Do startup accelerators really work?
"Innovation district." "Startup accelerator." "A Shark Tank school for startups." They have many names, but the fizzy trend is undeniable: the creation of spaces conducive to creating hot-seeming new companies, providing "access to mentors and peers along with space and venture funding," as Richard Florida put it.
These hotbeds of innovative ideas are popping up in San Francisco, New York City, Boston, San Jose, Chicago, Los Angeles, Seattle, and the D.C.-Virginia-Maryland area. They also tend to congregate in the buzziest corners of the American economy: mobile apps, IT, software, medical devices, new media, and entertainment.
Boston has an innovation district that has birthed companies like ZipCar, LogMeIn, and Rethink Robotics. In St. Louis, another innovation district — put together by local entrepreneurs and investors — has been using a fund to seed local startups since at least 2013, while repurposing some downtown buildings and taking advantage of local universities. Minneapolis has an innovation district focused on creating city infrastructure that's better equipped to endure the new and changing weather patterns that will come with climate change. Milwaukee's startup hub is working on ideas to use freshwater from Lake Michigan more sustainably and efficiently.
In Baltimore, the Emerging Technology Center has served as an incubator for startups in an effort to revitalize the city's urban core for several years now. It has a $2 million annual budget, one-third of which is provided by the city. It provides office spaces and basic logistics, like coffee and toner cartridges for printers, so startups don't have to worry about that stuff. But they also provide clinics for entrepreneurs, access to investors, advice, a community of other startups, and generous leasing terms. The Emerging Technology Center has attracted information technology service firms, companies that work on advertisements in mobile apps, and more.
It all sounds cool, right? Well, these examples also hide clues to the ultimate limits of innovation districts.
Boston benefits from being very accessible to many other giant economic hubs, as well as the presence of dozens of universities. Orlando already has a major media and entertainment industry that startups can build off of, and Cleveland has its famous medical hub. San Francisco and New York, perhaps the leaders in startup accelerators, already house many of the most cutting-edge firms in the country.
In other words, a lot of successful innovation districts seem to be a symptom, rather than a cause, of economic vibrancy.
"The nation's leading tech hubs have far and away the majority of accelerators," wrote Florida. "While accelerators have spurred lots of startups in these places, they are themselves a product of their well-established entrepreneurial ecosystems."
The places where startup accelerators blossom the most is where investors and experience and mentors and a community of entrepreneurs can already be found — and where major hubs of airlines and transit are already in place to bring in new talent, to connect with clients, and so forth.
There's also the question of local customers being able to buy what these startups are selling.
In Las Vegas, they tried to build an entire socioeconomic milieu of young, creative, upwardly mobile strivers: not just tech startups, but the shops, bookstores, private schools, bars, and restaurants the employees there would frequent. But Vegas was built on gambling, and doesn't have the resources tech entrepreneurs need already in place. So the tech companies themselves are having trouble gelling there. And given how the Great Recession and years of sluggish recovery hit gambling and tourism, it's not clear how those other businesses attached to the innovation district will do once the (admittedly generous) $350 million in seed money runs out.
The down economy is hurting the more successful hubs, too. Precisely because everyone is trying to get to the remaining good jobs in big urban centers, startups in Boston are being driven away by skyrocketing rents.
All of which can make it seem like innovation districts are putting the cart before the horse: trying to create a community of startups, or even the lifestyle or "vibe" of an entrepreneurial cluster, before the underlying resources or demand are in place to actually sustain those ventures. This is betrayed by how innovation clusters are often described: walkable urban places with mixed-use developments and public transit, lots of coffee shops, and spaces where "collisions" can occur between highly educated creative people.
It's not hard to see this as a mere valorization of the college-educated upper class and its preferred lifestyle environs.
Phoenix's innovation district, for instance, is still in its early stages. And while no one knows what policy will create it yet, they definitely know "the proposed district would focus on branding, marketing, and coalescing the entrepreneur community."
Cool marketing. But maybe they ought to focus on the policy, resources, financing, and overall economic conditions that could actually make it happen.