What if the problem isn’t that cities can’t build startups, what if the problem is they’re building the wrong kind of systems?
In the frenzy to claim, “innovation district,” many regions forget the fundamentals: connections, capital-fit, customer access, and context. In a recent panel for Founder Institute, I brought together three ecosystem practitioners, Levi Velez Reed (Seattle/Bellevue), Elizabeth Packer, AICP (Washington, D.C.), and Hunter McFarland (Tulsa), to dig into what really works and what should in startup ecosystems throughout the world.
What emerged wasn’t more accelerators or photo-op pitch nights. It was collaboration, coalition, and startup ecosystem infrastructure (social, financial and institutional) that’s built intentionally. Let’s walk through their insights, consolidate the evidence, and surface what you, as an economic-development leader, VC, or founder, should actually act on.
Tune in to our event here and then read on as I ramble through my intro:
Article Highlights
Bellevue/Seattle: Capital in the Shadows
Levi Velez Reed knows the Seattle region has enormous technical wealth and corporate density, yet he starts from the ideal foundation for in any community, we can do better. He notes:
We have a real lack of very early-stage investors. Most of our high-net-worth individuals made their wealth as corporate executives … They want to invest on pre-seed terms with seed-stage traction.
In other words: the money is there, but not the risk posture. Reed’s program, Startup425, works at the public-sector interface, supporting businesses “of all sizes” rather than only chasing unicorns.
He points out that Bellevue is punching above its weight:
Out of the roughly 18 unicorns based in the Seattle area, about half are headquartered in Bellevue … The city’s administration is more forward-looking.
Which means a suburban-adjacent locale is gaining the startup halo while regional capital remains locked in conservative patterns.
Why does this matter? Because research shows that venture capital and innovation activity are heavily concentrated in very few places. A Brookings Institution report (July 2025) found “30 metros (with San Francisco and San Jose central)…” dominate the emerging AI economy. Without active investor education and risk-capital diversification, even regions with strong assets lose founders to other cities.
Tulsa: Retention-Oriented, Not Just Attraction-Oriented
Tulsa, not traditionally viewed as a “startup mecca,” is playing a more strategic long game. Hunter McFarland frames it this way:
Tulsa is doing a lot of amazing things. It’s one of those ecosystems where everyone is one coffee away.
He’s referring to the mindset: intimacy, connection, trust. Build in Tulsa, supported by local foundations and state resources, helps founders “from ideation to scale, through both non-dilutive and equity-based funding programs like TechStars.”
We probably have five true VC firms,” he said. “We need people to invest in our companies and not take them away.
Here’s why that mindset matters: a region that incentivizes retention of companies, not just their launch, flips the conventional model. The infrastructure is less about spectacle, more about durability.
McFarland’s point, that early-stage capital is only half the issue; the rest is aligning incentives for founders to stay, spotlights an often-overlooked metric of ecosystem health.
Washington, D.C.: When the Public Sector Picks Up the Venture Playbook
Elizabeth Packer is rewriting the script for D.C. as a tech ecosystem more than the nation’s capital.
Five years ago, D.C. wasn’t really thinking about tech as a driver of our economy … Now, we’re focused on growing our private sector as a generator of jobs.
There they launched the D.C. Venture Capital Fund to support early-stage companies that commit to staying and hiring in the region. They added an international “soft landing” program for non-U.S. based startups.
“Cybersecurity and fintech are booming because companies want to be close to where decisions are made,” she observed. Yet she also recognized the headwinds:
Maryland and Virginia often offer more competitive incentives … We see founders who want to stay in D.C., but affordability pushes them elsewhere.
This mirrors international findings: the Organisation for Economic Co?operation and Development (OECD – OCDE) notes that strong ecosystems require not only resources but structure: networks, institutional quality, regulation and culture.
What the Evidence Says: Ecosystem Health Isn’t About Hype
- The OECD emphasizes that the health of regional entrepreneurial ecosystems depends on “access to finance, talent and skills, networks and institutions.”
- The Kauffman Foundation shows persistent gaps in access to capital for certain groups: “gaps in entrepreneurial activity… Barriers can prevent people from ever becoming entrepreneurs or slow their decision to start up.
- The Brookings Institution finds that while “capital exists,” it is geographically concentrated, leaving many regions underserved.
In plain English: you can’t fix a city’s startup ecosystem simply by planting co-working spaces and hiring a “Chief Innovation Officer.” You must fix the plumbing underneath: Who’s investing? How are they investing? Are there real customer pathways? Is government a helpful or hostile actor?
What Cities & Investors Should Do
- Investor education is indispensable. Seattle has capital; what it lacks are investors willing to seed risk. Training, networks and structure (like angel groups) change investor behavior.
- Retain the companies you help launch. Tulsa’s emphasis on keeping founders local isn’t romantic, it’s smart. Regions that lose scaling firms lose the brain-capital loop.
- Public agencies must learn to move at startup speed. D.C.’s shift to venture investment and collaborations such as Penn West, show government can adapt, but only if they treat founders like stakeholders, not recipients of grants.
- Customer-first, not funding-first. As Hunter put it: “A lot of our companies have early funding but no customers … They realize their ideal customer isn’t here, so they move.”
