Go West, Young Entrepreneur

To find the city where technology startup businesses are thickest on the ground, “Go west, young entrepreneur.” When you reach Fremont, Calif., you’re there. Some cities may have larger raw numbers of startups in computers, software, medical devices and electronics. But measured by number of tech startups per capita, Fremont is all alone: The mid-sized city on the San Francisco Bay has more than 21 technology startups for every 100,000 residents. That blows away second-place San Jose, just south of Fremont in the heart of Silicon Valley. In fact, Fremont has almost as many tech startups per capita as the next three cities combined.

That is one of the striking findings of a ranking of U.S. cities by technology startups per capita. Another is that none of these tech startup hotbeds lies east of the Mississippi River. Silicon Valley boasts the three, Southern California has another and the rest scatter across Texas, Arizona, Nevada and Washington.

The data and analysis came from SizeUp, a San Francisco–based provider of free business intelligence for small and mid-sized businesses. SizeUp CEO and cofounder Anatalio Ubalde sifted through millions of records from a plethora of sources to build it. He and his team identified companies less than five years old in the fields of computers, software, medical devices and electronics that were located in the top 100 cities by population.

 

Historic Ties

Through various iterations, the filter was tweaked to remove, among other things, businesses identified as branches of other organizations. The result is a snapshot of independent, youthful enterprises engaged in a wide range of technological pursuits.

 

So why does Fremont have 12 times as many startups per capita as Tulsa, the 25th entry on the top 100 list? One likely answer is history. Fremont is part of Silicon Valley, which has spawned countless tech startups since Shockley Semiconductor was founded in Mountain View in 1956. The long record of tech startups has created a critical mass of talented employees and savvy investors that is like fertilizer to entrepreneurial imaginations. And it certainly doesn't hurt that one of the most successful startups in history, Tesla Motors, bought the shuttered NUMMI (New United Motor Manufacturing Inc.) factory in Fremont to ramp up production of its Model S. 

A quality public education system is one of Fremont’s pluses. Its Mission San Jose High School has a dropout rate below 1 percent, sends 95 percent of graduates to post-secondary education and has the highest academic performance test scores of any of California’s 7,000 non-magnet high schools. “That means a really strong workforce,” says Christina Briggs, economic development manager for the city.

Fremont doesn’t rest entirely on its history or its laurels. Briggs says they offer two-year business license tax exemption to encourage local startups in clean technology and biotechnology. It’s all about the city’s effort to rev up tech startups as engines of employment expansion. “We recognize they have a long lead time to market, but we see them as having the highest growth potential,” Briggs says.

A Strategic Hub

Neither history nor geography explains the presence of Irving, Texas, on the list. The Dallas suburb of 215,000 is half a continent away from Silicon Valley, and is known primarily as the long-time home of the Dallas Cowboys football team. While it hosts the headquarters of five Fortune 500 companies, none of them was founded there, and the city has no particular entrepreneurial past.

What Irving has, according to Chris Wallace, president and CEO of the local chamber of commerce, is Dallas/Fort Worth International Airport. One of the world’s busiest passenger hubs and centrally located in the United States, the airport abuts Irving’s western boundary, very convenient to entrepreneurs jetting off to meet with customers and inventors. “We have access,” Wallace explains. “A lot of them fly to the Northeast and West Coast and that airport is a big draw.”

Irving also works to help startups take advantage of its unusual wealth of the aforementioned big company headquarters, including those of ExxonMobil, Fluor, Kimberley-Clark, Commercial Metal and Celanese. Wallace say they do this by connecting entrepreneurs with corporate executives who can provide mentoring, connections and entry into possible vendor relationships. “We really pride ourselves that the large companies are helping the small companies,” Wallace says.

Incubating Innovation

Factor out history and geography, and you are left with what Chandler, Ariz., has to work with. This Phoenix suburb of 240,000 created its own entrepreneurial advantage by energetically embracing business incubation. The city-sponsored Innovations Technology Incubator is home to 20 early-stage companies in biotech, software, hardware, sustainability, mobile devices and other fields. Entrepreneurs can tap legal, accounting, marketing and fundraising help as well as sub-market rent.

The city provides a funding source for a downtown workspace called Gangplank to give entrepreneurs free space to get their visions underway. “At any given time 100 or more people can be found working in this space,” says Christine Mackay, Chandler’s economic development director. Startups thus blessed get hooked up to conferences, pitch nights and crowdfunding opportunities.

Lifestyle Matters

While free rent, corporate mentors and being across the bay from the Menlo Park and all its venture funding sound great, there’s still more to being a startup hotbed than offering amenities. Economic development types point to the fact that well-educated, youthful entrepreneurs are attracted to quality of life. That possibly looms large in the startup equation for places like Seattle, Austin and Paradise, Nev., which includes much of the Las Vegas strip.

Quality of life also helps entrepreneurs draw good employees, notes Ubalde. “For the truly talented workers whose skills are in demand, they can live where they want, so the places they live have to have quality of place with the right types of amenities and the right culture,” he says.

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