establish the business case for employers to continue to [allow remote work],” says Cross.
Trying to turn these regional hubs, or micropolitan areas—which are home to 1 in 10 Americans—into tech centers rather than chasing larger employers, like Foxconn or Amazon, offers a more immediate and cost-effective economic boost.
“Too many communities focus on trying to provide incentives for large manufacturing or mining jobs,” says Ross DeVol, a fellow at the Walton Family Foundation who has studied micropolitan areas and their impact on local economies. “It’s easy to say, ‘We brought in 100 or 200 new jobs,’ but in many cases, if a city focused on providing entrepreneurship training and business skills instead of paying to lure companies, they might have had a greater return.”
This year, Vermont will begin offering $10,000 to anybody willing to relocate and work remotely in the state, and will subsidize rent at coworking spaces for any qualifying applicants. According to Joan Goldstein, commissioner of the state’s Department of Economic Development, there’s a persistent fear in the state of not having enough people to sustain a strong economy.
While state efforts focus largely on helping existing companies, like Green Mountain Coffee Roasters, expand, there have also been successful attempts to get new companies to relocate or open new factories or offices. In Quebec, for example, several companies have benefited from opening U.S. locations just across the border. Why not apply that logic to individuals?
“We’ve crunched the numbers, and there’s a return for the state from just a single new worker, in terms of taxation and other intangibles, such as having more kids in our schools, or getting more people involved in our community,” she says. “We’re working on all fronts when it comes to economic development. We realize it’s not just one size fits all.”
Other cities have launched similar initiatives: New Haven, Connecticut, is providing up to $80,000 to attract homeowners. North Platte, Kansas, is offering $5,000 in incentives to remote workers. And Tulsa Remote promises $10,000 to those who relocate to the Oklahoma town and stay for a year, as well as membership at a local coworking space and up to three months of discounted rent in a furnished apartment in city’s Arts District.
Bluegrass, beer, and now, broadband
Dunne believes these kind of programs can not only spur the development of local jobs and startups, but also provide talent for larger tech firms that are increasingly opening up offices in smaller cities outside of the San Francisco Bay Area to avoid the region’s astronomical commercial rents. The Rural Innovation Initiative could, in effect, create a network of locations bigger companies can tap for talent.
Dunne points to the increased prevalence of rural broadband internet networks. While much of the country still lacks high-speed connections, an increasing number of communities now boast this important infrastructure.
“There are over 8.5 million rural Americans with access to gigabit internet, nearly equivalent to the workforce of New York City,” says Dunne.
Can a few more laptop-carrying techies camped out in the coffee shop make a difference? In a town of 15,000, adding a few dozen well-paid workers isn’t insignificant, especially if the added economic activity eventually leads to new businesses and shows recent graduates there’s opportunity in town. Dunne envisions this kind of tech job creation as a new pillar of rural placemaking, what he calls the three B’s: bluegrass (and other arts), craft beer, and broadband.
Dunne also plans to test out this placemaking concept on a larger scale in Springfield, Vermont, where CORI is working with local partners to open the Black River Innovation Campus, a former machine tool shop turned tech campus that boasts 10-gigabit internet, the fastest in the United States.
In Traverse City, Cole says that 20Fathoms has already made a big impact, creating a focal point for the local community. Since the space opened last July, companies based there have created 12 new jobs, with an average salary of $87,000. That’s more than $1 million annually flowing into the community. He sees the Rural Innovation Initiative’s idea as just the next step in showcasing what this community, and communities like it, can do.
“You can have some success putting a bubble around your community,” he says. “But anything that helps connect you to communities across the country can really help you get to the next level.”