Where Nick Rothenberg launched his company is not Silicon Valley either, but farther from Fort Myers you almost couldn't get. Rothenberg, cofounder of the Web-site developer W3-design, set up in the Hayden Tract area of Culver City, Calif.--a quintessential networked neighborhood.
Like Burbank, Glendale, and other nearby Southern California municipalities, Culver City has become a hotbed of technology-based entertainment and multimedia companies. "We've created an entrepreneurial community from the ground up," explains Rothenberg, who cofounded W3-design in 1994 with $10,000 borrowed from a relative. "Everything around here--from the coffee shops to the architecture--has been shaped to meet the needs of companies like ours."
Indeed, the architecture--obsolete red-brick industrial buildings--is just the kind of flexible, slightly retro space preferred by multimedia companies like Rothenberg's, which employs 27 people and posted $2 million in 1996 sales. But it's where the architecture stands and who else fills it that make Culver City a magnet for businesses like W3-design. In a rapidly changing industry characterized by one-project alliances (such as movies), you're only as good as the intellectual capital you have to offer and the access you have to people who might pay for it. Proximity to Hollywood and to one another is what the industry's company builders need to keep abreast of technical advances and find roles for their businesses on fast-forming project teams. The neighborhood is networked. For Rothenberg, being there--not being somewhere cheaper--is what matters.
What CEOs Treasure Most
Why don't the "best places for business" lists ever notice the Culver Cities of the country, let alone the Houstons? Because anointing the cheap is what most of them are about. Except when they're anointing sanitized, white-collar bastions like Seattle; Portland, Oreg.; or Provo, Utah--places where the journalists who make the lists and set the criteria fantasize about living. (Such places do sometimes qualify as science cities or networked neighborhoods.)
Surveys such as the Small Business Survival Foundation's list of places "good for small business" focus relentlessly on taxes, in the process dismissing the entire state of California--which continues to lead the way in creating fast-growing companies. The survey's highest rankings were reserved for states such as South Dakota and Wyoming, not exactly the nation's entrepreneurial hubs.
Similarly, an account in Forbes last year, headlined "It's the Costs, Stupid," tried to link high costs with slow growth and vice versa. But business costs represent only one factor, and by no means the most critical one, that determines a company's fortunes. Low costs can be associated with a booming economy, such as Las Vegas's, but low costs have not turned other inexpensive areas, such as Omaha, or Rochester and Syracuse, both in New York, into prodigious job-creating neighborhoods.
In most networked neighborhoods and science cities, costs don't matter at all. Consider the spectacular job growth experienced over the past two years by one of the nation's most expensive regions, San Jose, Calif., thanks to its entrepreneurial, high-tech economy.
So what does matter to growth-minded CEOs? The priorities differ according to the nature and the needs of the company (see the checklists in the Best Neighborhoods below), but taken together, here's what they tell us is important:
- The right workforce. For some businesses that means low-wage, unskilled workers. For others, uniquely educated technicians. For still others, a pool of potential employees with experience functioning in entrepreneurial, chaotic organizations. (Think of Silicon Valley.)
- Undervalued resources. Buildings, machinery, raw materials, human capital--all are comparatively less expensive in reinvented districts and sometimes in boomtowns. And those are costs that some entrepreneurs care about. Not many focus on tax rates.
- A hungry market. That big sucking sound you hear is the noise of runaway growth and the pure opportunity it presents to entrepreneurs willing to meet needs that keep expanding. For small companies, especially in service businesses or building-related trades, the ride offered by a boomtown may be the closest thing there is to a sure thing--in the short run, at least. Las Vegas may be the exemplar.
- Accessible intellectual capital. Universities and the graduates they attract to an area are the oldest form of that capital. Business and technological know-how, in companies increasingly inclined to share it, are the newest.
- Coaching: managerial, technical, and personal. Whether reflected in informal mentoring relationships, organized training programs, or the kind of opportunistic learning that comes from intense intercompany cooperation, no small-business neighborhood thrives without it.
- The right contacts: a network that's either industry-based or inclination-based. The networked neighborhoods provide those contacts best (they have to), but all the best neighborhoods nurture them in one way or another.
- No distractions. The companies attracted to science cities are most likely to prize an ordered environment. ("It's an engineer's dream," said one founder.) But some boomtowns, too, are known for their uncomplicated, easy-to-manage environs.
- Highly evolved small-business service organizations. These might be revamped chambers of commerce, growth councils, or university-based outreach programs. They're often found in reinvented districts--which have existing institutional frameworks and place a premium on an entrepreneurial turnaround.
- Eager capital. Venture capital (in science cities), enthusiastic bankers (in boomtowns), and funding from customers, joint venturers, or strategic allies (in networked neighborhoods) all count.
- A positive, enfranchised, respected business culture. Nothing matters more, and no great neighborhood can do without it.
Culture shock
