It Pays to Be Neighborly For Silicon Prairie Startups

SmartyPig and Dwolla are based within blocks of each other in Des Moines, Iowa, and they share more than just a ZIP code.

Though their products do not overlap directly — SmartyPig offers a prepaid card tied to an online savings account and Dwolla offers an online alternative payments system — the companies frequently benefit from one another's experiences.

"It's not unique for a guy on my team … to pick up the phone and call Ben [Milne, Dwolla's chief executive] and chat," says SmartyPig's president, Scott McCormack. "We certainly are very, very open to making sure we are bettering the ecosystem."

The companies are based in one of several regions called Silicon Prairie. This one, which is drawn around Omaha, Neb., Des Moines and Kansas City, Mo., has existed for decades and has seen a surge of new activity from companies founded just within the past five years.

This week, SmartyPig and Dwolla join numerous other companies in the region at the Big Omaha conference, which is sponsored by the online publication Silicon Prairie News.

Organizers describe the event, which has sold out since its inception in 2009, as intimate.

"It's 600 attendees in the same room … [and] most of the speakers are there for the whole conference," says Geoff Wood, Silicon Prairie News' chief operating officer. "They are participating as attendees. They are not there just for the stage."

Though its name draws inspiration from Silicon Valley to the West, payments companies and others based in Silicon Prairie consider themselves distant from the major technology and financial headquarters in the U.S. This outsider status has its perks, say entrepreneurs and industry watchers.

Companies like SmartyPig and Dwolla can sidestep the entrenched players, build new payments systems or take a fresh look at transactions that don't involve the major banks or card associations. Each has the leeway to experiment with new ideas.

SmartyPig in particular has been aggressive about reworking its business strategy in its few short years. Originally a direct-to-consumer online savings site, in February SmartyPig rebranded itself as Social Money Systems to sell its technology to banks. That technology, called GoalSaver, allows banks to copy the vendor's direct-to-consumer service by allowing bank customers to publicize their progress toward specific savings goals.

Even more recently, SmartyPig dropped a location-based rewards offering when it determined that a flat cashback perk was more practical for its audience than merchant-specific incentives.

Dwolla, by contrast, added a location-based feature in August, which allows Dwolla users to locate others who are nearby.

Dwolla also has the financial support of the celebrity actor and tech investor Ashton Kutcher. Though most people probably know Kutcher for his films and television shows, his investment firm, A-Grade Investments, has supported important tech companies like Foursquare, Zaarly and Skype.

Kutcher, an Iowa native, participated in a February funding round for Dwolla, which raised $5 million from all investors. Kutcher's involvement was not publicized at the time, though he confirmed his role in an April interview with Silicon Prairie News. Kutcher did not say how much of the $5 million his firm contributed.

Other Silicon Prairie companies also provide payments technology and services to banks.

Financial Transmission Network Inc. of Omaha develops and manages bank software that incorporates check scanning, ID verification and processing for automated clearing house and card transactions.

The founders are serial entrepreneurs who have worked together for 20 years.

"You got the same group of guys with the same mentality, the same understanding of what a startup is," says Kurt Matis, FTNI's CEO.

The region's farming culture lends its residents the patience it takes to develop financial services software, he says.

"You are not trying to create a website, where it's for fun. We are dealing with payments, which is the most critical component of a company's survival," Matis says. "In the brokerage space, we were dealing with trades. It's a very serious deal, and you have to understand that."

Other prominent young financial technology companies in the Silicon Prairie region include Lodo Software, a personal financial management provider founded in 2005; Sentinel Financial Services, an Omaha online escrow platform provider founded last year; and T8 Webware, a Cedar Falls, Iowa, bank website design and software company founded in 2008.

Established players like International Business Machines, TD Ameritrade and PayPal have offices in Omaha as well.

But even working among such giants, the younger companies have left their mark.

SmartyPig was "out there, they were having success," Wood says. "They were the hot startup in Des Moines, and then Dwolla followed up on that … I think the next company will be even more exciting."