If you think that big companies lay eggs that hatch into little startups that grow and thereby continue the cycle of business life, you’d be closer to the truth than one would think. This according to a new whitepaper published by the Ewing Marion Kauffman Foundation, titled “Path-Dependent Startup Hubs – Comparing Metropolitan Performance: High-Tech and ICT Startup Density.” Dane Stangler, director of Research and Policy at the Kauffman Foundation and the author of the whitepaper, examined and compared startup densities for metropolitan statistical areas (MSAs) and divisions for the last two decades, from 1990-2010.
He was looking for an answer to three questions:-
- Were the top metro areas (in terms of startup densities) the same in 2010 as they were in 1990?
- Which metro areas saw the biggest increases and decreases in high-tech startup density?
- What did relative performance look like by different-sized MSAs?
Well, you can have the short answer or the long one. The summary of general findings is outlined below, and then if you still have the stomach for it, continue reading for a detailed look at findings for each MSA size group.
Startup Density is Path-Dependent
New startup hubs and a culture of technology entrepreneurship aren’t actually that “new.” These are all places with a history of string technology sectors and a slow build up of growth startup among tech startups over the last two decades. The top 10 cities with the highest startup density in 1990 are still all there on the top 20 list in 2010.
Recent adoption of entrepreneurship programs by many cities is not because they suddenly saw a lot of startup activity and decided to promote it some more with supporting policies. Rather, these programs are an indication of the talent base and underlying strength of the region.
Universities and post-secondary institutions are not the main source that spawns startups. The most fertile source for entrepreneurial spawning is the population of existing companies. We’ll come back to how an existing cluster spawns startups, but let’s first look at some of the hard data in the whitepaper.
Silicon Valley, as in the San Jose-Sunnyvale-Santa Clara, CA MSA, was the top large metropolitan area (population greater than 1 million) for both high-tech and ICT startup density in 1990, and it remains at the top in 2010. The San Francisco metropolitan area (San Francisco-San Mateo-Redwood City) has climbed up from fourth place to second in the last two decades.
Boston’s tech startup frenzy is actually centered around Cambridge, with the Cambridge-Newton-Framingham, MA MSA climbing from sixth place in 1990 to third place in 2010.
This doesn’t mean they’re all doing very well. Houston, TX is the only city in the top ten in 1990 that entirely dropped out of the top 20 list in the last two decades. Austin, which is still considered to be a hotbed for tech startups, actually dropped down from third to tenth place.
Couple this with the fact that the Fort Worth and Dallas metropolitan divisions were among the top ten biggest decreases in startup density. The overall takeaway is that Texas is going down big-time in terms of tech startup density, despite its booming economy and its first-in-the-nation status in terms of job creation.
The Seattle metropolitan area showed the largest high-tech startup density gains over the last two decades, with Kansas City also showing huge gains to take its place in the top 20 in 2010. The two major surprises in terms of a huge increase in startup density are New Orleans and Wilmington, DE. It’s fair to say that not many people consider New Orleans to be a seething hotbed of tech startups, but the numbers say otherwise.
Another point to be noted – The author says that being chosen as the first pilot project for citywide Google Fiber has helped propel Kansas City’s burgeoning high-tech and ICT startup activity, it is actually building on a strong prior base of tech growth.
As far as the mid-to-large MSAs (population between 500,000 and 1 million) are concerned, there were two standout trends. First, the Colorado Springs MSA in Colorado jumped from eighth place to the top of the list in the last two decades.
Boise, Idaho is mentioned along with Portland, Seattle and Kansas City as places that have large institutions such as big companies and research institutions that have continued to spawn entrepreneurs across multiple generations.
University towns and cities dominate the list of small-mid MSAs (populations between 250,000 and 500,000). Boulder, CO retains top spot across the decades, with Fort Collins-Loveland, CO now in second place.
The only thing to say about the MSA group with populations below 250,000 is that their data doesn’t matter so much in terms of trends because of the lack of volume.
Going back to that spawning question, the whitepaper says the data shows that entrepreneurs aren’t primarily college grads and dropouts. In fact, the entrepreneurial ecosystems now in place in Kansas City, Seattle, Portland and other cities mentioned above are all the result of years of spinoffs and entrepreneurial spawning.
The biggest success stories such as Silicon Valley and Boulder also developed over many years and owe their vibrancy to entrepreneurial genealogies. Back in the early 20th century, the U.S. Navy established a station on California’s Pacific Coast and got people hooked on amateur radio. These ham enthusiasts and a then-young institution called Stanford formed the core of what has now become Silicon Valley.