The Cost of Entrepreneurship in Your Community
Having spent a couple years now in Austin, and the previous 12 in Silicon Valley, a frequent topic of discussion over drinks or dinner is the question of how entrepreneurship works. Not “Startups” per se, at least not in the context that we think of them when reading about all the innovation on TechCrunch; rather, mere entrepreneurship and the fact that people are wired to work for themselves.
It’s really an intriguing topic when you consider entrepreneurship where you live. As a country, we’re excited by the hype machine that fuels entrepreneurship in California but generally speaking, the economy there is NOT entrepreneurial. It’s simply too expensive. Other than the funded ventures served by the exceptional amount of capital available to the brilliant innovators there, people generally don’t work for themselves, at least not compared to the ambitious entrepreneurs of a place like Austin; who I’d bet, are not unlike the individuals creating opportunity in your city.
There are countless comparisons of one city to another; one economy to another. People love to posit and debate what makes one community thrive while another fails or why a city churns out billion dollar ventures while another rarely crosses that threshold. My thoughts here are along the same lines but I’ve come to a conclusion of late that I think is unique and worth considering.
If we distill down all of the variables driving an economy, we can conclude that there are only two types of entrepreneurial markets in the U.S.
High Cost vs Low Cost Startup Economies
High cost markets are flush with experience, new talent, and ideas BUT require greater investment in business simply to get started. As a result, the “ideas” which receive investment are already fleshed out by experience, ambition, collaboration, and a network of peer professionals BECAUSE no one can afford to start a business without being so capable and taking an idea to market worth investment. This gives such markets (think San Francisco, Los Angeles, and New York) a tremendous advantage and the opportunity to go for big risks; you see this in the billion dollar valuations of Silicon Valley, the dominance of the entertainment industry through LA, and the center of commerce in New York.
Of course, I’m generalizing.
Low cost markets are also flush with experience, talent, and ideas but it takes virtually nothing to get started. Consider the expensive cities on the coast vs. middle America – It costs $185 per hour to get a Ruby on Rails developer in San Francisco. What requires $750k in capital investment there takes only $250k elsewhere. As a result, a few things happen:
- Startups from those big cities get a lot of attention; much of it for no reason other than how big they seem. After all, a $750k investment is newsworthy! Isn’t it? No one bats an eye at the same exact startup in another city raising only $250k. What a pittance! The flaw in that happening is that PR = traction; for good ideas and bad. Capital buys time and resources and in our increasingly outsourced economy, even though it costs more to hire talent in those expensive cities, $750k applied to some overseas developers goes a LONG way further than $250k. Time = opportunity.
- Entrepreneurs in middle America try to replicate from the coasts… let’s do it like they did… without appreciating everything that goes into making those economies work – A great idea, some money, and we’re set! The problem is that other factors are easily overlooked: experience, ambition, collaboration, and a network of peer professionals, PLUS the PR impact of being in those high costs markets. Inexpensive markets can’t replicate what happens in those expensive cities so why are we trying? Rather, learn from their examples as what works there, in those market dynamics, won’t work the same way elsewhere.
- Are “ideas” new? Are ideas worth anything? How does your city feel about big ideas? Expensive cities seem to fully embrace the perspective that there is no new idea and that it’s about execution. After all, ideas in high cost markets really aren’t even ideas by the time we hear about them, they’ve been vetted, tested, and in development by experienced individuals. They work that way because of that first, and the next, considerations but important to evaluate is that in that, no one is testing an idea; everyone, all the investment, development, advisors, investors, and entrepreneurs, are focused on executing, scaling, and growing. What’s happening where you live? Are people validating ideas or scaling businesses?
