How U.S. Cities Can Maintain Their Startup Edge

Photo Credit: Flickr Contributor huckstero

Despite global leaders like New York and San Francisco, the future of tech startup enterprise and capital in the United States is uncertain. Today, the capital is moving overseas, and with it, so goes industry: In mid-1990s, the United States represented 95 percent of the world’s venture capital activity — a number that has fallen to just over half. And much of the current growth is in cities across China, India, Europe, and the United Kingdom. .

Recently the NYU SPS Schack Institute of Real Estate Urban Lab and the Center for American Entrepreneurship released a study on venture capital activity worldwide, and convened a panel of experts for conversations on what businesses, organizations, cities, and policymakers can do to support the growth of startup enterprise at the local and national levels in the United States. The following are four key insights from the discussion, aimed at cities looking to grow their innovation economies. [Full report available here.]

Harness how cities shape technology

Cities today play an integral role in the tech economy. The majority of tech and venture capital activity has moved from the suburbs, turning major cities such as Boston, New York, and Seattle into hubs of startup activity. With their arrival has come urban inequality and challenges, alongside a boom in high-paying jobs, and creative-class professionals. Crucially, cities are also the vehicle for many new so-called urban tech companies today. From ride-sharing services like Lyft, to coworking spaces like the Wing, “cities are not just the host of the ecosystems, but are the platforms,” says Richard Florida, Distinguished Fellow at the NYUSPS Urban Lab. That means cities can harness their position as both host and platform to support and regulate the urban tech picture, spreading the wealth into the less-saturated hubs of the future.

Find avenues to support immigration, diversity, education, and talent

The United States is no longer the default center for tech, and the industry may go elsewhere if the conditions — like starting businesses or hiring talent — are too difficult. “The real risk now is [losing] this global war for talent,” says Ian Hathaway, Research Director for the Center for American Entrepreneurship. For tech to continue to expand into secondary hubs, the larger business community needs to focus on supporting immigration efforts, educate the next wave of talent, and partner with schools to help cultivate diverse talent across the sector. There are organizations arising through government, and private enterprise, that actively supporting these efforts.

One such organization is Tech:NYC, a NY-based nonprofit that supports a “robust tech ecosystem, led by Executive Director Julie Samuels. When President Trump signed his January 2017 executive immigration order, which sought to widely limit travel and immigration immigration, Samuels organized a letter from many leaders in the tech community that opposed the policy and underscored the importance of diversity and immigration in their industry. “[The letter] has a real impact,” Samuels says. “We’ve seen a lot of really interesting things happening at the local and state level, and some of that comes from government, and a lot of it comes from community.”

Support cities on the technological rise

To build national support for the ideas and policies that will help tech thrive, the sector needs to impact a broader swath of cities where post-recession growth has been lacking. “For the entrepreneurial community, you have to be thinking about innovative ways to bring people along — to demonstrate to folks that they have a stake in this,” says Congressman Jim Himes (D-CT 4th). Second-tier hubs are rising up nationwide, including Nashville, Atlanta, Denver, Detroit, and parts of the Midwest. Toronto, which has experienced a tech boom, is leveraging its urban planning focus, partnering with Alphabet’s Sidewalk Labs to help build a downtown waterfront district that is conducive to tech innovation and equality in urban life. Tech development and VC activity in these areas could help provide not only good-paying jobs to a larger array of people but also help those cities engage more robustly with the new, tech-focused economy.

Think globally, understand locally, and leverage major anchors

For tech to grow in smaller hubs, and for venture capital firms in the U.S. to leverage international markets in their investing, those communities need to understand the local landscapes they’re investing in. On the international scale, VCs can closely assess the startup landscape in an overseas hub. Nationally, cities and companies can invest in relationships with major anchors: Research universities and their offshoots, including the UC system, Cornell Tech in NYC, or the University of Oregon, provide access to R&D and a tech incubator landscape that encourages startup growth and innovation.

Tech companies in smaller hubs can leverage a city’s historic ties to a major industry, such as Nashville and its association with healthcare, says Samuels. Those cities and startups benefit from not only a lower cost of operating, but as members of a new community to build in, and help shape. “There is an army of people and initiatives in communities all through the country. Civically minded individuals in these cities will move things forward, and we need to give people the tools to do that,” Hathaway says.

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The changing geographic landscape of startups and venture capital promises to shift the global economy into the 21st century and beyond. Understanding how to harness these changes is crucial in order for the United States to remain a robust global player, and a continued leader on innovation.

STEVEN PEDIGO is the Director of the NYUSPS Urban Lab at the Schack Institute of Real Estate, and a Clinical Assistant Professor for Economic Development at the NYU School of Professional Studies.

ABIGAIL SINDZINSKI is a writer, editor, and communications professional. Her work has appeared in outlets including Curbed, LAmag.com, JNCI, and Guernica.