The 52 Million Dollar Black Hills Blueprint

Okay, so I want you to picture a drive. You're in the American Midwest, the Black Hills, specifically. You're crossing between South Dakota and Wyoming, and it's just, I mean, it is objectively stunning. Ponderosa pines, granite peaks, you might even see a bison causing a traffic jam. It's an iconic American landscape, for sure. It is. And, you know, statistically, if you're driving there, you're one of about 13 million tourists who pass through every single year. 13 million. Yeah, you're probably heading to Mount Rushmore, or maybe you're grabbing dinner in Rapid City. You, you know, you stop for gas, buy some jerky, and you keep moving. You don't really look at the small towns you're just blowing past. Which is pretty much the standard story for that part of the country. You look at the scenery, not the economy. Exactly. But if you did look at the economy of those towns, I'm talking place like Custer, Hill City, Edgemont, Newcastle, you'd see a struggle. Braindrain and aging population, seasonal jobs that just, you know, vanish in the winter. It is the textbook definition of left behind. But I was reading through the stack for this week, and there is something happening there that honestly sounds a little crazy. Crazy is one word for it. I'd also say ambitious. Okay, so we're talking about a single founder, this guy at Luke Alvarez, who is deploying a $52 million capital raise. To try and revitalize eight specific cities in this region, and he's not doing it by opening a factory or something. He's doing it with AI, remote work incentives, and a very, very specific lifestyle brand. It almost sounds like the plot of a simulation game, doesn't it? SimCity, South Dakota edition. But no, this is the Black Hills Consortium or BHC. And you're right to flag the ambition. We aren't just looking at, you know, another real estate project here. This is arguably one of the most complex, economic experiments happening in rural America right now. See, that's where I get a little skeptical, because we hear these revitalization stories all the time. Do. And usually it's like a local chamber of commerce gets a grant to paint a mural or they open a co-working space that stays empty. How is this actually different? I mean, $52 million is a lot of money, but is it enough to fix eight different towns? That's exactly the right question to ask. And to understand why this is different, you have to look at the scope of it. Usually these towns, they all operate in silos. Custer fights for scraps against Hill City. Right, they're all fighting over the same tourist. Exactly. Meanwhile, just 20 minutes north, you've got Rapid City and Rapid City is booming. They have this organization called Elevate. It's got a $3.5 million budget. They've created what, thousands of jobs. Wow. But the Southern Black Hills, these eight towns were focusing on, they had nothing like that. No unified economic engine. So who exactly is included in this consortium? So it covers Custer, Hill City, High Springs, Keystone, Edgemont, Lead, and Deadwood in South Dakota. Okay. And then New Castle and Sundance just over the border in Wyoming. And the total population was only about 25,000 people. That's tiny. I mean, that's a sold out crowd at a minor league baseball game is spread across two states. It is. And that's precisely why the strategy had to change. The BHC isn't just one company hiring people. It's structured as an ecosystem of six different entities. Six. Yeah. All designed to sort of control every variable of the local economy. Okay. Walk me through this ecosystem. Because when I first looked at the list, it felt like a random grab bag of businesses, you know? It does look a little eclectic at first glance, but I promise there's a logic to the madness. So first you have the Black Hills Consortium itself. That's the nonprofit arm for like regional coordination. Okay. Governance. And that a place to sit, right? There's real estate. Right. That's the grow campus. Real estate co-working, some housing. Then you have Oracle Labs, which is a startup accelerator that takes equity in new companies. Standard so far. Then there's the session, which is a media network. You have the OP, a cafe, and merch shop. And then the one that probably caught your eye. Yeah, monumental highs. The cannabis company, I had to double check my notes on that one. Right. You've got a regional economic development plan. And right in the middle of it is the cannabis sauce platform. That feels like a curve ball. It's actually a hedge. I mean, think about the cash flow. Real estate takes years to pay off. A startup accelerator might not see exit for a decade. A cafe has razor-thin margins. Sure. But a vertical sauce platform for the cannabis industry. That is high growth, recurring revenue, like right now. So the weed software pays the bills while the real estate gets built? In a sense, yes. It proves they aren't just building some generic tech. They're building real revenue generating assets to sustain the whole project. OK, so they have the structure. They're raising the money aiming for roughly 50 million. But you still need people, right? You can build the nicest co-working space and custer South Dakota. But if nobody moves there, it's just a shiny, empty building. And that brings us to the Settle OS program. This is really the engine of the whole thing. Which sounded really familiar to me. It's basically Tulsa remote, isn't it? Oh, it's directly inspired by it. And we have to give Tulsa credit. The data there is, well, that's undeniable. Tulsa paid remote workers $10,000 to relocate. 