All Economic Development Can't Be About Promoting Tech Startups
In their efforts to cultivate entrepreneurship, local policymakers need to be leery of copycat solutions.
All over the country, local governments of all sizes have created -- or are trying to create -- entrepreneurship support strategies. Walk into any economic-development meeting with a mayor or city manager and you're bound to hear some combination of these words: "accelerator," "venture fund," "pitch competition" or "co-working space."
This rush to cultivate startups is not without good reason. New and young companies are the principal source of the creation of new jobs. Startups and high-growth firms (which are mostly young) represent around one-quarter of firms in any given year but account for about three-quarters of job creation. Naturally, then, any policymaker will want to support new, young, and growing companies. This was the motivation for dozens of mayors and other city leaders who came together at the Kauffman Foundation's third annual Mayors Conference on Entrepreneurship recently in Albuquerque.
The growing recognition of the importance of startups has created the rush to foster "entrepreneurial ecosystems." Co-working spaces are popping up everywhere, and it seems like every city has a new incubator or accelerator to show off. Chances are, if you're a policymaker, you've likely approached your local university about hooking up with its new entrepreneurship programs and courses.
This startup fever, however, is beginning to look the same from place to place and may be creating not entrepreneurial vibrancy but what some are calling a "startup monoculture."
In agriculture, monoculture is the high-intensity cultivation of a single crop across large swathes of land that, while it may make economic sense in the short term, is not necessarily good for crops or soil. In economic development, startup monoculture is the application of the same elements across different places and different contexts with the expectation of the same results. See an accelerator that purportedly worked in one city? Then you must create one in your city. See a combination coffee shop and co-working space that buzzes with activity? Immediately create one in your downtown. And so on.
Startup monoculture did not develop perniciously. It has roots in the largely benign explosion of entrepreneurship support and training programs. In the 1980s, entrepreneurship education was a minor pursuit on college campuses, with only a few hundred places doing it. Today, nearly every one of the nation's 4,000 colleges and universities has some sort of entrepreneurship offering.
Accelerators and co-working spaces are a more recent phenomenon. The first true accelerators were started in 2005 and 2006, but their numbers have exploded in the past few years, and there are now an estimated 200 in the United States. The proliferation of co-working spaces is evident in the rapid rise of WeWork, a company that operates co-working spaces and which went from a valuation of zero to an estimated $10 billion in just five years. However, the latest trend is to combine all of this into one physical place: put your coffee shop on the first floor, a co-working space on the second floor, the accelerator on the third floor and living space in the floors above. Entrepreneurs do not need to leave the building -- it is literally, as some have called it, an "ecosystem in a box."
This sort of growth is not necessarily evidence of malpractice. Accelerators seem to be an improvement on the older model of incubators. University students profess higher levels of interest in starting companies. Co-working spaces cater to a fleet-footed army of laptop-toting entrepreneurs who want peer support and interaction.
But from place to place, startup fever has turned into startup monoculture: It looks the same everywhere, irrespective of differences between places or their entrepreneurs. The support and promotion of entrepreneurship has become professionalized and industrialized. Big companies have noticed, with many now opening up internal corporate accelerators to tap this fever, the surest sign that entrepreneurship is fast approaching a significant fork in the road.
Startup monoculture is the opposite of what entrepreneurship is all about. Entrepreneurship is about experimentation and mixing things together. It is gloriously messy. Trying to put your entrepreneurs and startups into boxes and neat and tidy rows will likely not create vibrancy in your community.
This doesn't mean places can't learn from each other. Indeed, a huge part of economic development is observing the experience of other places and sharing lessons. But there is a difference between learning and copying. What seems to work in one place may not work in another. When it comes to economic development, policymakers need to think like the entrepreneurs they're trying to cultivate.