Originally published in PE Hub
By Matthew McCooe
Think back to where Connecticut was 20 years ago.
A National Hockey League franchise had just left the state, it was one of the only places in the country where incomes were actually falling and we were known more for David Letterman’s speeding tickets than anything resembling innovation.
On the national economic stage, Connecticut was a punchline.
Yet, since then, Connecticut has steadily flown under the radar, evolving from a state that most investors would bypass to a place that saw exits for two homegrown unicorns — startups valued at more than $1 billion — in the past few months.
How is Connecticut suddenly topping lists of the most desirable locations for tech startups? It wasn’t easy, requiring that 20 years plus just the right combination of ingredients.
We’re pleased that AOL Co-Founder Steve Case’s Rise of the Rest fund is promoting venture capital investment in areas bracketed by the East and West Coasts. But Connecticut, quietly, is already there.
Here’s how things turned around.
An Engaged University is a Linchpin
Boulder’s startup success doesn’t happen without the University of Colorado. Austin’s doesn’t happen without the University of Texas. And the New Haven startup scene doesn’t happen without Yale.
But it’s not just a matter of having a major university in town. Plenty of college towns have very smart people and don’t have startup ecosystems. The university needs to be engaged in the process as well. In New Haven, Yale has embraced its role as the city’s biggest economic driver, offering mentorship and funding to seed new companies.
This has given Yale graduates new options when they look for fun, innovative places to work, enabling them to stay in town after graduation instead of leaving for nearby cities like New York or Boston.
Startups need passionate, forward-thinking talent willing to take lower salaries in riskier business models. Recent college graduates are the ideal candidates to fill those roles. As recent graduates gain experience, they may move on to roles at larger companies in the region.
It’s a cycle that benefits startups, established companies and universities alike. It can even revitalize entire cities: New Haven was once crime-ridden and virtually deserted in the evenings, where now it has lively nightlife.
But for this type of economy to thrive, universities must be willing to embrace and encourage it. Yale’s leadership in healthcare research has provided a beachhead for the region in the life sciences.
Entrepreneurs Create a Network Effect
Startup ecosystems need critical mass, and today more than 130 startups are in Stamford alone. Connecticut had to reach a point of startup density where investors and founders would recognize it as a viable location to start innovative businesses. Startups beget more startups, and there seems to be a point at which the floodgates open.
Connecticut has quietly become home to nearly 1,000 tech startups, and we expect that number to grow over the coming years.
Believe in Unicorns
Achieving unicorn status is what every founder and investor dreams of. Yet, it’s extremely rare. Some 57 startups joined the unicorn club in 2017, which was down from the peak two years ago, but two of those companies are based in Connecticut.
Datto, of Norwalk, was acquired in late 2017 after hitting a billion-dollar valuation, and New Haven’s Biohaven consistently trades near a $1 billion market cap following its IPO last year.
Success stories like these are attracting new attention to our state, with more investors and founders considering locating here.
Quality of Life Matters
It might sound simple, but being a nice place to live matters, and in this area Connecticut shines. The state offers easy access to several major cities at a fraction of the cost, a waterfront lifestyle and downtown areas that are bustling with activity.
The math is easy: New York City home prices average over $1,500 per square foot. But 45 minutes away in Stamford, that price drops to less than $270 a square foot. Startups can spend less and employees can enjoy a higher outdoor quality of life in Connecticut.
As more students stick around and new talent comes to Connecticut’s cities, local economies are also being rejuvenated. Anyone who visited 15 years ago would be surprised to see the number of restaurants, bars and other small businesses that now accompany the influx of tech companies.
It Takes an Ecosystem
We’ve come a long way, but there’s still plenty of work to do in Connecticut’s startup scene. Local government and business leaders recognize that investing in development, whether directly related to startups or not, will keep the momentum going. It takes everyone, from large companies to founders to local brew pub owners, for a place like Connecticut to turn into a thriving technology hub.
Connecticut will continue to need the guidance and support of all of its leaders, in all spaces, to ensure the state remains an affordable, attractive destination for technology innovators.
Will that bring the Hartford Whalers back? We’re still working on it.
Matthew McCooe is CEO of Connecticut Innovations, the state’s strategic venture capital arm and the leading source of financing and support for innovative, growing companies there. He can be reached at Matt.McCooe@ctinnovations.com and +1 860-563-5851.