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Editor’s Note: In the new podcast Masters of Scale, LinkedIn co-founder and Greylock partner Reid Hoffman explores his philosophy on how to scale a business -- and at Entrepreneur.com, entrepreneurs are responding with their own ideas and experiences on our hub. This week, we’re discussing Hoffman’s theory: Silicon Valley has an inimitable blend of talent. No other region can match its collective capacity or wisdom for scaling, except maybe China. Listen to this week's episode here.
Municipalities across our nation are dedicating substantial funds and efforts to growing their entrepreneurial ecosystems and supporting small businesses. This makes sense. We know that statistically, small businesses employ about half of the workforce, even though only about 21 percent of small businesses are employers. Small businesses make up the bulk of all businesses, add the majority of new jobs and are considered the backbone of the American economy.
In addition, communities are focusing on encouraging high-quality, high-growth startups because they seemingly promote the most job and economic growth. Research shows that regions that produce more high-quality startups enjoy improved economic performance. One study reported that the top 25 metro areasfor startup growth averaged 11.9 percent private sector job growth over a nine-year period ending in 2016. Areas with lower levels of startup activity averaged less than half that growth.
Reid Hoffman is right when he states that Silicon Valley is unmatched when it comes to scaling and supporting startups and that this effort takes a lot of resources. Silicon Valley is the behemoth when it comes to entrepreneurial ecosystems, and will most likely keep this title for some time. But, other cities can benefit greatly from the same economic boost created by a thriving entrepreneurial community. The question is, what is needed to support these growing businesses? While different experts argue that the ecosystem needs three, four or more components for success, we will leave it to the scholars to discuss the particulars. Instead, we will look at several forces that have created a favorable environment for entrepreneurs in our city, Richmond, Va.
Richmond is a long way from challenging the Valley, but it is a city that is quickly moving up the “best of” lists, was named a top tech town and was the subject of a Rise of the Rest Tour. We will focus on three areas that support our thriving ecosystem and some of the key players who are helping with the construction. Our hope is that Richmond’s experiences may help others to think about what their town, city or region might do to improve the environment for their startups and small businesses.
In order to have entrepreneurs, you need educated, ambitious people who are capable of starting and supporting a growing business. Frankly, this means leveraging your college and university systems. Richmond is blessed to be the home of Virginia Commonwealth University, one of the largest universities in our state. However, it doesn’t stop there. We also have the University of Richmond, Randolph-Macon College, Virginia Union University, Virginia State University and two large community colleges within 20 miles of our downtown. We also draw talent from the University of Virginia and Virginia Tech. Combined, these institutions graduate tens of thousands each year.
Related: 3 Myths About Starting a Company in the Midwest
You also need to keep your graduates. Therefore, you have to be a place where young people want to live, work and play. This year, Time recently named Richmond the second most popular location in the country for millennials to move. With its nationally recognized food and craft beer scene, its budding arts and entertainment venues and its quirky vibe that includes a strong affinity for tattoos, Richmond is cool.
Funding is crucial to business growth, and lack of capital is cited as one of the key reasons that businesses stall or fail to scale. Richmond has several active angel investor groups, individual angels, and for the past five years, a VC focused on the Richmond region. The firm, NRV, just closed on the NRV Early-Stage Growth Fund last month. This $33-million dollar fund will be used to invest in promising early-stage businesses in the Richmond region and throughout Virginia.
It may be a bit cliché, but it does take a village to grow and support the startup community. There are many players in this field, but we will mention several to give you some ideas to use in your areas.
- ChamberRVA, Richmond’s regional chamber of commerce is extremely active in supporting the entrepreneurial community. It houses Thrive, our local Small Business Development Center (SBDC). Thrive is our city’s one-stop shop offering assistance to individuals and small businesses by providing a wide variety of information, one-on-one guidance and education. It supplies mentoring provided by some of the city’s most experienced entrepreneurs.
- Lighthouse Labs is a non-profit that for the past four years has worked with 27 startups. Its three-month accelerator program connects promising startups with mentors, investors, support services, working space and education. It has helped several promising companies including Tenant Turner, which went on to the Y Combinator, but then returned to Richmond to continue its growth.
- The Bio+Tech Park is a community that houses nearly 70 life science companies, research institutes and state/federal laboratories. This facility, led by Carrie Roth, provides an environment of collaboration, business support and specialized facilities designed to grow companies in the global biotechnology environment.
- Coworking and Incubators are a growing part of the entrepreneurial community in Richmond. From Gather, 804RVA, and the newest arrival 1717, an incubator with support from one of our local employers, Capital One, startups, small businesses and the freelancers who work with them can find low-cost space that gives rise to collaboration and community.
- Quality of life is exceptional in Richmond. Our location is superb with about an hour’s drive to the Shenandoah Mountains and two hours’ drive to Washington, D.C. and Virginia Beach. We have the amenities of a large city without the traffic. We laughingly say that we don’t have “rush hours,” we have “rush minutes.” Our cost of living is below the national average with our exceptionally affordable housing leading the way.
While no one can predict where the next LinkedIn, Facebook or Google will come from, one thing is sure: Communities that focus on startups, entrepreneurs and small businesses will reap many benefits. It is true that less than 1 percent of businesses will ever grow to meet the government’s definition of a large business and employ more than 500 people. However, we would argue that creating an environment where startups can become small businesses and small businesses can become true midsize companies may be an even better investment. You may still grow a superstar, but if not, you will have created a great entrepreneurial ecosystem. One that will provide jobs and keep your talent from moving away. This is what Richmond is doing.