3 Things to Look for When Deciding Where to Start Your Startup
It’s as true for entrepreneurs as it is for real estate agents: location, location, location.
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Whether you're neck deep in your first entrepreneurial endeavor or your startup is just a nagging idea that won't go away, you should know that the area you choose as your home base will have a big impact on your prospects for success.
Policymakers are slowly coming around to the importance of startups. According to the Ewing Marion Kauffman Foundation, startups are key to the creation of new jobs.
Disruption is often tough for the players in existing industries to handle, but without the competition provided by startups, industries and economies would inevitably stagnate. New businesses are crucial to a healthy economy on both a local and national scale, and more entrepreneurs need to realize that the local landscape plays a role for them that's just as important.
When seeking a vigorous entrepreneurial ecosystem for your new business, look for these three indicators that you've found one.
1. Local colleges and universities are contributing to the entrepreneurial scene
It's difficult to overstate the importance of local educational institutions in cultivating an environment that's friendly to startups. Higher education is about encouraging innovative thinking and creative problem solving, which are essential to realizing a successful entrepreneurial venture.
One of the best ways schools can contribute to the startup community is with an accelerator program. A university accelerator will allow students taking courses in entrepreneurship to interact with many different kinds of startups and their founders.
As Dan Lauer, founding executive director of UMSL Accelerate, points out, classes may even be taught by practicing entrepreneurs, as many in the UMSL Accelerate program are. In a city like St. Louis, which has an ample supply of entrepreneurs, the ecosystem and students both benefit. Lauer explains: "Faculty, scientists, and researchers can now engage as mentors or judges or collaborators. Students can gain real-world experience while getting paid to participate with a world-class startup."
Accelerator programs can also give larger corporations the opportunity to work with small startups in a less risky way. That's because established enterprises can be confident that projects have been thoroughly vetted and entrepreneurs are receiving guidance and facilitation through the university and its faculty.
2. Experienced entrepreneurs are mentoring newcomers
Experienced entrepreneurs can provide perspective to inform your decisions and connect you to their well-established networks, which can in turn lead to influential business introductions. Austin, Texas, is one city that has been recognized for its startup-friendly environment, in large part because of its entrepreneurs' enthusiastic support of each other.
Marketing consultants such as Christine Alemany of Trailblaze Growth Advisors recommend entrepreneurs seek out cities that have meetups, alumni entrepreneurship programs, local entrepreneur networks, and accelerators to bolster mentorship opportunities. "Part of entrepreneurship is failure," Alemany observes. "It's great to be able to bring your challenges to someone who has overcome the same ones themselves. They can offer a perspective from experience and showcase the good and the bad for each option."
Alemany also recommends collaborating with local business coaches. Just make sure to vet them carefully and choose wisely.
3. Local regulations favor startups
Policies often evolve to favor large companies that have dominated an area's business landscape for some time. The problem with this approach is that it constrains competition and makes it even more difficult for newcomers to gain a foothold in an economy.
Avoid areas with excessive regulations or laws governing noncompete agreements that stifle the growth of new businesses. Tech executives in Idaho, for example, are calling for the repeal of a 2016 noncompete law -- one of the most restrictive in the nation -- that impedes an employee's ability to change jobs. In comparison, California prohibits noncompete agreements altogether, a move that economists say has aided Silicon Valley's ascent.
Instead, look for ecosystems where policymakers listen to entrepreneurs and understand the impact that the creation of new businesses can have on a local economy. You can begin to identify locations that foster startups by examining local tax codes, zoning regulations, licensing regulations, and available training or networking programs.
Many startups, especially in the tech world, are spinoffs from existing companies. The ideal entrepreneurial environment requires a healthy respect for established companies while still encouraging the creation of new ventures.
It's no secret that entrepreneurs are fighting an uphill battle. Indeed, 80 percent of new businesses will fail within the first 18 months. When choosing where to start your new business, prioritize an area with these key entrepreneurial ingredients for the best chance of achieving startup success.