From the November 1999 issue of Startups

Want to hit it big in high-tech? Where you set up shop may be a major factor in how high your company soars because, increasingly, tech businesses are found not in isolation, but in clusters--witness Silicon Valley where, it seems, every business is tech-related.

But that doesn't mean Silicon Valley is the nation's only tech hotbed--or even the best spawning ground for start-ups. To find out exactly where tech newcomers are thriving, Business Start-Ups asked the economic analysts at Dun & Bradstreet to crunch the numbers and rank the nation's 139 metro areas from best to worst for fledging tech businesses. Read on for the rankings--and for a surprise: Silicon Valley can't claim the top spot.


Robert McGarvey has covered the tech industry for more than 15 years.

10. Seattle

When Microsoft landed here in the '80s, Seattle was known for fish and airplanes, but just as Bill Gates has changed the way America works, he's also transformed Seattle into one of the nation's undisputed high-tech engines. The big action nowadays: dot-com start-ups that have taken off in the wake of the success of Seattle-based Amazon.com. New dot-coms include online pharmacy rivals Drugstore.com and Soma.com, as well as HomeGrocer.com. There are also hundreds of little software companies, and Seattle remains home to the king of the cyberhill, Microsoft.

Joe LePla, co-owner of Parker LePla, a Seattle high-tech integrated-brand development firm, gives the local scoop:

Why it's hot: Venture capitalists, plenty of muscular industry groups (like the Washington Software Alliance) and "an overwhelming belief on behalf of the local populace that software/Internet content are key to everyone's future," says LePla. A compelling geography--snow-capped mountains, lakes and ocean--doesn't hurt when luring newcomers.

What's not so hot: "Rampant development of residential communities" to house the newcomers, and "traffic problems," says LePla. "The other problem, especially for people from California, is rain, rain, rain."

Hot networking spots: LePla recommends Washington Software Alliance dinner meetings, but says lots of networking happens in "people's own offices via job-hopping friends."

Power eats: "Who has time?" LePla asks. "Everyone's rushing to do an IPO." Those who've done their IPO hit McCormick & Schmick's, Wild Ginger and Satay Bar, says Clare Hagerty of the Greater Seattle Chamber of Commerce.

9. Orange County, California

Used to be, Orange County was known for yachts and Disneyland, but now there's a lot more bubbling in the Big Orange, a coastal county south of Los Angeles. Among the biggies there: lots of dot-com companies (Autobytel, Buy.com, Shopping.com), more established tech leaders (like Kingston and Western Digital), and even Lincoln Mercury (which recently moved its headquarters there).

What's fueled Orange County's transformation? We asked Rick Reiff, editor of the Orange County Business Journal.

Why it's hot: "It's a magnet for brainy people," says Reiff, adding that the region thrives on ethnic diversity--"many tech companies are run and staffed by Vietnamese, Chinese and other minorities."

What's not so hot: "Nowhere to walk to," says Reiff. "Lacks the multimedia, show-biz sizzle of neighboring Los Angeles. Home prices are soaring."

Hot networking spot: The Chief Executive Roundtable at the University of California at Irvine, the Association for Corporate Growth, the Software Council and the Society for Internet Advancement.

Power eats: Bistango and PF Chang's, but as Reiff notes, "many worker bees bag their lunches or order in."

8. Orlando, Florida

They're not just mousing around in central Florida anymore. Some 800,000 people live and work in Orange County, Florida, and while DisneyWorld remains the Big Show, a vibrant educational scene--anchored by the University of Central Florida--plus unbeatable winter weather have transformed the region into a beehive of tech businesses. Among local leaders: Lockheed Martin and Lucent Technologies.

Local tech lawyer Peter Reinert of law firm Ackerman Senterfitt tells about living and working in his turf:

Why it's hot: The big companies invent new processes and gizmos but don't want to commercialize them, so "they spin them off and let other people build companies around them," says Reinert. Other pluses: a comparatively low cost of living and great weather.