- Measure ecosystem health differently. Instead of counting accelerator graduates, ask: How many local startups raised follow-on rounds? How many founders stayed city-based? How many jobs created from local firms?
Don’t Ask If Your City Can Be Silicon Valley
Ask: can your city be what your city is for entrepreneurs?
If you’re imitating coastal models without adapting to your culture, resources, and realities, you’ll build a mirror image of someone else’s problem.
Levi’s candid summation:
We need more sophistication and understanding among early investors… It’s not just about writing checks; it’s about being a value-add beyond capital.
And Hunter’s reminder: “We need people to invest in our companies and not take them away.”
Stop modelling ecosystems around what looks good. Model them around what actually works. Every region has its niche. Entrepreneurs don’t need more theatre, they need a system that makes them visible, fundable, and sticky.
So, if your region were a startup, would you invest in it today?
Couple of ways we can accelerate your change to better impact entrepreneurship
- Making investors available is easy when you appreciate that it isn’t local. We can solve a big part of the infrastructure need for you. Learn more here.
- Through my work in Startup Economist, let’s better map your ecosystem and uncover opportunities, I’ve done so for Bellevue (Seattle), Washington D.C., and many more, if you want to be next, let me know.
What’s your region’s biggest bottleneck right now: Capital? Founders? Retention? Investor sophistication? I’d love to know.
Another great event upcoming for City Leaders, Economic Development Offices, and Ecosystem Builders: How to Unlock Your Region’s Entrepreneurial Potential for Economic Growth, to explore how data-driven infrastructure can make it happen – Register to Attend Here
Good roads as well are fundamental
Kenny Madden mobility > roads
Or maybe a better word is foundational
Kenny Madden
yes, can’t forget physical infrastructure. I was hanging out with investors/impact folks from overseas last night, they were impressed by the train running by full of many different types of mail/cargo in Seattle. I think we as Americans sometimes forget how good the quality of life is here and how well most things work.
All cities were successful start-ups once, an interesting question is what have they lost, as much as what they need to gain.
Fantastic article, I love it. For cleantech, I’d also say providing low cost R&D space and ideally working to established cleantech cohorts is very important. The CleanTech Alliance pretty much manifested 14 fusion companies being founded in WA State.
Michael Waggoner I hear that. I’ve been pushing that cities need to stop supporting a local accelerator with space when what’s needed (and appropriate to public funding) is underwriting venture studio space, sector specific hubs, and incubator curriculum and infrastructure.
Paul O’Brien yes, although I think providing space for co-working and networking is helpful. Also, cities and non-profits need to find ways to rent existing spaces, not waste millions on new buildings. I love the Seattle Climate hub and 9Zero and Lowell Bander because they were super scrappy (started networking with Seattle Climate Week in bars) and then found partnerships with the city of Seattle, universities, and non-profits. Now I just need more physical space closer to Seattle (I’ve got 45,000 square feet in Wapato (Central WA) to share/incubate cleantech, which is great for scaling, but I’d love to do more showcasing/networking in the city with other wrench turners). Am hoping the port, City of Seattle, or others will support this vision.
“providing space for co-working and networking is helpful. Also, cities and non-profits need to find ways to rent existing spaces, not waste millions on new buildings.”
Yes… so give WeWork or The Cannon Community incentives. For example.
cowork and network space is “helpful” yes, but it’s not an appropriate use of public funding to allocate a grant to someone who wants to monetize work space.
Cowork at Starbucks
Build networking on Facebook, with Circle, or with Founder Institute’s platform
Cities have been giving money to local businesses that claim to be Accelerators when all they really do is coworking and some events.
Paul O’Brien we might have to agree to disagree here on this point, at least in cleantech/climate/impact where many people are broke and can’t afford expensive office space. There was nowhere to get together to discuss climate, with regular meetings prior to 9Zero Seattle and the Seattle Climate Hub. I’ve met so many great people there, and working alongside other passionate environmentalists got me through some dark days (which are $#$@# over, thank goodness). Support from the city allowed them to ramp up – I think it was a great use of public funds, as my target is 200+ jobs in the state over the next few years and I don’t know if it would’ve happened without them. If you purely rely on commercial support, you tend to get a business model where the space is either pandering to corporates, pandering to donors, or hosting expensive firms that often don’t care about impact. I really appreciate your article and the back forth.
Michael Waggoner are we disagreeing? You’re adding, “in cleantech/climate/impact”
You’re saying the city should be funding that coworking space where the community is the video game developer, a CPG company, the owner of a new hair salon, a full stack AI developer, and a cleantech startup?
I don’t think you are, and neither am I (I said sector specific space is valid). Am I wrong? Most coworking spaces in the country fail after a couple years because no one needs a community of every entrepreneur or every startup… cities are keeping them afloat as Startup Hubs and then they’re misleading people by calling themselves Accelerators. That money needs to be reallocated to more meaningful use of public funding.
Sorry if I thought we disagreed. I think sector-specific co-working spaces are valid, especially in impact, while mixed ones can be just normal co-working spaces. Is this correct? Thank you for you the clarification. 🙂
Paul O’Brien great stuff. Let’s connect sometimes. I agree with a lot of the commentary here.
Heath Naquin Let’s. Next week is great for me.
1 is key. Culture comes in 2 pieces: what we tell the broader world and what we tell people who want to build the future.
Paul O’Brien will DM you