Originally published in American City Business Journals
By Matthew McCooe
Great attention is being paid to how to sprinkle the fairy dust of innovation on areas outside of Silicon Valley and the Northeast.
Getting venture capitalists to fund startups in the interior of the country not only makes sense, but it is way overdue. Entrepreneurs with good ideas aren’t relegated to California, Boston and New York.
That’s why efforts like Steve Case’s Rise of the Rest fund are so important. Funding big ideas in places like Cincinnati, Louisville, Nashville and Kansas City could invigorate those regional economies and attract the kind of talent from the coasts to ensure that growth continues.
Everyone from Case to Brad Feld in Colorado to Dan Gilbert in Michigan and others around the country have been trying to crack the code on how to build innovation centers away from the coasts. But it will take more than money to make middle America a hotbed of innovation. Most importantly, it will take time. The transformation will be like stacking blocks — carefully.
Consider, for example, Connecticut — where it took about 20 years to go from being a punchline as one of the only places in the country where incomes were actually falling to a place that saw exits for two homegrown “unicorns” — startups worth more than $1 billion — in the past few months.
How did this happen? It wasn’t easy. It took a special combination of ingredients to move in that direction. The work is never finished, but there are valuable lessons that communities across the country can take from this experience.
An engaged university is a linchpin
Boulder, Colorado’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.
It’s not just a matter of having a major university in town. There are plenty of college towns with very smart people that 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.
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 your 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. Now, there is lively nightlife.
But universities must be willing to embrace and encourage this type of economy for it to thrive. Yale’s leadership in health care research has provided a beachhead for the region in the life sciences. Building on what your university does best can be the jumping off point for stoking that start-up ecosystem.
Entrepreneurs create a network effect
These ecosystems need critical mass. It is advantageous to have startup density in your city or state to attract investors and founders to base their businesses there. Startups beget more startups, and there seems a point at which the floodgates just open.
The first step is developing the entrepreneurs you have. They will help attract others when the time comes.
Believe in unicorns
Achieving unicorn status is what every founder and investor dreams of — but it’s extremely rare. Approximately 57 startups joined the unicorn club in 2017. That’s down from the peak two years ago.
Still, success stories like these, if you can achieve them, will bring new attention to your markets. Unicorns can flourish anywhere with the right support.
Quality of life matters
It might sound simple, but being a nice place to live matters. Communities that offer easy access to several major cities at a fraction of the cost, an affordable lifestyle and bustling downtowns are really attractive to the entrepreneurial set.
Connecticut is a great example. New York City home prices average more than $1,500 per square foot. But 45 minutes away in Stamford, that price drops to less than $270 per square foot.
Students and new talent can rejuvenate the local economy if they can afford to live there. Some cities outside of the coasts have reported seeing restaurants, bars and other small businesses flourish with the influx of tech and other start-up companies.
It takes an ecosystem
Local government and business leaders have to recognize that investing in development, whether directly related to startups or not, will create huge momentum. It takes everyone — from large companies to founders to local brew pub owners — to help make your state into a thriving technology hub.
Even as your community gets a reputation as a desirable place for entrepreneurship, it is essential everyone work together to help it remain affordable.
We’ve come a long way and learned a lot in Connecticut, but there’s still plenty of work to do here and across the nation.
Matthew McCooe is CEO of Connecticut Innovations and manages CI’s full array of business startup and growth initiatives, which include venture and equity investment funds, loans and loan guarantees, and programs to support innovation, entrepreneurship, collaboration and commercialization. He has more than 20 years of experience in venture capital, sales, marketing and product management.