What's not so hot: "The unemployment rate is very low," says Reinert, so it's tough to fill job openings. Other problems: a viciously hot summer, occasional hurricanes and frenzied vacation crowds.

Hot networking spot: "Any lunch or dinner put on by the Central Florida Innovation Corp.," says Reinert. Financial angels, tech execs and entrepreneurs flock to this business development group's events.

Power eats: Reserve a table for lunch at Pebbles downtown or the Citrus Club.

7. Monmouth/Ocean Counties, New Jersey

Once most famous as Bruce Springsteen's hometown, the Boss' turf is coming into its own. This coastal strip of central Jersey has emerged as a hip place for start-ups. A quiet lifestyle and location just 90 minutes from New York City draw companies like AT&T, Lucent and Xpedite (a broadcast fax pioneer) to set up shop.

Alyson Miller-Greenfield, assistant state director of the New Jersey Small Business Development Center, gives local insight.

Why it's hot: "High quality of life and good schools have made this the state's fastest-growing area," Miller-Greenfield says, adding that many people move here while still employed elsewhere, but tire of the commute and "transition from commuter to entrepreneur."

What's not so hot: "High energy costs and high costs of living," says Miller-Greenfield.

Hot networking spots: Networking happens in offices, at the New Jersey Technology Center or at events sponsored by Monmouth University in West Long Branch.

Power eats: "Hot" restaurants aimed at the business set are few, but try Oyster Point Hotel (Red Bank), Ashes Cigar Bar (Red Bank) and Tidal Wave (West Belmar). You're also just as likely to spot deal-making locals up the road in New Brunswick eateries. (See No. 4, Middlesex/Somerset/Hunterdon counties.)

6. Atlanta

The Georgia capital bills itself as the leader of the "New South," a robust economic engine transforming the turf below the Mason-Dixon line into a happening region. Fulton County, Atlanta's home, is ethnically diverse, with solid universities (Georgia Tech, Emory); a great airport; and thriving companies, including CNN, MindSpring, WebMD and Security First Network Bank.

For an insider's perspective, we talked to Evelina Shmukler, former technology reporter for the Atlanta Business Chronicle and current Atlanta correspondent for dbusiness.com, an online business-news service.

Why it's hot: "Low cost of living, relatively cheap labor and a growing number of angel investors," says Shmukler. "The state-funded tech incubator, Advanced Technology Development Center, is helping a bunch of young companies."

What's not so hot: "Still not enough investors and not enough of a risk-taking attitude among them," Shmukler says. Plus, "traffic is terrible."

Hot networking spot: According to Shmukler, "Red Herring's [http://www.redherring.com] Venture Market South brings out the investors."

Power eats: Hit the Silver Skillet near Georgia Tech for breakfast--"it's a greasy spoon popular with techies," says Shmukler. Another hot eatery: The OK Cafe--"you'll see venture capitalists, lawyers, even the governor."

5. San Jose, California

It may rank fifth on our list, but this is the Big Kahuna of tech capitalization. Everybody does business in "the Valley," a hard-to-define slice of land centered on San Jose. Intel, Apple, Oracle, Sun and Hewlett-Packard are the granddaddies. Top universities are nearby--Stanford and the University of California at Berkeley. Venture capital is thick. So are new-breed Internet billionaires from companies like Yahoo! and eBay.

Tech journalist and publicist Tom York gives the insider's perspective:

Why it's hot: "All the knowledge, resources and capital are here, so it's easy to get an idea, fund it and build a company quickly," York says.

What's not so hot: "Traffic--some people commute two hours each way to work--and housing prices," York says. One-bedroom apartments rent for more than $1,000; $400,000 buys a "starter home."

Hot networking spots: The two biggies are the San Jose Athletic Club and the Silicon Valley Capital Club.

Power eats: Breakfast at Buck's in Woodside. ("A lot of deals get cut there," says York.) Lunch spots include Il Fornaio (Palo Alto location only), Bella Mia (San Jose) and Lion & Compass (Sunnyvale).

