Indianapolis bucks the trend to become a hotbed for startups - Axios
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Indianapolis bucks the trend to become a hotbed for startups

Photo Illustration: Rebecca Zisser / Axios; Photo: Visions of America / Getty

INDIANAPOLIS — Four years ago, Salesforce bought the email marketing company ExactTarget for $2.5 billion — an enormous payout for the Indianapolis-based firm. Instead of moving it to its own headquarters in San Francisco, Salesforce committed to growing the business in Indianapolis. Since then, it has doubled its employee base, it has its name on the city's tallest tower, and its alums have invested in a new wave of startups.

Why it matters: While startup activity in the Midwest tends to be much lower than the rest of the country, Indianapolis is a star performer, ranking alongside Minneapolis and just below Chicago. The question is how to replicate that success in other struggling, manufacturing-dependent places.

Where it stands: Indianapolis is a thriving business center where the startup rate far outpaces the rest of the state — 7.3% vs. 6.2% statewide. That high rate likely helps explain its resilience and growth during what has been a rough recovery for much of the region, according to an analysis of Census Bureau and Bureau of Labor Statistics data by the Economic Innovation Group.

The formation of new startups is a key ingredient to a diversified local economy that is more likely to benefit from the modern economy. AOL co-founder Steve Case is highlighting the successful ecosystems in areas that are largely overlooked when it comes to investment and attention on his "Rise of the Rest" tour of Midwestern cities this week.

The big break: Indianapolis has had a more diversified business community for several decades, with the headquarters of Eli Lilly, Anthem and Angie's List here. But Salesforce's acquisition of ExactTarget was a turning point for the city — because the wealth generated by the sale stayed in town instead of flowing back to a coastal hub. And Salesforce just kicked off a campaign to get more workers to move to Indianapolis.

  • Scott Dorsey, who was ExactTarget's founder and CEO, launched an incubator called High Alpha across the street. He and his partners create and invest in other fledgling companies.
  • Chris Baggott, another former ExactTarget exec, recently started a company called ClusterTruck to disrupt the third-party food delivery services like GrubHub and UberEats.
  • Companies have clustered around downtown's Monument Circle, creating the density of people that is key to most successful tech hubs.
That re-investing of money and mentorship back into the community has had a big payoff: $7 billion worth of transactions for Indianapolis tech companies in the past 10 years, according to Mike Langellier of TechPoint, an organization that supports the local tech community.
Having an ecosystem of serial entrepreneurs who have found success "creates a wealth of experience and confidence" that the next generation of entrepreneurs can draw from, Langellier said.
Public-private partnerships: Indianapolis is also unique in the collaborative relationship between the local government and business leaders. For example, established companies like Eli Lilly have set aside endowments to help foster business growth. Meanwhile, Indiana Gov. Eric Holcomb's administration is preparing to invest $250 million to support entrepreneurs with its "Next Level Fund," the largest of its kind in the country.

For contrast: Despite the bright spot for startups in Indianapolis, 79% of the state's jobs are in established incumbent companies that are at least 16 years old — the third-highest share in the country.

Coming home: The city has been lucky in attracting a new crop of engineering and business graduates from area universities. It's also benefited from an influx of "boomerang" talent who grew up in Indianapolis, moved away for jobs in San Francisco or Chicago, and are now moving back home. But it's still struggling to attract more senior-level workers, said Bob Stutz, Salesforce Cloud Marketing CEO.

"We've been able to recruit more and more people from places like Oracle and Microsoft," Stutz said. "Once they get here, they love it. But when you first tell them they have to move to Indianapolis for a job, they have a blank stare in their eyes."

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Eatsa's robot-assisted tech for restaurants heads to Chicago

Eatsa, the San Francisco-based company that recently shuttered most of its robot-assisted restaurants, is beginning to make its technology available to outside eateries, starting with Chicago's Wow Bao.

Why it matters: This is a classic startup play—focus on the tech while leaving heavy operations to partners and customers, helping them to streamline restaurant operations.

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Report: Trump administration plans to halt work permits for H-1B spouses

Computer information specialist and immigrant from India, Santosh Pala, right, carries his three-month-old son Hemang during a prayer procession at the Karya Siddhi Hanuman Temple in Frisco, Texas, in 2015. Photo: LM Otero / AP.

The Trump administration plans to halt work permits for the spouses of H-1B visa holders, which would discourage H-1B visa applicants from staying in the country and would revoke the ability to work for thousands of visa holders' spouses, the San Francisco Chronicle reports.

Why it matters: It's another move by the Trump administration to make it more difficult for foreign workers to come to America in its larger effort to safeguard American jobs.

