When John Gibbons clicked on a website for a startup generator in the Midwest last summer, he wondered at first whether it was a scam.

Yet he wasn't asked for his Social Security or credit card number. Its pitch to help those selected create fintechs in the city of his alma mater, Notre Dame, was compelling. And the visa allowing him to live in Bangalore, India, was running out. So Gibbons applied for INVANTI’s inaugural six-month program in South Bend, Ind., for aspiring entrepreneurs.

He was accepted, beginning a journey shared by other entrepreneurs hoping to improve grass-roots banking in Des Moines, Iowa, Kansas City, Mo., and small cities and towns around the region. Some, like Gibbons, are drawn to existing community programs. Others are staying put or boomeranging back to fill jobs that established fintech companies, like Dwolla, are supplying. Some will visit the Midwest because banks, like nbkc bank, are beckoning them there with fintech accelerators.

By graduation from the program, Gibbons had partnered with Jada McLean, a transplant from New York City, to found Hurry Home, an early-stage startup that helps finance home purchases that traditional banks would not consider profitable enough. The company has since been accepted into Techstars Chicago. It is also preparing to run a small-scale pilot in Indiana. Its fate is far from known, but Gibbons says Hurry Home is committed to having some sort of presence in South Bend because of what the community has offered: its start.

“The city has been so important for us in getting going,” said Gibbons.

Hurry Home co-founders John Gibbons and Jada McLean listen to employees.
Hurry Home co-founders Jada McLean and John Gibbons, together above right, say being in South Bend, Ind., has been crucial to getting their startup running.

For startups, they are not the obvious places to settle down. While fintech is flush with venture capital, three states — California, Massachusetts and New York — gobble up 75% of all VC funds. Yet if there is a good time to go against the odds, it might be now. These days, it has become fashionable for venture capitalists to say they are scouting for opportunities beyond the coasts.

Most visibly, Revolution’s Rise of the Rest seed fund, co-founded by AOL co-founder Steve Case, continues to make a splash by investing in all kinds of startups across America to promote growth and increase investment capital. As Case blogged, “People know that the future of America is tied to more than just three cities, and there is an eagerness, now more than ever, to address the investment gap.”

Dustin Mix, co-founder of INVANTI, says the Midwest offers venture capitalists what their careers depend on: looking at things differently. As Mix sees it, the Midwest is ripe with untapped opportunities that differ from those in San Francisco. “It’s not just a copy-paste,” Mix said.

Consider Hurry Home, which seeks to help renters buy homes for what some might assume is the price of a car: less than $60,000. Already, Gibbons said, the startup has heard feedback such as, "You are missing a zero, no?"

The comment is striking. Fintech companies are often praised for the many ways they experiment to develop innovative products. But startups as a whole are also slammed for solving shallow problems most useful to a narrow slice of Americans — young, Ivy League-educated, coastal residents.

In Hurry Home’s case, it found that there are about 5,600 housing units in South Bend worth $50,000 or less. “We know people want to buy them,” said Gibbons.

It is the next step that will likely prove hard. While talent abounds in the Midwest, entrepreneurs are up against significant challenges. The No. 1 issue? Capital.

“They don’t know where to get the money,” said Vanessa Vreeland, head of acquisitions and strategic investments for Fifth Third Capital Holdings. “It’s hard to make the connections.”

Then again, entrepreneurs may find that it is easier to find board members and others who can help them rule out ideas sooner. “The biggest advantage is you have [access] to world-class corporations that can support what you are doing,” Vreeland said.

The cheaper cost of living can also help entrepreneurs survive the period when they are validating their models on a product that barely works.

Hurry Home co-founders Jada McLean and John Gibbons
Hurry Home co-founders Jada McLean and John Gibbons are helping renters buy homes in South Bend, Ind., for what some might assume is the price of a car.

“You are able to last longer without having to prove the results in the Midwest,” said Zach Pettet, managing director of nbkc bank’s accelerator.

The Kansas City, Mo., bank is readying to host a handful of startups from anywhere in the world in an accelerator in its hometown. While the program will only run for 75 days, Pettet loves the idea of one or more remaining in the neighborhood as a result. “If that happened, a jig would be danced,” Pettet said.

It has been done. If there’s a poster child for an established fintech company in the Midwest, Dwolla is one of the main contenders. The Des Moines company employs a team in San Francisco. But the Midwest is where Dwolla, which launched in 2010, continues to expand its staff. And more recently, Dwolla has been formalizing its community outreach, such as hosting an event on funding sources for Iowa startups.

“This is our home, our community,” said Jordan Lampe, head of strategic projects at Dwolla. “We want to make it better.”

INVANTI, the startup generator, made a conscious decision to put itself in the Midwestern city. To Mix, South Bend offers what Mayor Pete Buttigieg has been celebrating: The city is big enough to have the complexity of problems many Americans are up against, but small enough for entrepreneurs to quickly create a network of people. “You can validate what you are working on very quickly,” he said.

Now having lived nearly a year in South Bend, Hurry Home’s Gibbons has witnessed these perks firsthand. Not only can he get a steak and eggs for $11 at a decent restaurant, Gibbons says he can source potential homebuyers for the pilot through networking, rather than paying for online advertising.

Gibbons is well aware of the looming funding challenges. And he acknowledged that attracting tech talent could easily prove challenging. But Gibbons said he and McLean are “confident we can address those challenges.”

And if he had not made the move from India to Indiana, Hurry Home probably would not have emerged. It took living in South Bend, a city emblematic of so many others, to uncover a specific financing problem and discover great houses for around $50,000, to dream up yet one more way to improve consumers' financial health.

“It’s a great beta city,” Gibbons said.

Mary Wisniewski

Mary Wisniewski

Mary Wisniewski is deputy editor of BankThink. She also writes on a variety of subjects as part of American Banker's bank tech team.