The truth: There isn't a single best metro area to start and grow new companies, but there's a best place to start yours

Ever feel you're in the wrong city? Bob Freese did.

Freese and three colleagues from 3M Corp., in St. Paul, Minn., set out on their own a few years ago. Their new company's product was a given: optical storage devices for computers, a field their giant employer hadn't been interested in. They figured -- rightly, as it happened -- that they could raise seed money from prospective customers to build a prototype. Even the name, Alphatronix, proved easy to come up with.

But the place, the city that would be the new company's home, was a puzzle. Freese didn't want to stay in the Twin Cities. The cost of doing business in Minnesota was high. And he had learned while at 3M that A-list recruits were reluctant to move to so cold a climate, even for a job with one of the world's premier corporations. How could a start-up attract good people?

Engineers all, Freese and his colleagues began a methodical search for a home base, compiling data on cities all over the United States. The search produced a list of 15 possibilities. By some lights, Freese realized, it was a surprising selection. Despite Alphatronix's high-tech orientation, no city in California or New England made the cut. Neither did population magnets like Las Vegas or Orlando. Instead, the four entrepreneurs found themselves considering locations such as the Kansas City area; Washington, D.C.; and the Raleigh-Durham area of North Carolina. They developed a matrix of five factors and ranked the regions on each. The one scoring best on all five, they decided, would win.

May we have the envelope, please? And may we find out how a less-than-glitzy place like Kansas City was in contention, while Dallas and Boston and San Jose, Calif., were not?

Sure -- in a minute. First, by way of prologue, consider how important and how difficult a young company's choice of location can be.

For one thing, business and economic conditions vary dramatically from region to region in the United States. In one recent month the metropolitan unemployment rate was 9.9% in Detroit and 3.3% in Omaha, only a few states away. Cities differ not only by obvious measures (population growth, cost of living) but by subtler ones as well (the average restaurant in Orlando sells 33% more than its counter-part in nearby Tampa/St.Petersburg and 55% more than an eatery in Detroit). "There's really no national economy," says Mitchell Horowitz of the Corporation for Enterprise Development, a Washington, D.C., organization that tracks state-level trends. "Every state seems to have its own competitive positions and its own strengths and weaknesses." Cities' strengths and weaknesses are even more pronounced; they can make or break a new company.

Trouble is, there's no way of adding up all the virtues and defects into a single good-to-bad scale. Low tax rates? An advantage, so it would seem -- but not if low taxes mean lousy public schools. A tight labor market? A sign of a booming economy -- but a start-up in a tight labor market may have trouble finding employees. Freese wanted a place with a favorable business climate, just not too favorable. "If a community is offering you extra-special incentives, tax abatements, or whatever, there's usually some reason for it," he explains. "Maybe it has really high unemployment. And maybe that's because it has an uneducated work force."

To be sure, the Alphatronix story is unusual. Most entrepreneurs start their businesses where they live and rarely even consider anywhere else. But even homegrown company builders need a working knowledge of business geography. Maybe you plan on franchising your young company or expanding into another region. Maybe your start-up has competitors in other cities who don't face the same costs and constraints you do. Whenever the location issue crops up -- and it will -- you'll find yourself in a position similar to Freese's, figuring out what kind of city makes sense for your particular business.

At that point, you'll have to throw out preconceptions and prejudices about what various cities have to offer entrepreneurs. Some enjoy brighter prospects than others. Some provide better combinations of business inputs -- access to customers, suppliers, employees, money -- than others. Maybe most important, some have learned how to help young companies in ways that spell the difference between success and failure. Growth, it turns out, is not only where you find it, but where you make it.

The Wealth of Cities
If they were setting out afresh, most entrepreneurs would choose to build their businesses in robust local economies, regions that thrive in upturns and hold their own in recessions. What makes for such economic health? During the 1980s, the key ingredient seemed to be a swelling population. Midsize Sunbelt cities, fed by massive influxes of immigrants, regularly topped the charts on indicators such as job growth and business starts. For a while, they even seemed to be skipping the current slowdown.

