THE BLOG
06/06/2014 01:47 pm ET | Updated Aug 05, 2014

Cities and the Cult of the Entrepreneur

Silicon Beach, Silicon Alley, Silicon Hills, Philicon Valley... one begins to notice a trend. These locales are not adjacent to Palo Alto -- they refer to newfound tech districts within Los Angeles, New York City, Austin and Philadelphia respectively, just some of the many that have recently emerged.

Urban centers are trying more aggressively than ever to recast themselves as hubs of entrepreneurship. It makes sense: Local policy makers hope to tap into the zero-to-billion growth curve that Silicon Valley's bubbly resurgence has so loudly entailed. They hope to create places that disincentivize promising technologists from inevitably fleeing westwards to California's abundance of resources.

Though I grew up in Silicon Valley, I have spent the last four years on the East Coast during a very interesting time. I have led energy entrepreneurship programs at Harvard and MIT, and I have worked with start-up advisory firms in NYC and the Bay Area. In this, I am fortunate to have been privy to the massive upswing in urban entrepreneurial activity over the last few years. These experiences have deeply informed my interest in how companies grow, in how different environmental levers in the early stages influence firms' paths.

Cities have embraced the many "mechanisms" of entrepreneurship: seed funds, accelerators, incubators, hackathons. New York City has created a $22 million entrepreneurship fund (the NYCEF) alongside funding the annual BigApps competition; Zappos CEO Tony Hsieh helms the $50 million VegasTech Fund; the City of Philadelphia formed the FastFWD accelerator just this past year, joining some 180 odd accelerators in the U.S. already.

There are several models for catalyzing urban entrepreneurship. This, however, begs the question: Who is doing the catalyzing? It is typically some combination of municipal endorsement and financing, corporate sponsorship (from those who stand to gain from innovation in a particular area), and activity at the university level, trying to recreate the VC-laden hallways of Stanford and capitalize on student entrepreneurialism. Together, these characterize a city's overall approach to cultivating start-up activity.

In my experience, there are three main axes along which these strategies vary:

Top-down resources vs. Grassroots culture. The top-down "if you build it they will come" approach is resource-centered: Cities and universities can pour funds into firms and provide real estate in the hopes that an entrepreneurial culture will take root. New York is an excellent example: In addition to a municipally financed seed fund, it provides grants to house start-ups through programs such as NYC ACRE. Likewise, the Harvard Innovation Lab provides ample advisory support and office space, looking to establish an entrepreneurial campus culture through an eclectic array of incentives and resources.

In contrast, organizations such as the Cleanweb Initiative build momentum through grassroots movements, inspiring entrepreneurial energy that will in turn attract resources. The Cleanweb Initiative in particular focuses on building communities in different cities that foster innovation in the sustainability IT space -- it is a movement that establishes shared values, beyond simply funding various ideas.

Integration vs. Breaking out of the box. Another important distinction is the degree to which varying entrepreneurship programs focus on integrating with an urban center's existing industry strengths. Many programs and funds focus on technology in its vaguest sense -- its application to any potentially lucrative process. Programs in some cities, however, have a definitive industry-bent: Boston's Bolt is a seed fund for hardware start-ups, playing to Boston's long-time hardware capabilities; similarly, the SURGE accelerator in Houston focuses on solutions across the energy spectrum, from cleantech to oil and gas.

Insourcing vs. Outsourcing. This was perhaps the most surprising distinction I observed between cities. Silicon Valley benefits from both 'insourcing' and 'outsourcing', as it has both a plentiful supply of young people eager to become entrepreneurs, as well as a constant influx of technologists from outside the Bay Area seeking its network and resources. Universities understandably focus on forging entrepreneurs out of their own students, and Boston, as a college town, has enough budding yuppie technologists to go around.

Last year I attended ThinkChicago, a conference for engineering and computer science students spearheaded by Mayor Emanuel. I observed that the primary point of the event was to draw top talent to the city and its resources, and only secondarily to convert Chicagoans themselves into entrepreneurs. This strategy seems predicated on the notion that to stimulate start-up activity, outside seeds must be planted first.

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What model is in fact the most effective? Are cities even the optimal venue to situate a technology hub (one might point out that Silicon Valley grew out of the peninsula, Stanford and Bell Labs rather than San Francisco)?

Any program to cultivate entrepreneurship in an urban center will face many challenges. A fluid culture of risk-taking may be attempting to displace a rigid status quo; existing industry focus points may limit opportunities and resources; high concentrations of large firms raise the effective cost of entry. It is difficult to recreate the power and scale of Silicon Valley's networks -- the intellectual and technical wealth of existing IT professionals, the pool of different levels of financing.

Municipal grants and funding are ultimately unsustainable and, indeed, incomparable to the full force of private investment. Even if certain urban start-up efforts capture entrepreneurs in the short-term, early-stage support structures alone may not be sufficient to retain these firms as they scale.

That said, these observations are grounded in initiatives and programs rolled out over just the past few years. Silicon Valley grew out the convergence of several successes over several decades. Time and chance will tell which efforts will boom and which will bust.