It would not be a stretch to say that nearly every community of size in the U.S. now has some type of program to seed, nurture, and grow start-up enterprises. Whether the program is coordinated by a public entity, an economic development corporation, a higher-educational institution, or some type of public-private hybrid entity, the basic premise is the nearly always the same. Provide an environment (typically a physical space) where innovators with a new business idea can launch their enterprise while taking advantage of low-cost rent and shared utilities/services. Many of today’s incubators take things a step further by serving as “accelerators” with on-site expertise, entrepreneurs-in-residence, and other young companies present to provide advice and counsel on how to build a business to scale and gain market share. Still others provide seed capital and follow-on funding for promising start-ups.
All this is well and good, but a recent relocation of a Pittsburgh-based start-up to Austin, Texashighlighted the danger of these incubation/acceleration models. Namely that your community not only needs the capacity to launch companies but also keep them in town. This is when the non-tech hub cities and regions really run up against the oftentimes overwhelming competitive advantages of talent- and capital-rich areas like Silicon Valley, Boston, D.C., Seattle, Austin, New York/New Jersey, etc. It’s one thing to get a start-up off the ground and another to navigate the treacherous waters of sustainability. A growing enterprise requires reams of capital and a robust supply of skilled talent to compete in sectors where they’re often facing major multi-national corporations in the battle for market penetration. An example here in Des Moines is the electronic-payments company Dwolla. Dwolla’s founder Ben Milne is trying to grow the company in Des Moines despite long odds and calls from many experts and potential investors to relocate to the “Coasts.” Despite this pressure, he’s gone on record as saying, “If Dwolla fails, it’s not because we’re in Des Moines. It’s because we didn’t execute.” Can Dwolla win out over giants like PayPal, major corporate banks, and other well-funded competitors and build a lasting company here? Time will tell. I hope Milne pulls it off because it will make a definitive statement about the ability of emerging tech regions to counter the currently-gospel attitude that building a major tech company outside “the Valley” is a fruitless exercise.
While relocation of promising new start-ups is a risk that incubators/accelerators in non-tech-hub communities will always face, it shouldn’t stop them from trying to develop an entrepreneurial ecosystem that can one day reach critical mass. As with so many economic development strategies these days, slow and steady wins the race. Keep identifying and cultivating new sources of start-up capital; keep working to build a labor force with the skills needed to support growing technology companies; keep providing networking and mentoring opportunities for entrepreneurs; keep fostering a quality of life with appeal to tech workers and investors. In other words, keep striving every day to be better than the day before. These days, there really is no other alternative.