Today some of those booms have gone bust. Between 1988 and 1990, according to data compiled by Inc. from the Bureau of Labor Statistics and other sources, the Greenville-Spartanburg region of South Carolina ranked fourth in the nation in job growth. In the past two years its rank has dropped to 109th. That's a story repeated elsewhere in the Southeast (Fort Myers, Fla., plummeted from 10th to 126th) and in parts of California (San Diego fell from 22nd to 120th). One reason, of course, is that growth itself -- in the form of construction, real estate, and all the stores and service firms needed to serve a growing population -- was among those areas' biggest industries. Then immigration tapered off, partly because of the recession and partly because the huge baby-boom generation was growing older and less mobile. That touched off a downward spiral.

"Rapid growth can sound sexy," says location consultant Dennis Donovan of the Wadley-Donovan Group, in Morristown, N.J., "but it can overtax an area's infrastructure. By itself it isn't necessarily a good thing."

The healthiest cities, by contrast, have evolved distinct economic roles in the emerging global marketplace. (See "Pick Your Place," below.) Miami, emulating New York City and Los Angeles, is becoming a center of international trade and finance; it's the hub for the United States' growing business with Latin American nations. Phoenix, capitalizing not just on sunshine and retirees but on a booming electronics sector led by companies such as Motorola and Intel, is an up-and-coming regional capital. (DRI/ McGraw Hill projects that Phoenix will be ninth among the top 10 job growers between now and the year 2000; it's the largest city to make the list.)

Midwestern metro areas, home to the manufacturers that are storming back into global markets, are on the upswing as well. "The major exporters in this country are in the Midwest," says Stan Duobinis, senior vice-president with the WEFA Group, an economics-forecasting and consulting firm in Bala Cynwyd, Pa. "The states that touch water may do the shipping, but they don't have the export industries."

The Raleigh-Durham area of North Carolina -- high on Freese's list -- is a good example of a metropolitan area with just such a "core competence," to use the currently fashionable term. Its Research Triangle Park alone houses about 60 high-tech companies and is in the process of expanding into 2,000 undeveloped acres. Recession? At last report the region's unemployment rate had climbed all the way to 3.5%, which is less than half the national rate. A different kind of core competence accounts for the continuing position of Las Vegas at or near the top of everybody's economic charts, including our Most Business Starts rankings. (See page 38.) Sure, Vegas has been fed by huge population flows. But it's the gaming-and-entertainment industry that's really watering the desert city's bloom. "Las Vegas has become an international destination city," observes Duobinis.

For brand-new companies, of course, a healthy economy can be a bane as well as a blessing. The reason: high costs. The San Francisco Bay area, for example -- particularly Silicon Valley -- continues to boom; as it did last year, San Jose tops our list for highest number of young high-growth companies. But it's also one of the nation's most expensive regions, which is why even high-tech entrepreneurs frequently set up shop elsewhere. Nor is it easy for newcomers to navigate California's maze of regulations. "California is a very antibusiness state," says Freese.

Ingredients of Growth
Who would start a company in New York City? The Big Apple has slumped in the last couple of years, losing more than 100,000 jobs. Its costs are astronomical, its public services dreadful, the hassles of doing business off the charts. None of that fazes entrepreneurs such as Sandy Chilewich, who cofounded Hue Legwear 13 years ago in New York and would do the same thing today in a minute. "There's no other place for our kind of business," says Chilewich. "It's where the buyers come. Any fashion services we might use have offices here. It's the place to be."

The attractions of world capitals such as New York and Los Angeles have always been apparent to company builders with highly specialized needs. For certain industries -- fashion and financial services are only two -- the mammoth metropoles provide unparalleled access to customers and suppliers, a large pool of specially skilled employees, and a variety of supportive institutions such as training schools. What's often forgotten, however, is that other cities, too, offer their own unique combinations of these business inputs. A new or small company does best in a city with just the right blend.

