The Optimal Tech Startup Community: Who, What, When, Where, and How?

As the uncertainty of the economy continues to loom in this country, there is an entire subset of the population that is ignoring those numbers and venturing into the land of entrepreneurship. Many of those who are entering the startup community are tech people who are focused upon making a difference not only in their immediate communities but in the world. In order to make their entrepreneurial dreams come true, startups need the right environment to get started. The optimal ecosystem for the launching of tech startups could be narrowed down to location e.g. Silicon Valley, Austin, TX, etc. What are the factors that makes those cities/areas the best places for startups? How can entrepreneurs know where their ideas will be nurtured from thought to fruition? Startup expert and all-around smart guy, March Nathan gives us an idea in the following blog. After reading it, let us know your thoughts and whether you agree with his assessment.
TSH Team
I initially wrote this post in response to Kevin Plank’s  post about the Baltimore Tech community, but it turns out to really be about my experience in Houston.
I can’t speak for Baltimore since I’ve only moved here a few weeks ago from Houston, Texas – the single least dense city in the country that also has almost zero public transportation. I can tell you that ‘density’ is not the biggest problem, nor  is it the easiest to fix. High density is great for learning about new startup ideas (or pivots into other ideas) and best practices, density is good for learning about markets and competitors and it’s particularly good for hiring (more often, ‘poaching’ from other companies within that density). The problem with density is that it mostly fuels change, not growth which is more important to established companies. Change is important to  begin startup communities. However, I also  believe that growth where a diverse set of startups can achieve escape velocity through acquisition or IPO is important to help sustain startup communities as long as the thread of the original entrepreneurial DNA is present after the original exit. Companies that strive for growth or scalability often thrive in situations where they can dominate a particular ecosystem and attract the best talent, capital, and support.
Houston, like Baltimore, suffers from the same startup community problems that every city experiences with the sole exceptions of San Francisco, and to a growing degree, NYC. There are three main problems to be addressed that keep an area from being considered a startup community or ‘Silicon X (Hills, Swamp, Forest etc.):
  1. There is a relatively small number of motivated entrepreneurs (lots of great ideas and intelligence, but very few people willing to execute on a scalable basis).
  2. There is not enough risk capital including VC’s and professional angels that understand the startup investment cycle – that is always true even in the age of Angelist and crowdfunding via the JOBS Act.
  3. And last but not least, there are very few companies that have achieved escape velocity AND have been able to spin off trained entrepreneurs looking to start new companies. This is evident by the tightest market in any city – bonafide, seasoned startup mentors. These can take the form of Angels and/or lawyers who have successful startup experience and C-Level talent that work for new startups. Think about the PayPal Mafia or Dell (you used to hear a lot about ‘Dellionaires’ in Austin starting new companies, but you’ve never heard of a ‘Compaq-aire’ in Houston starting a new company). Outside of the Valley, NYC comes closest to solving these problems for consumer-facing web based companies. Boston still has a strong foundation in biotech and life sciences and Boulder, Colorado is likely the best example of growing a community from nothing to something within a few short years. Tony Hsieh is building this in Vegas almost single-handedly, despite the accusation of gentrification.
A few comments on Kevin Plank’s statement – it’s a nice sentiment and I’m glad that he’s putting the spotlight on innovation. He certainly must understand that innovation goes hand in hand with tech simply because of his involvement with StartupAmerica. But it is not his responsibility nor should he be shamed into spending his money on supporting the tech startup community. I have to disagree that Under Armor is a technology company in the sense that we talk about tech companies – UA makes and sells clothes—period. Their competitive landscape includes Nike, Reebok, Adidas, Fila and Puma – not Microsoft, Google, Amazon, Apple and Facebook.
I’m all for participating in or helping to support a community roundtable (even if it’s just a Google+ Hangout) about this topic. I would hope that we can gain something of value and create a plan to execute it appropriately.