What Do the Best Entrepreneurs Want in a City?

WHAT DO THE BEST ENTREPRENEURS WANT IN A CITY? Lessons from the Founders of America's Fastest-Growing Companies ENDEavoOR INSIGHT We believe that the magic formula for attracting and retaining the best entrepreneurs is this: a great place to live plus a talented pool of potential employees, and excellent access to customers and suppliers. INTRODUCTION The founders of high-growth companies are important job creators. They tend to start their firms in cities and rarely relocate them. Research shows that a relatively small number of fast-growing firms have the ability to create a large number of new jobs. For example, between 1994 and 2006, the fastest-growing American companies represented less than 3% of all firms, but generated almost all U.S. employment and revenue growth. Endeavor Insight conducted surveys and interviews with 150 entrepreneurs who lead some of America's fastest- Inc. 500 growing firms. The companies of these entrepreneurs were listed on the Inc. 500 list of fastest-growing U.S. firms in 2010, 2011, or 2012. Most of the entrepreneurs who lead these companies live in cities. About 40% of our respondents live in the ten largest metropolitan areas of the country, each of which have 4.5 million or more After an entrepreneur launched her company in a city, she rarely relocated the firm to a new metropolitan area. Nearly 90% of the entrepreneurs in our study (131 out of 150) continued to locate their companies in the individual cities where they were founded. 90% 131/150 residents. An additional 40% live in other metropolitan areas with population between 1 and 4.5 million. LESSON #1 Entrepreneurs at fast-growing firms usually decide where to live based on personal connections and quality of life factors many years before they start their firms. 80% 50% of entrepreneurs had lived in their city for at least two years before founding their company. of respondents cited their current residence as a factor in deciding where to launch their company. SELECTED QUOTATIONS FROM SURVEYED ENTREPRENEURS Why did you choose to found your company in the city where you did so? "I was able to place my office two blocks from my house, and one block away from the school my wife teaches at and my children attend." "I already happily lived here. I also had a good feeling that Richmond was where I was planning to stay for the foreseeable future." "I lived here prior to starting my business. Asheville has a great quality of life, including a vibrant downtown, beautiful nature, and a good community for raising a family." "My basement was located in Park City, and it was started in my basement." "T have lived in Orlando for many years, so it just made sense to start the company here." LESSON #2 Founders of high-growth companies value a pool of talented employees more than any other business-related resource that cities can offer. 31% 20% of founders cited access to talent of entrepreneurs who cited access to talent specifically mentioned the availability of technically skilled employees. as a factor in their decision on where to launch their company. SELECTED QUOTATIONS FROM SURVEYED ENTREPRENEURS Why did you choose to found your company in the city where you did so? "Employees want to live and work here. We "I chose Boston because of the cultural life: symphony, colleges, theater, beautiful architecture, etc. These knew that when we moved here and later started the company." things attract the kind of intelligent people we'd like to employ. 'San Diego has a wonderful blend of tech talent coming out of Qualcomm, the defense contractors, "Human capital is the most essential common and especially UCSD." ingredient of all startups...We had to tackle technical and "It's a great place to recruit local talent and great place to invite other potential employees to move to." financial challenges. New York City was the only place that offered outstanding resources for both." LESSON #3 Access to customers and suppliers is the second most valuable business-related resource that cities can provide, according to the founders of rapidly expanding firms. 1in5 21% entrepreneurs cited access to clients and suppliers as a factor in deciding where to launch their company. of respondents in our study cited geographic factors, such as proximity to other large population centers. SELECTED QUOTATIONS FROM SURVEYED ENTREPRENEURS Why did you choose to found your company in the city where you did so? "Central location. We "Studios, such as Disney, Warner Brothers, and Dreamworks, are able to meet with anyone in the United States at 9 a.m." are our customers and are in or near Burbank..we also manufacture and many of our vendors are in Burbank." "It's located in the Midwest making it closer to many markets." "Atlanta is appealing "Houston is the global hub for many clients in the oil and gas industry." because there are a lot of companies we can provide our services to in a variety of industries." LESSON #4 Entrepreneurs who lead fast-growing companies rarely cite low tax rates or business-friendly regulations as reasons for starting businesses in a specific city. ONLY ONLY 5% 2% of entrepreneurs cited low tax rates as a factor in deciding where to launch their company. of respondents mentioned business- friendly regulations or policies when discussing why they founded their company in a specific city. MOST COMMON DESCRIPTIVE WORDS IN ENTREPRENEURS' RESPONSES LISTED IN DESCENDING ORDER OF FREQUENCY Why did you choose to found your company in the city where you did so? talent proximity grow professionals graduated stay enterprise opportunities lived tech hub restaurants growing traffic facilities parents home clients technologyNess Ave Cindustries universities move grew program people companies moved travel industry wife highways vendors &Marke e community space reasonable ability market world hours weather live work rent affordable schools balanced house working years college resources attract services basement impact young living quality airport build tax beautiful income zone close school building businesses girlfriend chamber medicine cost time center capital homes cheap members family life day central honest country mortgage town pool local choice job diverse mountains employees residence near culture media draw national office back park global opportunity drive network To learn more, visit www.endeavor.org For additional information on this research, please contact Rhett Morris at [email protected]