Take Kansas City. Home to Hallmark and H&R Block, a suitor for McDonnell Douglas's planned new plant, the bistate burg scarcely has a reputation as a hotbed of 1990s-style entrepreneurship. Yet Jack Pierson, for one, is convinced that his Kansas City location is a key element in his small company's growth. Bill Crooks thinks the same way -- for a completely different set of reasons.

Pierson's company is Preco Industries Inc., a $7-million, 60-employee manufacturer of specialty machine tools that are sold worldwide. Since each sale represents an investment on the customer's part of from $40,000 to $250,000, Preco relies heavily on mutual plant visits and other elements of face-to-face selling. The Kansas City advantage: easy air access for domestic customers, not-too-difficult access for buyers from both Europe and the Far East, and $60 hotel rooms for all. Then too, Preco relies on engineers and skilled technicians, which the region's well-regarded schools and universities turn out in quantity, and on a dense network of highly specialized suppliers, hard to find outside a world-class manufacturing region like Kansas City. "If we were located even 50 miles away, I'd be tearing my hair out every day," says Pierson. "Here, we get instant support from a dozen different suppliers that are just critical to us."

Unlike Pierson, Bill Crooks sells locally and needs little specialized talent. But he's no less enamored of his location. Crooks and partner Paul Khoury, having pursued nationwide careers in the restaurant industry, came home to Kansas City a few years ago to start PB&J Restaurants Inc. The company, which now includes four eating establishments and a catering service, boasts annual sales of around $8 million.

The keys to PB&J's rapid growth? One is loyal customers; in Kansas City, says Crooks, people stay with a restaurant they like rather than scurry to the latest trendy bistro. A second is money. Like most start-up entrepreneurs, Crooks and Khoury had to pony up virtually all their cash for the first restaurant, though they also managed to land a Small Business Administration guaranteed loan. Ever since, however, the two have found local financiers receptive to their expansion plans, mostly because they made themselves known in what is still a relatively small downtown business community. "People see you at business lunches," says Crooks, "and you move through the system a little quicker because you get to know people. That's a tremendous advantage, having a personal relationship -- not just with a loan officer, but with the owner of the bank." Picture that happening in New York or Chicago.

The critical factors naturally differ from start-up to start-up and hence from city to city. Doc Hamm moved from Washington, D.C., to the Raleigh-Durham area to make sure his new company, SilentPower Technologies Inc., would have a steady supply of mechanical engineers. Paul Shand started the Classic Marble Co. in Cleveland because the city was about to embark on $2 billion worth of downtown construction -- and because it housed a sizable supply of skilled stoneworkers. Freese of Alphatronix wanted to make sure his new home offered good public education and an appealing quality of life, and thus would be attractive to recruits. But he wasn't thinking Boise or Boulder; he also needed quick access to customers and to a well-developed high-tech infrastructure, complete with technically oriented universities. Finding the right place, he felt, was central to "maximizing our probability of success."

Help for Start-Ups
Back in 1989 Vince Campanelli and Frank McConnell had a plan to open a graphic-arts-production-support service, a specialized company to work with ad agencies and corporate-communications departments. They figured they'd do it in San Francisco, where they had lived for 15 years and where they had all their business contacts. Looking for assistance in getting started, they visited the San Francisco Chamber of Commerce and the local SBA office. Not much help was available, they discovered; they were on their own. Then, on a vacation, they visited Cleveland, where both had grown up. On a lark they stopped in at the Cleveland Growth Association's Council of Smaller Enterprises, known as COSE, which serves Greater Cleveland.

