The Best 4 Small-Business Neighborhoods in America

Here's what entrepreneurs are looking for when selecting a community for start-ups, and what they're finding.

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What is it about an entrepreneurial community that matters most to company builders? And where are they finding it?

To begin with, three requests: First, quit looking for the map everyone expects to find in a report like this. It's not here. Second, forget everything you've read in all those stories about "best places" to live, work, launch a company, or relocate the company you've already launched. The advice is usually wrong. Third, close your eyes and think of Houston.

If you're like most people, what you picture is an overbuilt oil town gone suddenly bust--all glass towers and tall weeds. What Charlie Wilson saw was opportunity. "I started in 1990, right dab in the middle of the recession," recalls the 29-year-old entrepreneur at his warehouse office in an industrial district just beyond the downtown high-rises. "The oil boom, the same boom that built this town overnight, was shot. By the time I got started, the whole infrastructure was here, but prices had crashed and everything was cheap."

So for Wilson--and many other Houstonians who noticed what he did--the city's problems provided the perfect backdrop for an entrepreneurial success. Wilson's company, SeaRail International, brokers salvaged goods (damaged electronics, spilled rice). What he needed, Houston had: low-priced warehouse space; big-league transportation capabilities (Houston's oil money had built the nation's third-largest seaport and ninth-largest airport); plentiful and flexible labor (skilled and unskilled to work by the day, the week, or the month); and a business community that encouraged him every step of the way. SeaRail's annual revenues have grown to $1.9 million, from $300,000 five years ago. And the city overall has seen a massive surge in business starts, producing one of the nation's most impressive economic turnarounds. Houston created more than 53,000 companies in 1996, ranking fourth among the nation's 200 largest metro areas in start-ups per capita. (See " The New-Economy Almanac.")

Nevertheless, you won't often find Houston on the lists of best business environments. And, indeed, for many companies it wouldn't belong there. What Charlie Wilson needs isn't necessarily what everyone else does. What's more, what Wilson needs isn't available only in Houston.

Which brings us to the dirty little secret of the "best" lists, which is that there are no one-size-fits-all best places (hence, no map accompanying this story and conveniently showing readers where to move). There isn't even a best place for you.

There are, however, best kinds of places. Ask entrepreneurs around the country to identify what makes a business community ideal, and two observations are inescapable:

1. Though the characteristics that matter most vary from one sort of company to the next, some are treasured universally, and they aren't the ones that the "best" lists rely on.

2. Four types of places emerge as more attractive than the rest--as places possessing some mix of characteristics that make them just right for certain kinds of companies. They are the boomtown, the science city, the reinvented district, and the networked neighborhood. Houston, a model of the reinvented district--which is notable especially for its undervalued resources and immigrant workforce--is the perfect fit for Wilson and SeaRail. But even the best of the other great small-business neighborhoods might have left Wilson underwater.

A Custom-fitted Location

A company like Searail might find consistently highly rated places like the Raleigh-Durham area, in North Carolina--with its inland location, poor plane connections, and paucity of immigrant workers--a less than ideal locale. Yet for a business like HAHT Software, a fast-growing maker of Internet-related programs, nothing could be finer than locating in Carolina. With its concentration of universities, numerous large software companies (including IBM's massive facilities and large branch operations of Silicon Valley transplants such as Cisco Systems), the Research Triangle has become a classic science city. It boasts tremendous advantages for high-tech enterprises like HAHT, particularly when it comes to recruiting software experts.

"We don't have to recruit," says chairman and CEO Richard Holcomb, who cofounded HAHT in 1995 and now has 56 employees. "I like finding people through word of mouth, and around here there's a lot of technical talent to choose from. If you're a fast-growing company with a neat product, people will find you."

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