  • Approximately 100,000 spouses and children of H-1B visa holders come to the U.S. every year on a visa known as H-4.
  • These workers were not able to work in the U.S. before 2015, when President Barack Obama created a work permit for some H-4 holders.
  • Silicon Valley will be disproportionately affected, since many high-tech employers employ H-1B workers. Because of the region's high cost of living, It is difficult for a family to survive on one salary and, as a result, may not be able to stay in the country.
  • A decision on the H-4 work authorization will likely come soon, immigration attorneys told The Chronicle.

Other efforts: Earlier this week, a House committee advanced Rep. Darrell Issa's bill to increase restrictions on how "H-1B dependent" companies can obtain the work permits for employees. Find details of Issa's bill here, and the Indian firms' lobbying efforts against crack downs on H-1B visas here.

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Former JC Penney CEO: Amazon should fear Walmart

Elise Amendola / AP

Former JCPenney CEO and Apple Store pioneer Ron Johnson said on CNBC's Fast Money that Amazon "should be really worried" about Walmart's resurgence of late, arguing that the Bentonville retailer's network of stores is cheaper and more efficient to operate than Amazon's collection of warehouses.

Why it matters: Walmart's earnings announcement was the highlight of a week filled with surprisingly strong performances by Amazon's brick-and-mortar competitors, like Best Buy, Gap, Abercrombie, and Foot Locker, which all reported stronger than expected same-store sales growth. These performances have powered the SPDR S&P Retail ETF 3.9% higher this week — its best five-day stretch of the year.

Sound smart: Despite a good week, Retail indices are still down year-to-date, while Amazon's value is up more than 50%. Outside of a few exceptions like Walmart and Best Buy, brick-and-mortar retailers are still struggling to attract traffic and grow sales, just less so that we thought last week.

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Elon Musk unveils an electric semi-truck

Screenshot from Tesla live feed

In a typically showy ceremony in Southern California last night, Tesla CEO Elon Musk unveiled a sleek prototype electric semi-truck that he said will travel 500 miles on a charge, go zero to 60 mph in 20 seconds fully loaded, and charge most of the way in 30 minutes while a driver rests and eats. He appeared to say that the vehicle will be able to operate semi-autonomously in convoy, which would be the first step to self-driving trucks.

Why it matters: Musk did not say how much the truck will cost, but that it will be cheaper to operate than a standard diesel. If he is able to deliver the semi-truck as described, it seems likely to shake up the freight market just as he has the car business. Experts expect semi-truck traffic to surge in the coming decades as the global population grows to 9 billion people.

The unveil in an airport hanger in Hawthorne, CA., came as Musk is confronting doubts about his ability to pull off arguably his most important project of all — the scale-up of the Model 3, the flagship mainstream-priced electric that he has touted as Tesla's route to the mass market, and the jump-starting of a global electric car industry.

Tesla has taken more than 450,000 reservations at $1,000 apiece for the Model 3, which launched in July, and he was supposed to be turning out 5,000 of them a week by now. But, while making high-profile announcements about a Hyperloop, Space-X launches and now the prototype semi-truck, he has failed to create a standard automated assembly line for the Model 3, so his workers are building them in part by hand, and only by the dozen. As a result, Tesla's sky-high share price has plunged by about 19% over the last two months, closing at $312.50 yesterday.

    • Yet the semi-truck launch, with unexpected specs including a far-more-than-expected range, seems likely to wow his fans and quiet at least some of his critics. Musk said the average truck trip is less than 250 miles, which meant that a driver could do a round trip without recharging. Still, Musk said the truck's battery pack, built into the floorboard, can be charged to 80% of capacity in 30 minutes. He said solar-powered "mega-charging" stations for the trucks would be installed worldwide, and would be priced at 7 cents a kilowatt.
    • The cost per mile would be $1.26, compared with $1.51 for a diesel-operated truck. If the semi-truck is operated in a convoy, he said, the efficiencies took the operating cost below $1 a mile, and made them cheaper than moving freight by train.
    • The two details — range and recharge time — were crucial, and they dispelled the most profound doubts about the truck. In addition, he said standard equipment will include automatic breaking, lane-keeping and forward collision warning.
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GOP tax plans could worsen housing affordability crisis

Photo: Keith Srakocic / AP

Proposed changes to corporate tax rates, and tax credits for the construction of below-market housing, could worsen the nation's affordability crisis, the Wall Street Journal reports.

Why it matters: A recent report from Freddie Mac estimates that America's stock of housing that is affordable for low-income Americans fell by 60% between 2010 and 2016.