10 grand. Yeah. They move nearly 3,500 people. Those people generated $622 million in local income. The ROI was something like four and a half times. Which is incredible for Tulsa. But here's my pushback. Tulsa is a city. It has an airport. It has nightlife. It has Uber. Custer has, well, it has deer. Can you really just copy paste a city strategy into a town of 2,000 people? That is the risk. But the BHC argument is that the whole market has shifted. They call it the perfect storm. You have the maturity of remote work combined with what they call cost of living arbitrage. And then the very specific tax benefits of these two states. Let's break down the money part. Because I think people gloss over cost of living until they see the actual numbers. Let's do the math. So say you're a software engineer in San Francisco, making $200,000 a year. Between federal and California state taxes, a huge chunk of that is gone before it even hits your bank account. Then you're looking at a starter home that costs what, $1.5 million. You're rich on paper, but you're actually cash poor. Right, you're just scraping by in six figures. Now, take that same $200,000 remote salary to South Dakota or Wyoming. First of all, both states have zero state income tax. Zero. Zero corporate income tax, zero state tax. So you instantly give yourself a 10 to 13% raise just by crossing the state line. Immediately. Then look at housing. In Custer, a nice home might be $350,000. You aren't just saving money. You are literally buying financial freedom. The whole pitch is keep your Silicon Valley salary, cut your burn rate by 60% and look at eagles out your window instead of a concrete wall. That is a compelling pitch for a certain type of person. But what about the job itself? I mean, if I'm moving to Custer, am I just sitting alone in my house on Zoom all day? Well, this is where the AI element comes in. And honestly, this is the part of the story I found most fascinating. The founder, Luke Alvarez, he isn't a coder. Oh. He comes from operations. He worked at Instructure of the company that makes campus. But he's not a software engineer. Which is usually a red flag if you're launching a tech consortium, right? Hi, I'm building a tech hub. I don't know how to code. Usually, yes. Yeah. But Luke is using this project to prove a point about the future of work. He built the entire BHC infrastructure, the pitch decks, financial models, legal docs, the website, even that cannabis software platform. He built it all using AI. When you say he built it, you mean he was just typing prompts into chat GPT? It's a bit more sophisticated than that. And this is important for you to understand. He used what he calls an AI stack. It's not just one tool. He used Quad, which is Anthropics model for the logic and the reasoning. OK. But then he used a tool called cursor. Break that down. What is cursor? So think of cursor as an AI-powered code editor. If you are an architect, Quad is drawing the blueprints. But cursor is the construction crew that's actually laying the bricks. It writes the code based on your instructions. OK, so he designs it, cursor writes it. Right. Then he used Versel to host it, which handles all the server side stuff instantly and super base for the database. Basically, this stack of tools allowed one guy to do the work of a $500,000 a year engineering team. That's the so-what right there. He's proving you don't need a dev team in Palo Alto to build a world-class product anymore. Exactly. You just need good internet, which they have via Starlink. And you need the AI stack. It democratizes the ability to build. And he's not just hoarding that secret. They are literally driving it into schools. The AI training tour, I loved this detail. It's such a smart, long-term play. BHC has a whole fleet of vans filled with MacBooks and Starlink units. They're visiting 20 K through 12 schools in their first year. They go in, they teach the students prompt engineering, they teach them how to use these tools responsibly. It's like the old bookmobile, but for the singularity. It is. But think about the psychological impact. If you're a kid in a rural town, the narrative is usually get out. Yeah. You have to leave to find a good job. Right. BHC is trying to flip that. If you learn AI and you get an internship at one of these consortium companies, you can stay. You can build the future right from your hometown. It's reversing the brain drain pipeline. It's creating a new pipeline. Local kid trained in AI becomes the workforce for the next wave of startups. It's brilliant. OK, so let's talk about the physical reality of this, because we're talking about building the future. But you know, eventually you have to put on pants and go to an office. What does this grow campus actually look like? It's in Custer. It's 15 acres, backing right up to the National Forest. Luke has already put about 2 million of his own capital into the infrastructure. It's got headquarters they call the Barn Dominium. Of course, it's a Barn Dominium. It totally fits the vibe. And a VIP suite they call the Vista. But the most interesting piece of real estate is actually the coffee shop, the EAP. Why is the coffee shop interesting? It's just coffee. It's the business model. This is where that operational background of his really kicks in. Most corporate campuses, they treat the cafeteria as a lost leader. It's a perk they pay for. Sure. The OP is a separate LLC designed to make a profit. How? Tourism. Remember those 13 million people driving by? Ah. The OP is open to the public. So the tourists paying $6 for a latte are effectively subsidizing the perks for the remote workers. That is clever. The tourists fund the ecosystem. And Luke actually went and worked at a place called Spruce Market, specifically to learn the margins. He didn't just guess. He learned the unity economics of a latte before he even broke ground. I also wrote about their fleet. They have cyrotrucks and broncos