"I was astounded," remembers Campanelli. That first visit quickly led to a three-hour meeting with "10 or 15 specialists in all different areas of starting a business"; later, COSE provided the partners with quantities of demographic information and with introductions to veteran Cleveland entrepreneurs willing to share their experiences. When Campanelli and McConnell decided to launch Technigraph Media Services Inc. in the city, COSE offered training in how to write a business plan, introductions to the local SBA and Service Corps of Retired Executives (SCORE) offices, and hands-on assistance in locating financing. "They literally put all the pieces of the puzzle together for me," says Campanelli. Even now, he adds, he continues to review his company's progress with volunteer COSE business counselors.

Cleveland, which a decade ago witnessed the virtual collapse of its old-line industrial economy, "gets" two fundamental facts about the future, namely, that prosperity depends mightily on entrepreneurship and that entrepreneurship can be nurtured. "After the pain we went through, we began to work like crazy to stimulate new ventures of all kinds," explains COSE executive director John Polk. "We recognized we could create a pretty interesting economy, where small companies play a very significant role."

For start-ups, the benefits of this attitude are considerable. COSE runs what is probably the nation's best-developed entrepreneurial-support program: it includes not only extensive start-up assistance but three separate tracks of ongoing management education. The organization also administers a widely admired health-insurance program for small companies. (See "Safety in Numbers," Hotline, May 1991.) Like Campanelli, plenty of Cleveland company owners feel COSE has been a critical element in their success. Moses Saleh, a franchisee of the Coffee Beanery Ltd., wrote a business plan with the organization's help, then submitted it for criticism to three bankers on COSE's list of volunteer consultants. He got back comments, changed the plan, and submitted it to real bankers -- one of whom had already reviewed it as a volunteer. "It was like getting the answer to a test before you take it," exults Saleh, who landed a $150,000 loan.

Incredibly enough, COSE is only one of several entrepreneurial-assistance programs in Cleveland. Economic Development Inc. (associated with Case Western Reserve University) runs incubators, provides counseling for start-up entrepreneurs, and sponsors venture-capital conferences. The Cleveland Senior Council, a private-sector version of SCORE, matches start-ups with teams of experienced businesspeople. A recently published list of area resources includes literally dozens of other agencies and organizations committed to helping new and small companies.

The Cleveland model, if it can be called that, is slowly being emulated in other cities, including some that were high on Bob Freese's list. Kansas City's chamber of commerce, for example, runs an entrepreneurial-training program; an organization called the Silicon Prairie Technology Association has set up health-insurance and cooperative buying arrangements for small companies.

In at least one respect, Kansas City is going Cleveland one better: Silicon Prairie and the Ewing Marion Kauffman Foundation's new Center for Entrepreneurial Leadership recently announced the creation of a large-scale information network designed to match investors with early-stage companies. "We've suffered from a lack of seed and venture capital," says Silicon Prairie's Jerry Stogsdill. "Now we're addressing that issue very aggressively."

And Now: The Envelope
Alphatronix's Bob Freese and his partners looked carefully at Kansas City, as well as at other finalists such as Washington, D.C., and Salt Lake City. Various cities scored high on one or another criterion. Washington had a well-developed high-tech infrastructure; it also had high costs and a mixed quality of life. Salt Lake City had moderate costs and a high quality of life, but transportation was a problem: reaching customers on the East Coast wouldn't be easy. The ultimate winner: Research Triangle Park, in the Raleigh-Durham area of North Carolina. "Other places in the country might look better in any given category," says Freese. "But when you begin looking at two or three criteria, this area just pops right up."

Ironically, the Research Triangle region is a Johnny-come-lately to the entrepreneurial economy: most of its technology companies are branches of national or international concerns, and start-ups until recently were few in number. "If you left IBM down here, people would ask you why you lost your job," says Fred Hutchison, a Raleigh lawyer who has been involved in local economic-development efforts. "In California they'd ask why it took you so long." But in the past few years, Hutchison and other observers say, the atmosphere has changed noticeably. An organization called the Council for Entrepreneurial Development (CED) offers start-up assistance and networking opportunities. The North Carolina First Flight Center, a state-sponsored nonprofit, recently opened Research Triangle Park's first new-business incubator. Among the signs of change: people such as Gerard Hall, a young New Jersey native and Harvard graduate who runs two-year-old SportsMedia Technology Corp. and has a company called Schoolbook Computer Systems almost ready to launch. "With my kind of businesses, I could have located anywhere," says Hall. "But I wanted a great place to raise a family and settle down, as well as a great place to run a high-tech company."

