A Tale Of 25 Cities

Why Location Doesn't Matter

But the opinions of entrepreneurs are divided on whether they need to be anywhere in particular. For instance, since opening his office in Austin, Abel has questioned whether he couldn't have handled his Austin clients from Dallas by e-mail, instant messaging and other communications technology. "We service clients in 21 states," he notes. "The technology certainly makes it easier, but we still need two locations."

In San Diego, Scott Phillips, president and CEO of MassHysteria, an 80-person content application service provider, says location is a lifestyle, not a business, decision. "We don't think regionally; we don't think nationally. We just think globally," says Phillips, 35. "It doesn't really matter where you are. You just have to be willing to travel."

Fort Worth/ Arlington, Texas

Fort Worth became famous more than a century ago as the place "where the West begins," the assembly and starting point for the epic cattle drives that, more than anything, inspired the legend of the American cowboy. But the toughest drover who ever saddled up a mustang never saw anything like this Texas city's sprint from 25th place in last year's "Best Cities" study to the front of the herd this year.

"It doesn't surprise me. Fort Worth is booming," says Lerii Smith, 39-year-old co-owner of Project Partners, a two-person project management company that specializes in fundraising and event planning. Indeed, the study revealed an exceptionally sleek entrepreneurial economy in Cowtown, as Fort Worth continues to be known (even though the stockyards closed decades back).

Fort Worth/Arlington, as the four-county metropolitan area is called, beat the pack largely by sharply increasing the rate of employment growth in existing businesses with fewer than 20 employees. (Although there was an even more striking change in the risk of bankruptcy, a difference in the way bankruptcy figures were gathered this year makes comparisons with 1999's figures difficult.) Meanwhile, it held steady its very high ranking in entrepreneurial activity and only slightly less robust economic growth.

"What you really saw was not an increase in the percentage of small businesses," explains Iris Geisler of Dun & Bradstreet. "But the small businesses they have were really growing in terms of employees."

What we're seeing, adds Bill Thornton, the president of the Fort Worth Chamber of Commerce, is the fruit of Fort Worth's effort at diversification that began a decade ago as the city faced twin slumps in its then-key industries of energy and defense. While four of 10 city manufacturing jobs were defense-related then, only two of 10 are now, he says.

Credit the long-standing beneficial influence of Dallas-Fort Worth International Airport, as well as a renaissance in Fort Worth's downtown area that has seen it turn into a bustling nighttime destination and a major stimulus from Alliance Airport, a specialized commercial facility on the north side developed by Ross Perot Jr., son of the maverick billionaire and erstwhile presidential candidate. By attracting major facilities from American Airlines, Nokia, Motorola, Federal Express and nearly two dozen other Fortune 500 firms, Alliance has added 14,000 of Fort Worth's 870,000 jobs and 14 million square feet of industrial and commercial space.

You obviously don't build airports or renovate downtowns overnight, but Thornton says a more fluid commodity-public perception-is also behind the metropolitan area's sudden surge. "We've been underserved for years and years because of our historical, economic and geographic ties with Dallas," he said. "But almost two million people can't be ignored. We're really catching up."

For Smith, the presence of large employers and low unemployment means lots of opportunities to sell her project management services as an outsource provider. When one large firm recently relocated to the Alliance Airport area, she says, Project Partners got the job of planning the groundbreaking at the new facility. "That's trickle-down," she said. "That's big business and great economic development coming together and my company getting business because of it."

New York, New York

New York City hasn't made much of a showing in the history of our "Best Cities" list, but its appearance in the top 10 this year shouldn't be a complete surprise. "They have been consistently rising in the ranking," notes Dun & Bradstreet economist Iris Geisler. New York appeared at 41 in 1998 and 23 in 1999 en route to ninth place in 2000.

What happened? "What's very noticeable about New York City between last year and this year is their increase in business growth," says Geisler. "Small firms with fewer than 20 employees have really seen growth in employment over the last year compared with other MSAs. They made a big leap."

Counterbalancing New York's sizzling 99 rating on small-business growth is a tepid 52 on entrepreneurial activity, lowest of any top 10 city on this critical measure. But New York entrepreneurs are puzzled by this low position on new business formation, because they see a city where entrepreneurial activity is hot and getting hotter.

"The city is just bustling with people starting new businesses and trying to create new industries," says Ken Shapiro, 35, president and co-founder of 10-person Internet customer service company Askit.com.

Even as recently as only a few years ago, however, things were much different, says Shapiro. New York was largely untouched by the Internet boom, and most of the young businesspeople Shapiro knew wanted to work at the financial giants. "Now the majority of the people I went to business school with that worked at Goldman Sachs or American Express or someplace similar have left to go into entrepreneurial endeavors," says the graduate of the Wharton School's MBA program.

Despite the city's energy, obstacles remain in the form of high costs and heavy regulation. "The city has become so high-priced with all the people making money on Wall Street," said Shapiro. "The dollar doesn't go very far here."

California Comeback

On the West Coast, an entire state is moving to dominate the "Best Cities" listing. With seven metropolitan areas, California is better-represented than any other state, despite having no top-10 cities. And, without exception, each city has improved on its 1999 ranking.

Dun & Bradstreet economist Iris Geisler sees no clear pattern to explain California's steady creep upward. And, indeed, the various metro areas' rankings don't appear to present any sort of coherent picture. Neither Northern nor Southern California appears to have much of an edge, with San Jose's top spot in 15th place nearly matched by Orange County's 19th position. Los Angeles, both the largest and lowest-ranked large city in the state, is stuck at 53rd, only slightly better than 1999's 56th-place ranking. But San Francisco improved sharply, rising 17 spots to 32nd, and Sacramento ended up even better, climbing 21 spaces to 29th.

City governments and business associations may deserve some of the credit. Wallace Walrod, vice president of Orange County Business Council, a private business group in Irvine, points to the Venture Point Tech Coast Small Business Development Center, an incubator for high-tech start-ups, as one new factor that could make that part of the state stand out. "Our budget for Venture Point is doubling next year," says Walrod. "When it has events, it gets 700 or 800 companies attending. So there's obviously a need."

While starting businesses is important, California's main obstacle seems to be keeping them going. California cities rank consistently near the bottom on the risk-of-bankruptcy scale, exemplified by Sacramento's cellar-level score of 1. Still, bankruptcy data needs to be looked at in the context of other key indicators, Geisler says, because it can involve so many factors, from access to capital to entrepreneurs' eagerness in tackling risky ventures. "Higher failures do not necessarily indicate a negative climate for businesses. And cities with higher failure rates, especially with otherwise good business climates, can help budding entrepreneurs by providing information about where the risks are," Geisler says.

At least they're trying. In San Jose, Lou Hoffman of Hoffman Agency, is encouraged by the fact that the city's mayor has asked him and other business owners to sit on an advisory panel to suggest ways to boost entrepreneurship. "It's going to take some time to put it into action," says Hoffman, "but I believe San Jose's going to keep getting better and better."

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This article was originally published in the October 2000 print edition of Entrepreneur with the headline: A Tale Of 25 Cities.

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