Cities

3 Cities That Have Found the Secret Sauce for Startup Success

3 Cities That Have Found the Secret Sauce for Startup Success
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This story appears in the August 2015 issue of Entrepreneur. Subscribe »

What do Austin, Atlanta and San Diego have in common? They’re among the youngest large metro areas in the U.S., and they have some of the highest startup densities in the nation.

Coincidence? Not at all.

“We seem more likely to develop a startup when there are more young people around,” says Paige Ouimet, an assistant professor of finance at the University of North Carolina, Chapel Hill’s Kenan-Flagler Business School. Ouimet, who cowrote a paper on the relationship between the ages of businesses, their employees and growth published in 2011 with the help of the U.S. Census Bureau’s Center for Economic Studies, adds, “The startups that start with more young people employed have higher growth rates and are more likely to get VC support.”

While the effect of a youthful population on startup success is impossible to quantify—it’s a factor that can’t be isolated—the link is too great to ignore. Ouimet and her co-author found that about 27 percent of employees in companies that have been operating for less than 6 years are younger than 35. And that data covers every sector, not just tech.

With median ages between 32.3 and 34.5, Austin, Atlanta and San Diego seem to be benefiting from their youthful populations. According to research from the Kaufman Foundation, each of those cities ranks higher than the national average of 130.6 in startups per 100,000 residents, with 180, 154 and 154.7, respectively. (The city with the closest average startup activity is Minneapolis-St. Paul, at 132.1.) Metro areas with older populations—including Pittsburgh (median age 42.2), Cleveland (40) and Milwaukee (36.7)—rank far below the national average, with 98.3, 105.9 and 100.9 startups per 100,000 residents, respectively.

“This young-employee/startup connection is due in part to young employees being more risk-tolerant and a better fit for startup culture,” Ouimet says, “as well as the fact that young people just out of college will likely have more up-to-date skills that are a better fit with a startup that’s trying to do things differently.”

Also worth noting: “It’s exciting to have young people around,” says Mike Maher, the 30-year-old co-founder of San Francisco-based clothing startup Taylor Stitch, which has capitalized on young professionals’ longtime attraction to the Bay Area. “It creates an energy and vibe that is pretty awesome.”

Edition: December 2016

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