just driving around. Yes. And this addresses your earlier concern about isolation. You ask, are people just going to be lonely? The BHC has this concept called rotating city work. How does that work? The staff and the cohort. They don't just sit in the barn to many every day. They rotate. One week they're in Hill City, the next week they're in Hot Springs, then Deadwood. They take this branded fleet of cyrotrucks and yellow broncos. And they physically show up in these other towns. So they're making a scene? Intentionally. They work from a local coffee shop or a partner space. They buy lunch. They spend money. It's all about visibility. It shows the locals, hey, the tech economy is real. And it's spending cash in your town today. That's actually a really big deal for small towns. If a dozen tech workers show up and buy lunch in Edgemont, that might be the biggest revenue day that Cafe has had all month. Precisely. It builds social capital. It stops the project from feeling like some fortress on a hill. It integrates the newcomers into the existing fabric of the region. OK, so the plan is solid. The tech is accessible. The location is beautiful. But we have to talk about the money. $52 million. How are they convincing investors to put that kind of cash into rural South Dakota? This is maybe the most unorthodox part of the whole blueprint, typically a VC pitches. Give us money. We will grow 100 X in five years and then sell to Google. The exit strategy. Right. Luke Alvarez is pitching the build forever model. There is no exit. There is no plan to sell the consortium. So if I'm an investor, how do I get my money back? Dividends. Cash flow. You get a cut of the real estate income, the cannabis software subscription fees, the coffee shop profits. It's a very old school investment model. You own a piece of a profitable business, not a lottery ticket. That really changes the type of investor you attract. You aren't looking for the gambler. You're looking for the empire builder. And to find them, they don't do a Zoom pitch. They require a three day experience. Yeah. You have to fly to Custer, which is a hurdle in itself. It's a filter. If you aren't willing to get on the plane, you aren't the right partner. But once you land, it's his whole curated experience. Luke picks you up in the cyber truck. You stay in the VIP suite at the bar and dominion. I'm not the holiday in them. No, you live the lifestyle. Day two, you see the demos, but you also eat at places like Chameyam and Skogan Kitchen. Which I was surprised to learn are James Beard recognized restaurants in Custer. Exactly. They're shattering the stereotype that rural means bad food. But the genius move is on day three. Before the investor leaves, they sit down and record a podcast episode for the session, which is the BHC's media arm. Why? Just to have content. It's the credibility flywheel. It reminds me of that story about J.E. and Flowhub. Do you know this one? vaguely. J.E. has a cannabis line, right? His company, Rob Nation, wanted to invest in Flowhub, which is a major cannabis tech company. They offered $19 million. A huge check. And Flowhub said no. They turned down J.E. They did because they realized that taking the money was just money. They wanted leverage. They wanted a partnership that meant something more. The BHC looked at that and said, we need to build our own leverage. So by putting the investor on the podcast, they turn the investor into a marketing asset. The investor shares the episode. It validates the project. Suddenly, the BHC isn't just asking for money. They are giving a platform. They have the tech, the land, the food, A&D, the media. It creates this center of gravity that is really hard to ignore. It's incredible how intertwined it all is. But I want to play devil's advocate one last time. We're painting a very rosy picture here. What goes wrong? Oh, a lot can go wrong. Execution risk is massive. I mean, managing six companies is so much harder than managing one. And we can't ignore the lifestyle shift. South Dakota winter is not a joke. Yeah, minus 20 degrees is a real thing. It is. An isolation is real. Even with rotating city work, you are far from a major metro. If you need a specific medical specialist or you want to see a Broadway show, you are just out of luck. This life isn't for everyone. It's for the pioneers effectively. That's the branding, isn't it? Right. Settle the West. It attracts a self-selecting group who wants that challenge. So bringing it all back home, we have a founder using AI to act like a corporation leveraging remote work to repopulate a region and asking investors to bet on a forever business model. Is this just a quirk? Or is this actually a blueprint? I think it's a blueprint. That's the most exciting part for me. If this works in custer, why can't it work in Appalachia? Why can't it work in the rural south? It challenges the entire idea that you have to be in a hub to matter. Precisely. We've spent the last 20 years believing that innovation only happens in skyscrapers in what three or four coastal cities. BHC is arguing that with the right tools, specifically AI innovation can happen anywhere there's a Wi-Fi signal. It suggests that the hollowing out of rural America isn't inevitable. It's just a lack of imagination and tools. And maybe a lack of audacity. Yeah. Luke Alvers isn't asking for permission. He's just building it. That's the takeaway for me. The barrier to entry has never been lower. You don't need the dev team. You need the idea and the AI stack. The pitch deck is the plane ticket. And the goal isn't the exit. It's the legacy. A fascinating experiment. And one will definitely be watching. Thanks for listening to this deep dive into the Black Hills Blueprint. Go build something. We'll see you next time.