4. Middlesex/Somerset/Hunterdon counties, New Jersey

This thriving region centers on sprawling Rutgers University and its top-notch programs in business, science and technology. Among the big players here: Johnson & Johnson, AT&T and Lucent.

What's putting central Jersey on the map? We asked John Harrington, business editor of the local daily Home News Tribune.

Why it's hot: "The confluence of large companies, major educational institutions and affluence--New Jersey's per-capita income is the nation's second highest," says Harrington.

What's not so hot: "The cost of living is a major problem," Harrington says. Real estate is among the nation's priciest; traffic jams are legendary.

Hot networking spot: Newark International Airport (in neighboring Essex County), where high-fliers meet, especially in the Continental Airlines' Presidents Club.

Power eats: At Clyde's and Teresa's, both in New Brunswick, conversations revolve around making money.

3. Salt Lake City

Some 150 years ago, Mormon leader Brigham Young thought it was the right place to live; today, Salt Lake City continually racks up mentions in lists of the best places to live and work. Low taxes, high education levels (anchored by the University of Utah), modest crime rates and a strong work ethic have lured businesses like Novell, Iomega and hot start-up PowerQuest. The latest figures peg the number of tech businesses at more than 2,000.

Michael Lawson, president of the Economic Development Corp. of Utah, fills us in with more details:

Why it's hot: "The state's business infrastructure understands and supports start-ups," Lawson says. "The costs of doing business are advantageous, and the tax rates are among the most competitive in the nation."

What's not so hot: "There's nothing not hot about Utah," Lawson maintains. There is one drawback, though, he'll admit to: "Housing prices [in the area] have risen substantially."

Candice Steelman, vice president at PowerQuest, says one problem is the lack of diversity. "Like many landlocked states, we don't get the enriching experience of working with many ethnic groups," she says.

Hot networking spot: At functions of the Utah Information Association, says Lawson, movers and shakers as well as tech up-and-comers rub shoulders.

Power eats: "Who has time?" asks Lawson. Steelman says hot places include Park Cafe, Cafe Pierpont and Market St. Grill--all in Salt Lake--and Cafe Rio, Carver's or Macaroni Grill in Orem/Provo.

2. Colorado Springs, Colorado

How hot is Colorado Springs, 63 miles south of Denver? A few years ago, Sun decided to shut down its engineering facility there. Hotshot programmers were offered jobs in Silicon Valley, but revolted--they wanted to stay put. Silicon Valley entrepreneur Ken Hollen snatched them up, moved his start-up, ChannelPoint Inc., to Colorado Springs, and now is a leader in providing insurance on the Web. Who else is in Colorado Springs? The Air Force Academy churns out a stream of educated workers, who find jobs at Oracle, Gateway 2000, Hewlett-Packard, Compaq and a growing number of start-ups.

Joanna Bean, technology reporter for the Colorado Springs Gazette, has the skinny:

Why it's hot: "People love to live here," Bean says. "It's a great family town." The still-modest cost of living is another boon.

What's not so hot: "The perception is that this is a conservative place, and there are many evangelicals and military personnel here," says Bean, who acknowledges Colorado Springs can be a tough town for singles.

Hot networking spot: Get out your hiking boots and mountain bike, because the best networking spots are the hiking and bike trails, often just 10 minutes from the office.

Power eats: Picnic spots on the trails are a safe bet, but for cushier surroundings, Bean points to Phantom Canyon, Jack Quinn and the Ritz downtown.

1. Austin, Texas

Crack open a couple of celebratory Lone Star beers. So many flights shuttle between Austin and San Jose, local techies dub the planes "Nerd Birds." With the University of Texas providing a bedrock of brains, the city is home to Dell, lots of dot-com Wunderkind (like Rx.com), thriving tech companies (PcOrder, Vignette Corp. and more) and thousands of start-ups.

