Creating high-growth, high-impact entrepreneurial enterprises has become a common goal of cities. Metros and states have cut taxes, implemented entrepreneur-friendly business policies, launched their own venture capital efforts, and underwritten incubators and accelerators — all in the hope of creating the next Apples, Facebooks, Googles, and Twitters.
But what really attracts innovative entrepreneurs who create these economy-boosting companies?
The answers: talented workers, and the quality of life that the educated and ambitious have come to expect — not the low-tax, favorable-regulation approach that many state and local governments tout.
These are the findings in a new report from Endeavor Insight, the research department of the nonprofit Endeavor, which focuses on fostering and mentoring “high-impact” entrepreneurs. Based on surveys and interviews with 150 founders of some of the country’s fastest-growing companies, the report answers the basic question, “What do the best entrepreneurs want in a city?” It offers basic evidence that cities should focus on factors and conditions that attract the talented, educated workers who fast-growing entrepreneurial enterprises need.
Entrepreneurs look for talented workers and the amenities that these workers like.
Looking at this sample of America’s most successful new businesses, Endeavor identified two fundamental patterns.
For one, size matters. These top business-creators gravitated towards cities with at least a million residents in the metro area. This size offered the scale and diverse array of offerings needed to attract talent.
A city also needs to appeal to the young and the restless. The entrepreneurs surveyed were a highly mobile bunch when they first started out. They moved often and easily in the early phases of their careers, following personal ties or lifestyle amenities while also seeking the right environment to launch their enterprises. But 80 percent of respondents had lived in their current city for at least two years before launching their companies, meaning that cities had to catch them early. And once they started their first company, these business leaders rarely moved. So attracting this mobile group at an early age is key.
The report then dug deeper into exactly what these entrepreneurs cited as the most important part of their location choices.
The top-rated factor by far was access to talent. Nearly a third of those surveyed mentioned it as a key factor in their decisions for where to live and work (many specifically prized access to technically trained workers). Entrepreneurs explained that they proactively sought out the places that educated and ambitious workers want to be.
As one Seattle-based entrepreneur put it:
“Employees want to live and work here. We knew that when we moved here and later started the company.”
Or as another based in Boston explained:
“I chose Boston because of the cultural life: symphony, colleges, theater, beautiful architecture, etc. These things attract the kind of intelligent people we’d like to employ.”
The study found that two other key factors in entrepreneurs’ location choices are major transportation networks (like airports and highways that can connect them to other cities) and proximity to customers and suppliers. This echoes MIT’s Eric von Hippel‘s claim that end-users and customers are key innovators.
Just 5 percent of those surveyed mentioned low taxes.
Perhaps even more interesting from the perspective of urban policy are the location factors that did not make the cut — those that high-growth entrepreneurs found to be of little consequence in their location decisions. At the very bottom of the list were taxes and business-friendly policies, which are, unfortunately, exactly the sorts of things so many states and cities continue to promote as silver bullets. Just 5 percent of respondents mentioned low taxes as being important, and a measly 2 percent named other business-friendly policies as a factor in their location decisions.
To drive this point home, Endeavor tracked more than 100 of the most common descriptive words that entrepreneurs used to answer the question, “Why did you choose to found your company in the city that you did?” Tax doesn’t make the top 50, falling below “rent,” “park,” “restaurants,” and “schools.” In fact, it barely manages to edge out the word “girlfriend.” Of the top10 most popular words, “lived,” “live,” and “living” all make the cut. Talent takes the first slot.
The report’s conclusion is clear, and I agree. “The magic formula for attracting and retaining the best entrepreneurs is this,” they explain: “a great place to live plus a talented pool of potential employees, and excellent access to customers and suppliers.”
What We're Following See More »
Perhaps Donald Trump can take a plebiscite to solve this whole messy immigration thing. At a Fox News town hall with Sean Hannity last night, Trump essentially admitted he's "stumped," turning to the audience and asking: “Can we go through a process or do you think they have to get out? Tell me, I mean, I don’t know, you tell me.”
Donald Trump "nearly quintupled the monthly rent his presidential campaign pays for its headquarters at Trump Tower to $169,758 in July, when he was raising funds from donors, compared with March, when he was self-funding his campaign." A campaign spokesman "said the increased office space was needed to accommodate an anticipated increase in employees," but the campaign's paid staff has actually dipped by about 25 since March. The campaign has also paid his golf courses and restaurants about $260,000 since mid-May.
Donald Trump probably isn't taking seriously John Oliver's suggestion that he quit the race. But he has canceled or rescheduled rallies amid questions over his stance on immigration. Trump rescheduled a speech on the topic that he was set to give later this week. Plus, he's also nixed planned rallies in Oregon and Las Vegas this month.
Donald Trump's Fox News brain trust keeps growing. After it was revealed that former Fox chief Roger Ailes is informally advising Trump on debate preparation, host Sean Hannity admitted over the weekend that he's also advising Trump on "strategy and messaging." He told the New York Times: “I’m not hiding the fact that I want Donald Trump to be the next president of the United States. I never claimed to be a journalist.”