These 5 Traits Make for The Perfect Startup City
Your startup will bloom — or not — where it’s planted. So why not look for good entrepreneurial soil and plenty of startup sun?
PHOTO CREDIT: Getty Images
Though Silicon Valley is the traditional territory for tech startups, you don't have to be there for your startup to succeed. Many cities love courting young companies and the possible revenue and good reputation that accompany a new startup's success. Communities across the country have been working hard to boost their startup scene.
Let's start with the Valley's neighbor to the south, Los Angeles. According to CB Insights, tech startups there acquired $3 billion in funding in 2016. The City of Angels is now the No. 3 city for startups after San Francisco and New York.
VentureDevs CEO Joe Gardner is happy to be operating there. "There is a great mixture of creative people, ambitious startups, thriving enterprises, and venture capital," Gardner told L.A. Biz. "This is a great recipe for companies that will be growing and need to scale, and those are exactly the types of companies that we want to work with."
And California is not the only option -- there are entrepreneurial incentives peppered throughout the U.S. But whether you stay close to the Valley or explore the smaller corners of the country, staying informed on trends and opportunities is key to creating a successful home base for your startup.
In Search of a Startup Home
There are thriving startup communities much farther from the Valley. New York, Boston, and Seattle get plenty of buzz, but don't forget smaller metros like Austin, Minneapolis, and Nashville. Even cozier locales, such as Virginia Beach or Cleveland are becoming attractive hubs for talent.
With so many options, it's tough to pick. Look for the following traits, which could be signs that the area you're considering for your venture's new home is on track to become the next hotbed for startup activity.
1. A supportive ecosystem
A city has to be supportive of its startup culture and entrepreneurship generally. That may express itself in the form of government incentives for startups (e.g., tax breaks), the city's embrace of diversity, or public recognition of and pride in the local startup culture.
To see what this can look like, consider Toronto, which benefits not only from a Canadian policy that fast-tracks visas for high-skilled workers but also from its own efforts to promote diversity and the University of Toronto's commitment to entrepreneurship education.
2. A low cost of living
Although the prestige of living in places like New York or San Francisco may be tempting, the cost of renting office space in those cities is very high. A location's affordability for employees and startup founders can help a new business's bottom line. Anything that cuts costs significantly, such as cheaper office space, will extend the "runway" the startup has before it runs out of funding.
A prime example is Chattanooga, Tennessee, which a SmartAsset study touts for its low costs for office space and employee payroll. The study estimates that a business owner with five employees could operate a business for $225,442 in a 1,000-square-foot office for five years there. When we opened our first business the cost of a 15,000 square feet warehouse in Myrtle Beach South Carolina was a quarter of what it would have been in New York or anywhere in the Northeast. That saving gave us the ability to hire and invest more in the business.
3. Higher ed presence
The existence of nearby universities and colleges is another desirable trait for startups because these can provide interns for your venture and other supportive resources. Universities are also directly fomenting the growth of startups by actively encouraging them through new course offerings and workshops,
More recently, some universities have begun sweetening the deal by offering to fund startups through academic accelerator programs. UC Berkeley's SkyDeck, for instance, offers $100,000 to each startup team in its program.
4. Access to funding
It's true that in the digital age, the pool of investors across the country is open to you no matter where you live. However, having some local funding options can only help. Just make sure you are well prepared to reach out to investors for funding.
As I mentioned in one of my recent columns, always have a compelling story when you're searching for funding. That story might be even easier to convey if you share a city with your investors, as that will enable you to emphasize the local element in your startup's story.
5. A pool of potential mentors
Finally, don't forget the need for mentors. Mentors can be one of the biggest accelerators of your success, and cities that have a connected and experienced pool of potential mentors have to rank high on any startup founder's list.
Putting down startup roots in a community allows you to get to know the people and build your network. That's the best way to meet one or more mentors to advise you along your startup journey.
Coming up with a great idea and assembling a team is tough enough. Don't fight the elements by locating your company in an unsuitable area.
Start researching and getting a feel for possible locations. Then, after factoring in the five traits above, you can make an informed choice. Your startup's future might depend on it.