When President Trump criticized Baltimore in late July, local business owners took to social media to defend their city. They know some people still associate Baltimore with HBO's drama series The Wire, which premiered 17 years ago, but say the city's dark reputation doesn't represent what's happening there today

"Entrepreneurs are changing the narrative," says Evan Lutz, the founder and CEO of Baltimore-based produce delivery service Hungry Harvest. "There's a lot of success around this city and a lot of opportunities to make it a better place."

In response to Trump's Twitter tirade--in which he said the city was a "disgusting, rat and rodent-infested" place where "no human being would want to live"--Inc.took a closer look at the city's startup ecosystem. Baltimore ranked No. 38 on Inc.'s list of Surge Cities, the 50 best places to start a business in the U.S., and has become a robust environment for founders. The tight-knit community, often affectionately called "Smalltimore," has a high rate of entrepreneurship and a laserlike focus on helping the city's businesses.

"Entrepreneurs are starting to move to Baltimore--I couldn't say that was a thing five years ago," says Lutz, who grew up about 20 miles away in Pikesville, Maryland, and launched his business in 2014. "I've met dozens and dozens that have moved their businesses here." 

Lower costs, better vibe

One of those founders is Anders Jones. He was working in San Francisco and knew he didn't want to start his business, a personal finance firm called Facet Wealth, in the Bay Area's crowded startup market. Jones studied the other entrepreneurial hubs in the U.S. and settled on Baltimore because of its low costs, access to talent, and proximity to larger companies. 

Founders looking to save cash would be wise to settle in Baltimore: The average asking rent per square foot of the city's office space is $23.93, a steal compared with San Francisco's $84.89, according to real estate advisory firm Newmark Knight Frank. Meanwhile, the average monthly apartment rental in Baltimore is $1,233, whereas San Francisco's is $3,450, according to the online real estate database Zillow.

Baltimore's talent pipeline is fueled by the city's prestigious academic institutions, including Johns Hopkins University, Loyola University, and the University of Maryland, Baltimore, which host entrepreneurship and business programs. Additionally, powerhouse public companies like T. Rowe Price, Under Armour, and McCormick & Co. have lured employees to the area and expanded the talent pool for local startups. 

"There are also more qualitative things that attracted us here," Anders says. "You're welcomed with open arms, versus San Francisco, where if there's one more tech company people are not happy about it." 

Baltimore's startup community knows it doesn't have the same reputation as the Bay Area, but it's working to fuel entrepreneurial growth. For example, in 2013, Johns Hopkins launched Technology Ventures, which helps the school's researchers and inventors license, patent, and commercialize their creations, and supports startups launched in and around the university. Last year, eight startups came out of the program, including Dracen Pharmaceuticals, which develops drugs created at Johns Hopkins and raised a $40.5 million seed round

Businesses are also getting a boost from local incubators such as Betamore, Bwtech@UMBC, and Emerging Technology Centers, which, since 1999, has aided more than 500 companies, 85 percent of which are still in business, according to its website. Under Armour founder Kevin Plank has made a sizable effort to support the city's growth, investing approximately $100 million in the $5.5 billion waterfront development at Port Covington, which will include an innovation center, more than a million square feet of office space, and Under Armour's new headquarters, according to The Baltimore Sun. The project is expected to take 25 years to complete and will create 35,000 new jobs, according to an analysis commissioned by the city.

Unique challenges 

To be sure, the city's founders still have significant challenges to overcome. Violent crime rates dropped between 2006 and 2015, but myriad factors have contributed to a dramatic increase since then. In 2017, Baltimore recorded 342 murders--its highest per-capita rate ever and a higher absolute number than New York City, a city with 14 times as many people, according to The Baltimore Sun

The increase in violent crime makes it harder for startups to lure outside talent to the city, and has other damaging effects on the business ecosystem. Maryland Governor Larry Hogan canceled a $2.9 billion rail transit line that could have helped workers commute from West Baltimore, arguing the state could not afford it after spending $14 million responding to riots over the death of Freddie Gray. Target also closed its store in West Baltimore.

Separately, access to capital can be difficult for Baltimore businesses, says Deb Tillett, the president and executive director of Emerging Technology Centers. While there's a large network of people willing to be angel investors, she says, some later-stage investors are risk-averse.

Finding C-suite executives and other experienced talent is a challenge for local founders, as well. "We have to either grow the talent from within or import it," says Elizabeth Burger, the senior director of strategic initiatives at Johns Hopkins University's Technology Ventures. "One takes time and the other takes battling a perception of Baltimore." 

As the city contends with its negative reputation, many local entrepreneurs have launched philanthropic units within their businesses to solve problems that plague residents. For example, Lutz's company sets up markets in primarily low-income neighborhoods and sells fresh fruits and vegetables at a 50 percent discount through its Produce in a Snap market. Meanwhile, adult sports league startup Volo--No. 939 on this year's Inc. 5000, a list of the fastest-growing private companies in the U.S.--uses its revenue to fund free youth sports programs. Founder Giovanni Marcantoni launched that initiative when he saw the city couldn't afford to provide such activities. Both Hungry Harvest's and Volo's charitable programs have expanded outside of Baltimore to help other communities. 

"A lot of people in the startup scene fight to make it a better startup city, and city in general," Lutz says. Johns Hopkins's Burger agrees. When it comes to making connections, raising funding, or even just talking business over a cup of coffee, she says, entrepreneurs want to help each other: "If someone they know asks [for] a meeting, they will clear their schedule."

Published on: Aug 22, 2019