There is no economic evidence that high quality physical places alone will lead to new businesses.
Of course the physical infrastructure of a city impacts the ability for people to interact. And various issues, such as affordable housing, mobility and blight, hamstring countless cities. But when it comes to supporting new businesses, the prevailing zeitgeist that cool places precede cool companies is simply wrong and extremely harmful.
At least once a week I talk with a local leader that wants to build a robust network of young businesses by constructing a new, or more often, revitalizing, an old building. My reaction is always the same, “great, what problem will the new space solve?”. Answers generally fall into two categories. First, the city needs a central location to spur ‘collisions’ – serendipitous, productive encounters between startups, funders and mentors that wouldn’t happen without designated space. The second reason is that entrepreneurs need access to capital, mentorship, customers and employees. And while these things are hard to provide to startups, the thinking goes, creating a new place is a step in the right direction.
Both of these answers are the wrong reasons to invest in a new or revitalized building. The economic research shows purely serendipitous encounters rarely lead to effective partnerships. Instead, great meeting places are often only effective for people who already know each other, and understand how they can benefit from working together. If serendipitous encounters led to new businesses, venture capitalists would spend a lot more time in Amtrak stations.
The real appeal of the “build it and they will come” mentality is its simplicity. With enough money, any municipality can get a new building. And with even more money, you can get a really cool new building. And who doesn’t love a good ribbon cutting? But the most pressing constraints for new businesses are often different for each city and it’s really hard to identify those issues. Doing so requires countless conversations with both successful and unsuccessful entrepreneurs; collecting, often extremely limited, data; learning from peer cities and trying new things while aggressively measuring their impact. Even after all that, many cities simply won’t have enough high-growth startups to get too far beyond anecdotes.
But there are other interventions cities of all sizes and capacities can try to support entrepreneurship. And they don’t require the significant cost of construction. Here are a few examples that NLC is currently working with cities to implement:
- Joining national networks like One Million Cups to help entrepreneurs interact with each other and local leaders. If the goal of new physical spaces is to get startups to begin talking with each other and the broader ecosystem, then programming those engagements is a better first step. On Million Cups is a light touch way to begin the process of connecting with entrepreneurs.
- Measuring the impact of existing programs, co-working spaces and accelerators. Before trying something completely new, why not better understand if existing programs and entrepreneurial spaces are working? There are number of organizations that can help cities better quantify the actual outcomes of existing investments.
- Creating an entrepreneurship ambassador position in local government to coordinate, connect and communicate with new business owners. One of the most important assets a city can have to help young firms is someone who’s job it is to listen to startups and relay their concerns to the mayor’s office, Chamber of Commerce and other public, private and civic leaders.
In partnership with Schmidt Futures and the Kauffman Foundation, NLC’s City Innovation Ecosystem program is working with 100 cities to implement these ten solutions. If you’d like to learn more, let us know. Contact Scott Andes at andes@nlc.org.
About the Author: Scott Andes is the program director for the City Innovation Ecosystems program. The program, which looks to foster local innovation, entrepreneurship and STEM learning opportunities, is currently accepting applicants. Please visit the program’s web page to learn more.