What Most American Cities Get Wrong About Entrepreneurship
On the surface, who would dispute the merits of luring entrepreneurs to America's cities?
For many reasons--job growth, branding, bolstered commerical tax bases (ostensibly enabling cities to rely less on residential property taxes)--it behooves and benefits many cities to attract entrepreneurs.
It always has and it always will.
That's why you'll be pleased to read Richard Florida's recent article in the Atlantic about how cities can attract more entrepreneurs.
In the article, Florida eloquently summarizes a thorough report on the topic from Endeavor Insight, which is based on a survey of 150 successful entrepreneurs. The key takeaways include:
- What entrepreneurs want most in a city "by far" is 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)," writes Florida.
- Tax policies don't matter. "Just 5 percent of the respondents mentioned low taxes as being important, and a measly 2 percent named other business-friendly policies as a factor in their location decisions."
- Eighty percent of the entrepreneurs surveyed had resided in their city for at least two years before starting their companies. On some level, this suggests entrepreneurs might need to like the city for personal reasons, as much as for business-policy ones.
- The larger the city, the better. "These top business-creators gravitated towards cities with at least a million residents in the metro area," writes Florida.
It's interesting material, to be sure. The tax insights, in particular, can help debunk the policies that "so many states and cities continue to promote as silver bullets," notes Florida.
I applaud his idea of debunking the specious policies that so many states and cities consider to be helpful. And it's in that spirit that I'd like to debunk one more specious policy: The emphasis on attracting and retaining startups, as opposed to businesses that have already survived their brutal first five years of existence.
Specifically, I'm talking about a policy problem that Babson professor Daniel Isenberg has articulated in the Harvard Business Review. That problem is the tendency of policy makers to equate entrepreneurship with the mere act of starting a company:
Equating entrepreneurship with startup is not wrong; it is just very incomplete. It is also problematic because of two flawed implied messages: The first is that the most difficult and important task of the entrepreneur is launching his or her venture. The second is a notion we might call "the more the merrier"--i.e., the more startups, the more successful the program. Quantity of start implicitly trumps quality of scale.
Isenberg's overall point is that policy tends to focus too much on the birth of companies; instead, it should focus on the proper way to grow companies. For it's the growth of companies--not merely the birth of them--that produces what cities and states are really seeking: jobs, branding, commerical tax revenues.
If all of that leaves cities and states baffled about what their top small-business priority should be, I can make it simple: Your top priority should be enhancing the local labor pool. Isenberg calls this "an essential aspect" of a growth-business ecosystem. "Entrepreneurs I meet with from Boston to Bangalore to Barcelona who have succeeded in obtaining market traction almost universally complain about the paucity of appropriately skilled people and managers to hire," he writes.
His observation dovetails with what the 150 entrepreneurs told Endeavor Insight: that "by far" they value a pool of talented employees "more than any other business-related resource that cities can offer."
In short: Talented employees come first.
If cities and states have those, then fast-growth businesses--and the entrepreneurs who launch them--will be sure to follow.