Originally published in American City Business Journals
By Tim Schigel
Amazon is about to make one city very, very happy.
In early September, the retail giant announced plans to open a second headquarters, a global operations hub to support the work at its main complex in Seattle. Amazon has been expanding its operations worldwide and expects to employ as many as 50,000 people at its new headquarters, which it is choosing on the basis of location, talent, tax breaks and other incentives.
That’s going to be a great thing for whatever city gets that office.
But only one city will be chosen. What should other cities be thinking about when it comes to jumpstarting their local economies? They should be looking beyond just attracting established corporations to their areas. They should be looking for innovators.
The multiplier effect these exceptional innovators can have on a community that values startups cannot be overstated.
As Facebook founder Mark Zuckerberg famously told The New York Times in 2010: “Someone who is exceptional in their role is not just a little better than someone who is pretty good. They are 100 times better.”
I’ll take it a step farther. I believe one great entrepreneur is worth 1,000 employees to a city. But creating that kind of culture in regions like the Midwest has been difficult. Home-grown talent that could help cities like Louisville, Detroit and Cincinnati develop entrepreneurial reputations are settled in faraway places like California, New York and Boston.
There’s a need to bring that talent back home — the “boomerang” effect — and demonstrate that innovation centers are not exclusive to the coasts.
Boomerangs can have that multiplier effect, building companies, creating thousands of jobs and contributing to the economy in ways that aren’t possible with big, established corporations.
They aren’t just any entrepreneurs. A decade in Silicon Valley is better than a master’s degree in innovation. So, when these people move home, they bring this high-growth, successful mindset. They might come back for family support or the better cost of living, but they also have in tow the know-how and will to supercharge a local economy.
That’s why regions need to be focused on bringing them home. Here are some ideas to consider:
Make it appealing
The first thing any prospective boomerang founder is going to look at when they consider coming back to the Midwest or elsewhere is how much activity is going on. What else is happening for entrepreneurs in the area? Who else is there? Economic development offices need to get that information out, touting their startup successes and depicting their hometowns as the growing, successful ecosystems that they are.
Promote other boomerangs
A winning example is Drura Parrish, a Kentucky native who left for college in 1994, returned home to teach in 2006, and founded his Lexington-based company, MakeTime, in 2013. Last year, the company attracted an $8 million investment from the Foundry Group of Colorado to help it scale its operation. He also credits the Kentucky Science and Technology Corp. and state and local economic organizations for helping him get launched. Spread the word that your local community is committed to entrepreneurship.
Offer incentives
Economic incentives come in many forms. They can include tax breaks for entrepreneurs, startup money to fund new ventures and even personal grants to help entrepreneurs move and get set up. Even guarantees are an option: “Move to our state to work on your startup, and if the idea fails, we’ll give you an income-tax break for awhile until you get your next venture started.” The sky is the limit, and nothing should be off the table.
Partner with local universities
Large universities already pay local executives to help commercialize the technologies that are being spun out of their research departments. Why not use some of that capital to attract entrepreneurs with that hyper-growth background back to the area to help them? These institutions have the money to support this, they’re already in touch with their alumni all over the country, and it is in their interest to grow the local economies in their regions. After all, any graduate that goes off to work for a venture-backed company could turn into the next tech titan. They need to be talking to those people.
One of the universities doing an excellent job in this regard is Carnegie Mellon University in Pittsburgh. Reed McManigle, mentor-in-residence at the Center for Technology Transfer and Enterprise Creation at CMU, has reported that since 2011, CMU startups have raised more than $1 billion in venture capital funding, and roughly 70 percent of that funding has gone to companies based in Pittsburgh.
The city also has become home to research operations by Google, Uber, Bosch and Delphi, and McManigle has said with that has come an influx of new talent to Pittsburgh — many of them boomerangs.
Other cities are working hard to bring that high-growth, Silicon Valley mindset home. The ones that figure it out will be well positioned to succeed in the years ahead.
Tim Schigel is the founding partner of Refinery Ventures, an early stage venture capital investment firm based in Cincinnati. He also is chairman and founder of ShareThis Inc. and in 2013 was the founding manager of the Cintrifuse fund of funds, where he led investments in early stage venture funds around the country.