Startup Cities

“Ultimately, what propels a region’s startup scene to the top of the Pillar Company Staircase is an ample supply of talented entrepreneurs who have the ability to scale a company to $100 million or more in revenue. Indeed, of all the critical resources that make the difference between a region’s startup success and failure, nothing is more important than an adequate supply of entrepreneurs who can scale a company. Regions that attract and develop such talent over generations of companies sustain their leadership, and regions that repel such talent face overwhelming hurdles to creating local startup success.” — Peter S. Cohan

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This publication by Peter S. Cohan delves into the question of why some cities are dominant in the startup Scene, and what others could do to foster their own startup ecosystem. The book works primarily with the concept of the “Startup Common”, the common ground and resource pool for startup development in a city, similar in principle to the former English fields of the same name.

According to the book, a Startup Common consists of pillar companies, universities, human capital, investment capital, mentor networks and shared values. New startups draw from this resource pool and, if successful, can help increase it by reinvesting in it, if a failure, can give the resources back to it by being composted. However, this pool can also be depleted in several ways, from as local graduates migrating to other cities to successful entrepreneurs deciding not to give back to the local community. Such threats must be kept in mind by the cities.

Another important concept used in the book is that of a “Pillar Company Staircase”, a framework for classifying different groups of cities according to the strength of their startup environment. After all, although all cities are trying to foster startups, the actions that a small city wanting to attract capital has to take are completely different from those that startup powerhouses take to maintain and expand their status. For this, Cohan divides cities in 5 different groups, based on the presence and quantity of “gazelles” (rapidly growing startups) and “pillar” companies (big local firms that can provide talent and capital, as well as acquire local companies or their products).

So, for example, while places like Silicon Valley have affordable housing and the development of public infrastructure capable of coping with their explosive growth as their top priorities, cities at the initial stages should instead focus on getting their universities aligned with local startup research needs or on simplifying regulations for the opening, sale and closing of companies. Especially important for cities at stage 0 is the attraction or creation of their first gazelle, as that serves as an initial to push startup growth forward.

But most important of all is the understanding that becoming a Startup city is an organic and entrepreneur-dependent phenomenon. Actions from policymakers that don’t take this into account can turn into a waste of resources or bring about a short startup boom with no long-term sustainability, which can be the case when one signs government grants to foster startups without previous studies. On the other hand, methods that require more commitment and close partnership with startups, but that help shape a local entrepreneurial mindset, such as the creation of Startup Incubators, can help turn the local community into just the right soil for these businesses to grow and take root on, spurring economic growth and innovation.

The book is split into 8 chapters, in which the author first explains the notion of a Startup Common, goes through each of its elements, showing how they are manifested in cities from each level of the Pillar Company Staircase. Finally, the author gives his advice for cities wishing to boost their own Startup Common.

Creators of zones and societies may delve into chapters 2–8 to understand the role of individual components of a Startup Common and learn from the extensive amount of successful and less-successful case studies.

Policymakers and analysts should look no further than chapter 8, in which all implications for cities are laid out and the key insights from the case studies are summarized.

Scholars and experts may read chapter 1 to understand what is meant by a Startup Common and what elements it is composed of, so they can do further research on the topic.

The book can be found here.

Written by: Francisco Litvay