The emerging interest in entrepreneurship clinched the deal for Freese. "A small company coming into this area gets a lot of help from an organization like the CED, all of it free," he says. One key moment for Alphatronix: it made a presentation at a venture-capital forum organized by the CED. That led to one contact, which led to another, which led eventually to two rounds of expansion capital totaling $4.5 million.

Today Freese couldn't be happier with his Research Triangle home. Even so, you get the sense that several of the cities on his list would have been fine, too -- and that they aren't the cities that would have been on anyone's list in the past. "You go back seven or eight years," he says, "and everyone was talking about Silicon Valley, Southern California, and Boston. Those areas just aren't as fertile for growing new companies today.

"But Cleveland, Kansas City, Raleigh-Durham -- they all have a reasonably good quality of life, good transportation, good educational systems, a favorable climate for start-ups." The right city for you? It's your call. But your own list, like Freese's, may include some unexpected candidates.

Data for this article were compiled under the direction of special-projects consultant Sara Baer-Sinnott.



Most Business Starts 1989-1991

1. Las Vegas 2. Orlando

3. Phoenix 4. Atlanta

5. Raleigh-Durham, N.C.

Most young high-growth companies 1989-1991

1. San Jose, Calif. 2. Las Vegas

3. Anaheim, Calif. 4. Seattle

5. Houston-Galveston

SOURCE: Cognetics Inc., Cambridge, Mass. Business-starts leaders are cities with the most new businesses of five or more employees, founded between December 1989 and December 1991, calculated as a percentage of all businesses in the area. Young high-growth companies are companies whose employment growth (in both absolute and percentage terms) exceeds a certain threshold; the leaders are cities with the most high-growth companies as a percentage of all young companies in the area. Metropolitan areas with fewer than 500,000 people were excluded.

* * *

Job Growth 1990-1991

1. Salt Lake City 2. Houston

3. Denver-Boulder Riverside, Calif.

5. Indianapolis

SOURCE: Bureau of Labor Statistics; Woods & Poole Economics, Washington D.C. Excludes cities with fewer than 500,000 people in 1991.

* * *

Projected job growth 1991-1996

1. Riverside, Calif. 2. Orlando

3. Houston 4. San Diego

5. Sacramento

SOURCE: DRI/McGraw Hill, Lexington, Mass. Excludes cities with fewer than 500,000 jobs in 1996.

* * *

Et Cetera
In some ways, U.S. cities are more different than alike, and finding the right place means knowing what's important for your particular company. Some random samples:

* * *

The talent pool: full-time college students per 1,000 workers

Boston (highest) 119.5 New York City 107.1

Phoenix 57.5 Kansas City 25.5

Fort Lauderdale, Fla. (lowest) 9.8

Cost of living (U.S.=100)

Salt Lake City (lowest) 93.2Kansas City 97.7

Cleveland 104.1 Riverside, Calif. 122.5

New York City (highest) 149.3

SOURCE: The Wadley-Donovan Group, Morristown, N.J. Metro areas with population of fewer than 1 million were excluded.


Product in hand -- a new electronic atlas -- Richard Smith began casting about town for a first-rate software-patent lawyer. There wasn't one; Smith had started his company in Fayetteville, Ark.

Jackie Stewart chewed the end of her pencil as she scanned the darkening sky. For the fourth day in a row, no planes would be flying out of Anchorage, Alaska. Her shipment of goods from her Great Alaska Catalog Co., in Juneau, wouldn't reach her customers in time for the Christmas holidays. It was the second season in a row: last year the volcano, now foul weather.