  • The problem is concentrated in cities with the highest-paying jobs, like New York, Seattle, and San Francisco.
  • The lack of affordable homes in America's most economically vibrant areas is reducing economic mobility, because workers cannot afford to move to cities with higher-paying jobs.

Both the House and Senate tax bills, by lowering the corporate tax rate from 35% to 20%, would automatically reduce the uptake of the affordable housing credit, because lower rates make tax credits less valuable.

  • The House bill goes further, eliminating a tax break on bonds used to finance affordable housing projects.
  • The Journal cites a report by Novogradac & Co., an accounting firm specializing in real estate, that predicts if the House bill passes, the U.S. economy would create 1 million fewer affordable housing units over ten years.

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Immelt says he wasn't "ready" to lead Uber

Lauren Olinger / Axios

Former GE CEO Jeffrey Immelt said he's ok with not getting picked to be CEO of Uber. "At the end of the day I wasn't really ready for something that visible, that intense," Immelt said at an Axios "Smarter Faster Revolution" event at the University of North Carolina.

He said Uber is based on a "seminal" idea but an open question remains: "Can you take this thing that's an amazing idea and turn it into a fantastic business, a profitable business?"

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Average Bitcoin investor would sell at $196,165 — or 26x current value

A Robocoin kiosk used to sell bitcoins. Photo: Jeff Chiu / AP

A new LendEDU survey of Bitcoin investors shows that a vast majority plan to hold their investment for over a year, challenging the assumption that the cryptocurrency is mostly used by short-term investors.

Why it matters: Only 16.49% of respondents to the survey said they planned to hold their Bitcoin for less than a year, coupled with more than two-thirds who hadn't sold any of their investment. If these results are actually indicative of most Bitcoin investors, that finding suggests a much stronger long-term outlook for the cryptocurrency as a viable, productive investment.

More from the survey:

  • A third of Bitcoin investors don't plan on reporting their purchase to the IRS, which officially states that "virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency."
  • The average investor would sell their Bitcoin at a price of $196,165.78, which is more than 26 times higher than the current price of $7,476.78.
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Best Buy misses revenue forecast on late iPhone release

Alan Diaz / AP

Best Buy reported third-quarter earnings and revenue below analyst forecasts, sending the retailer's stock down 6.6% in early trading Thursday. It said $100 million in revenue was not registered in the third quarter, due to Apple delaying the release of its iPhone X—though these sales will presumably show up in the fourth quarter numbers.

Why it matters: Best Buy has ramped up discounts to keep pace with rivals like Amazon.com, and is now offering free shipping through Christmas, with no minimum order requirements.

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Trucks are fueling the world's oil demand

Tesla is hardly the only player in the nascent electric truck market — as Bloomberg notes — as big companies like Daimler and Cummins are moving toward commercialization.

Why electric trucks matter: Trucks, especially big rigs, are a small percentage of vehicles on the road but use lots of oil. (Check out the chart above, reconstructed from the International Energy Agency's new World Energy Outlook 2017.)

Data: IEA World Energy Outlook 2017, OECD/IEA; Chart: Andrew Witherspoon / Axios

In what amounts to IEA's base case (a model of existing and officially announced policies), oil demand for trucking swells to 20 million barrels per day in 2040, led by that sharp increase you see in diesel demand for heavy-duty freight.

  • It's one reason, though hardly the only one, why IEA does not forecast a peak in global crude oil demand through the end of their analysis period in 2040.

The bottom line: Widespread deployment of electric heavy-duty trucking — alongside other alternative fuels and stronger fuel efficiency mandates for diesel-powered rigs — could alter the trajectory of oil demand in coming decade if Musk and other players can make it cost-effective.

Go deeper: Check out a preview of Tesla's electric truck, which is scheduled to be unveiled today.

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Walmart revenue soars on strength of online sales

Photo: Jeff Chiu / AP

The reigning heavyweight champion of brick-and-mortar retail is making a name for itself in e-commerce, with Walmart announcing that online sales grew 50% in the third quarter, powering the company's revenue past analyst expectations.

Why it matters: Acquisitions of e-commerce upstarts like Jet.com, Modcloth, and Bonobos have helped supercharge online growth, but Walmart.com is also benefiting from innovations like free two-day delivery on orders more than $35 and curbside pick-up.

The better than expected numbers were about more than e-commerce:

  • Same-store sales rose by 2.7%, well above analyst expectations of 1.7%.
  • Grocery sales were strong, powering the average customer spend 1.2% and illustrating customers durable preference so far for brick-and-mortar grocery shopping.
  • Walmart stock is up 4% in early trading.
One problem was a decline in operating income due to shrinking profit margins as Walmart and subsidiaries like Jet.com invest heavily in discounting aimed at growing market share.