Unlike most major and well-populated U.S. cities, Memphis isn't on a mission to become the next big startup hub -- yet it still (effortlessly) manages to attract some of the most outstanding entrepreneurs.
At least that's what some startup leaders in the Tennessee city believe. Jan Bouten, a partner at early-stage venture fund Innova Memphis, frames it simply: "We're not trying to become the next Silicon Valley."
Memphis, best known for its good food, blues, jazz, and rock 'n' roll, is also home to multimillion-dollar success stories like Restore Medical Solutions. The company has raised $4.15 million in funding. There's also MRI Interventions, a medical-device company that has raised $30.53 million in funding since it was founded in 1998.
In addition, it's also garnering attention from startups around the world. One of them is Preteckt, a Canadian trucking-logistics startup that predicts vehicle breakdowns before they become serious. The company relocated to Memphis after partnering with venture-development organization Start Co.
Why the boom in Memphis' startup scene? According to some of the biggest players in the city's entrepreneurial ecosystem, here are three major reasons:
1. Startups thrive because of the city's many existing strengths.
Currently, many of the city's entrepreneurs, incubators, and accelerators are focusing on attracting startups that fit well with industries already thriving in Memphis.
With a population of 653,450, the city is home to a number of large hospitals and health-research institutions, including St. Jude Children's Research Hospital and Methodist University Hospital. In 2012, Memphis Bioworks Foundation, a nonprofit that aims to create companies (and jobs) in bioscience, launched ZeroTo510, a startup accelerator focused on bringing more medical-device manufacturers to the city.
Similarly, FedEx became one of the city's biggest entrepreneurial success stories when it went public in 1978. It now takes in over $45 billion in annual revenues. This year, the company announced that it was sponsoring the launch of a new 90-day logistics accelerator.
Brad Silver, CEO and cofounder of Quire, a health care analytics startup, knows how vital it is to make sure you align your company's mission with your city's strengths. Quire was founded in 2009 (as Computable Genomix) to develop software once described as "the Google of gene research."
But Silver quickly realized that being in Memphis put Computable Genomix at a disadvantage. Located far away from the genomic hubs of the Northeast and Silicon Valley, it had a hard time recruiting customers and Memphis investors -- many of whom didn't know much about the genomic field.
"I would go to a cocktail party, and somebody would ask me what I did, and 30 seconds later, they'd say, 'I think I have to get a drink,'" Silver jokes. Since rebranding under the new name Quire, the company has raised more than $5 million in venture capital funding.
2. The city's startup resources have found ways to collaborate.
EPIcenter Memphis, one of the biggest players in the city's startup scene, recruited Leslie Smith to become its director earlier this year in February. Smith, who had previously served as president and CEO of TechTown Detroit to help boost the Motor City's startup scene, says she was impressed with the entrepreneurial work already under way in Memphis. However, she said, it was still missing a few key components.
"What was lacking was a sort of overall cohesive strategy that was shared, repeated, recognized by all of the constituent partners. The city also needed a really audacious goal that the community could march toward," says Smith.
As a result, EPIcenter Memphis launched last year (spearheaded by Memphis Bioworks and Innova, among other Memphis startup organizations). It announced a goal of creating 1,000 new entrepreneurs and 500 new companies within the next 10 years. And this year, ZeroTo510 and Start Co. decided to host a joint Demo Day to make it easier for investors outside of Memphis to see both of the organizations' graduating classes in one fell swoop.
"We've really formalized that collaboration over the past year," says Bouten.
3. Starting up is extremely affordable.
Memphis was recently ranked as the No. 9 city with the lowest startup costs by SmartAsset, a personal finance technology company.
The rent for a 1,000-square-foot office space in Memphis is $18,000. In San Francisco, by comparison, office spaces can cost anywhere from $60 to $97 per square foot. A lower average cost of living in Memphis (14.3 percent below the national average) also means that companies can offer smaller salaries than in Silicon Valley or Silicon Alley. That puts more money back into the pockets of startup owners, who can use it for other needs such as product development and marketing.
While this may make Memphis an attractive destination for founders with a tight budget, the city is still missing a few resources that could attract even more entrepreneurs -- namely, more experienced entrepreneurs and access to plenty of capital. But that's not stopping the growth of Memphis' startup scene. Regardless of whatever Silicon Valley has that Memphis lacks, the goal isn't to make the city great for just entrepreneurs, says Bouten.
"We can build a very shiny star of high-tech companies, but if the rest of the city isn't being dragged along, you don't do a lot of good," he explains. "So what we're really trying to do is build a platform that benefits everyone in the city."