Who Says Silicon Valley's the Startup Hub?

Launching an IT company in Indianapolis isn’t as sexy as Silicon Valley, but the economics are pretty appealing.

Just ask Jeff Ready, an Indiana native, who has spent the majority of his career launching startups in Silicon Valley. Recently, he decided to move back to the Midwest to be closer to extended family. The move seemed jinxed, however, as the timing happened to coincide with the launch of Ready’s new storage company Scale Computing. Ready feared the hunt to secure $5 million in venture funding would land him right back in northern California.

Why would that send him back? Ready says that in his experience Valley VC firms tend to invest strictly in local companies. “Companies they can drive to and look in on,” as he puts it. It’s understandable, to be sure, and Ready had pretty much resigned himself to a return to the West Coast.

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But before packing up the moving van again, he and his partners gave it a shot, looking for for local sources of investment cash. They were pleasantly surprised to find it in the form of a $2 million grant from Indiana’s 21st Century Research and Technology Fund and another $3 million from Blue Chip Venture Co., a Midwest-based VC.

And that’s not all. Because the cost of doing business is that much less expensive in the Midwest, Scale Computing is able to afford to operate its own manufacturing plant and hire local employees at Indiana-level wages and benefits. The other plus is Indianapolis’ place as a logistics hub for North America, with the largest Fedex facility in the country located there.

Being in the middle of the country actually adds up to better customer service, Ready contends. “If need be I can drive to Fedex at 9 p.m. and get a replacement to a customer next day. In California, the cut-off would be 2 or 3 p.m.”

Scale Computing went live with its low-cost storage appliance in February. The hardware is commodity-based, which keeps the cost low – 50 percent to 75 percent less than similar units from NetApp, Dell’s Equalogic and HP’s Lefthand Networks, according to Ready – but the software technology called TruCluster is what allows a scalable storage cluster that can behave as a SAN or a NAS.

The devices hold 2 usable terabytes of data that can be stacked together like Legos. So three devices snapped together hold 6 usable terabytes of data. Despite being three units, servers and applications on the network treat the storage pool as one system, Ready said.

Scale Computing is building up a channel in North America with 20 partners signed on thus far. The products are mainly targeted at the small- and midsized companies that benefit from being able to scale their storage only as they need and as budgets allow.

But even enterprises are taking a look. Motorola, for example, is deploying Scale’s systems companywide “It started as a departmental deal with their R&D group, but has since grown to where we are now being deployed companywide, which in this case means worldwide," he said.

So what’s the moral in all this? Certainly not that Silicon Valley is passé. In fact, Scale Computing still has an office there and taps the engineering talent pool. But in this terrible economy, it’s nice to find that opportunity is not bound by location or geography – and in fact might flourish being someplace out of the norm.

In this recession, saving money actually is sexy.