- Perhaps most important, in low cost markets, entrepreneurs with ideas can easily, and therefore all to often, try to go it alone. If not alone, with few others, from the sense of independence that smaller towns and middle America seems to encourage. Silicon Valley, for example, isn’t an entrepreneurial environment – it’s a startup environment. There is a BIG difference. Entrepreneurs have a bit of the lone wolf in them whereas startups are never sole proprietorships. Entrepreneurs can’t and shouldn’t do it all themselves. There is NO reason to Learn and Discover (my 3rd point) how to scale when the rest of the country already knows so much about your industry, marketing channels, segments, etc. High cost markets put more emphasis on Agile principles for the very reason that they must leverage one another because it’s too expensive to do anything but get the dang thing out and get some proof – and then iterate, iterate, iterate. The high cost of a market forces people to appreciate that time and resources are valuable and though expensive, I don’t have the time to discover something with which I’m unfamiliar – I’m going to focus on what I know well and collaborate with others who can contribute what I need.
So ask yourself and please share with me, how much of this rings true about where you live. Don’t consider the access to talent, experience, education, or even capital that drives your economy; simply consider the cost of doing business where you live. How much of that cost determines how your economy works and drives how entrepreneurship might excel with your support.
TL;DR – The mere cost of markets creates different cultures and expectations and rather than learning from one another we try to emulate things. Expensive markets try to attract and retain the talent from inexpensive markets while inexpensive markets try to replicate how expensive markets work. It’s a failed approach which in and of itself needs innovation if we’re to foster entrepreneurship in the United States.
5 Responses to “The Cost of Entrepreneurship in Your Community”
Leave a Reply
Paul is hands down one of the best people to work with in the startup ecosystem in Austin, TX.
Hit the ground running and has been a great contributor to the polishing of our business. His expert knowledge of SEO, strategy and marketing will enable VChain Solutions to gain even more traction than we are currently experiencing.
Easily one of my favorite people in tech. Passionate, knowledgeable, connector and tenacious are the words that come to mind if I were to label him. Paul’s a constant hustler (in a good way) who always has time to talk about anything related to technology, marketing and all things startup related. He’s a great person to have on your team and an even better person to just simply know.
Providing Marketing and Strategy through the Clean Tech Open accelerator, Paul was readily available for a helping hand and opened his extensive network to us helping us connect with thought leaders in our industry. I would recommend Paul as a mentor and definitely use him again.
Paul provided a much more comprehensive strategy to our marketing and branding. He’s an expert in his field and knows how to deliver results. He took the time to understand our business and forge a multi-faceted approach to marketing our brand. We continue to leverage Paul’s talents and I wouldn’t hesitate to recommend him.
Paul is a true Go-Giver! His willingness to share his expertise in Digital Marketing is priceless. I highly recommend anyone who is starting a company or who is starting to invest in marketing read his Startups articles on his website and then make sure you meet with him. I only wish I had met Paul earlier when I first started my company.
In the startup world, everything is rough waters. Paul came to us a couple years ago when he found out what we were building. He believed in our idea and wanted us to achieve our goals. In the past two years I’ve known Paul, he has always been there to mentor and guide me through the rough waters he’s seen through having once been our shoes. His advice is rock solid, practical and most importantly – executable. As an individual, he holds to his word, he’s dedicated and he’s one of the few wh…
Paul has been an advisor on numerous initiatives over the years. His knowledge and experience in all the aspects of digital marketing and media product strategy is matched with a creativity unique in the industry. Time spent “talking shop” with Paul has effectively become the foundation for my understanding of how digital marketing works and how to navigate an increasingly.
Paul has been an invaluable adviser to our start-up. His experience in the events space as well as his knowledge of today’s marketing stack has taken us a long ways from what we started with. His honest assessment of both our company and the Austin start-up scene has proven to be immensely helpful in guiding our strategy and direction.
Paul has the great ability to juggle 8 balls at once and is a jack of all trades. He is not only helpful on everything related to press, PR, marketing and social media, but has also added value by providing strategic direction/advice and even gets his hands dirty with technical development. He can be relied upon as a trusted partner and project manager.