Tim Sharp set his alarm, for the following morning he was off to Germany to present his high-tech, superabsorbent potting material, EZ Soil, to the biggest merchandiser of garden products in Europe. This was no small matter: the nearest airport was three hours away from his hometown of Idabel, Okla.

Mention small-town enterprise and you conjure up Norman Rockwell visions of neighborhood hardware stores and five-and-dimes. But look again: a new breed of growth company is inhabiting Main Street. Smith, Stewart, Sharp, and scores of others are part of a wave of entrepreneurs setting up businesses in places not on anyone's list of hot spots. Instead of Salt Lake City or Silicon Valley, they're in towns such as Fayetteville (population 42,100), Juneau (population 26,800), or Idabel (population 7,000).

Start a business in the boondocks, entrepreneurs like to say, and people on the street will look you in the eye and greet you by name. You can spend your lunch hour cross-country skiing or sitting in a meadow in untrammeled solitude. In addition to quality-of-life advantages, small-town start-ups typically enjoy savings from lower office, service, and cost-of-living expenses ("so you can struggle along not making very much and still manage to survive," says Smith), as well as relative ease of access to start-up funds or lines of credit (familiarity breeds trust). That's why George Harris chose Lewiston, Maine (population 39,800), for his $2-million, high-tech manufacturing business. And why Alex Kahler, for his biotech start-up, made the unconventional selection of Brookings, S. Dak. (population 16,300), where, to his delight, business taxes are "virtually nonexistent" and there is no state income tax.

Boons aside, the boondocks have their share of drawbacks. The price of setting up shop in a place no one has heard of includes compulsory adaptability. Smith had to find a patent lawyer in Los Angeles; then, realizing he couldn't market his product worldwide from Fayetteville, he signed on with a Northern California software publisher. Stewart ran around the weather by switching to a fulfillment house on the mainland -- a mail-order outfit in Louisiana, Mo. (population 5,000), whose busy season was the opposite of hers. Sharp can't escape his airport commute, but he sidesteps some trips by reading reams of faxes daily from all over the world.

Are the pastoral virtues worth it? These entrepreneurs, at least, have no plans to move back to the bright lights and big city.

-- Alessandra Bianchi


When it comes to cities,one size doesn't fit all

Everybody loves to see who's on top, which is why so many books and magazines give us features such as the 10 Best Cities for Business. Where start-ups are concerned, no ranking could be sillier. A fledgling company needs a city that suits its own unique needs -- that offers the right combination of robust markets, appropriate business inputs, and support for entrepreneurship. A new clothing manufacturer could succeed in Los Angeles and fail in Des Moines. A telemarketing company might do the exact opposite.

So start by picking what kind of city your company could thrive in. A guide:

World Capitals
20th century -- New York City. 21st century -- Los Angeles. The cities that are truly international -- in outlook, in population, in business orientation. L.A.'s foreign trade has risen 12% a year since 1980. Immigration between 1980 and the year 2000 is expected to total 6 million.

Up-and-comer: Miami. Unemployment's high at the moment, but Latin American trade will revive the almost-bilingual city.

An Entrepreneur's Dream: Plenty of hardworking immigrants. Vast numbers of specialized suppliers and specialty markets. "If you're oriented toward Hispanic or Asian customers, L.A. is the place to be," says Stephen Levy, an expert on California's economy.

An Entrepreneur's Nightmare: Costs, congestion, crime. Riots (at worst) and red tape (at best). Linda Griego spent four years trying to open her first L.A. restaurant. It took so long, she says, because she kept bumping into code violations. Hopeful sign: Griego is now the city's deputy mayor, working to change its attitude toward new business.

An Ideal Location For: Specialty companies. Internationally oriented companies. Financial and business services. The New York metro area has more than 28,000 business-service establishments, L.A. about 18,000. Most of America's other big cities have fewer than 5,000.

Population Magnets
Orlando, whose pay-rolls grew 15% in only two years, before the recession hit. Riverside, Calif., east of Los Angeles, expecting 20% employment growth between now and 1996. Like a river, population is flowing south and west: every one of the top 10 job growers in the next five years is in a Sunbelt state.

