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Where High-Growth Company Founders Start Out and Where They End Up

Where High-Growth Company Founders Start Out and Where They End Up
eurobanks / Shutterstock.com

Economic development experts and politicians have long recognized that many cities have turned from traditional “smokestack chasing” to place-making, adding amenities — like green spaces, more walkable neighborhoods, and better public transportation — as well as investing in schools, higher education, and the arts to make themselves attractive to talented workers. Whether these efforts actually spur economic growth or are merely a product of this growth continues to be a matter of ongoing debate.

A new study by Kate Maxwell and Samuel Arbesman, "The Ascent of America’s High Growth Companies: Founder Mobility" (PDF) for the Kauffman Foundation, offers important new insights on this issue by providing data on the movements of a key group of entrepreneurial talent — the founders of Inc. 500 companies, ranked as the fastest-growing privately held firms in the United States. Covering the period 2000 to 2008, it charts the peregrinations of these founding entrepreneurs from their alma maters to the metros where they launched their companies. Geographically, these Inc. 500 companies were located in 210 metros and 49 states, which are also home to 605 universities. The research identified data on 1,702 founders over this period, including the university they attended for 1,476 of them. Ultimately, the study provides a detailed, objective handle on the flow of entrepreneurial talent and which metros are “producing,” “exporting,” “importing,” and “consuming” it.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Where Founders Go to School:  The table above from the study lists the top ten metros where entrepreneurial founders received their university educations. The list tracks major clusters of great universities and colleges. Boston ranks first, not surprisingly given Harvard and MIT, followed by New York. Other metros along the Bos-Wash corridor place highly, with Philadelphia in fourth and Washington, D.C. sixth. On the West Coast, Los Angeles is third, the San Jose metro (where Palo Alto and Stanford are located) eighth, and San Francisco ninth. In the Midwest, Chicago is fifth. Austin is seventh. Provo, Utah, rounds out the top ten.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Cities That Produce the Most Founders:  Washington, D.C., tops the list, as the table above (from the study shows) followed by New York, L.A., Boston, Atlanta, San Francisco, Dallas, Chicago, Denver, and Philadelphia.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Cities That Attract the Most Founders:  Washington, D.C., also tops this list, followed now by L.A., New York, and San Francisco. Rounding out the top ten are Atlanta, Boston, Dallas, Chicago, Denver, and Miami.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Cities That Lose the Most Founders:  Boston tops the list, followed by New York, L.A., Philadelphia, San Jose, and Chicago. The rest of the list includes college towns, like Austin, Ann Arbor, and Champaign-Urbana, as well as San Francisco.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Cities That Retain the Most Founders: The Bos-Wash region excels here, with New York, Boston, and Washington, D.C., at the top. Conspicuously absent is San Jose, at the heart of Silicon Valley. The picture changes when cities are ranked by the percentage of founders they retain. Now, Portland, Oregon, Houston, Louisville, Oklahoma City, Bloomington, Illinois, and St. Louis join the list.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

Founder Mobility:  A key aspect of the study looks closely at founder mobility from one metro to another. Here it finds that "Seventy-five percent of founders started their companies in different cities from the ones where they last received a degree, but only 37 percent moved to a different region."

Washington, D.C., has the highest net flow of founders, followed by Atlanta, Dallas, San Francisco, and L.A. The rest of the top ten include New York, Denver, San Diego, Salt Lake City, and Houston.

The metros with the lowest net flow of founders are mainly college towns. Ann Arbor tops this list, followed by San Jose, Urbana-Champaign, Durham, Ithaca, Syracuse, Columbia, Missouri, Gainesville, Iowa City, and State College, Pennsylvania.

Table courtesy of “The Ascent of America’s High Growth Companies: Founder Mobility” (PDF)

The study develops an innovative network analysis of founder mobility based on “which counties are connected by a founder moving from one to the other" and the metro areas where “founders’ schools are connected with the metro areas.” The authors find that:

The East Coast is a distinct community, as is the West Coast, extending all the way to Denver (note that, in some runs, the East and West Coast communities are combined). In addition, there is a community that cuts through the middle of the country, running from Chicago through Kansas City all the way down through Texas. Similarly, there are smaller regional clusters, such as one (orange) that runs through the Carolinas and Kentucky and Indiana. The map is also reminiscent of Richard Florida’s and others’ ‘megaregions’ concept, echoing connections in the northwest, for example. However, we also see more distinct connections and communities that are not necessarily connected by neighboring geography.

Co-author Arbesman explains this regional stickiness. "It's striking that most people stay in their region, meaning there are perhaps certain geographical basins of attraction," he says. "Once you're in a certain place, you might stray, but not too far. You may be in a different city but not necessarily a different ecosystem, and these ecosystems are defined regionally."

The authors conclude:

The popular narrative of where high-growth entrepreneurs emerge from and where they go is too narrow to account for all of the patterns seen here. Moreover, these data fit well with a narrative of economic development in which mobility and flux play positive roles—retaining human capital is not the only way in which a city can create economic vibrancy...Explaining how and why founders choose to move to different cities is an important piece to start understanding the larger entrepreneurial ecosystem.

Talent is a highly mobile factor of production — it flows, concentrating more in some places than others. The cities that excel the most at attracting and retaining skilled, entrepreneurial talent, enjoy a critical economic advantage.

Top image: eurobanks / Shutterstock.com

Richard Florida is Co-Founder and Editor at Large at The Atlantic Cities. He's also a Senior Editor at The Atlantic, Director of the Martin Prosperity Institute at the University of Toronto's Rotman School of Management, and Global Research Professor at New York University. He is a frequent speaker to communities, business and professional organizations, and founder of the Creative Class Group, whose current client list can be found here. All posts »

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