Glenn West, former president of the Greater Austin Chamber of Commerce, shared the insider's perspective:

Why it's hot: "We have critical mass--there are over 1,700 technology companies in greater Austin," West says. "The work force is highly educated, the costs of doing business are comparatively low, and the quality of life is high."

What's not so hot: "The labor market is tight, the region is coping with rapid growth, and many complain about the air service--the lack of frequent nonstops to other business centers," West says.

Hot networking spot: Topping West's list: The Headliners Club downtown and, "for young tech types," the Barton Creek Club. Austin venture capitalist Bob Fabbio cites the Metropolitan Club.

Power eats: Breakfast at the Four Seasons Hotel. Do lunch or dinner at Ztajas Grill--"it's in the arboretum area of the city, where many tech companies are," says West. Another standby: the Marriott Renaissance Hotel.

Rank & File

Surprised by our rankings?

Argue with Steve Hess, director of analytical services for Dun & Bradstreet and the guru behind the numbers. Hess explains the rankings are based on two criteria: 1. the concentration of high-tech businesses (i.e., what percentage of business activity is high-tech), and 2. entrepreneurial activity (i.e., how many businesses are less than 5 years old). Data came from Dun & Bradstreet's database of more than 11 million U.S. businesses.

The big surprise? According to Hess, it's the strong showing of New Jersey--with the fourth, seventh and 25th (Newark)-place finishers. "New Jersey doesn't have a high-tech image," says Hess, "but our data show there's a substantial amount of [high-tech activity] happening."

How Green is the Valley?

People seem to think that we here in Silicon Valley live in some sort of reality-distortion field just because houses have been known to sell for $1 million more than the asking price. They can't wait for those stock-rich young entrepreneurs, who have never experienced an industry recession, to be shocked when the market takes a sudden turn for the worse.

There's a feeling--call it jealousy--that our Internet entrepreneurs have become zillionaires just because they got into the business at the right time. The implied criticism is that their money is a quirk of technological fate and is largely unearned. Some people think the money will disappear when the world regains its senses.

My perspective is a bit different. I'm the chief executive of a computer company that's done pretty well out here. I have the benefit of 18 years in the business.

For all the instant Internet wonders, there are plenty of grown-up companies run by grown-ups. They're not going to go away overnight. The equity won't evaporate; the jobs won't just disappear.

As for the start-ups, the ones that will make it will be those that create goods and services that people want and are actually adding value to people's lives. In other words, those that make a profit. If you don't create value, you have a virtual company with virtual profits. A virtual competitor can blow you out of the water just as easily as you created your virtual value. For start-ups and established companies alike, the competition is just one mouse-click away.

One of the great things about Silicon Valley is that you can start a business on nothing more than an idea. The culture in Silicon Valley is ultracompetitive. For the new entrepreneurs, it's eat lunch or be lunch, really.

So there's no need to worry about all the young zillionaires getting soft. Some will succeed, some will fail--and then they'll all get up and do it all over again. That's another great thing about the Valley--you get the chance to learn from your mistakes.

Scott McNealy is chief executive of Sun Microsystems.

©1999 The New York Times. Distributed by The New York Times Special Features/Syndication Sales

Austin Power

Five years ago, Ross Garber, now 32, left the cold New England climate and moved with his wife to Austin, Texas. (Although he wanted to live and work in high-tech Silicon Valley, they couldn't afford it.)

By 1995, he'd co-founded Vignette Corp., an Internet relationship management company, and soon raised $36 million in venture capital. Flash forward to 1999, when Vignette went public and quickly notched a market cap of about $1.8 billion. Not bad for a guy who just wanted to stay warm.

Today, Garber remains an unabashed Austin-booster. "It's a better environment than Silicon Valley," he says. "People expect to see dry, dusty plains, but this place is green. It's spectacular."

It's also a much better place for tech business than five years ago, Garber says. "This was a village when I arrived," he explains. "Now it's a tech metropolis, with plenty of talent, venture capital and sophistication."