Up-and-comer: Las Vegas. Still not a big city -- 1990 metropolitan population was only 750,000 -- the gambling mecca tops nearly every growth chart. Number of jobs rose 8% in the last two years.

An Entrepreneur's Dream: Plenty of labor. Plenty of land. Growing markets, both business and consumer. "Las Vegas can be a dynamite place to start a business," says Tom Carns, founder of PDQ Printing. "Most of the companies are small." Like PDQ, your company can grow with its customers.

An Entrepreneur's Nightmare: The curse of any frontier, namely, that a lot of people arrived only yesterday. "You wouldn't take a personal check from people here unless they have a check-guarantee card from their bank," says Carns.

The Ideal Location For: Anybody looking for booming local markets. "In a static area, a start-up has to take market share away from existing suppliers," points out Martin Holdrich of Woods & Poole Economics Inc. "Growing areas demand new output and new suppliers." Will population flows reverse themselves? Not anytime soon, says Holdrich.

Salt Lake City. Not huge, not on either coast, not cosmopolitan, not known for any particular industry. Loved by residents, ignored by everybody else.

Up-and-comers: Kansas City; Des Moines.

An Entrepreneur's Dream: Good education. Utah has the highest literacy rate of any state, Iowa the highest SAT scores, Kansas City the most innovative inner-city school-reform program. Low cost of living. Easy access, internally and externally. "A tie-up on our interstates is when traffic slows to 25," says Jerry Stogsdill of Greater Kansas City's Silicon Prairie Technology Association. "And the airport can sometimes seem like a ghost town, it's so easy to get in and out of."

An Entrepreneur's Nightmare: Shortage of capital, particularly from organized venture-capital firms. Also, "the old perception/reality thing," says one Kansas City business owner, explaining why even local customers look down their noses at homegrown suppliers. "People don't expect to be able to get what they need locally."

The Ideal Location For: Office operations. (Des Moines's insurance industry is second only to Hartford's.) Telemarketers (well-educated workers, no regional accent). Any company selling or shipping from one location to a national market.

Rustbelt Revivals
Pittsburgh. From defunct steel town to most-livable city, in a few short years.

Up-and-comers: Cleveland; Rochester, N.Y. Revivified manufacturing base complemented by new service industries.

An Entrepreneur's Dream: Well-established universities set up specialized research-and-development centers, then spin off dozens of advanced-technology companies. City and state governments realize the importance of entrepreneurship. There's "an atmosphere that recognizes the future of this region lies in small business," says Albert Van Kirk of King's Medical Co., in suburban Cleveland.

An Entrepreneur's Nightmare: In some industries, strong unions. "They can make it hard on you if they want to," says a company owner in the construction industry.

The Ideal Location For: Technologically sophisticated manufacturing. Rochester mounts a collaborative effort in next-generation optics-manufacturing technology. The Cleveland Advanced Manufacturing Program helps small companies learn the latest production technology.

Urban Boutiques
Austin, Tex.; Cambridge, Mass.; Raleigh-Durham, N.C. Smaller, university-based cities; some are state capitals. Durable economies with high concentrations of Ph.D.'s. "These are the cities that will be growing," says Jim Renzas, executive vice-president of Paragon Decision Resources Inc., in Irvine, Calif. "They're the places of the '90s."

Up-and-comers: Madison, Wis.; Boulder, Colo.

An Entrepreneur's Dream: The urban boutiques keep repopulating themselves with highly educated people. "The most successful companies are knowledge-intensive companies that need to be able to recruit bright, talented people out of good universities," adds Renzas.

An Entrepreneur's Nightmare: A lot of generals, not many soldiers. If your company needs regular, dependable help at lower skill levels, set up shop somewhere else.

An Ideal Location For: R&D. Other high-value-added operations such as specialty professional-service firms.