What doesn't he like about Austin? There's a grave shortfall in senior marketing talent, and, yes, sometimes locals do talk funny. But overall, "This is a good place to do business," says Garber. "If I were doing another start-up, Austin still would be very high on my list of places to do it."

Cloning Silicon Valley

The story goes that, nowadays, things are so go-go in Silicon Valley that if two people get an idea over coffee and Pop Tarts in the morning, by noon they have a business plan, by 3 p.m. they've scored VC funding, and by nightfall they've done an IPO. Of course it's not that simple--but when talking to your girlfriend about Pez dispensers leads to founding eBay, with a market cap well over $10 billion, it's proof there is magic in Silicon Valley. Can any other region even attempt to replicate the Valley's prosperity?

For an unexpected answer in the affirmative, look overseas to Ireland, which in the past two decades has transformed itself from an impoverished, sleepy, agricultural backwater into the tech hot spot in Europe, home to dozens of U.S.-based firms (like Microsoft, 3Com and Intel) plus hundreds of Irish-bred start-ups.

The following keys to tech prosperity have worked in Ireland--and could work anywhere:

  • Availability of brainy, tech-educated, young workers
  • Money, either from venture capitalists, angels or the government
  • Favorable costs of doing business
  • Lots of tech businesses
  • Willingness to take risks

As our list of the top 10 hot spots shows, it isn't all that hard to put it all together. (Did you know Microsoft got its start in Albuquerque, New Mexico--21st place on our list--not Seattle or Silicon Valley? Go figure.)

Read 'Em And Reap

Get in a Silicon Valley state of mind with these three key reads:

Karen Axelton

  • Got a high-tech start-up looking for venture capital? Check out Zero Gravity: Riding Venture Capital from High-Tech Start-up to Breakout IPO (Bloomberg Press, $26.95, 800-233-4830). Internet investment analyst Steve Harmon offers advice on preparing your business plan, approaching and evaluating venture capital firms, and avoiding common mistakes. You'll profit from peeks inside top venture capital firms, interviews with major players and scoop from Internet success stories.
  • "In L.A., everyone has a screenplay. In Silicon Valley, everyone has a business idea," writes Po Bronson in The Nudist on the Late Shift: And Other True Tales of Silicon Valley (Random House, $25, 800-726-0600). Bronson, a feature writer for Wired, powerfully conveys the dreams, desperation and determination of high-tech hopefuls yearning for their big break. Far from starry-eyed, Bronson seems to seek the negative in every situation. But the people he writes about are unfailingly positive, and they provide the inspiration here.
  • From its title, you'd expect Silicon Gold Rush: The Next Generation of High-Tech Stars Rewrites the Rules of Business (John Wiley & Sons, $24.95, 800-225-5945) to focus on flashy start-ups founded 10 minutes ago and 22-year-old instant millionaires. Instead, Karen Southwick, editor of Upside Magazine's book division, interviews head honchos from companies such as Yahoo! and Cisco. Their valuable lessons show what it really takes to be a high-tech CEO.

Contact Sources

ChannelPoint Inc., (888) 454-CHPT, http://www.channelpoint.com

Colorado Springs Gazette, http://www.gazette.com

dbusiness.com, http://www.dbusiness.com

Dun & Bradstreet, http://www.dnbcorp.com

Economic Development Corp. of Utah, 215 S. State St., #850, Salt Lake City, UT 84111, johnhar@thnt.com

New Jersey Small Business Development Center, http://www.nj.com/smallbusiness

Orange County Business Journal, http://www.ocbj.comvv

Parker LePla, jlepla@parkerlepla.com, http://www.parkerlepla.com

PowerQuest, candices@powerquest.com

Vignette Corp., (888) 608-9900, http://www.vignette.com

Tom York, tom_york@pacbell.net

Robert McGarvey has covered the tech industry for more than 15 years.